SKYX - NASDAQ

Good day, and welcome to the SKYX Platforms Corporation Third Quarter 2023 Investor Update Call. Today's webinar is being recorded. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcasts, including those regarding future financial results and industry prospects, are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the company's SEC filings for a list of associated risks, and we would also refer you to the company's website for more supporting industry information. At this time, I would like to turn the webinar over to Rani Kohen, Founder and Executive Chairman of SKYX Platforms Corp. Sir, please go ahead.

Thank you, everyone, for joining us for our third quarter call. Today, we will go over highlights of Q3 business development and financial. We will start today with our President, Steve Schmidt. Steve Schmidt is the former President of Office Depot International and former CEO of ACNielsen Data Corporation that joined us several years ago, invested with us and is serving as our President. So, with that being said, we will start with Steve, please.

Hey, Rani, thank you very much. As Rani said, I invested and I joined this company over four years ago after a 40-year corporate career and just over a year ago agreed to take on the role as President. And as I've said in the past, there were really six or seven key reasons that I became really excited about SKYX, and it started with Rani for both his strategic vision, his leadership, and the way that he understands how to run a company. Second, the management team. Third, the Board. Fourth, when you look at the number of patents and proprietary products that we have, both from a technology and service perspective one gets excited. The global opportunity that exists for this company as well as the fact that we have filed for mandatory within the code with the National Electric Code. And when you combine those things, they were the reasons that I decided to join as President of the company. So with that, let me jump into the Q3 2023 results. First of all, we generated a record $21.6 million in revenue in the third quarter of 2023, including sales of our advanced and smart plug and play products. Cash, cash equivalents, restricted cash, available cash, and investments available for sale totaled $24.4 million as of September 30, 2023 as compared to $16.8 million as of December 31, 2022. We continue to enhance our market penetration of our advanced and smart platform technology products to both retail and commercial segments through our e-commerce platform of over 60 websites for lighting and home decor. We have filed for a mandatory safety standardization with the National Electric Code for ceiling outlet receptacle for ceilings in homes and buildings with SKYX's code team, which is led by Mark Earley, the former Head of the National Electric Code, and Eric Jacobson, former President and CEO of the American Lighting Association. Mr. Earley and Mr. Jacobson were instrumental in numerous code and safety changes in both the electrical and lighting industries. Eight additional patents have now been issued, resulting in us now having 77 pending and issued patents in the U.S. and globally, including the issuance of five new utility patents in the U.S. and international markets, including Canada, Mexico, and Hong Kong, for its related smart plug and play platform technology products. We announced the collaboration with QUOI

Thank you very much, Steve, and appreciate that. And before I get into an overview of our financial results, I'd like to pass it over to Rani to do a three-minute video. So, if we could go ahead and do that, it's only three minutes. Thank you. [Commercials]

And now, Lenny Sokolow will elaborate. After Lenny talks in more detail on our recent builder activity with those products you saw, and Lenny Sokolow [indiscernible] some financial updates, please.

Thank you, again, and thanks for that video. I thought it was important for those new to our company and our story and our movement. I was introduced to SKYX over 12 years ago. And during the last 12 years, I invested in SKYX and joined the Board in 2015. I just became Co-CEO and joined this fantastic and experienced management team. I agreed to take a substantial portion of my compensation in SKYX equity because I strongly believe SKYX was at a great inflection point, well positioned to be a U.S. and global leader in smart plug and play platform technology products. Furthermore, I strongly believe in the compelling safety aspects of SKYX products. As a former Executive and General Counsel of Windmere Corporation, which was on the New York Stock Exchange years ago. We manufactured and sold hairdryers and other personal care electrical appliances. As you can see today, and as I experienced first-hand, the industry implemented the mandatory requirement of adding a GFCI safety plug to the end of the electrical cords of these personal care appliances. This is why I am a strong believer in the SKYX safety and standardization path. With respect to our financials, as mentioned, our revenue in the third quarter of 2023 increased to a record $21.6 million, including e-commerce sales as well as smart and standard plug and play products. Gross profit in the third quarter of 2023 increased to $6.7 million or 31% of revenue. Gross profit was positively impacted by the gross profit of the acquisition of our e-commerce platform of over 60 websites for lighting and home decor. Cash, cash equivalents, restricted cash, available cash, and investments available for sale amounted to $24.4 million as of September 30, 2023 as compared to $16.8 million as of December 31, 2022. The company's current liabilities include a 2024 non-cash liability of $5.6 million payable in shares to the Belami shareholders as part of the consideration for the acquisition of our e-commerce platform of over 60 websites for lighting and home decor. Sales and marketing expenses amounted to $5.7 million during the third quarter compared to $1 million during the prior year's comparable quarter. Net cash loss before interest taxes, depreciation, and amortization as adjusted for share-based payments, which is an adjusted EBITDA, a non-GAAP measure, amounted to $2.5 million in addition to a non-cash basis loss of $4.7 million, amounted to a net loss of $7.2 million, or $0.08 loss per share, in the third quarter of 2023, as compared to a net cash loss of $1.9 million, in addition to a non-cash basis loss of $2.8 million, amounted to a net loss of $5.7 million, or $0.07 per share, in the third quarter of 2022. Cash used in operating activities for the three months ended September 30, 2023 amounted to $3.4 million as compared to $3.5 million in the comparable period last year. And if I can now, I'd like to turn it over to Marc Boisseau, our Chief Financial Officer, for further information... [Technical Difficulty]

Ladies and gentlemen, please bear with us. We are experiencing technical issues. Thank you. Ladies and gentlemen, you are back in.

Okay. So, this is Lenny Sokolow again. I'm sorry, we had an actual disconnection from the internet. I'm not sure where we dropped off, but if I could again reintroduce Marc Boisseau, our CFO, who could discuss some of the further financial information. Marc, please.

Okay. So, for the next few minutes, we'll cover certain elements of the company's financial condition, results of operation for the quarter ending September 30, 2023 compared to Q2 2023. The cash, cash equivalent, restricted cash, and available cash increased by $700,000 from $23.7 million as of June 30, 2023, to $24.4 million as of September 30. The working capital increased also by $700,000 from $1.9 million as of June 30t to $2.6 million as of September 30. The revenues increased from Q2 to Q3 2023 from $15 million to $21.6 million. That's an increase of $6.6 million. The gross profit increased from $4.7 million to $6.7 million. The net loss declined from $12.3 million in Q2 2023 to $7.2 million in Q3. And the loss before interest tax, depreciation and amortization and share-based payment declined from $2.7 million in Q2 2023 to $2.5 million in Q3. Steve?

Okay. Marc, thank you. I believe you can clearly see that we're advancing our builder and commercial strategy. To conclude our formal remarks, let me kick it back to Rani to explain in more detail our continuing market penetration growth. Rani?

Thank you, Steve. And as you can see here on the slides, we are blessed to have key members that are joining us as part of our members here that invested in us. So, we started with Steve Schmidt, our President and former CEO of Nielsen and Office Depot. We have Bob Nardelli, former CEO of Home Depot, Chrysler, and GE Power Systems. We also have Al Weiss, former President of Disney Worldwide, Parks, Hotels, Resorts, Cruise Ships, and Products. Mark Earley, heading our code team, former Head of the National Electrical Code. Eric Jacobson, former Head of the American Lighting Association. And recently joined us, Khadija Mustafa, former Head of AI -- Microsoft, AI Global, and as well as Sales. To touch about some of our builder activity here, we're sharing with you this slide, and let me see until it comes up, takes a minute. Here we are. So, as you can see here, our ceiling receptacle is on the ceiling, I'll large a bit, so you can see it better. But we have here several packages that can serve builders. As Steve mentioned here, we signed an agreement with a developer to supply approximately 1,000 homes, approximately 30 units per home. We're going to start supplying the first project for him next year. And the way those projects go is you have here a package for one bedroom, if you see on the left, two bedrooms, three bedrooms, a home, a large home, apartment building, hotel, or commercial. Those packages will include smart light fixtures, regular light fixtures, as well as smart ceiling fans and regular ceiling fans, and is also going to include our all-in-one smart platform that if you have a package like this and you supply 30 ceiling outlet receptacles, the builder installs them as they build the home and at the same time they install the wall outlet receptacles, they will install also our ceiling outlet receptacle. And when the time comes and the building is ready to be delivered to the consumer, our team is going to come and plug a package that's going to include those smart and standard light fixtures, smart and standard ceiling fans, as well as our all-in-one smart platforms. And our crew is going to come to that building and plug each unit in a few minutes. So really, what we're doing here is, if you would think about it, it's kind of the razor and the blade model. We supply our razors, our ceiling receptacle, and then the builder will choose the package. Those package can vary from five to tens of thousands of dollars per package depends on what size and what size of the unit and what type of fixtures they choose or like to have. But this is something that we have really great response as it really takes all the time, cost, simplify the process as well as life-saving aspects that we add to those units. And we take all the headache out of the builder by only having him install the ceiling outlet receptacle that you can see on the ceiling, while we have a crew that will come to that building and plug in all the fixtures and connect it to the IT system and have everything ready and working in a very simple way. So, here you can see in the next slide, when it comes up, you'll see our all-in-one platform that we have shared in the past and you will see the type of unit. And it can fit homes as we said, large homes, high rises, one bedroom, two bedroom, three bedroom, et cetera, and that's quite unique. As we mentioned, to make a home smart today, a one bedroom will take you a couple of days in the normal world, but our device will take you less than a minute. When you see here a large home in the normal world, today's world, will take you weeks, but our device will take you an hour. And here on a high-rise or a 500-bedroom hotel, for example, it can be a year project with millions of dollars. We can supply this project and install those smart home platforms within a day or two rather than a year and probably in a fraction of a cost, let's say, an iPhone per room if it's one device and if it's more, slightly more. Those are -- next slide is going to show packages. We have -- most of the product is under production already and we're selling and enhancing our market penetration, as Steve was mentioning in opening statements. And everything you see here besides the all-in-one platform that we did not start production, we expect to start it very soon next year, is already in sales in the market and we have eight packages of our outlet receptacles and et cetera. So, those are really very important points in segments that we strongly believe that we can capture a nice percentage of the market with this. And with a huge market like this, even a very small percentage of the market can be a quite significant number for us. Here you can see as we mentioned and Steve mentioned in open, we filed for mandatory safety application in September. What you see on the left is what happens in homes today. Globally, billions of installations, people go on ladders, as you can see here, and touch hazardous wires. And our solution, we strongly believe, would save many lives in addition to saving time, significant cost and money, as well as simplifying the entire process. People go, as we say, on ladders millions of times a year -- or probably billions of times a year globally, hundreds of millions of times a year here in the U.S. alone just to install a light fixture and risking their life doing so. The last time something like this happened in the USA -- in the U.S. in a significant matter for homes was approximately 40 years ago when the GFCI, that you will see now coming on the slide, is what everyone in this call has in this bathroom and probably in many kitchens as well. And as we know it's in your homes because it's there, mandated for safety reasons. We followed that path and we strongly -- management and our co-team, strongly believe we have the safety necessities to become mandatory. We can't say exactly when, but we have filed for the mandatory in September and we hope it will be as soon as possible, but it really is the sole discretion of the panel voting members on the timetable and the decisions. And this is really similar to a global standard that happened many years ago as probably one of the famous standards that happened also many years ago. As you can see in the slide coming now, the Edison bulb was installed for years, many, many years with wires to the ceiling until the Edison base here, as you can see in the center, was invented and that became a global standard. We're trying to follow that path and really we believe we have the equivalent of concepts here and we have a good chance, we believe strongly to make this happen. So, I think at that point, we -- as you can see in this slide, we accomplished what we believe and what we were told to understanding all the safety necessities here and we accomplished all significant -- additional significant milestones including the voting of ANSI, American National Standardization Institute, that's in charge of constructions reliability and safety of the products going to every construction in the U.S., as well as NEMA, the National Electrical Manufacturers, as well as we got voted by the American Institute of Architects as part of the safety and continuing education programs. So, if you look at this slide, we really got voted by the building organizations that determine our building codes, and safety aspects are many of them. Our code team, as we mentioned, is led by Mark Earley, former Head of National Electrical Code, that was instrumental in major safety codes in the past 33 years as serving as Head of National Electrical Code during those years. And we have Eric Jacobson that joined us as former president of the American Lighting Association and during his 30 years in American Lighting Association was instrument to major lighting safety code changes. So, we have this leadership. Also with Bob Nardelli that in addition to being CEO of Home Depot and Chrysler was the former CEO of GE Power Systems, one of the three remaining divisions of GE Again here, I'm going to share with you a slide describing a bit of our online activity here. So, as you can see in the next coming slide, we'll take -- here we go. So we're starting to sell -- started last quarter to sell a bit. We enhanced our integration -- online integrations of many products into plug and play capability and smart plug and play capability. And we started, I think, last quarter with having less than a hundred or a couple of hundred fixtures, and now we have nearly 10,000 fixtures that can eligible -- or can enable our smart or standard plugs. We expect to be in tens of thousands of fixtures that will be eligible or capable to use our products by the end of this year, and we expect to be with hundreds of thousands of fixtures by next year that will be compatible with our products. This is significant because as we're approaching the builder segments, the more variety we have, the more products we're going to have there, the more capabilities for us to secure builders as well as retail and other commercial segments. But we see that growing and as we mentioned, we strongly believe we'll be tens of thousands of fixtures just in less than 45 days or 45 days or so by the end of this year and hundreds of thousands of fixtures by next year. And that's a significant growth and we expect this to become a bigger play as we go. As of today, we're selling products online in three ways. And if you go to our sites, you will see that there's three choices to buy products with our device -- two with our device. So on the left is the old-fashioned way, the hazardous wires on the left, and the plug-and-play products in the center and the smart and plug-and-play products. And we're very happy with our conversion rates that are improved significantly, significantly improved from first quarter to this quarter, and we expect them to significantly improve as we load more and more fixtures and our conversion rates are getting better from day to day. So with that being said, we are excited about our opportunity with builders and we are probably one of our last slides here, is really what builders have today with the smart home complexity, as you see on the left here. It will take them two days probably to have -- a couple of days to make a smart home happen even on a one bedroom compared to a one minute that will take them with our device. So, saving 99% of time at least. And probably the cost of installation itself, even if our product -- even if someone got this product, the smart home product of today for free somehow as a gift, the installer itself will probably charge him 2 times or 3 times more than paying for a device installed in the ceiling. So, it's not only significant time saving, it's significant cost saving as well as simplifying. And obviously, the life-saving aspect that we bring to the table. And as to remind everyone, we have many case uses for this, including hotel rooms, as you would see, cruise ships, elder living, hospitals, and many other segments, including office and retail. So with that being said, we're opening now to Q&A here, and we'll start the Q&A here. And yes -- and we see here on the list we have Michael Legg from Benchmark. So, you can direct those questions to us please.

Thank you sir. [Operator Instructions] And our first question comes from the line of Michael Legg with The Benchmark Company. Please proceed.

Thanks. Good afternoon, everyone. I want to start with a couple of financial questions. We had $21 million of revenue. We bought Belami. They had [$80 million] (ph) of annual revenues. Can you talk a little bit about what's going on with the traditional sales at Belami and what we're seeing with the economic environment there? And then, what part of the sales did we see that was the smart products if you could just give us a little breakout on that? Thanks.

Sure. So, as everyone knows the home decor is in decline for the past few years. It started when the peak of the home decor and you can see Wayfair, for example, was in 2020 and 2021 as people were home and didn't have too many choices to renovate their homes and a lot of people got the SBA loans and renovated their homes. So, the peak was the 2020 and 2021. But as you can see, the numbers of Wayfair and many others in home decor were sliding and every year going down. In addition to the slowdown in the builders market, that is not helping the high interest and slowdown in new construction. So, the home decor market and lighting market in general are in decline. We are actually very pleased where we are with those numbers and the number of this quarter proves us that we're in the right path and the conversion rate towards our products we're selling. I think our goal is to have around for now two-thirds to be the plug and play and one-third to be the smart, and I think we're very close to that -- to those goals. And again, that's our anticipation towards growing our variety of fixtures. And that's our goal is more people will learn about our smart features. We have a nice conversion ratio for them now. Percentages actually look good and we hope to enhance to get much more smarts, but a lot of people want the standard. Again the smart cost a bit more or more than double than the standard, probably triple. So, we're very encouraged with this.

Okay.

Any other questions?

Yeah, I have a couple more. Can we talk about your 30,000 units and what that means from a revenue perspective? And then, some of the other agreements you have and can kind of put some numbers on them with like Material Bank and some of the other agreements you just announced over the past quarter?

Yes, of course. So again, as our agreement with the developer, South Floridian developer here is for around 1,000 units approximately. We anticipate approximately 30 units per home as the slide that we have still on is showing. We'll provide approximately, it depends on each size of unit, but let's say 30 receptacles to each unit, and then the builder plus the homeowner will choose a package. So, our packages can vary from probably around $5,000 per package. It will include smart lighting, smart ceiling fans, standard lighting and standard ceiling fans, as well as all-in-one smart platform that really makes your home become -- as you saw in the video and as you saw in the slides, can make your home become smart. So that can start with a few thousand, like $5,000, and grow up to tens of thousands really depends on the size of the unit. And again, what we emphasize here, what the builders really like is the simplicity and the one app for all of those fixtures together. And it's really today to do -- the reason, if you think about this, that builders did not announce we're selling smart homes as standards because of the complexity of making it happen between so many different companies and so many different technologies. We're here bringing the all-in-one that you, as we said, put the receptacle in construction when you do the wall outlet, you do at the same time our ceiling receptacle outlets, and once you do this, the builder calls us when he's ready to deliver the building we have a team that comes in and a few minutes per unit everything is installed and ready to go. So that -- we're very excited on this. And this is really before we really went to the market and we're just starting now with the builder segment and we have great feedback already and we recommend people to stay tuned on this as we believe we'll have more news on the builder segment as we go forward. The same here with Material Bank. It's the world largest architect sample -- product and sample supplier. It's a global company. And as we expect to launch the product with them, we signed the agreement. Then next year, we expect to launch and to be included in projects they're going to spec or projects they're going to recommend to spec to, and we're excited to work with them and I think it's going to open much more doors to work with architects and additional builders and we're going in that direction. We also -- as we mentioned, we have our 60 websites or so. We'll all be equipped to work with builders. Builders, they log in have a pro segment that they can log in and buy wholesale from us, and we're going to channel a lot of this builder business and architect business directly to our e-commerce although we're working directly with them too. Did you ask about -- I think you mentioned the QUOI

Yeah, the QUOI

So, QUOI

Okay. So the QUOI

Yeah, we expect to start deliver early next year and either Q1 or Q2 of next year. It depends on when the construction level is ready for us.

Okay. And then I'll just ask one more question and get back in the queue. The cash increase, it looks like you used your line of credit for a $4 million. Can you just talk about how the cash was increased and where it came from? Thanks.

I mean, we have to refer you to the statement of cash flows because there's a lot of line items. But basically -- so we took some additional -- we got some proceeds from a line of credit from a bank that is secured by inventory to accounts receivables. And that was approximately, let's say, $4 million.

Right.

Now, we repaid...

No, so that's the bulk of where the increase came from. That's what I was just trying to confirm. Is there a reason you used a line of credit instead of using the cash balance?

So, we actually decreased the utilization of the line of credit as of September 30. There's $2.3 million available under those line of credit as of September 30. And as of June 30, it was [indiscernible].

Okay, thanks. I'll go back in queue, too. Thank you.

Our next question comes from the line of Leo Carpio with Joseph Gunnar. Please proceed.

Good afternoon, gentlemen. I actually got two quick questions. First question is, now that you've got Belami acquired and have a sense of your sales flow, will you be providing any revenue guidance for this year or next year? And then secondly, now that you've got these contracted deals in place, how are you going to be seeking -- trying to drive more consumer demand and awareness for your products at this stage? Thanks.

Thank you, Leo. We're not providing financial guidance yet. Our goal is to keep on enhancing our market penetration. To remind everyone, the more receptacles we put in the market, the more recurring revenues we will have due to several reasons, but that can open the doors for interchangeable of fixtures, a replacement of fixtures for season, holiday, and other reasons, as well as it can open the door for us, the smart products, to monitoring subscription models in the future. So, we are all focused now on enhancing market penetration, as well as enhancing the availability and variety of products that can use our product. And as I mentioned earlier with Michael's question is that we started with hundreds of products, we're already close to 10,000. We expect to be on tens of thousands by the end of this year. So very soon, tens of thousands of products that will be compatible with our products, smart and standard, and hundreds of thousands next year. So, we're just focusing and growing and enhancing our market penetration. We're not publishing those markets -- those financial expectations yet as we're in process of growing here. But percentage growing very significant quarter-to-quarter, but it's -- again it's with the more we enhance our products towards compatibility with other products, the more we expect to grow in numbers.

Okay, a quick follow-up question. On the mandate, any sense on the timing of when you may receive an answer?

So, we anticipate it to be next year, hopefully earlier than later. But regulators, we know one thing about them, they're not fast. That's the bad news. The good news is, we're 12 years in the process already. So, some feel it can be very early, some feel it can be later and we can't -- the ball is not in our court, it is in the sole discretion of the panel members of the NEC.

Okay, thank you.

Any other questions, Leo? Maybe I missed one of your questions or we're good?

Well, there are no further questions at this time.

Okay. So, if that's -- any other questions? And if not, we thank you very much for being with us. And again, we're very happy, as Steve mentioned, where we are, keep on enhancing market penetration. We strongly all believe that we can revolutionize an industry or more than one industry even with our disruptive technology here and our feedbacks from both consumers and builders are really encouraging. And we ask everyone to stay tuned and bear with us. We'll have more news. We also announced that we're going to be a main event in the builder -- IBS, Builders' Show in Vegas in February 2024. And we're going to be also included in the homes of the future of that entire show, and that can be quite significant for us. So, thank you again, everyone, and looking forward to talk to you in our next update call. Thank you very much.