UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
The
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Number of Class A and B common shares outstanding as of November 14, 2023 was and , respectively.
Number of Series A Convertible Preferred Stock shares outstanding as of November 14, 2023 was 1,812.
2 |
SIDUS SPACE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash | $ | $ | ||||||
Accounts receivable | ||||||||
Accounts receivable - related parties | ||||||||
Inventory | ||||||||
Contract asset | ||||||||
Contract asset - related party | ||||||||
Prepaid and other current assets | ||||||||
Total current assets | ||||||||
Property and equipment, net | ||||||||
Operating lease right-of-use assets | ||||||||
Intangible asset | ||||||||
Other assets | ||||||||
Total Assets | $ | $ | ||||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities | ||||||||
Accounts payable and other current liabilities | $ | $ | ||||||
Accounts payable and accrued interest - related party | ||||||||
Contract liability | ||||||||
Contract liability - related party | ||||||||
Asset-based loan liability | ||||||||
Notes payable | ||||||||
Operating lease liability | ||||||||
Total current liabilities | ||||||||
Operating lease liability - non-current | ||||||||
Total Liabilities | ||||||||
Commitments and contingencies | ||||||||
Stockholders’ Equity | ||||||||
Preferred Stock: shares authorized; $ par value; shares issued and outstanding | ||||||||
Common stock: authorized; $ par value | ||||||||
Class A common stock: shares authorized; and shares issued and outstanding, respectively | ||||||||
Class B common stock: shares authorized; shares issued and outstanding | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total Stockholders’ Equity | ||||||||
Total Liabilities and Stockholders’ Equity | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3 |
SIDUS SPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Revenue | $ | $ | $ | $ | ||||||||||||
Revenue - related parties | ||||||||||||||||
Total - revenue | ||||||||||||||||
Cost of revenue | ||||||||||||||||
Gross profit (loss) | ( | ) | ( | ) | ||||||||||||
Operating expenses | ||||||||||||||||
Selling, general and administrative expenses | ||||||||||||||||
Total operating expenses | ||||||||||||||||
Net loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other income (expense) | ||||||||||||||||
Other income | ||||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Asset-based loan expense | ( | ) | ( | ) | ||||||||||||
Finance expense | ( | ) | ||||||||||||||
Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Provision for income taxes | ||||||||||||||||
Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Basic and diluted loss per common share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
Basic and diluted weighted average number of common shares outstanding |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4 |
SIDUS SPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
For the Three and Nine Months Ended September 30, 2023
Class A Common Stock | Class B Common Stock | Additional Paid-In | Accumulated | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
Balance - December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Class A common stock units issued | - | |||||||||||||||||||||||||||
Warrants issued for finance expense | - | - | ||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance - March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Class A common stock units issued | - | |||||||||||||||||||||||||||
Class A common stock issued for exercise of warrants | - | ( | ) | |||||||||||||||||||||||||
Warrants issued for finance expense | - | - | ||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance - June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Class A common stock issued for exercise of warrants | - | ( | ) | |||||||||||||||||||||||||
Shares to be issued - Board Compensation | - | - | ||||||||||||||||||||||||||
Stock option expense | - | - | ||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance - September 30, 2023 | $ | $ | $ | $ | ( | ) | $ |
For the Three and Nine Months Ended September 30, 2022
Class
A Common Stock | Class
B Common Stock | Additional
Paid-In | Accumulated | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
Balance - December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Class A common stock issued for service | - | |||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance - March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Debt forgiveness related party | - | - | ||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance - June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Class A common stock issued for cash | - | |||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance - September 30, 2022 | $ | $ | $ | $ | ( | ) | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5 |
SIDUS SPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended | ||||||||
September 30, | ||||||||
2023 | 2022 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Stock based compensation | ||||||||
Depreciation and amortization | ||||||||
Bad debt | ||||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | ( | ) | ||||||
Accounts receivable - related party | ( | ) | ||||||
Inventory | ( | ) | ( | ) | ||||
Contract asset | ( | ) | ( | ) | ||||
Contract asset - related party | ( | ) | ||||||
Prepaid expenses and other assets | ( | ) | ( | ) | ||||
Accounts payable and accrued liabilities | ( | ) | ||||||
Accounts payable and accrued liabilities - related party | ||||||||
Contract liability | ( | ) | ||||||
Contract liability - related party | ||||||||
Changes in operating lease assets and liabilities | ( | ) | ( | ) | ||||
Net Cash (used in) Operating Activities | ( | ) | ( | ) | ||||
Cash Flows From Investing Activities: | ||||||||
Purchase of property and equipment | ( | ) | ( | ) | ||||
Cash paid for asset acquisition | ( | ) | ||||||
Net Cash used in Investing Activities | ( | ) | ( | ) | ||||
Cash Flows From Financing Activities: | ||||||||
Proceeds from issuance of common stock units | ||||||||
Proceeds from asset-based loan agreement | ||||||||
Repayment of asset-based loan agreement | ( | ) | ||||||
Repayment of notes payable | ( | ) | ( | ) | ||||
Payment of lease liabilities | ( | ) | ||||||
Repayment of notes payable - related party | ( | ) | ||||||
Net Cash provided by Financing Activities | ||||||||
Net change in cash | ( | ) | ( | ) | ||||
Cash, beginning of period | ||||||||
Cash, end of period | $ | $ | ||||||
Supplemental cash flow information | ||||||||
Cash paid for interest | $ | $ | ||||||
Cash paid for taxes | $ | $ | ||||||
Non-cash Investing and Financing transactions: | ||||||||
Debt forgiveness | $ | $ | ||||||
Class A common stock issued for cashless exercise of warrants | $ | $ | ||||||
Modification of right-of-use asset and lease liability | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6 |
SIDUS SPACE, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
Note 1. Organization and Description of Business
Organization
Sidus Space Inc. (“Sidus”, “we”, “us” or the “Company”), was formed as Craig Technologies Aerospace Solutions, LLC, in the state of Florida, on July 17, 2012. On April 16, 2021, the Company filed a Certificate of Conversion to register and incorporate with the state of Delaware and on August 13, 2021 changed the company name to Sidus Space, Inc.
Description of Business
Founded in 2012, we are a growing U.S. commercial space company with an established manufacturing business who has been trusted to provide mission-critical space hardware to many of the top aerospace businesses for over a decade. We plan to offer on-orbit services as the space economy expands; said services are either in a developmental phase or soon to achieve flight heritage. We have strategically decided to expand our business by moving up the satellite value chain by becoming a provider of responsive and scalable on-orbit infrastructure as well as collecting Space and Earth observational data to capture larger market needs.
To address Commercial and Government customer needs and mission sets, we plan to organize into three core business lines: manufacturing services; space-infrastructure-as-a-service; and space-based data and insights. Our vertically integrated model is complementary across each line of business aiming to expand existing and unlock new potential revenue generating opportunities. Additionally, we look to further transition into a subscription-based model upon the digitization of our manufacturing process as we expand alongside our space-based focus.
Note 2. Summary of Signification Accounting Policies
Basis of Presentation
The Company prepares its financial statements in accordance with rules and regulations of the Securities and Exchange Commission (“SEC”) and GAAP in the United States of America. The accompanying interim financial statements have been prepared in accordance with GAAP for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the Company’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2023, are not necessarily indicative of the results for the full year. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim financial statements should be read in conjunction with the audited financial statements and the footnotes thereto for the year ended December 31,2022, contained in the Company’s Form 10-K filed on March 15,2023.
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. For the three and nine months ended September 30, 2022, the Company has reclassified operating expenses to selling, general and administrative expenses.
Going Concern
For
the nine months ended September 30, 2023, the Company had a net loss of $
7 |
Principles of Consolidation
The consolidated financial statements include the variable interest entity (“VIE”), Aurea Alas Limited (“Aurea”), of which we are the primary beneficiary. Aurea is a Limited company organized in the Isle of Man, which entered into a license agreement with a third party vendor, whereby they licensed the rights to use certain available radio frequency spectrum for satellite communications. All intercompany transactions and balances have been eliminated on consolidation.
For entities determined to be VIEs, an evaluation is required to determine whether the Company is the primary beneficiary. The Company evaluates its economic interests in the entity specifically determining if the Company has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance (“the power”) and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE (“the benefits”). When making the determination on whether the benefits received from an entity are significant, the Company considers the total economics of the entity, and analyzes whether the Company’s share of the economics is significant. The Company utilizes qualitative factors, and, where applicable, quantitative factors, while performing the analysis.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates. Examples of estimates and assumptions include: for revenue recognition, determining the nature and timing of satisfaction of performance obligations, the fair value of and/or potential impairment of property and equipment; product life cycles; useful lives of our property and equipment; allowances for doubtful accounts; the market value of, and demand for, our inventory; fair value calculation of warrant; stock based compensation; the incremental borrowing rate used on right-of-use assets and the potential outcome of uncertain tax positions that have been recognized in our consolidated financial statements or tax returns.
Cash and Cash Equivalents
For
purposes of balance sheet presentation and reporting of cash flows, the Company considers all unrestricted demand deposits, money market
funds and highly liquid debt instruments with an original maturity of less than 90 days to be cash and cash equivalents. The Company
had
Periodically,
the Company may carry cash balances at financial institutions more than the federally insured limit of $
The Company accounts for stock-based compensation awards in accordance with ASC Topic 718, “Compensation – Stock Compensation.” The cost of services received from employees and non-employees in exchange for awards of equity instruments is recognized in the consolidated statements of operations and comprehensive income based on the estimated fair value of those awards on the grant date and amortized on a straight-line basis over the requisite service period or vesting period. The Company records forfeitures as they occur.
8 |
Share-based payments are valued using a Black-Scholes option pricing model. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service.
The expected option term is computed using the “simplified” method as permitted under the provisions of ASC 718-10-S99. The Company uses the simplified method to calculate expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The share price as of the grant date was determined by current market prices for our common stock. Expected volatility is based on the historical stock price volatility of comparable companies’ common stock, as our stock does not have sufficient historical trading activity. Risk free interest rates were obtained from U.S. Treasury rates for the applicable periods.
Inventory
Inventory consists of finished goods and work in progress and consists of estimated revenue calculated on a percentage of completion based on direct labor and materials in relation to the total contract value. The Company does not maintain raw materials.
Contract Assets and Contract Liabilities
The amounts included within the contract assets and contract liabilities are related to the Company’s long-term construction contracts. Retainage for which the company has an unconditional right to payment that is only subject to the passage of time is classified as contracts receivable. Retainage subject to conditions other than the passage of time are included in contract assets and contract liabilities on a net basis at the individual contract level. Contract assets represent revenue recognized in excess of amounts paid or payable (contracts receivable) to the company on uncompleted contracts. Contract liabilities represent the company’s obligation to perform on uncompleted contracts with customers for which the company has received payment or for which contracts receivable are outstanding.
Property and Equipment
Property and equipment, consisting mostly of plant and machinery, motor vehicles, computer equipment and capitalized research and development equipment, is recorded at cost reduced by accumulated depreciation and impairment, if any. Construction in progress generally involves short-term capital projects and is not depreciated until the development has reached completion and the asset has been put into service. Depreciation expense is recognized over the assets’ estimated useful lives of three – ten years using the straight-line method. Major additions and improvements are capitalized as additions to the property and equipment accounts, while replacements, maintenance and repairs that do not improve or extend the life of the respective assets, are expensed as incurred. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts.
Fair Value Measurements
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows:
● | Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; | |
● | Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and | |
● | Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. |
9 |
The Company’s financial instruments, including cash, accounts receivable, contract assets and liabilities, prepaid expenses and other current assets, accounts payable and accrued liabilities, and loans payable, are carried at historical cost. At September 30, 2023 and December 31, 2022, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.
Business Combinations
Business combinations are recorded using the acquisition method of accounting. The purchase price of the acquisition is allocated to the tangible assets, liabilities, identifiable intangible assets acquired and non-controlling interest, if any, based on their estimated fair values as of the acquisition date. The excess of the purchase price over those fair values is recorded as goodwill. Acquisition-related expenses are expensed as incurred.
Intangible Assets
Intangible assets with an indefinite life are not amortized and are tested for impairment annually or more frequently if events or changes in circumstances indicate that they might be impaired.
Intangible assets with finite lives are initially recorded at cost and amortized on a straight-line basis over the estimated economic useful lives of the respective assets.
Acquired intangible assets from business combinations are recognized and measured at fair value at the time of acquisition. The identifiable intangible asset recognized in the Company’s acquisitions is a customer list, which will be tested for impairment annually.
Revenue Recognition
Revenue from the Company is recognized under Topic 606 in a manner that reasonably reflects the delivery of its services and products to customers in return for expected consideration and includes the following elements:
● | executed contracts with the Company’s customers that it believes are legally enforceable; | |
● | identification of performance obligations in the respective contract; | |
● | determination of the transaction price for each performance obligation in the respective contract; | |
● | Allocation of the transaction price to each performance obligation; and | |
● | recognition of revenue only when the Company satisfies each performance obligation. |
These five elements, as applied to each of the Company’s revenue category, is summarized below:
Revenues from fixed price contracts that are still in progress at month end are recognized on the percentage-of-completion method, measured by the percentage of total costs incurred to date to the estimated total costs for each contract. This method is used because management considers total costs to be the best available measure of progress on these contracts. Revenue from fixed price contracts and time-and-materials contracts that are completed in the month the work was started are recognized when the work is shipped. To achieve this core principle, we apply the following five steps: identify the contract with the client, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to performance obligations in the contract and recognize revenues when or as the Company satisfies a performance obligation.
Revenues from fixed price service contracts that contain provisions for milestone payments are recognized at the time of the milestone being met and payment received. This method is used because management considers that the payments are nonrefundable unless the entity fails to perform as promised. If the customer terminates the contract, the Company is entitled only to retain any progress payments received from the customer and the Company has no further rights to compensation from the customer. Even though the payments made by the customer are nonrefundable, the cumulative amount of those payments is not expected, at all times throughout the contract, to at least correspond to the amount that would be necessary to compensate the Company for performance completed to date. Accordingly, the Company accounts for the progress under the contract as a performance obligation satisfied at a point in time. To achieve this core principle, we apply the following five steps: identify the contract with the client, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to performance obligations in the contract and recognize revenues when or as the Company satisfies a performance obligation.
10 |
Recent Accounting Pronouncements
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. These amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments in this update are effective for public business entities for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.
The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements.
Note 3. Variable Interest Entity
The consolidated financial statements include Aurea Alas Limited (Aurea), which is a variable interest entity of which we are the primary beneficiary, and on August 26, 2020, the Company entered into a licensing agreement with Aurea. Aurea is a Limited company organized in the Isle of Man, which entered into a license agreement with a third-party vendor, whereby they licensed the rights to use certain available radio frequency spectrum for satellite communications. The Company is responsible for 100% of the operations of Aurea and derives 100% of the net profits or losses derived from the business operations. The assets, liabilities, and the operations of Aurea from the date of inception (July 20, 2020), were included in the Company’s consolidated financial statements.
Through a declaration of trust, % of the voting rights of Aurea’s shareholders have been transferred to the Company so that the Company has effective control over Aurea and has the power to direct the activities of Aurea that most significantly impact its economic performance. There are no restrictions on the consolidated VIE’s assets and on the settlement of its liabilities and all carrying amounts of VIE’s assets and liabilities are consolidated with the Company’s financial statements.
If facts and circumstances change such that the conclusion to consolidate the VIE has changed, the Company shall disclose the primary factors that caused the change and the effect on the Company’s financial statements in the periods when the change occurs.
As of September 30, 2023, and December 31,2022, Aurea’s assets and liabilities are as follows:
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Assets | ||||||||
Cash | $ | $ | ||||||
Prepaid and other current assets | ||||||||
$ | $ | |||||||
Liabilities | ||||||||
Accounts payable and other current liabilities | $ | $ |
For
the nine months ended September 30, 2023 and 2022, Aurea’s net loss was $
11 |
Note 4. Prepaid expense and Other current assets
As of September 30, 2023, and December 31, 2022, prepaid expense and other current assets are as follows:
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Prepaid insurance | $ | $ | ||||||
Prepaid components | ||||||||
Prepaid satellite services & licenses | ||||||||
Prepaid software | ||||||||
Other current assets | ||||||||
$ | $ |
During
the nine months ended September 30, 2023, and 2022, the Company recorded interest expenses of $
Note 5. Inventory
As of September 30, 2023, and December 31, 2022, inventory is as follows:
September
30, 2023 | December
31, 2022 | |||||||
Work in Process | $ | $ |
Note 6. Property and Equipment
At September 30, 2023, and December 31, 2022, property and equipment consisted of the following:
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Office equipment | $ | $ | ||||||
Computer equipment | ||||||||
Vehicle | ||||||||
Software | ||||||||
Machinery | ||||||||
Leasehold improvements | ||||||||
R&D software | ||||||||
Construction in progress | ||||||||
Accumulated depreciation | ( | ) | ( | ) | ||||
Property and equipment, net of accumulated depreciation | $ | $ |
As of September 30, 2023, and December 31,2022, construction in progress represents components to be used in the manufacturing of our satellites.
Depreciation
expense of property and equipment for the nine months ended September 30, 2023 and 2022 is $
Note 7. Business Acquisition
On
August 18, 2023, the Company entered into an Asset Conveyance Agreement (the “Purchase Agreement”) with Exo-Space Inc., a
Delaware corporation (“Exo-Space”), and certain shareholders thereof. The Purchase Agreement provided for the acquisition
by the Company of substantially all of the assets of Exo-Space (the “Assets”) which includes the customer contracts and lists
related to Exo-Space’s business of providing analytics services by (i) providing on-orbit data processing services, including satellite
imaging intelligence services, and (ii) the development of artificial intelligence and machine learning technology and software used
for the on-orbit processing of data (the “Business”) from Exo-Space. The purchase price for the Assets was approximately
$
12 |
In addition, on August 18, 2023, the Company entered into a Sale of Business Non-Competition and Non-Solicitation Agreement with Exo-Space Inc. and each of Jeremy Allam (“Allam”), Mark Lorden (“Lorden”), Marcel Lariviere (“Lariviere”) and Tate Schaar (“Schaar” and collectively, with Allam, Lorden and Lariviere, the “Sellers”) pursuant to which the Sellers agreed to keep confidential certain information related to the Business and agreed to a five (5) year non-compete and non-solicitation.
On August 21, 2023 (the “Closing Date”), the Company completed its acquisition of the Assets related to Exo-Space (the “Acquisition”). As part of the Acquisition, Jeremy Allam, Marcel Lariviere, Mark Lorden and Tate Schaar entered into employment agreements with the Company which granted non-statutory stock options to Jeremy Allam, Marcel Lariviere, Mark Lorden and Tate Schaar with respect to the following number of shares of the Company’s common stock: (Allam); (Lariviere); (Lorden) and (Schaar). These option awards were made outside of the Company’s 2021 Omnibus Equity Incentive Plan and are made pursuant to the NASDAQ inducement grant exception in connection with such individuals’ commencement of employment with the Company which is August 21, 2023. The option awards have an exercise price of $ which is equal to the fair market value of our stock on August 21, 2023, the date of grant of such options. The options have a five ( )-year term and shall vest in four (4) equal installments on each of the first four (4) anniversaries of the date of grant, in each case subject to the optionee continuing to provide services to the Company through the applicable vesting date. Notwithstanding the foregoing vesting conditions, no portion of the options shall be exercisable prior to the second (2nd) anniversary of the date of grant. In the event that the applicable optionee resigns from employment for any reason prior to the second (2nd) anniversary of the date of grant, the option will be immediately cancelled and terminated on the date of such resignation.
Pro
forma results of operations have not been presented because the effects of the Acquisition was not material to our consolidated results
of operations. Acquisition-related costs included legal fees of $
Cash paid | $ | |||
Assets Acquired: | ||||
Accounts receivable | $ | |||
Inventory | ||||
Property and equipment | ||||
Intangible asset | ||||
Total | $ |
Note 8. Accounts payable and other current liabilities
At September 30, 2023, and December 31, 2022, accounts payable and other current liabilities consisted of the following:
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Accounts payable | $ | $ | ||||||
Payroll liabilities | ||||||||
Credit card liability | ||||||||
Other payable | ||||||||
Insurance payable | ||||||||
$ | $ |
13 |
Note 9. Asset-based loan
The
Company is party to a recourse loan and security agreement with an unrelated lender dated November 30, 2022, whereby the lender will
provide loans secured by certain accounts receivable for up to
Note 10. Contract assets and liabilities
At September 30, 2023 and December 31, 2022, contract assets and contract liabilities consisted of the following:
Contract assets | September
30, 2023 | December
31, 2022 | ||||||
Revenue recognized in excess of amounts paid or payable (contracts receivable) to the company on uncompleted contracts (contract asset), excluding retainage | $ | $ | ||||||
Retainage included in contract assets due to being conditional on something other than solely passage of time | ||||||||
Retainage included in contract assets due to being conditional on something other than solely passage of time – related party | ||||||||
Total contract assets | $ | $ |
Contract liabilities | September
30, 2023 | December
31, 2022 | ||||||
Payments received or receivable (contracts receivable) in excess of revenue recognized on uncompleted contracts (contract liability), excluding retainage | $ | $ | ||||||
Retainage included in contract liabilities due to being conditional on something other than solely passage of time | ||||||||
Retainage included in contract liabilities due to being conditional on something other than solely passage of time – Related party | ||||||||
Total contract liabilities | $ | $ |
Note 11. Leases
Operating leases
14 |
We recognized total lease expense, primarily related to our operating leases, on a straight-line basis in accordance with ASC 842.
As
of September 30, 2023, and December 31, 2022, the Company recorded a refundable security deposit of $
The operating lease expense were as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Operating lease cost | $ | $ | $ | $ |
Supplemental balance sheet information related to operating leases was as follows:
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Operating lease right-of-use assets at inception | $ | $ | ||||||
Accumulated amortization | ( | ) | ( | ) | ||||
Total operating lease right-of-use assets, net | $ | $ | ||||||
Operating lease liabilities - current | $ | $ | ||||||
Operating lease liabilities - non-current | ||||||||
Total operating lease liabilities | $ | $ | ||||||
Weighted-average remaining lease term — operating leases (year) | ||||||||
Weighted-average discount rate — operating leases | % | % |
Future minimum lease payments under operating leases that have initial noncancelable lease terms in excess of one year at September 30, 2023 were as follows:
Year Ending December 31, | ||||
2023 (excluding the nine months ended September 30, 2023) | $ | |||
2024 | ||||
Thereafter | ||||
Less: Imputed interest | ( | ) | ||
Operating lease liabilities | $ |
Note 12. Notes Payable
Decathlon Note
On
December 1, 2021, we entered into a Loan Assignment and Assumption Agreement, or Loan Assignment, with Decathlon Alpha IV, L.P., or Decathlon
and Craig Technical Consulting, Inc (“CTC”) pursuant to which we assumed $
15 |
Management
believes that the assumption of the Decathlon Note from CTC is in our best interests because in connection therewith, Decathlon released
us from a cross-collateralization agreement it was a party to with CTC for a loan of a greater amount. Also in connection with the Loan
Assignment on December 3, 2021, we entered into a Revenue Loan and Security Agreement, or RLSA, with Decathlon and our CEO, Carol Craig,
pursuant to which we pay interest based on a minimum rate of one (1) times the amount advanced and make monthly payments based on a percentage
of our revenue calculated as an amount equal to the product of (i) all revenue for the immediately preceding month multiplied by (ii)
the Applicable Revenue Percentage, defined as 4% of revenue for payments due during any month. The Decathlon Note is secured by our assets
and is guaranteed by CTC and matures the earliest of: (i)
During
the nine months ended September 30, 2023, and 2022, the Company recorded interest expense of $
Note 13. Related Party Transactions
Revenue and Accounts Receivable
The
Company recognized revenue of $
The
Company recognized contract asset and liability of $
Accounts Payable
As
of September 30, 2023 and December 31, 2022, the Company owed $
Cost of Revenue
For
the nine months ended September 30, 2023 and 2022, the Company recorded cost of revenue to Craig Technical Consulting, Inc. of $
Professional Service Agreements
A Professional Services Agreement, effective November 15, 2021, was made, between the Company and Craig Technical Consulting, Inc. The period of performance for this Agreement was December 1, 2021, through November 30, 2022. The Agreement was amended, and the term of the Agreement was extended to November 30, 2023.
During
the nine months ended September 30, 2023 and 2022, the Company recorded professional services of $
Sublease
On
August 1, 2021, the Company entered into a Sublease Agreement with its related party Majority Shareholder, CTC, (“Sublandlord”),
whereby the Company shall sublease certain offices, rooms and shared use of common spaces located at 150 Sykes Creek Parkway, Merritt
Island, FL. The Lease is a month-to-month lease and may be terminated with 30 days’ notice to the Sublandlord. The monthly rent
is $
16 |
Note 14. Commitments and Contingencies
Litigation
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. We are currently not aware of any such legal proceedings or claims that will have, individually or in aggregate, a material adverse effect on our business, financial condition, or operating results.
License Agreement
The
consolidated financial statements include Aurea Alas Limited, which is a variable interest entity of which we are the primary beneficiary
(see Note 3). On August 18, 2020, Aurea entered into a license agreement with a third-party vendor (the “Vendor”), whereby
they licensed the rights to use certain available radio frequency spectrum for satellite communications. The Company shall pay an annual
Reservation Fee of $
Note 15. Stockholder’s Equity
Authorized Capital Stock
Effective July 3, 2023, the Company filed Amended and Restated Certificate of Incorporation to amend for authorized capital stock to authorize the Company to issue shares.
The Company has authorized shares of preferred stock with a par value of $ .
The Company has authorized shares of common stock with a par value of $ , consisting of shares of Class A Common Stock and shares of Class B Common Stock. The Class B Common Stock is entitled to 10 votes for every 1 vote of the Class A Common Stock.
Class A Common Stock
On
January 30, 2023, the Company offered an aggregate of up to
On
April 20, 2023, the Company sold an aggregate of
17 |
During
the nine months ended September 30, 2023,
The Company had and shares of Class A common stock issued and outstanding as of September 30, 2023 and December 31,2022, respectively.
The
Company had a total of
Class B Common Sock
The Company had