false --12-31 Q3 0001879726 0001879726 2023-01-01 2023-09-30 0001879726 us-gaap:CommonClassAMember 2023-11-14 0001879726 us-gaap:CommonClassBMember 2023-11-14 0001879726 2023-09-30 0001879726 2022-12-31 0001879726 us-gaap:NonrelatedPartyMember 2023-09-30 0001879726 us-gaap:NonrelatedPartyMember 2022-12-31 0001879726 us-gaap:RelatedPartyMember 2023-09-30 0001879726 us-gaap:RelatedPartyMember 2022-12-31 0001879726 us-gaap:CommonClassAMember 2023-09-30 0001879726 us-gaap:CommonClassAMember 2022-12-31 0001879726 us-gaap:CommonClassBMember 2023-09-30 0001879726 us-gaap:CommonClassBMember 2022-12-31 0001879726 2023-07-01 2023-09-30 0001879726 2022-07-01 2022-09-30 0001879726 2022-01-01 2022-09-30 0001879726 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2022-12-31 0001879726 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2022-12-31 0001879726 us-gaap:AdditionalPaidInCapitalMember 2022-12-31 0001879726 us-gaap:RetainedEarningsMember 2022-12-31 0001879726 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2023-03-31 0001879726 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2023-03-31 0001879726 us-gaap:AdditionalPaidInCapitalMember 2023-03-31 0001879726 us-gaap:RetainedEarningsMember 2023-03-31 0001879726 2023-03-31 0001879726 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2023-06-30 0001879726 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2023-06-30 0001879726 us-gaap:AdditionalPaidInCapitalMember 2023-06-30 0001879726 us-gaap:RetainedEarningsMember 2023-06-30 0001879726 2023-06-30 0001879726 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2021-12-31 0001879726 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2021-12-31 0001879726 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001879726 us-gaap:RetainedEarningsMember 2021-12-31 0001879726 2021-12-31 0001879726 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2022-03-31 0001879726 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2022-03-31 0001879726 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001879726 us-gaap:RetainedEarningsMember 2022-03-31 0001879726 2022-03-31 0001879726 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2022-06-30 0001879726 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2022-06-30 0001879726 us-gaap:AdditionalPaidInCapitalMember 2022-06-30 0001879726 us-gaap:RetainedEarningsMember 2022-06-30 0001879726 2022-06-30 0001879726 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2023-01-01 2023-03-31 0001879726 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2023-01-01 2023-03-31 0001879726 us-gaap:AdditionalPaidInCapitalMember 2023-01-01 2023-03-31 0001879726 us-gaap:RetainedEarningsMember 2023-01-01 2023-03-31 0001879726 2023-01-01 2023-03-31 0001879726 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2023-04-01 2023-06-30 0001879726 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2023-04-01 2023-06-30 0001879726 us-gaap:AdditionalPaidInCapitalMember 2023-04-01 2023-06-30 0001879726 us-gaap:RetainedEarningsMember 2023-04-01 2023-06-30 0001879726 2023-04-01 2023-06-30 0001879726 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2023-07-01 2023-09-30 0001879726 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2023-07-01 2023-09-30 0001879726 us-gaap:AdditionalPaidInCapitalMember 2023-07-01 2023-09-30 0001879726 us-gaap:RetainedEarningsMember 2023-07-01 2023-09-30 0001879726 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2022-01-01 2022-03-31 0001879726 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2022-01-01 2022-03-31 0001879726 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-03-31 0001879726 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001879726 2022-01-01 2022-03-31 0001879726 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2022-04-01 2022-06-30 0001879726 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2022-04-01 2022-06-30 0001879726 us-gaap:AdditionalPaidInCapitalMember 2022-04-01 2022-06-30 0001879726 us-gaap:RetainedEarningsMember 2022-04-01 2022-06-30 0001879726 2022-04-01 2022-06-30 0001879726 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2022-07-01 2022-09-30 0001879726 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2022-07-01 2022-09-30 0001879726 us-gaap:AdditionalPaidInCapitalMember 2022-07-01 2022-09-30 0001879726 us-gaap:RetainedEarningsMember 2022-07-01 2022-09-30 0001879726 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2023-09-30 0001879726 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2023-09-30 0001879726 us-gaap:AdditionalPaidInCapitalMember 2023-09-30 0001879726 us-gaap:RetainedEarningsMember 2023-09-30 0001879726 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2022-09-30 0001879726 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2022-09-30 0001879726 us-gaap:AdditionalPaidInCapitalMember 2022-09-30 0001879726 us-gaap:RetainedEarningsMember 2022-09-30 0001879726 2022-09-30 0001879726 SIDU:AureaShareholdersMember 2023-09-30 0001879726 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember SIDU:AureaMember 2023-01-01 2023-09-30 0001879726 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember SIDU:AureaMember 2022-01-01 2022-09-30 0001879726 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember SIDU:AureaMember 2023-09-30 0001879726 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember SIDU:AureaMember 2022-12-31 0001879726 us-gaap:OfficeEquipmentMember 2023-09-30 0001879726 us-gaap:OfficeEquipmentMember 2022-12-31 0001879726 us-gaap:ComputerEquipmentMember 2023-09-30 0001879726 us-gaap:ComputerEquipmentMember 2022-12-31 0001879726 us-gaap:VehiclesMember 2023-09-30 0001879726 us-gaap:VehiclesMember 2022-12-31 0001879726 us-gaap:SoftwareDevelopmentMember 2023-09-30 0001879726 us-gaap:SoftwareDevelopmentMember 2022-12-31 0001879726 us-gaap:MachineryAndEquipmentMember 2023-09-30 0001879726 us-gaap:MachineryAndEquipmentMember 2022-12-31 0001879726 us-gaap:LeaseholdImprovementsMember 2023-09-30 0001879726 us-gaap:LeaseholdImprovementsMember 2022-12-31 0001879726 SIDU:ResearchAndDevelopmentSoftwareMember 2023-09-30 0001879726 SIDU:ResearchAndDevelopmentSoftwareMember 2022-12-31 0001879726 us-gaap:ConstructionInProgressMember 2023-09-30 0001879726 us-gaap:ConstructionInProgressMember 2022-12-31 0001879726 us-gaap:CostOfSalesMember 2023-01-01 2023-09-30 0001879726 us-gaap:CostOfSalesMember 2022-01-01 2022-09-30 0001879726 SIDU:ExoSpaceMember 2023-08-18 2023-08-18 0001879726 SIDU:ExoSpaceMember SIDU:JeremyAllamMember 2023-08-21 2023-08-21 0001879726 SIDU:ExoSpaceMember SIDU:MarcelLariviereMember 2023-08-21 2023-08-21 0001879726 SIDU:ExoSpaceMember SIDU:MarkLordenMember 2023-08-21 2023-08-21 0001879726 SIDU:ExoSpaceMember SIDU:TateSchaarMember 2023-08-21 2023-08-21 0001879726 SIDU:ExoSpaceMember 2023-08-21 0001879726 SIDU:ExoSpaceMember 2023-08-21 2023-08-21 0001879726 SIDU:ExoSpaceMember 2023-08-18 0001879726 srt:MaximumMember 2023-01-01 2023-09-30 0001879726 SIDU:OfficeFacilityMember 2023-01-01 2023-09-30 0001879726 SIDU:OfficeFacilityMember 2023-09-30 0001879726 SIDU:NewLeaseAgreementMember 2021-05-01 2021-05-31 0001879726 SIDU:NewLeaseAgreementMember 2023-01-01 2023-09-30 0001879726 SIDU:NewLeaseAgreementMember 2023-09-30 0001879726 SIDU:DecathlonAlphaIVLPMember 2021-12-01 0001879726 us-gaap:RelatedPartyMember 2021-12-01 0001879726 SIDU:DecathlonAlphaIVLPMember 2021-01-01 2021-12-31 0001879726 SIDU:DecathlonAlphaIVLPMember 2021-12-02 2021-12-03 0001879726 SIDU:DecathlonAlphaIVLPMember 2023-01-01 2023-09-30 0001879726 SIDU:DecathlonAlphaIVLPMember 2022-01-01 2022-09-30 0001879726 SIDU:DecathlonAlphaIVLPMember 2023-09-30 0001879726 SIDU:CraigTechnicalConsultingIncMember 2023-01-01 2023-09-30 0001879726 SIDU:CraigTechnicalConsultingIncMember 2022-01-01 2022-09-30 0001879726 us-gaap:RelatedPartyMember 2022-09-30 0001879726 SIDU:CraigTechnicalConsultingIncMember 2023-09-30 0001879726 SIDU:CraigTechnicalConsultingIncMember 2022-12-31 0001879726 SIDU:SublandlordMember 2022-01-01 2022-01-31 0001879726 SIDU:SublandlordMember 2022-02-01 2023-01-31 0001879726 srt:ScenarioForecastMember SIDU:SublandlordMember 2023-02-01 2024-01-31 0001879726 SIDU:SublandlordMember 2023-01-01 2023-09-30 0001879726 SIDU:SublandlordMember 2022-01-01 2022-09-30 0001879726 us-gaap:LicenseAgreementTermsMember 2020-08-18 0001879726 2023-07-03 0001879726 us-gaap:CommonClassAMember 2023-01-30 0001879726 us-gaap:OverAllotmentOptionMember us-gaap:CommonClassAMember 2023-01-30 0001879726 us-gaap:CommonClassAMember 2023-01-30 2023-01-30 0001879726 2023-01-30 2023-01-30 0001879726 us-gaap:CommonClassAMember 2023-04-18 2023-04-20 0001879726 us-gaap:CommonClassAMember SIDU:PreFundedWarrantsMember 2023-04-20 0001879726 us-gaap:CommonClassAMember 2023-04-20 0001879726 us-gaap:CommonClassAMember us-gaap:OverAllotmentOptionMember 2023-04-18 2023-04-20 0001879726 us-gaap:OverAllotmentOptionMember us-gaap:CommonClassAMember 2023-04-20 0001879726 2023-04-18 2023-04-20 0001879726 us-gaap:CommonClassAMember 2023-01-01 2023-09-30 0001879726 us-gaap:CommonClassAMember SIDU:OmnibusEquityIncentivePlanMember 2023-01-01 2023-09-30 0001879726 SIDU:PreFundedWarrantsMember 2023-09-30 0001879726 2023-01-31 0001879726 SIDU:AprilTwoThousandTwentyThreeOfferingMember 2023-01-01 2023-09-30 0001879726 SIDU:AprilTwoThousandTwentyThreeOfferingMember 2023-09-30 0001879726 us-gaap:CommonStockMember SIDU:AprilTwoThousandTwentyThreeOfferingMember 2023-09-30 0001879726 SIDU:PreFundedWarrantsMember SIDU:AprilTwoThousandTwentyThreeOfferingMember 2023-04-01 2023-06-30 0001879726 us-gaap:CommonClassAMember SIDU:AprilTwoThousandTwentyThreeOfferingMember 2023-07-01 2023-09-30 0001879726 SIDU:UnderwriterWarrantsMember SIDU:AprilTwoThousandTwentyThreeOfferingMember 2023-09-30 0001879726 us-gaap:WarrantMember 2023-01-01 2023-09-30 0001879726 us-gaap:WarrantMember 2022-01-01 2022-09-30 0001879726 us-gaap:WarrantMember 2023-09-30 0001879726 2023-08-21 2023-08-21 0001879726 us-gaap:WarrantMember srt:MinimumMember 2023-01-01 2023-09-30 0001879726 us-gaap:WarrantMember srt:MaximumMember 2023-01-01 2023-09-30 0001879726 SIDU:ZeroPointThreeZeroExercisePriceMember 2023-01-01 2023-09-30 0001879726 SIDU:ZeroPointThreeThreeExercisePriceMember 2023-01-01 2023-09-30 0001879726 SIDU:ZeroPointThreeEightExercisePriceMember 2023-01-01 2023-09-30 0001879726 SIDU:ZeroPointFourOneExercisePriceMember 2023-01-01 2023-09-30 0001879726 us-gaap:EmployeeStockOptionMember 2023-01-01 2023-09-30 0001879726 2022-01-01 2022-12-31 0001879726 us-gaap:CommonClassAMember us-gaap:SubsequentEventMember 2023-10-17 2023-10-17 0001879726 SIDU:SeriesAConvertiblePreferredStockMember us-gaap:SubsequentEventMember 2023-10-11 0001879726 us-gaap:CommonClassAMember us-gaap:SubsequentEventMember 2023-10-11 0001879726 SIDU:SeriesAConvertiblePreferredStockMember us-gaap:SubsequentEventMember 2023-11-03 0001879726 SIDU:SeriesAConvertiblePreferredStockMember us-gaap:SubsequentEventMember 2023-11-03 2023-11-03 0001879726 SIDU:SeriesAConvertiblePreferredStockMember us-gaap:SubsequentEventMember 2023-11-07 0001879726 SIDU:SeriesAConvertiblePreferredStockMember us-gaap:SubsequentEventMember 2023-11-07 2023-11-07 0001879726 SIDU:SeriesAConvertiblePreferredStockMember us-gaap:SubsequentEventMember 2023-11-09 0001879726 SIDU:SeriesAConvertiblePreferredStockMember us-gaap:SubsequentEventMember 2023-11-09 2023-11-09 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

 

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: 001-41154

 

SIDUS SPACE, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware   46-0628183

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

150 N. Sykes Creek Parkway, Suite 200,

Merritt Island, FL

  32953
(Address of principal executive offices)   (Zip Code)

 

(321) 450-5633

(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
Class A common stock, $0.0001 par value   SIDU   The Nasdaq Stock Market LLC

 

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. Yes ☒ No ☐

 

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). Yes ☒ No ☐

 

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
       
Non-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 ☐ No

 

Number of Class A and B common shares outstanding as of November 14, 2023 was 77,867,915 and 10,000,000, respectively.

 

Number of Series A Convertible Preferred Stock shares outstanding as of November 14, 2023 was 1,812.

 

 

 

   
 

 

   

Page

No.

PART I. FINANCIAL INFORMATION 3
     
Item 1. Financial Statements (Unaudited) 3
     
  Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 3
     
  Condensed Consolidated Statements of Operations for the Three Months and Nine Months ended September 30, 2023 and 2022 4
     
  Condensed Consolidated Statements of Stockholders’ Equity for the Three Months and Nine Months ended September 30, 2023 and 2022 5
     
  Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2023 and 2022 6
     
  Notes to the Condensed Consolidated Financial Statements 7
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 38
     
Item 4. Controls and Procedures 38
     
PART II. OTHER INFORMATION 38
     
Item 1. Legal Proceedings 38
     
Item 1A. Risk Factors 38
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 38
     
Item 3. Defaults Upon Senior Securities 38
     
Item 4. Mine Safety Disclosure 39
     
Item 5. Other Information 39
     
Item 6. Exhibits 39
     
Signatures 40

 

 2 
 

 

SIDUS SPACE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

   September 30,   December 31, 
   2023   2022 
Assets          
Current assets          
Cash  $1,597,331   $2,295,259 
Accounts receivable   628,616    850,340 
Accounts receivable - related parties   245,966    168,170 
Inventory   1,310,693    583,437 
Contract asset   77,124    60,932 
Contract asset - related party   30,938    14,982 
Prepaid and other current assets   5,972,020    3,476,748 
Total current assets   9,862,688    7,449,868 
           
Property and equipment, net   7,252,223    2,554,992 
Operating lease right-of-use assets   183,800    249,937 
Intangible asset   398,135    - 
Other assets   59,418    42,778 
Total Assets  $17,756,264   $10,297,575 
           
Liabilities and Stockholders’ Equity          
Current liabilities          
Accounts payable and other current liabilities  $5,962,192   $3,415,845 
Accounts payable and accrued interest - related party   596,189    566,636 
Contract liability   77,124    60,932 
Contract liability - related party   30,938    14,982 
Asset-based loan liability   500,187    502,349 
Notes payable   1,916,278    1,599,150 
Operating lease liability   189,718    199,158 
Total current liabilities   9,272,626    6,359,052 
           
Operating lease liability - non-current   -    63,310 
Total Liabilities   9,272,626    6,422,362 
           
Commitments and contingencies   -     -  
           
Stockholders’ Equity          
Preferred Stock: 5,000,000 shares authorized; $0.0001 par value; no shares issued and outstanding   -    - 
Common stock: 210,000,000 authorized; $0.0001 par value          
Class A common stock: 200,000,000 shares authorized; 70,965,559 and 8,022,736 shares issued and outstanding, respectively   7,096    802 
Class B common stock: 10,000,000 shares authorized; 10,000,000 shares issued and outstanding   1,000    1,000 
Additional paid-in capital   47,756,113    32,129,257 
Accumulated deficit   (39,280,571)   (28,255,846)
Total Stockholders’ Equity   8,483,638    3,875,213 
Total Liabilities and Stockholders’ Equity  $17,756,264   $10,297,575 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 3 
 

 

SIDUS SPACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   2023   2022   2023   2022 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
                 
Revenue  $762,231   $1,260,146   $3,852,571   $4,099,626 
Revenue - related parties   223,289    57,101    766,985    864,319 
Total - revenue   985,520    1,317,247    4,619,556    4,963,945 
Cost of revenue   1,081,801    1,402,870    3,312,261    3,724,467 
Gross profit (loss)   (96,281)   (85,623)   1,307,295    1,239,478 
                     
Operating expenses                    
Selling, general and administrative expenses   3,778,460    3,789,795    10,881,111    9,778,757 
Total operating expenses   3,778,460    3,789,795    10,881,111    9,778,757 
                     
Net loss from operations   (3,874,741)   (3,875,418)   (9,573,816)   (8,539,279)
                     
Other income (expense)                    
Other income   -    -    17,950    - 
Interest expense   (186,282)   (50,880)   (561,476)   (175,208)
Asset-based loan expense   (21,062)   -    (100,629)   - 
Finance expense   -    -    (806,754)   - 
Total other income (expense)   (207,344)   (50,880)   (1,450,909)   (175,208)
                     
Loss before income taxes   (4,082,085)   (3,926,298)   (11,024,725)   (8,714,487)
Provision for income taxes   -    -    -    - 
Net loss  $(4,082,085)  $(3,926,298)  $(11,024,725)  $(8,714,487)
                     
Basic and diluted loss per common share  $(0.05)  $(0.23)  $(0.21)  $(0.52)
Basic and diluted weighted average number of common shares outstanding   74,304,946    17,178,648    51,880,279    16,886,582 

 

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

 

   Shares   Amount   Shares   Amount   Capital   Deficit   Total 
  

Class A Common

Stock

  

Class B Common

Stock

  

Additional

Paid-In

   Accumulated     
   Shares   Amount   Shares   Amount   Capital   Deficit   Total 
                             
Balance - December 31, 2022   8,022,736   $802    10,000,000   $1,000   $32,129,257   $(28,255,846)  $3,875,213 
                                    
Class A common stock units issued   17,250,000    1,725    -    -    4,613,740    -    4,615,465 
Warrants issued for finance expense   -    -    -    -    566,229    -    566,229 
Net loss   -    -    -    -    -    (3,441,059)   (3,441,059)
Balance - March 31, 2023   25,272,736   $2,527    10,000,000   $1,000   $37,309,226   $(31,696,905)  $5,615,848 
                                    
Class A common stock units issued   12,359,892    1,236    -    -    10,169,247    -    10,170,483 
Class A common stock issued for exercise of warrants   22,162,426    2,216    -    -    (653)   -    1,563 
Warrants issued for finance expense   -    -    -    -    240,525    -    240,525 
Net loss   -    -    -    -    -    (3,501,581)   (3,501,581)
Balance - June 30, 2023   59,795,054   $5,979    10,000,000   $1,000   $47,718,345   $(35,198,486)  $12,526,838 
                                    
Class A common stock issued for exercise of warrants   11,170,505    1,117    -    -    (507)   -    610 
Shares to be issued - Board Compensation   -    -    -    -    25,000    -    25,000 
Stock option expense   -    -    -    -    13,275    -    13,275 
Net loss   -    -    -    -    -    (4,082,085)   (4,082,085)
Balance - September 30, 2023   70,965,559   $7,096    10,000,000   $1,000   $47,756,113   $(39,280,571)  $8,483,638 

 

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   6,574,040   $657    10,000,000   $1,000   $26,074,292   $(15,415,878)  $10,660,071 
                                    
Class A common stock issued for service   300,000    30    -    -    1,208,970    -    1,209,000 
Net loss   -    -    -    -    -    (2,330,354)   (2,330,354)
Balance - March 31, 2022   6,874,040   $687    10,000,000   $1,000   $27,283,262   $(17,746,232)  $9,538,717 
                                    
Debt forgiveness related party   -    -    -    -    1,624,755    -    1,624,755 
Net loss   -    -    -    -    -    (2,457,835)   (2,457,835)
Balance - June 30, 2022   6,874,040   $687    10,000,000   $1,000   $28,908,017   $(20,204,067)  $8,705,637 
                                    
Class A common stock issued for cash   1,062,234    107    -    -    3,060,702    -    3,060,809 
Net loss   -    -    -    -    -    (3,926,298)   (3,926,298)
Balance - September 30, 2022   7,936,274   $794    10,000,000   $1,000   $31,968,719   $(24,130,365)  $7,840,148 

 

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)

 

   2023   2022 
   Nine Months Ended 
   September 30, 
   2023   2022 
         
Cash Flows From Operating Activities:          
Net loss  $(11,024,725)  $(8,714,487)
Adjustments to reconcile net loss to net cash used in operating activities:          
Stock based compensation   845,029    1,209,000 
Depreciation and amortization   148,166    238,859 
Bad debt   15,000    - 
Changes in operating assets and liabilities:          
Accounts receivable   258,493    (787,318)
Accounts receivable - related party   (77,796)   437,471 
Inventory   (717,645)   (269,633)
Contract asset   (16,192)   (60,932)
Contract asset - related party   (15,956)   - 
Prepaid expenses and other assets   (2,511,912)   (1,585,247)
Accounts payable and accrued liabilities   3,087,470    (299,165)
Accounts payable and accrued liabilities - related party   29,553    10,939 
Contract liability   16,192    (2,479)
Contract liability - related party   15,956    - 
Changes in operating lease assets and liabilities   (6,613)   (4,756)
Net Cash (used in) Operating Activities   (9,954,980)   (9,827,748)
           
Cash Flows From Investing Activities:          
Purchase of property and equipment   (4,836,249)   (1,425,623)
Cash paid for asset acquisition   (468,663)   - 
Net Cash used in Investing Activities   (5,304,912)   (1,425,623)
           
Cash Flows From Financing Activities:          
Proceeds from issuance of common stock units   14,788,121    3,060,809 
Proceeds from asset-based loan agreement   3,487,982    - 
Repayment of asset-based loan agreement   (3,490,144)   - 
Repayment of notes payable   (223,995)   (213,708)
Payment of lease liabilities   -    (148,019)
Repayment of notes payable - related party   -    (797,505)
Net Cash provided by Financing Activities   14,561,964    1,901,577 
           
Net change in cash   (697,928)   (9,351,794)
Cash, beginning of period   2,295,259    13,710,845 
Cash, end of period  $1,597,331   $4,359,051 
           
Supplemental cash flow information          
Cash paid for interest  $20,353   $19,951 
Cash paid for taxes  $-   $- 
           
Non-cash Investing and Financing transactions:          
Debt forgiveness  $-   $1,624,755 
Class A common stock issued for cashless exercise of warrants  $1,160   $- 
Modification of right-of-use asset and lease liability  $135,235   $- 

 

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 $11.0 million. For the nine months ended September 30, 2023, the Company had negative cash flow from operating activities of $10.0 million. The Company plans to fund its cash flow needs through current cash on hand and future debt and/or equity financings which it may obtain through one or more public or private equity offerings, debt financings, government or other third-party funding, strategic alliances, or collaboration agreements. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate its projects and services, which could adversely affect its future business prospects and its ability to continue as a going concern. While there are indicators of substantial doubt, the Company believes that its current available cash on hand plus additional sources of funding, including current customer contracts as well as the Company’s ability to raise additional capital through the Company’s issuance of Class A common stock. These alleviated the substantial doubt, and we believe the Company will be sufficiently funded to meet its planned expenditures and to meet the Company’s obligations for at least the one-year period following its consolidated financial statement issuance date.

 

 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 no cash equivalents at September 30, 2023 and December 31, 2022.

 

Periodically, the Company may carry cash balances at financial institutions more than the federally insured limit of $250,000 per institution. The amount in excess of the FDIC insurance as of September 30, 2023, was approximately $1.3 million. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant.

 

Stock Based Compensation

 

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, 100% 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  $85,129   $76,517 
Prepaid and other current assets   8,309    11,394 
Total Assets  $93,438   $87,911 
           
Liabilities          
Accounts payable and other current liabilities  $59,621   $29,005 

 

For the nine months ended September 30, 2023 and 2022, Aurea’s net loss was $115,087 and $103,021, respectively.

 

 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  $267,619   $994,450 
Prepaid components   1,317,634    950,679 
Prepaid satellite services & licenses   4,199,006    1,367,125 
Prepaid software   125,577    107,000 
Other current assets   62,184    57,494 
Total  $5,972,020   $3,476,748 

 

During the nine months ended September 30, 2023, and 2022, the Company recorded interest expenses of $20,353 and $18,128, respectively related to financing of our prepaid insurance policies.

 

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  $1,310,693   $583,437 

 

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  $17,061   $17,061 
Computer equipment   41,233    37,296 
Vehicle   28,143    28,143 
Software   257,127    158,212 
Machinery   3,202,642    3,386,111 
Leasehold improvements   391,167    372,867 
R&D software   -    386,182 
Construction in progress   6,478,354    1,497,276 
Property and equipment, gross   10,415,727    5,883,148 
Accumulated depreciation   (3,163,504)   (3,328,156)
Property and equipment, net of accumulated depreciation  $7,252,223   $2,554,992 

 

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 $148,166 and $238,859, respectively, of which $133,567 and $142,248 are included as components of cost of revenue.

 

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 $468,000 in cash.

 

 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: 1,898,502 (Allam); 949,251 (Lariviere); 711,938 (Lorden) and 395,521 (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 $0.16 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 (5)-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 $220,632 and were expensed as incurred. The following table summarizes the amounts for the business acquisition which were allocated to the fair value of aggregated net assets acquired:

 

      
Cash paid  $468,663 
Assets Acquired:     
Accounts receivable  $51,769 
Inventory   9,611 
Property and equipment   9,148 
Intangible asset   398,135 
Total  $468,663 

 

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  $4,356,543   $1,483,467 
Payroll liabilities   1,202,108    820,451 
Credit card liability   94,043    44,650 
Other payable   200,824    239,110 
Insurance payable   108,674    828,167 
Total accrued expenses and other liabilities  $5,962,192   $3,415,845 

 

 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 90% of the face amount, which is paid to the Company in the form of a cash advance. The Company has a revolving line of credit for $2 million with a loan interest rate of 15.2% annum on outstanding balances. Additionally, in the event of default the Lender at its option can increase the loan interest rate by 5% per annum for each month or partial month default on outstanding balances. Under the loan and security agreement, the Company must pay back any invoices that become uncollectable. As of September 30, 2023, and December 31, 2022, the asset-based loan was $500,187 and $502,349, respectively. For the nine months ended September 30, 2023 and 2022, the costs and interest incurred by the Company in connection with the loan and security agreement activities were $100,629 and $0, respectively.

 

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   77,124    60,932 
Retainage included in contract assets due to being conditional on something other than solely passage of time – related party   30,938    14,982 
Total contract assets  $108,062   $75,914 

 

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   77,124    60,932 
Retainage included in contract liabilities due to being conditional on something other than solely passage of time – Related party   30,938    14,982 
Total contract liabilities  $108,062   $75,914 

 

Note 11. Leases

 

Operating leases

 

We have a noncancelable operating lease entered in November 2016 for our office facility that expires in July 2021 and has renewal options to May 2024. The monthly “Base Rent” is $10,392 and the Base Rent is increased by 2.5% each year. In May 2023 the Company exercised its option and extended the lease to May 31, 2024.

 

In May 2021, we entered into a new lease agreement for our office and warehouse space that expires in May 2024. The Company shall have the option to terminate the lease after 12 months and 24 months from the commencement date. The monthly “Base Rent” is $11,855 and the Base Rent may be increased by 2.5% each year.

 

 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 $10,000 for its warehouse space and is included in other assets on the balance sheet.

 

The operating lease expense were as follows:

 

 Schedule of Operating lease expense

   2023   2022   2023   2022 
  

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

 
   2023   2022   2023   2022 
Operating lease cost  $89,137   $80,019   $264,192   $251,370 

 

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  $1,276,515   $1,119,675 
Accumulated amortization   (1,092,715)   (869,738)
Total operating lease right-of-use assets, net  $183,800   $249,937 
           
Operating lease liabilities - current  $189,718   $199,158 
Operating lease liabilities - non-current   -    63,310 
Total operating lease liabilities  $189,718   $262,468 
           
Weighted-average remaining lease term — operating leases (year)   0.67    1.20 
Weighted-average discount rate — operating leases   4.73%   4.86%

 

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)  $72,127 
2024   120,211 
Thereafter   - 
Total undiscounted lease payments   192,338 
Less: Imputed interest   (2,620)
Operating lease liabilities  $189,718 

 

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 $1,106,164 in loans (the “Decathlon Note”) to CTC by Decathlon. In connection with our assumption of the Decathlon Note, CTC reduced the principal of the Note Payable – related party by $1.4 million. The Company recorded a reclassification of $1,106,164 from Note Payable – related party to Note payable – non- current (Decathlon note) and recorded forgiveness of note payable – related party of $293,836 during the year ended December 31, 2021.

 

 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) December 9, 2023, (ii) immediately prior to a change of control, or (iii) upon an acceleration of the obligations due to a default under the RLSA.

 

During the nine months ended September 30, 2023, and 2022, the Company recorded interest expense of $541,123 and $137,143, respectively, which included an additional accrual estimate based on the principal and accrued but unpaid interest payment due when the note matures, and made payments of $223,995 and $213,708, respectively. As of September 30, 2023, and December 31,2022, the Company recorded principal amount and accrued interest of $1,916,278 and $1,599,150 on the balance sheet, respectively. At maturity the Company will be required to pay approximately $2.2M representing the Decathlon Note and accrued but unpaid interest. The company is currently in negotiations to extend the maturity term.

 

Note 13. Related Party Transactions

 

Revenue and Accounts Receivable

 

The Company recognized revenue of $766,985 and $864,319 for the nine months ended September 30, 2023 and 2022 and accounts receivable of $245,966 and $168,170, respectively from contracts entered into by Craig Technical Consulting, Inc, its majority shareholder and subcontracted to the Company for four customers.

 

The Company recognized contract asset and liability of $30,938 and $14,982 as of September 30, 2023 and December 31, 2022, respectively, related to contracts entered into by Craig Technical Consulting, Inc, its majority shareholder, and subcontracted to the Company for four customers.

 

Accounts Payable

 

As of September 30, 2023 and December 31, 2022, the Company owed $596,189 and $566,636, respectively to Craig Technical Consulting, Inc. Advances are unsecured, due on demand and non-bearing-interest.

 

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 $741,665 and $280,836, respectively.

 

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 $64,012 and $111,531, respectively.

 

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 $4,570 from inception through January 31, 2022, $4,707 from February 1,2022 to January 31,2023 and $4,847 from February 1, 2023 to January 31, 2024. During the nine months ended September 30, 2023 and 2022, the Company recorded $43,483 and $42,226 to lease expenses, respectively.

 

 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 $120,000 while the Company pursues up to four (4) Next Generation Non-geostationary-satellite Orbit (NGSO) satellite filing(s) via the Vendor. The Reservation Fee is levied on the date the filing(s) is received at the International Telecommunication Union (ITU). The Reservation Fee is payable annually at the anniversary of the date of receipt, as long as the customer retains the NGSO filing(s). The Reservation Fee payment continues to be payable until any of the frequency assignments of the NGSO filing(s) are brought into use. Upon submission to the ITU to bring into use any of the frequency assignments of a given constellation, an annual License Fee of $120,000 shall be paid in lieu of the Reservation Fee. On February 1, 2021, the Vendor submitted the license filing to the ITU and on April 6, 2021, the ITU published the license filing for LIZZIE IOMSAT. Payments began in February 2021. For the nine months ended September 30, 2023 and 2022 the Company recorded payments of $90,000 in Other General and Administrative expenses.

 

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 215,000,000 shares.

 

The Company has authorized 5,000,000 shares of preferred stock with a par value of $0.0001.

 

The Company has authorized 210,000,000 shares of common stock with a par value of $0.0001, consisting of 200,000,000 shares of Class A Common Stock and 10,000,000 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 2,640,000 shares of our Class A common stock and pre-funded warrants to purchase up to an aggregate 12,360,000 shares of Class A common stock. In addition, the company issued 2,250,000 prefunded warrants to cover over-allotments. All pre-funded warrants were exercised and total issued stock in this offering was 17,250,000 aggregate shares of Class A common stock. The purchase price for each share of Class A common stock was $0.30. Warrants equal to 4% of the number of securities issued by the Company in the offering were issued to the underwriter at an exercise price of 125% of the offering price per share. Gross proceeds from the offering were approximately $5.2 million, and net proceeds of approximately $4.6 million after underwriter expenses.

 

On April 20, 2023, the Company sold an aggregate of 8,572,018 shares of our Class A Common Stock and pre-funded warrants to purchase up to an aggregate 21,731,012 shares of Class A Common Stock and warrants to purchase up to 30,303,030 shares of Class A Common Stock. In addition, the Company sold 3,787,874 shares of Class A Common Stock and 3,787,874 of accompanying warrants to purchase shares of Class A Common Stock pursuant to the partial exercise of the underwriter’s over-allotment option. The purchase price for each share of Class A Common Stock and accompanying warrant was $0.33. Warrants equal to 3% of the number of securities issued by the Company in the offering at an exercise price of 125% of the offering price per share was issued to the underwriter. Gross proceeds from the offering were approximately $11.2 million, and net proceeds of approximately $10.2 million after underwriting discounts and commissions and estimated offering expenses payable by us.

 

 17 
 

 

During the nine months ended September 30, 2023, 11,601,919 Class A Common Stock were issued upon cashless exercise of warrants and 21,731,012 Class A Common Stock were issued upon exercise of pre-funded warrants of $2,173.

 

The Company had 70,965,559 and 8,022,736 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 136,463 shares with a value of $25,000 to be issued out of the Omnibus Equity Incentive Plan related to the Board Stock Compensation as of September 30, 2023.

 

Class B Common Sock

 

The Company had