Sidus Space(SIDU) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for Sidus Space, Inc., covering financial condition, results of operations, and related disclosures Item 1. Financial Statements (2025 Unaudited) This section presents the unaudited condensed consolidated financial statements for Sidus Space, Inc., including the balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining the company's accounting policies, financial position, and performance for the periods ended June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets The balance sheets show a decrease in total assets and stockholders' equity, and an increase in total liabilities from December 31, 2024, to June 30, 2025, primarily driven by a significant reduction in cash | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :--------------------------------- | :-------------- | :---------------- | | Total Assets | $29,669,423 | $37,745,567 | | Total Liabilities | $15,355,116 | $14,209,502 | | Total Stockholders' Equity | $14,314,307 | $23,536,065 | | Cash | $3,634,693 | $15,703,579 | Condensed Consolidated Statements of Operations The statements of operations reveal increased net losses for both the three and six months ended June 30, 2025, compared to the prior year, primarily due to higher costs of revenue and increased selling, general, and administrative expenses Three Months Ended June 30 | Metric | 2025 ($) | 2024 ($) | Change ($) | % Change | | :--------------------------------- | :----------- | :----------- | :----------- | :------- | | Total Revenue | $1,261,023 | $927,570 | $333,453 | 36% | | Cost of Revenue | $2,288,165 | $1,768,671 | $519,494 | 29% | | Gross Profit (Loss) | $(1,027,142) | $(841,101) | $(186,041) | 22% | | Selling, General & Administrative | $4,263,269 | $3,056,814 | $1,206,455 | 39% | | Net Loss | $(5,625,070) | $(4,136,084) | $(1,488,986) | 36% | | Basic & Diluted Loss Per Share | $(0.31) | $(0.99) | $0.68 | -69% | Six Months Ended June 30 | Metric | 2025 ($) | 2024 ($) | Change ($) | % Change | | :--------------------------------- | :----------- | :----------- | :----------- | :----------- | | Total Revenue | $1,499,517 | $1,977,725 | $(478,208) | (24)% | | Cost of Revenue | $4,155,137 | $2,734,762 | $1,420,375 | 52% | | Gross Profit (Loss) | $(2,655,620) | $(757,037) | $(1,898,583) | 251% | | Selling, General & Administrative | $8,707,711 | $6,702,397 | $2,005,314 | 30% | | Net Loss | $(12,039,697) | $(7,946,584) | $(4,093,113) | 52% | | Basic & Diluted Loss Per Share | $(0.66) | $(2.32) | $1.66 | -72% | Condensed Consolidated Statements of Stockholders' Equity The statements of stockholders' equity show a decrease in total equity for the six months ended June 30, 2025, primarily due to the net loss, partially offset by stock issuances from warrant exercises and equity-based compensation Changes in Stockholders' Equity (Six Months Ended June 30, 2025) | Metric | December 31, 2024 ($) | June 30, 2025 ($) | | :--------------------------------- | :---------------- | :-------------- | | Total Stockholders' Equity | $23,536,065 | $14,314,307 | | Class A common stock issued for exercise of warrants | - | $2,381,247 | | Vested officer and Director compensation | - | $213,050 | | Stock option expense | - | $223,632 | | Net loss | - | $(12,039,697) | Changes in Stockholders' Equity (Six Months Ended June 30, 2024) | Metric | December 31, 2023 ($) | June 30, 2024 ($) | | :--------------------------------- | :---------------- | :-------------- | | Total Stockholders' Equity | $7,131,756 | $13,104,077 | | Class A common stock units issued | - | $12,110,786 | | Class A common stock issued for exercise of warrants | - | $1,631,525 | | Net loss | - | $(7,946,584) | Condensed Consolidated Statements of Cash Flows The cash flow statements indicate increased cash usage in operating and investing activities for the six months ended June 30, 2025, compared to 2024, with a significant decrease in cash provided by financing activities, leading to a substantial reduction in cash on hand Six Months Ended June 30 | Cash Flow Activity | 2025 ($) | 2024 ($) | Change ($) | | :--------------------------------- | :----------- | :----------- | :----------- | | Net Cash used in Operating Activities | $(7,845,359) | $(7,570,068) | $(275,291) | | Net Cash used in Investing Activities | $(4,354,130) | $(4,067,741) | $(286,389) | | Net Cash provided by Financing Activities | $130,603 | $11,866,071 | $(11,735,468) | | Cash, end of period | $3,634,693 | $1,444,369 | $2,190,324 | - In 2025, financing activities included $2.38 million from warrant exercises and $4.41 million from asset-based loan proceeds, offset by $3.06 million in notes payable repayment[200] Notes to the Condensed Consolidated Financial Statements These notes provide comprehensive disclosures on the company's financial statements, covering its business organization, significant accounting policies, detailed breakdowns of assets and liabilities, related party transactions, equity changes, and subsequent events, offering crucial context for the reported financial figures - The company prepares financial statements in accordance with SEC rules and GAAP, with interim statements prepared under Article 8 of Regulation S-X[24] - The consolidated financial statements include Aurea Alas Limited, a variable interest entity where Sidus Space is the primary beneficiary[25][57] - Management makes estimates and assumptions affecting reported amounts, including revenue recognition, property and equipment impairment, useful lives, allowances for doubtful accounts, inventory valuation, and warrant fair value[28] - The company operates as a single operating segment, with the CEO reviewing consolidated financial information to assess performance and allocate resources[95] - Customer concentrations for the six months ended June 30, 2025, include Bechtel (37% of revenue), Craig Technologies (43% of revenue), and Xiomas Technologies (7% of revenue)[98] - On July 29, 2025, the company completed a public offering of 7,143,000 shares of Class A common stock at $1.05 per share, generating approximately $6.6 million in net proceeds[99] Note 1. Organization and Description of Business Sidus Space Inc. was founded in 2012 and converted to a Delaware corporation in 2021, operating as an innovative space and defense technology provider specializing in satellite manufacturing, AI-driven data solutions, and hardware manufacturing through a vertically integrated model - Sidus Space Inc. was formed in Florida in 2012 as Craig Technologies Aerospace Solutions, LLC, and converted to a Delaware corporation on April 16, 2021, changing its name to Sidus Space, Inc. on August 13, 2021[17] - The company provides flexible, cost-effective solutions including satellite manufacturing, AI-driven space-based data solutions, mission planning, AI/ML products, and space/defense hardware manufacturing[18] - Sidus Space offers services through verticals: Satellite Design and Manufacturing; Technology Design and Integration; Space-based Data Solutions; Mission Planning and Management Operations; AI/ML Products and Services; and Space and Defense Hardware[20] - The company's LizzieSat® is a hybrid 3D printed, multi-sensor, multi-mission modular satellite, offering a flexible and cost-effective platform[19] Note 2. Summary of Significant Accounting Policies This note details the company's accounting policies, including GAAP compliance, consolidation of a variable interest entity, reliance on estimates, cash management practices, accounts receivable, inventory valuation, property and equipment depreciation, stock-based compensation, fair value measurements, and revenue recognition under ASC 606 - Financial statements are prepared in accordance with SEC rules and GAAP, with interim statements following Article 8 of Regulation S-X[24] - The company consolidates Aurea Alas Limited, a variable interest entity, as it is the primary beneficiary[25] - Revenue recognition follows ASC 606, identifying five elements: contract, performance obligations, transaction price, allocation, and recognition upon satisfaction of obligations[43][46] - Warrants are classified as equity or liability based on ASC 480 and ASC 815, with liability-classified warrants re-measured at fair value using a Black-Scholes model[53][54] Note 3. Variable Interest Entity Sidus Space consolidates Aurea Alas Limited as a variable interest entity, holding 100% of its voting rights and being responsible for its operations and financial outcomes, including a net loss of $76,698 for the six months ended June 30, 2025 - Sidus Space consolidates Aurea Alas Limited, an Isle of Man company, as a VIE, holding 100% of its voting rights and being responsible for its operations and net profits/losses[57][58] Aurea's Assets and Liabilities | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :--------------------------------- | :-------------- | :---------------- | | Cash | $33,222 | $65,333 | | Prepaid and other current assets | $10,222 | $13,264 | | Total Assets | $43,444 | $78,597 | | Accounts payable and other current liabilities | $32,901 | $78,575 | - Aurea's net loss for the six months ended June 30, 2025, and 2024, was $76,698 and $85,634, respectively[60] Note 4. Prepaid expense and Other current assets Prepaid expenses and other current assets increased to $4.16 million as of June 30, 2025, from $3.43 million at December 31, 2024, primarily due to a significant increase in prepaid components Prepaid Expense and Other Current Assets | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :--------------------------------- | :-------------- | :---------------- | | Prepaid insurance | $181,691 | $374,480 | | Prepaid components | $1,753,568 | $528,000 | | Prepaid satellite services & licenses | $1,953,366 | $2,353,757 | | Prepaid software | $150,195 | $82,440 | | Other current assets | $116,578 | $90,979 | | Total | $4,155,398 | $3,429,656 | Note 5. Inventory Inventory, consisting solely of work in process, increased to $370,067 as of June 30, 2025, from $255,716 at December 31, 2024, valued based on the percentage of completion method Inventory | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :--------------------------------- | :-------------- | :---------------- | | Work in Process | $370,067 | $255,716 | - Work in Process inventory is based on estimated revenue calculated by the percentage of completion method, considering direct labor and materials relative to total contract value[62] Note 6. Property and Equipment Net property and equipment increased to $17.18 million as of June 30, 2025, from $14.89 million at December 31, 2024, driven by significant investments in satellite and related software and construction in progress, with depreciation expense increasing substantially Property and Equipment, Net | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :--------------------------------- | :-------------- | :---------------- | | Satellite and related software | $16,350,863 | $12,305,379 | | Construction in progress | $3,414,398 | $2,883,337 | | Total Property and equipment, net | $17,179,137 | $14,891,976 | - Depreciation expense for the six months ended June 30, 2025, and 2024, was $2,066,969 and $858,033, respectively, with a significant portion included in cost of revenue[64] - Asset purchases for the six months ended June 30, 2025, and 2024, were $4,354,130 and $4,088,669, respectively[65] Note 7. Accounts payable and other current liabilities Accounts payable and other current liabilities increased to $5.76 million as of June 30, 2025, from $3.39 million at December 31, 2024, primarily due to increases in accounts payable and payroll liabilities Accounts Payable and Other Current Liabilities | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :--------------------------------- | :-------------- | :---------------- | | Accounts payable | $3,614,524 | $1,978,857 | | Payroll liabilities | $1,735,387 | $907,697 | | Total | $5,755,965 | $3,388,667 | Note 8. Asset-based loan The company's asset-based loan liability increased to $7.88 million as of June 30, 2025, from $6.90 million at December 31, 2024, following an increase in the revolving line of credit to $10.5 million, which was used to pay off a $3.2 million note payable - The company has a recourse loan and security agreement, amended in 2024, to include unbilled manufacturing and delivery orders as collateral, increasing the revolving line of credit from $7 million to $10.5 million as of January 31, 2025[67] - The asset-based loan balance was $7,881,629 as of June 30, 2025, up from $6,902,636 as of December 31, 2024[67] - Costs and interest incurred for the loan were $792,737 for the six months ended June 30, 2025, compared to $161,375 in 2024[67] Note 9. Contract assets and liabilities Contract assets decreased to $1.10 million as of June 30, 2025, from $1.39 million at December 31, 2024, while contract liabilities increased to $107,013 from $63,145, primarily reflecting changes in revenue recognized in excess of amounts paid or payable and retainage Contract Assets | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :--------------------------------- | :-------------- | :---------------- | | Revenue recognized in excess of amounts paid or payable (contract asset) | $993,504 | $1,331,194 | | Retainage (related party) | $107,013 | $46,953 | | Total contract assets | $1,100,517 | $1,394,339 | Contract Liabilities | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :--------------------------------- | :-------------- | :---------------- | | Retainage (related party) | $107,013 | $46,953 | | Total contract liabilities | $107,013 | $63,145 | Note 10. Leases The company entered a new operating lease for office and warehouse space in June 2025, extending the weighted-average remaining lease term to 2.92 years and increasing total operating lease right-of-use assets and liabilities to $835,140 and $835,909, respectively - The company entered a new lease contract on June 1, 2025, for office and warehouse space, expiring May 31, 2028, with monthly base rent increasing by 3.0% annually[69] Operating Lease Information | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :--------------------------------- | :-------------- | :---------------- | | Operating lease cost (six months) | $204,787 | $188,741 | | Total operating lease right-of-use assets | $835,140 | $121,545 | | Total operating lease liabilities | $835,909 | $121,544 | | Weighted-average remaining lease term | 2.92 years | 0.41 years | | Weighted-average discount rate | 6.50% | 8.25% | Future Minimum Lease Payments as of June 30, 2025 | Year Ended December 31, | Total ($) | | :--------------------------------- | :------ | | 2025 (Remaining 6 months) | $152,295 | | 2026 | $309,920 | | 2027 | $319,218 | | 2028 | $134,641 | | Less: Imputed interest | $(80,165) | | Operating lease liabilities | $835,909 | Note 11. Notes Payable The Decathlon Note, assumed by the company in 2021 and amended in 2023, was fully paid off on January 31, 2025, for $3,163,239, utilizing an increased asset-based loan - The company assumed the Decathlon Note from Craig Technical Consulting, Inc. on December 3, 2021, which was subsequently amended and fully paid off on January 31, 2025, for $3,163,239[73][74][75] - The Decathlon Note was secured by company assets and guaranteed by CTC, with monthly interest converted to a fixed $50,000 per month after a November 2023 amendment[74] - Interest expense for the six months ended June 30, 2025, and 2024, was $69,945 and $331,165, respectively, with additional legal and late fees of $33,528 in 2025 related to the payoff[75] Note 12. Related Party Transactions The company engaged in various related party transactions, primarily with Craig Technical Consulting, Inc., including significant revenue generation ($647,743 for six months ended June 30, 2025), accounts receivable ($1,037,606 as of June 30, 2025), and accounts payable ($774,600 as of June 30, 2025), alongside cost of revenue, professional services, and sublease agreements Related Party Revenue and Accounts Receivable | Metric | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | June 30, 2025 ($) | December 31, 2024 ($) | | :--------------------------------- | :----------------------------- | :----------------------------- | :-------------- | :---------------- | | Revenue | $647,743 | $297,816 | - | - | | Accounts Receivable | - | - | $1,037,606 | $641,376 | | Contract Asset | - | - | $107,013 | $46,953 | - The company owed $774,600 to related parties as of June 30, 2025, including $527,476 in unsecured, non-interest-bearing advances from Craig Technical Consulting, Inc.[77] - Cost of revenue to Craig Technical Consulting, Inc. was $356,154 and $214,002 for the six months ended June 30, 2025, and 2024, respectively[78] Note 13. Commitments and Contingencies The company is not aware of any material legal proceedings and maintains a license agreement with Aurea Alas Limited for radio frequency spectrum, incurring an annual Reservation Fee of $120,000, with $90,000 recorded as expense for the six months ended June 30, 2025 - The company is not currently aware of any legal proceedings or claims that would have a material adverse effect on its business, financial condition, or operating results[81][224] - The company, through Aurea Alas Limited, holds a license agreement for radio frequency spectrum for satellite communications, incurring an annual Reservation Fee of $120,000 until frequency assignments are brought into use, then an annual License Fee of $120,000[83] - For the six months ended June 30, 2025, and 2024, the company recorded $90,000 in Other General and Administrative expenses related to these payments[83] Note 14. Stockholders' Equity This note details the company's authorized capital stock, with 18,204,483 Class A and 100,000 Class B common shares outstanding as of June 30, 2025. It also outlines warrant activity, stock option grants (265,000 options granted in February 2025), restricted stock units (265,000 RSUs granted), and stock awards, all contributing to equity-based compensation expenses - The company has authorized 5,000,000 shares of preferred stock and 210,000,000 shares of common stock ($0.0001 par value), comprising 200,000,000 Class A and 10,000,000 Class B shares (Class B has 10 votes per Class A vote)[84] - As of June 30, 2025, 18,204,483 Class A common shares and 100,000 Class B common shares were issued and outstanding[85][86] Warrant Activity for Six Months Ended June 30, 2025 | Metric | Shares | Exercise Price ($) | Life (years) | | :--------------------------------- | :------- | :------------- | :----------- | | Outstanding, December 31, 2024 | 5,402,306 | $2.50 | 5.35 | | Exercised | (2,231,134) | $2.25 | - | | Outstanding, June 30, 2025 | 3,171,172 | $2.68 | 4.77 | Stock Option Activity for Six Months Ended June 30, 2025 | Metric | Number of Options | Weighted Average Exercise Price ($) | Weighted Average Remaining Life (years) | | :--------------------------------- | :---------------- | :------------------------------ | :-------------------------------------- | | Outstanding, December 31, 2024 | 64,752 | $11.67 | 3.82 | | Granted | 265,000 | $2.57 | 5.00 | | Outstanding, June 30, 2025 | 329,752 | $4.36 | 4.34 | - The company granted 265,000 RSUs on February 1, 2025, valued at $620,689, vesting 100% on February 1, 2028, with $91,275 recognized as stock compensation expense for the six months ended June 30, 2025[93] Note 15. Segment Sidus Space operates as a single operating segment, with its Chief Executive Officer serving as the primary decision-maker who reviews consolidated financial information to assess performance and allocate resources - Sidus Space operates as a single operating segment, with the CEO serving as the chief operating decision maker (CODM) who reviews consolidated financial information[95] - The CODM uses consolidated operating margin and net income to assess financial performance and allocate resources[95] Note 16. Concentration The company has significant customer concentrations, with Bechtel, Craig Technologies, and Xiomas Technologies collectively accounting for 87% of revenue and 81% of accounts receivable for the six months ended June 30, 2025 Customer Concentrations for Six Months Ended June 30, 2025 | Customer | Percentage of Revenue (%) | Percentage of Accounts Receivable (June 30, 2025) (%) | | :--------------------------------- | :-------------------- | :-------------------------------------------- | | Bechtel | 37% | 18% | | Craig Technologies | 43% | 54% | | Xiomas Technologies | 7% | 4% | | TNO | - | 5% | | Total (as a group) | 87% | 81% | Note 17. Subsequent Events On July 29, 2025, the company completed an underwritten public offering of 7,143,000 shares of Class A common stock at $1.05 per share, generating approximately $6.6 million in net proceeds - On July 29, 2025, the company completed an underwritten public offering of 7,143,000 shares of Class A common stock at $1.05 per share, yielding approximately $6.6 million in net proceeds[99] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, liquidity, and capital resources, along with an overview of operations, products, growth strategies, and the broader space industry. It also includes a discussion of critical accounting policies and non-GAAP measures, highlighting increased net losses and a shift to a working capital deficit Forward-Looking Statements and Industry Data This subsection cautions readers that the report contains forward-looking statements subject to substantial risks and uncertainties, and that actual results may differ materially from projections. It also notes that industry and market data are based on internal research and third-party publications, which have not been independently verified - The report contains forward-looking statements identified by terms like "may," "expects," "intends," and "plans," which are subject to substantial risks and uncertainties[100] - Key risks include projected financial position, cash burn rate, capital requirements, ability to compete, intellectual property protection, reliance on third-party suppliers, and potential lawsuits[102] - Industry and market data are based on internal research and third-party publications, which involve assumptions and limitations, and have not been independently verified[103] Overview of Operations Sidus Space is an innovative space and defense technology provider, leveraging its vertically integrated model, flight-proven LizzieSat® platform, and Orlaith™ AI ecosystem to offer flexible, cost-effective solutions, including satellite manufacturing, AI-driven data solutions, and hardware manufacturing. The company has successfully launched three LizzieSat® satellites and received FCC approval for its LEO micro constellation - Sidus Space is an innovative space and defense technology provider offering satellite manufacturing, AI-driven data solutions, mission planning, and hardware manufacturing[106] - The company's LizzieSat® is a flight-proven, hybrid 3D printed, multi-sensor, multi-mission modular satellite platform[107] - A vertically integrated model provides diverse revenue opportunities, mitigates risks, and allows swift adaptation to market changes[109] - The Sidus Orlaith™ AI ecosystem, leveraging FeatherEdge™ hardware and Cielo™ software, enables near real-time on-orbit and terrestrial data processing[110] - The company has successfully launched three LizzieSat® satellites in over 12 months, demonstrating proven space heritage and leadership in space technology and AI[112] Products and Services Sidus Space offers comprehensive solutions including custom satellite design and manufacturing (LizzieSat® variations), technology hosting and mission management, AI-enhanced space-based Data-as-a-Service via the Orlaith AI ecosystem, and extensive space and defense hardware manufacturing capabilities from its ISO/AS certified facility, supported by in-house design engineering - Offers custom satellite design and manufacturing, utilizing the modular LizzieSat® platform (Gen 1: LS1-3, Gen 2: LS4+, Lunar Lizzie) for various mission requirements[114][121] - Provides technology hosting and mission management services, including 24/7/365 real-time operations, satellite monitoring, control, and data management, leveraging AWS cloud and multiple ground station providers[117][122] - Delivers AI-enhanced space-based sensor Data-as-a-Service via the Orlaith AI ecosystem (FeatherEdge™ AI processor and Cielo™ AI solutions) for timely data insights, reducing downlink costs and bolstering response times[117][118] - Offers extensive space and defense manufacturing services from its 35,000-square-foot ISO 9001:2015, AS9100 Rev. D certified facility, including multi-material 3D printing, precision machining, and mechanical/electrical assembly[119][123][124][125][126] - Provides in-house design engineering services, including requirements definition, verification/validation, model-based systems engineering, 3D CAD, and finite element analysis[130][134] Key Achievements to date Sidus Space has achieved significant milestones, including the successful launch of three LizzieSat® satellites, securing a $120 million contract for a lunar fleet, establishing a mission control center, obtaining FCC approvals for its micro constellation and data relay, winning multiple contracts for advanced computing systems and defense manufacturing, and forming strategic international partnerships - Successfully launched LizzieSat®-1 (March 2024), LizzieSat®-2 (December 2024), and LizzieSat®-3 (Q1 2025), establishing a micro-constellation[135] - Signed an extended and amended preliminary contract valued at $120 million for the previously executed contract to exclusively design and build the first-generation lunar fleet of Data Storage Spacecraft for Lonestar Data Holdings[135] - Established a fully operational mission control center and received FCC approval for LEO micro constellation and Space-to-Space Data Relay Capability[136] - Awarded contracts including HEO Holmes Imager integration aboard LizzieSat®-3, FeatherEdge™ computing system for fire detection, and a $2 million contract for U.S. Navy Propulsion systems[136] - Formed strategic partnerships with Reflex Aerospace (Germany), Warpspace (Japan), and NamaSys Bahrain for international space initiatives[136] Differentiation The LizzieSat® platform differentiates itself through its modular design for multi-mission capabilities, on-orbit coincident data collection from multiple sensors, integrated Sidus Orlaith™ AI Ecosystem for edge processing, space-to-space data relay for rapid transfer, and post-launch mission adaptability via software updates, enabling higher-value data and flexible services - LizzieSat® offers a standard, modular platform for multiple missions (Leo, Geo, Cislunar, Lunar) and differentiated data collection[137] - Capabilities include collecting on-orbit coincident data from multiple sensors simultaneously, analyzing data on-orbit using the Sidus Orlaith™ AI Ecosystem (FeatherEdge™ GEN 2 with NVIDIA Jetson NX Orin module), and space-to-space data relay[138] - The platform allows post-launch mission additions through software and algorithm updates, enabling additional revenue generation from already launched satellites[138] - Planned services include delivering critical space-based data for agriculture, disaster assessment, illegal trafficking, energy, fire monitoring, maritime AIS, and weather monitoring[139] Key Factors Affecting Our Results and Prospects The company's future success hinges on expanding commercial satellite operations through cost-effective, modular LizzieSat® platforms and growing its space and defense hardware operations, while navigating competition and potential safety issues - Performance and future success depend on factors like competition from well-capitalized companies and risks related to safety issues[140] - The strategy focuses on expanding commercial satellite operations by increasing demand downstream, offering cost-effective and standardized LizzieSat® platforms, and leveraging vertical integration[141] - The company aims to grow its space and defense hardware operations, targeting expansion to two and a half shifts and increasing its customer base, particularly in avionics and wire harness divisions[147] Our Growth Strategies Sidus Space's growth strategies focus on expanding its customer base through direct and indirect sales, increasing spending from existing customers, penetrating international markets via partnerships, and growing distribution channels and its channel partner ecosystem to enhance global reach and market presence - Growth strategies include increasing the overall customer base through direct and indirect sales, expanding within current customers by offering more services, and penetrating international markets via partnerships[155][156][157] - The company is actively building a pipeline of prospective partnerships with small, underrepresented governments and global companies[157] - Strategic investments are being made to expand sales reach through robust distribution channels and partnerships with technology providers, solution partners, strategic global system integrators, and value-added resellers[158] Global Space Industry Overview The global space economy is experiencing significant growth, projected to reach $1.8 trillion by 2035, driven by technological advancements, new commercial applications, and increased private investment. The small satellite market, valued at $6.9 billion in 2024, is expected to grow at a 16.4% CAGR to $30.6 billion by 2034 - The space economy is experiencing significant growth due to technological advancements in satellites and terrestrial technologies, enabling new commercial applications like satellite broadband, remote imaging, and IoT[159] - The space economy is projected to reach $1.8 trillion by 2035 (from $630 billion in 2023), growing at an average annual rate of 9%[161] - The global small satellite market was valued at $6.9 billion in 2024 and is projected to grow at a CAGR of 16.4% to approximately $30.6 billion by 2034[162] - Private investment in the commercial space industry has surged, leading to new companies and increased government reliance on private sector innovation[163] Launch Market The small satellite launch market is rapidly evolving, shifting from a bottleneck to offering diverse solutions like dedicated vehicles and rideshare programs. Valued at $7.6 billion, it is projected to grow by over 279% to $28.4 billion, with increased attention and innovation to meet rising demand - The launch market has shifted from being constrained by high costs and limited availability to offering a wider range of solutions for small satellites, including dedicated small launch vehicles, rideshare programs, and brokers[165][166] - The small satellite launch market, valued at $7.6 billion, is projected to grow by over 279% to reach $28.4 billion[166] Small Satellite Market The small satellite market has undergone a significant paradigm shift since 2018, driven by miniaturization, enhanced performance, and the deployment of constellations. Key technical enablers include electric propulsion, miniaturized sensors, improved solar cells, COTS solutions, and 3D printing. Approximately 26,104 smallsats are projected to launch between 2023 and 2032, with the manufacturing market expected to grow to $55.6 billion by 2031 - The commercial space market has seen a significant paradigm shift since 2018, increasing demand for small satellites (smallsats) due to miniaturization and enhanced performance[167] - Key technical enablers include extended use of electric propulsion, miniaturization of attitude sensors, improvements in solar cell/battery efficiency, COTS solutions for bus electronics, and 3D printing technologies[170] - Approximately 26,104 smallsats (under 500 kg) are projected to be launched between 2023 and 2032[167] - The smallsat manufacturing market is expected to grow by 258% to $55.6 billion over 2022-2031, driven by numerous constellation projects[168] Results of Operations This section provides a detailed comparison of the company's financial performance for the three and six months ended June 30, 2025, versus 2024, highlighting significant changes in revenue, cost of revenue, gross profit, and operating expenses, which led to increased net losses Comparison of quarter ended June 30, 2025, to quarter ended June 30, 2024 For the three months ended June 30, 2025, total revenue increased by 36% to $1.26 million, but gross profit decreased by 22% to a loss of $1.03 million due to a 29% increase in cost of revenue. Selling, general, and administrative expenses rose by 39%, resulting in a 36% increase in net loss to $5.63 million Three Months Ended June 30 | Metric | 2025 ($) | 2024 ($) | Change ($) | % Change | | :--------------------------------- | :----------- | :----------- | :----------- | :------- | | Revenue | $1,261,023 | $927,570 | $333,453 | 36% | | Cost of revenue | $2,288,165 | $1,768,671 | $519,494 | 29% | | Gross Profit (Loss) | $(1,027,142) | $(841,101) | $(186,041) | 22% | | Selling, general and administrative expense | $4,263,269 | $3,056,814 | $1,206,455 | 39% | | Net loss | $(5,625,070) | $(4,136,084) | $(1,488,986) | 36% | - Non-related party revenue decreased by 17% to $691,000, while related party revenue increased by 514% to $570,000, both influenced by the timing of fixed-price milestone contracts[172] - Cost of revenue increased by 29% due to contract mix, a $486,000 increase in satellite and related software depreciation, and higher supply chain costs[173] - Selling, general, and administrative expenses increased by $1.2 million, primarily due to a $904,000 increase in labor costs (headcount and equity-based compensation), $228,000 in mission operations expenses, and $129,000 in software fees[176] Six Months Ended June 30, 2025 compared to the Six Months Ended June 30, 2024 For the six months ended June 30, 2025, total revenue decreased by 24% to $1.50 million, while cost of revenue increased by 52% to $4.16 million, resulting in a 251% decrease in gross profit to a loss of $2.66 million. Selling, general, and administrative expenses rose by 30%, leading to a 52% increase in net loss to $12.04 million Six Months Ended June 30 | Metric | 2025 ($) | 2024 ($) | Change ($) | % Change | | :--------------------------------- | :----------- | :----------- | :----------- | :----------- | | Revenue | $1,499,517 | $1,977,725 | $(478,208) | (24)% | | Cost of revenue | $4,155,137 | $2,734,762 | $1,420,375 | 52% | | Gross Profit (Loss) | $(2,655,620) | $(757,037) | $(1,898,583) | 251% | | Selling, general and administrative expense | $8,707,711 | $6,702,397 | $2,005,314 | 30% | | Net loss | $(12,039,697) | $(7,946,584) | $(4,093,113) | 52% | - Non-related party revenue decreased by 49% to $852,000, while related party revenue increased by 117% to $648,000, both due to timing of fixed-price milestone contracts[178] - Cost of revenue increased by 52% due to contract mix, a $1.1 million increase in satellite and related software depreciation, and higher supply chain costs[180] - Selling, general, and administrative expenses increased by $2.0 million, driven by a $2.1 million increase in labor costs (headcount, equity-based compensation, severance), $271,000 in mission operations, and $106,000 in depreciation[182] NON-GAAP MEASURES The company uses Adjusted EBITDA as a non-GAAP measure to evaluate operating performance, which is reconciled to net loss. For the six months ended June 30, 2025, Adjusted EBITDA was a loss of $8.62 million, a 47% increase in loss compared to $5.86 million in 2024, driven by increased interest, depreciation, and equity-based compensation expenses - Adjusted EBITDA is used as a non-GAAP measure to evaluate operating performance and make strategic decisions, defined as net income adjusted for interest expense, depreciation, acquisition costs, severance, capital market fees, equity-based compensation, and warrant costs[184] Adjusted EBITDA Reconciliation - Three Months Ended June 30 | Metric | 2025 ($) | 2024 ($) | Change ($) | % Change | | :--------------------------------- | :----------- | :----------- | :----------- | :------- | | Net Income / (Loss) | $(5,625,070) | $(4,136,084) | $(1,488,986) | 36% | | Total Non-GAAP Adjustments | $1,678,720 | $952,237 | $726,483 | 76% | | Adjusted EBITDA | $(3,946,350) | $(3,183,847) | $(762,503) | 24% | Adjusted EBITDA Reconciliation - Six Months Ended June 30 | Metric | 2025 ($) | 2024 ($) | Change ($) | % Change | | :--------------------------------- | :----------- | :----------- | :----------- | :----------- | | Net Income / (Loss) | $(12,039,697) | $(7,946,584) | $(4,093,113) | 52% | | Total Non-GAAP Adjustments | $3,418,924 | $2,083,598 | $1,335,325 | 64% | | Adjusted EBITDA | $(8,620,773) | $(5,862,986) | $(2,757,788) | 47% | Liquidity and Capital Resources The company's liquidity position deteriorated, with an accumulated deficit of $72.4 million and a working capital deficit of $3.6 million as of June 30, 2025, down from a working capital surplus of $8.0 million at December 31, 2024. Cash on hand significantly decreased to $3.6 million, primarily due to satellite build-out, necessitating reliance on debt and equity financing, including a $6.7 million public offering in July 2025 - The company had an accumulated deficit of $72.4 million and a working capital deficit of $3.6 million as of June 30, 2025, compared to an accumulated deficit of $60.3 million and a working capital surplus of $8.0 million as of December 31, 2024[190] - Cash on hand decreased from $15.7 million (December 31, 2024) to $3.6 million (June 30, 2025)[190] - The working capital deficit is primarily due to the build-out of LizzieSat satellites for upcoming launches[191] - A public offering in July 2025 generated approximately $6.7 million in net proceeds[194] Cash Flow For the six months ended June 30, 2025, cash used in operating activities increased by 4% to $7.8 million, and cash used in investing activities increased by 7% to $4.4 million. Cash provided by financing activities significantly decreased by 99% to $130,603, leading to a net change in cash of $(12.07) million and an ending cash balance of $3.63 million Cash Flow Summary - Six Months Ended June 30 | Cash Flow Activity | 2025 ($) | 2024 ($) | Change ($) | % Change | | :--------------------------------- | :----------- | :----------- | :----------- | :------- | | Cash used in operating activities | $(7,845,359) | $(7,570,068) | $(275,291) | 4% | | Cash used in investing activities | $(4,354,130) | $(4,067,741) | $(286,389) | 7% | | Cash provided by financing activities | $130,603 | $11,866,071 | $(11,735,468) | (99)% | | Cash on hand (end of period) | $3,634,693 | $1,444,369 | $2,190,324 | 152% | - Net cash used in operating activities increased by 4% to $7.8 million in 2025, driven by a $12.0 million net loss, partially offset by non-cash expenses and a decrease in working capital[196][197] - Cash used in investing activities increased by 7% to $4.4 million in 2025, primarily for purchasing satellite-related components and software[199] - Net cash provided by financing activities decreased by 99% to $130,603 in 2025, including $2.4 million from warrant exercises and $809,000 from an asset-based loan, offset by $3.1 million in notes payable repayment[200] Off-Balance Sheet Arrangements The company explicitly states that it does not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships - The company does not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships[202] Critical Accounting Policies and Significant Judgments and Estimates This section outlines the company's critical accounting policies and estimates, which require significant management judgment, including revenue recognition (ASC 606), inventory valuation, credit losses, lease accounting (ASC 842), and the valuation of stock options and warrants using the Black-Scholes model - Critical accounting policies and estimates include Revenue Recognition, Inventory, Credit losses, Lease Accounting, and Stock Option and Warrant Valuation[205] - Revenue recognition follows ASC 606, based on five elements, with fixed-price manufacturing contracts using percentage-of-completion and milestone-based service contracts recognized upon milestone achievement[204][206][207][208] - Operating leases are recognized on the balance sheet as ROU assets and liabilities, measured at the present value of lease payments using the incremental borrowing rate[213][214] - Stock options and Class A common stock warrants are valued using the Black-Scholes option-pricing model, requiring significant assumptions like fair value, estimated term, risk-free rates, volatility, and dividend yield[216] JOBS Act As an "emerging growth company" under the JOBS Act, Sidus Space benefits from extended transition periods for new accounting standards and exemptions from certain reporting requirements, such as auditor attestation on internal controls and mandatory audit firm rotation - The company is an "emerging growth company" under the JOBS Act, allowing it to delay adoption of new or revised accounting standards until they apply to private companies[217][218] - The company intends to rely on exemptions such as not providing an auditor's attestation report on internal controls (Section 404(b) of Sarbanes-Oxley Act) and not complying with mandatory audit firm rotation[219] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," Sidus Space, Inc. is exempt from providing quantitative and qualitative disclosures about market risk in this report - The company is a "smaller reporting company" and is therefore not required to provide quantitative and qualitative disclosures about market risk[220] Item 4. Controls and Procedures The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, and reported no material changes in internal control over financial reporting during the quarter - As of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[221] - There have been no material changes in internal control over financial reporting during the three months ended June 30, 2025[222] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and a list of exhibits Item 1. Legal Proceedings The company is not currently aware of any legal proceedings or claims that are expected to have a material adverse effect on its business, financial condition, or operating results - The company is not aware of any legal proceedings or claims that will have a material adverse effect on its business, financial condition, or operating results[224] Item 1A. Risk Factors The company refers readers to the comprehensive discussion of risk factors in its Annual Report on Form 10-K for the year ended December 31, 2024, and states that no material changes to these risks have occurred - Risk factors affecting the business are discussed in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2024, with no material changes reported[225] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports that there were no unregistered sales of equity securities or use of proceeds to disclose during the period - No unregistered sales of equity securities and use of proceeds to report[226] Item 3. Defaults Upon Senior Securities The company reports that there were no defaults upon senior securities during the period - No defaults upon senior securities to report[227] Item 4. Mine Safety Disclosure This item is not applicable to the company's operations - Mine Safety Disclosure is not applicable to the company[228] Item 5. Other Information During the three months ended June 30, 2025, none of the company's directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - None of the company's directors or officers adopted or terminated any "Rule 10b5-1 trading arrangements" or "non-Rule 10b5-1 trading arrangements" during the three months ended June 30, 2025[229] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Placement Agency Agreement, Form of Placement Agent Warrant, certifications from principal executive and financial officers, and various Inline XBRL taxonomy extension documents - The exhibits include Placement Agency Agreement, Form of Placement Agent Warrant, Certifications of Principal Executive and Financial Officers (302 and 906), and various Inline XBRL Taxonomy Extension Documents[230] Signatures The report is duly signed on behalf of Sidus Space, Inc. by its Chief Executive Officer, Carol Craig, and Chief Financial Officer, Adarsh Parekh, on August 14, 2025 - The report is signed by Carol Craig, Chief Executive Officer, and Adarsh Parekh, Chief Financial Officer, on August 14, 2025[233]