UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________to ___________
Commission
File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) | |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Number of Class A and B common shares outstanding as of August 19, 2024 was and , respectively.
| -2- |
SIDUS SPACE, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Accounts receivable - related parties | ||||||||
| Inventory | ||||||||
| Contract asset | ||||||||
| Contract asset - related party | ||||||||
| Prepaid and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible asset | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable and other current liabilities | $ | $ | ||||||
| Accounts payable and accrued interest - related party | ||||||||
| Contract liability | ||||||||
| Contract liability - related party | ||||||||
| Asset-based loan liability | ||||||||
| Notes payable | ||||||||
| Operating lease liability | ||||||||
| Total current liabilities | ||||||||
| Operating lease liability - non-current | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred Stock: shares authorized; $ par value; shares issued and outstanding | ||||||||
| Series A convertible preferred stock: shares authorized; and shares issued and outstanding, respectively | ||||||||
| Common stock: authorized; $ par value | ||||||||
| Class A common stock: shares authorized; and shares issued and outstanding, respectively | ||||||||
| Class B common stock: shares authorized; shares issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| -3- |
SIDUS SPACE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Revenue - related parties | ||||||||||||||||
| Total - revenue | ||||||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross profit (loss) | ( | ) | ( | ) | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative expense | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Net loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ||||||||||||||||
| Asset-based loan expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Finance expense | ( | ) | ( | ) | ||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Dividend on Series A preferred Stock | ( | ) | ||||||||||||||
| Net loss attributed to stockholders | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Basic and diluted loss per common share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Basic and diluted weighted average number of common shares outstanding | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| -4- |
SIDUS SPACE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
For the Three and Six Months Ended June 30, 2024
| Class A Common Stock | Class B Common Stock | Additional Paid-In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance - December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Class A common stock issued for conversion of Series A preferred stock and dividend | - | |||||||||||||||||||||||||||
| Class A common stock units issued | - | |||||||||||||||||||||||||||
| Class A common stock issued for exercise of warrants | - | |||||||||||||||||||||||||||
| Vested Board Compensation | - | - | ||||||||||||||||||||||||||
| Stock option expense | - | - | ||||||||||||||||||||||||||
| Common stock issue for reverse split adjustment | ( | ) | - | |||||||||||||||||||||||||
| Dividend on Series A preferred Stock | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Vested Board Compensation | - | - | ||||||||||||||||||||||||||
| Stock option expense | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| -5- |
For the Three and Six Months Ended June 30, 2023
| Class A Common Stock | Class B Common Stock | Additional Paid-In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance - December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Class A common stock units issued | - | |||||||||||||||||||||||||||
| Warrants issued for finance expense | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Class A common stock units issued | - | |||||||||||||||||||||||||||
| Class A common stock issued for exercise of warrants | - | |||||||||||||||||||||||||||
| Warrants issued for finance expense | - | - | ||||||||||||||||||||||||||
| Debt forgiveness related party | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| -6- |
SIDUS SPACE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation | ||||||||
| Depreciation and amortization | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Accounts receivable - related party | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Contract asset - related party | ( | ) | ( | ) | ||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Accounts payable and accrued liabilities - related party | ( | ) | ||||||
| Contract liability - related party | ||||||||
| Changes in operating lease assets and liabilities | ( | ) | ( | ) | ||||
| Net Cash used in Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows From Investing Activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net Cash used in Investing Activities | ( | ) | ( | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Proceeds from issuance of common stock units | ||||||||
| Proceeds from asset-based loan agreement | ||||||||
| Repayment of asset-based loan agreement | ( | ) | ( | ) | ||||
| Repayment of notes payable | ( | ) | ( | ) | ||||
| Net Cash provided by Financing Activities | ||||||||
| Net change in cash | ||||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Non-cash Investing and Financing transactions: | ||||||||
| Class A common stock issued for conversion of Series A convertible preferred stock | $ | $ | ||||||
| Recognition of right-of-use asset and lease liability | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| -7- |
SIDUS SPACE, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
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 have focused our business 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 six months ended June 30, 2024, 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, 2023, contained in the Company’s Form 10-K filed on March 27, 2024.
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 six months ended June 30, 2024, the Company has reclassified operating expenses to selling, general and administrative expenses.
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.
| -8- |
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; and the potential outcome of uncertain tax positions that have been recognized in our consolidated financial statements or tax returns.
Cash and Cash Equivalents
For
purposes of balance sheet presentation and reporting of cash flows, the Company considers all unrestricted demand deposits, money market
funds and highly liquid debt instruments with an original maturity of less than 90 days to be cash and cash equivalents. The Company
had
Periodically,
the Company may carry cash balances at financial institutions more than the federally insured limit of $
Bad Debt and Allowance for Doubtful Accounts
Historically the Company has been able to collect all past due amounts and has not written off past due invoices, therefore there is limited historical data on the company’s historical losses or expected losses at this time. In compliance with GAAP the Company has determined the following policy will be followed regarding outstanding customer invoices.
An allowance for doubtful accounts has been established to reflect the anticipated uncollectible value of the related receivable account. Review procedures have been established to provide a realistic reserve based on past collection experience and anticipated losses on the receivables.
The company will utilize the allowance method based on accounts receivable aging in order to accrue bad debt expense and the contra balance sheet account, allowance for doubtful accounts. The accounts receivable aging will be reviewed quarterly and necessary adjustments made to the allowance for doubtful accounts account balance. The Company will review their policy annually to determine if adjustments should be made based on more recent accounts receivable trends.
During
the six months ended June 30, 2024 and 2023, the Company did
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:
| -9- |
| ● | 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. |
The Company’s financial instruments, including cash, accounts receivable, prepaid expense and other current assets, accounts payable and accrued liabilities, and loans payable, are carried at historical cost. At June 30, 2024 and December 31, 2023, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.
Revenue Recognition
The Company adopted ASC 606 – Revenue from Contracts with Customers using the modified retrospective transition approach. The core principle of ASC 606 is that revenue should be recognized in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled for exchange of those goods or services. The Company’s updated accounting policies and related disclosures are set forth below, including the disclosure for disaggregated revenue. The impact of adopting ASC 606 was not material to the Consolidated Financial Statements.
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- |
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.
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.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the warrants was estimated using a Black-Scholes pricing model.
The Company has adopted ASC Topic 260, “Earnings per Share” which requires presentation of basic earnings per share on the face of the statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation. In the accompanying financial statements, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common stock issuable through contingent share arrangements, stock options and warrants unless the result would be antidilutive.
| -11- |
| June 30, | June 30, | |||||||
| 2024 | 2023 | |||||||
| (Shares) | (Shares) | |||||||
| Warrants | ||||||||
Note 3. Variable Interest Entity
Through a declaration of trust, % of the voting rights of Aurea’s shareholders have been transferred to the Company so that the Company has effective control over Aurea and has the power to direct the activities of Aurea that most significantly impact its economic performance. There are no restrictions on the consolidated VIE’s assets and on the settlement of its liabilities and all carrying amounts of VIE’s assets and liabilities are consolidated with the Company’s financial statements.
If facts and circumstances change such that the conclusion to consolidate the VIE has changed, the Company shall disclose the primary factors that caused the change and the effect on the Company’s financial statements in the periods when the change occurs.
As of June 30, 2024 and December 31, 2023, Aurea’s assets and liabilities are as follows:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid and other current assets | ||||||||
| $ | $ | |||||||
| Liability | ||||||||
| Accounts payable and other current liabilities | $ | $ | ||||||
For
the six months ended June 30, 2024 and 2023, Aurea’s net loss was $
Note 4. Prepaid expense and Other current assets
As of June 30, 2024 and December 31, 2023, prepaid expense and other current assets are as follows:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Prepaid insurance | $ | $ | ||||||
| Prepaid components | ||||||||
| Prepaid satellite services & licenses | ||||||||
| Prepaid software | ||||||||
| Other current assets | ||||||||
| $ | $ | |||||||
| -12- |
During
the six months ended June 30, 2024 and 2023, the Company recorded interest expense of $
Note 5. Inventory
As of June 30, 2024 and December 31, 2023, inventory is as follows:
| June
30, 2024 | December
31, 2023 | |||||||
| Work in Process | $ | $ | ||||||
Note 6. Property and Equipment
At June 30, 2024 and December 31, 2023, property and equipment consisted of the following:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Office equipment | $ | $ | ||||||
| Computer equipment | ||||||||
| Vehicle | ||||||||
| Software | ||||||||
| Machinery | ||||||||
| Leasehold improvements | ||||||||
| R&D software | ||||||||
| Satellite and related software | ||||||||
| Construction in progress | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net of accumulated depreciation | $ | $ | ||||||
As of June 30, 2024 and December 31, 2023, construction in progress represents components to be used in the manufacturing of our satellites.
As of June 30, 2024, one satellite and satellite related software were moved out of construction in progress and reported as assets with related depreciation expense.
Depreciation
expense of property and equipment for the six months ended June 30, 2024 and 2023 is $
During
the six months ended June 30, 2024 and 2023, the Company purchased assets of $
Note 7. Accounts payable and other current liabilities
At June 30, 2024 and December 31, 2023, accounts payable and other current liabilities consisted of the following:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Accounts payable | $ | $ | ||||||
| Payroll liabilities | ||||||||
| Credit card liability | ||||||||
| Other payable | ||||||||
| Dividend payable | ||||||||
| Payable for purchase of property and equipment | ||||||||
| Insurance payable | ||||||||
| $ | $ | |||||||
| -13- |
Note 8. Asset-based loan
The
Company is party to a recourse loan and security agreement with an unrelated lender dated November 30, 2022, whereby the lender will
provide loans secured by certain accounts receivable for up to
Note 9. Contract assets and liabilities
At June 30, 2024 and December 31, 2023, contract assets and contract liabilities consisted of the following:
| Contract assets | June
30, 2024 | December
31, 2023 | ||||||
| Revenue recognized in excess of amounts paid or payable (contracts receivable) to the company on uncompleted contracts (contract asset), excluding retainage | $ | $ | ||||||
| Retainage included in contract assets due to being conditional on something other than solely passage of time | ||||||||
| Retainage included in contract assets due to being conditional on something other than solely passage of time – related party | ||||||||
| Total contract assets | $ | $ | ||||||
| Contract liabilities | June
30, 2024 | December
31, 2023 | ||||||
| Payments received or receivable (contracts receivable) in excess of revenue recognized on uncompleted contracts (contract liability), excluding retainage | $ | $ | ||||||
| Retainage included in contract liabilities due to being conditional on something other than solely passage of time | ||||||||
| Retainage included in contract liabilities due to being conditional on something other than solely passage of time – related party | ||||||||
| Total contract liabilities | $ | $ | ||||||
Note 10. Leases
Operating lease
| -14- |
We recognized total lease expense, primarily related to our operating leases, on a straight-line basis in accordance with ASC 842.
As
of June 30, 2024 and December 31, 2023, the Company recorded a refundable security deposit of $
The operating lease expense were as follows:
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Operating lease cost | $ | $ | ||||||
Supplemental balance sheet information related to operating leases was as follows:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Operating lease right-of-use assets at inception | $ | $ | ||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Total operating lease right-of-use assets | $ | $ | ||||||
| Right-of-use assets obtained in exchange for new operating lease liability | $ | $ | ||||||
| Operating lease liabilities - current | $ | $ | ||||||
| Operating lease liabilities - non-current | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Weighted-average remaining lease term — operating leases (year) | ||||||||
| Weighted-average discount rate — operating leases | % | % | ||||||
Future minimum lease payments under operating leases that have initial noncancelable lease terms in excess of one year at June 30, 2024 were as follows:
| Total | ||||
| Year Ended December 31, | ||||
| 2024 - Remaining 6 months | $ | |||
| 2025 | ||||
| Thereafter | ||||
| Less: Imputed interest | ( | ) | ||
| Operating lease liabilities | ||||
| -15- |
Note 11. Notes Payable
Decathlon Note
On
December 3, 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 the Decathlon Note. In connection with our assumption
of the Decathlon Note, CTC reduced the principal of the Note Payable – related party by $
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
During
the six months ended June 30, 2024 and 2023, the Company recorded interest expense of $
Note 12. Related Party Transactions
Revenue and Accounts Receivable
The
Company recognized revenue of $
Accounts Payable
As
of June 30, 2024 and December 31, 2023, the Company owed $
Cost of Revenue and Operating expense
For
the six months ended June 30, 2024 and 2023, the Company recorded cost of revenue to Craig Technical Consulting, Inc. of $
Professional Service Agreements
A Professional Services Agreement, effective November 15, 2021, was made, between the Company and Craig Technical Consulting, Inc. The period of performance for this Agreement was December 1, 2021, through November 30, 2022. The agreement was amended, and the term of agreement was extended to November 30, 2024.
| -16- |
During
the six months ended June 30, 2024 and 2023, the Company recorded professional services of $
Sublease
On
August 1, 2021, the Company entered into a Sublease Agreement with its related party and a principal shareholder (“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
shall be $
Note 13. Commitments and Contingencies
Litigation
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. We are currently not aware of any such legal proceedings or claims that will have, individually or in aggregate, a material adverse effect on our business, financial condition, or operating results.
License Agreement
The
consolidated financial statements include Aurea Alas Limited, which is a variable interest entity of which we are the primary beneficiary
(see Note 3). On August 18, 2020, Aurea entered into a license agreement with a third-party vendor (the “Vendor”), whereby
they licensed the rights to use certain available radio frequency spectrum for satellite communications. The Company shall pay an annual
Reservation Fee of $
Note 14. Stockholder’s Equity
Authorized Capital Stock
Effective July 3, 2023, the Company filed an Amended and Restated Certificate of Incorporation to amend its authorized capital stock to authorize the Company to issue shares.
The Company has authorized shares of preferred stock with a par value of $.
The
Company has authorized shares of common stock with a par value of $, consisting of shares
of Class A Common Stock and shares of Class B Common Stock.
| -17- |
Series A Convertible Preferred Stock
On
October 11, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional
investors, pursuant to which the Company agreed to issue and sell to such investor, in a registered direct offering (the “Offering”),
an aggregate of shares of the Company’s Series A convertible preferred stock, par value $ per share
and stated value of $ per share (the “Series A Preferred Stock”) at an offering price of $ per share.
Each share of Series A Preferred Stock is convertible into shares of the Company’s Class A Common Stock at an initial conversion
price of $
During
the six months ended June 30, 2024, shares of Series A convertible preferred stock and a related dividend of
$
The Company had and shares of Series A Convertible preferred stock issued and outstanding as of June 30, 2024 and December 31, 2023, respectively.
Class A Common Stock
The Company had and shares of Class A common stock issued and outstanding as of June 30, 2024 and December 31, 2023, respectively.
Fiscal year 2024
On
January 29, 2024, the Company entered into a public offering of an aggregate of shares of Class A Common Stock and
pre-funded warrants to purchase up to an aggregate of
On
February 29, 2024, the Company entered into a public offering of an aggregate of shares (the
“Shares”) of Class A Common Stock, which have been sold pursuant to that certain Underwriting Agreement, dated
February 29, 2024, by and between the Company and the Representative of the Underwriters. Gross proceeds from the offering were
$
During
the six months ended June 30, 2024, shares of Series A convertible preferred stock and a related dividend of
$
During
the six months ended June 30, 2024,
| -18- |
Class B Common Sock
The Company had shares of Class B common stock issued and outstanding as of June 30, 2024 and December 31, 2023.
Warrants
During
the period ended June 30, 2024, the Company issued
January 2024 offering
The
Company issued a total of
February 2024 offering
The
Company issued a total of
A summary of activity of the warrants during the six months ended June 30, 2024 as follows:
| Number of | Weighted average | Average | ||||||||||
| shares | Exercise Price | Life (years) | ||||||||||
| Outstanding, December 31, 2023 | $ | |||||||||||