Sidus Space, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Financial statements are unaudited. Sidus provides space hardware manufacturing and engineering services and is developing its LizzieSat low-Earth-orbit constellation and related data services.
Financial performance
| Metric | Three months ended September 30, 2022 | Three months ended September 30, 2021 | Nine months ended September 30, 2022 | Nine months ended September 30, 2021 |
|---|---|---|---|---|
| Revenue | $1.32 million | $0.50 million | $4.96 million | $0.89 million |
| Gross profit (loss) | $(85,623) | $18,854 | $1.24 million | $(171,832) |
| Gross margin | (7)% | 4% | 25% | (19)% |
| Operating expenses | $3.79 million | $0.92 million | $9.78 million | $1.72 million |
| Net loss | $(3.93) million | $(0.62) million | $(8.71) million | $(1.32) million |
| Basic and diluted loss per share | $(0.23) | $(0.06) | $(0.52) | $(0.13) |
Revenue growth reflected increased non-related-party manufacturing and contract activity. Related-party revenue declined in Q3 as the related party outsourced less work, but increased for the nine-month period. Management attributed Q3 gross-margin deterioration to contract mix and higher supply-chain costs; the nine-month gross-margin improvement reflected revenue growth, contract mix, and higher-margin Satellite-as-a-Service activity. Operating expenses rose substantially, including from staffing growth, public-company costs, and one-time fees.
Cash flow, liquidity, and debt
- Cash was $4.36 million at September 30, 2022, down from $13.71 million at December 31, 2021. Working capital was $6.67 million; total current assets were $8.90 million and current liabilities $2.23 million.
- For the nine months, operating cash use was $9.83 million, investing cash use was $1.43 million, and financing provided $1.90 million. Capital spending on property and equipment was $1.43 million.
- Total liabilities were $3.37 million. Notes payable included $1.04 million of non-current debt; the company reported no related-party notes payable at quarter-end. Operating lease liabilities totaled $329,394. Finance leases were paid off during the period.
- Financing included $3.06 million of net common-stock proceeds and repayments of $797,505 on related-party notes. A related party also forgave $1.62 million of debt and accrued interest, recorded as additional paid-in capital.
Material changes, outlook, and risks
- For the nine months, revenue increased 461% year over year, while net loss increased to $8.71 million. Management identified $1.2 million of noncash stock-based consulting expense, a $600,000 banking advisory fee, and $100,000 of financing-related legal expense as one-time items. Management estimated adjusted net loss of approximately $6.8 million and adjusted operating cash use of approximately $9.1 million; these are management adjustments, not reported GAAP measures.
- The company entered a B. Riley equity purchase agreement allowing, subject to conditions, sales of up to $30 million of shares. Nasdaq's stated exchange cap is 3,373,121 shares absent qualifying pricing or stockholder approval; the agreement also includes a 4.99% beneficial-ownership limit. Additional shares were sold after quarter-end.
- Management expects LizzieSat operations to begin in 2023, with initial launches planned through NASA's CRS2 program agreement and rideshare contracts. It reported successful preliminary design review in Q1 2022 and said it was pursuing NOAA licensing for the initial launch. These are plans and expectations, not guaranteed milestones; no quantified financial guidance is provided.
- Management said cash on hand plus anticipated additional funding should cover planned expenditures and obligations for at least one year after the financial statements were issued. The company nevertheless reported substantial losses and operating cash use, and expects to rely on future debt or equity financing and other funding sources. Failure to obtain funding could force project delays or reductions and threaten its ability to continue as a going concern.
- Risks include financing needs, satellite launch and regulatory delays or cost overruns, supply-chain impacts, competition, reliance on third-party suppliers, and execution of growth plans. The company reported that disclosure controls were ineffective due to a material weakness involving insufficient accounting personnel, segregation of duties, and financial-statement review. Management described additional staffing as its remediation plan.
- The filing reports no known legal proceedings expected to have a material adverse effect and no material changes to previously disclosed risk factors. Class B shares carry ten votes per share, compared with one vote per Class A share.
Key facts for investors to verify
- Whether cash burn, working capital, and subsequent financing proceeds support the stated one-year funding outlook, and what financing terms or dilution may follow.
- Progress and funding for LizzieSat launches, NOAA approvals, customer payload commitments, and the expected 2023 start of operations.
- Whether revenue growth and the reported nine-month gross-margin improvement can continue without supply-chain and contract-mix pressure.
- The nature and recurrence of consulting, advisory, legal, and public-company costs, and progress in remediating the disclosed internal-control weakness.
- Related-party revenue, debt forgiveness, and other transactions, together with the voting and ownership effects of the dual-class shares.