Sidus Space, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Financial statements are unaudited. Sidus designs and manufactures space hardware and is developing a satellite and data-services business. Its Q1 revenue included activity related to its multi-mission constellation and partially 3D-printed LizzieSat satellite.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $1.80 million | $153,136; up 1,075% |
| Gross profit (loss) | $978,337; 54% gross margin | $(134,540); (88%) margin |
| Operating expenses | $3.24 million | $385,174 |
| Operating loss | $(2.26) million | $(519,714) |
| Net loss | $(2.33) million; $(0.14) per share | $(199,329); $(0.02) per share |
| Cash used in operations | $(2.45) million | $(248,776) |
| Cash used in investing | $(541,264), primarily equipment purchases | $0 |
| Cash at period end | $10.42 million | $13.71 million at Dec. 31, 2021 |
| Working capital | $10.38 million | $12.20 million at Dec. 31, 2021 |
Revenue from related parties was $438,947, versus $41,289 a year earlier. Operating cash use included working-capital increases, including receivables and prepayments. Financing cash use was $297,140, including a $250,000 repayment to the principal stockholder.
Total liabilities were $6.42 million at March 31, 2022. These included $1.00 million of current and $1.10 million of noncurrent related-party notes payable, $1.13 million of noncurrent notes payable, and $135,506 of finance-lease liabilities. Operating-lease liabilities totaled $460,356.
Material changes and unusual items
- Revenue rose substantially with more customers, larger contracts, and increased work subcontracted from a related party. Management attributed improved gross margin to fewer labor-intensive contracts and growth in the higher-margin Satellite-as-a-Service line.
- Operating expenses increased by $2.86 million. Professional fees included a one-time $1.2 million stock-based consulting charge; the company issued 300,000 restricted Class A shares valued at $1.209 million for consulting services.
- Q1 2021 results included a $324,460 gain from forgiveness of a PPP loan; there was no comparable gain in Q1 2022.
- Property and equipment purchases were $541,264, and net property and equipment increased to $1.21 million from $775,070 at year-end.
- On April 11, 2022, Teresa Burchfield became CFO, succeeding Scott Silverman, who was to assist with the transition as a consultant through June 30, 2022.
Outlook, risks, and controls
- No formal numerical financial guidance is provided. Management said it was on track to launch its first LizzieSat at the end of 2022, subject to launch-vehicle availability, weather, and other unforeseen conditions. The satellite completed its Preliminary Design Review in Q1; launch-related contracts with NASA and Mission Helios had been signed.
- The company is pursuing NOAA licensing for the planned launch and identifies regulatory approvals, launch delays or cost overruns, competition, reliance on suppliers, intellectual-property disputes, and the need for additional capital among its risks. Management specifically flags uncertainty around cash burn, future capital requirements, and its ability to continue as a going concern; the filing text does not provide a clear quantified cash-runway estimate.
- Management stated that disclosure controls were not effective as of March 31, 2022 due to a material weakness: insufficient accounting and financial-reporting personnel, resulting in inadequate segregation of duties and review. The company said it planned to hire additional personnel. Management nevertheless concluded the reported financial statements fairly present its financial position and results in all material respects.
- The filing reports no material changes to previously disclosed risk factors and no legal proceedings known to have a material adverse effect. Management reported no subsequent event requiring adjustment to the financial statements.
Important facts for investors to verify
- Whether the sharp revenue increase, margin improvement, and related-party sales are sustainable and supported by timely customer collections.
- Actual cash burn and capital needs relative to the $10.42 million quarter-end cash balance, including any financing plans or going-concern developments.
- LizzieSat launch timing, customer commitments, NOAA and other regulatory approvals, and any schedule or cost changes.
- The extent and dilution impact of stock-based consulting compensation and future equity awards; Class B shares carry ten votes per share, and 16,874,040 common shares were outstanding on May 13, 2022.
- Progress in hiring accounting personnel and remediating the material weakness in internal controls.
- Terms and repayment obligations of related-party and other notes, including the revenue-based Decathlon loan arrangements.