UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2024

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

For the transition period from _________to ___________

Commission File Number: 001-41154

SIDUS SPACE, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware		46-0628183
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

150 N. Sykes Creek Parkway, Suite 200, Merritt Island, FL		32953
(Address of principal executive offices)		(Zip Code)

(321) 450-5633

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A common stock, $0.0001 par value		SIDU		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of Class A and B common shares outstanding as of November 13, 2024 was 4,081,344 and 100,000; respectively.

		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023	3

	Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2024 and 2023	4

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months ended September 30, 2024 and 2023	5

	Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2024 and 2023	7

	Notes to the Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4.	Controls and Procedures	37

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosure	38

Item 5.	Other Information	38

Item 6.	Exhibits	38

Signatures		39

-2-

SIDUS SPACE, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	September 30,			December 31,
	2024			2023
Assets
Current assets
Cash	$	1,231,401		$	1,216,107
Accounts receivable		1,495,340			1,175,077
Accounts receivable - related parties		269,957			67,447
Accounts receivable		269,957			67,447
Inventory		1,700,614			1,217,929
Contract asset		77,124			77,124
Contract asset - related party		50,204			43,173
Contract asset		50,204			43,173
Prepaid and other current assets		4,405,168			5,405,453
Total current assets		9,229,808			9,202,310

Property and equipment, net		13,198,308			9,570,214
Operating lease right-of-use assets		192,498			115,573
Intangible asset		398,135			398,135
Other assets		78,066			64,880
Total Assets	$	23,096,815		$	19,351,112

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and other current liabilities	$	5,236,280		$	6,697,562
Accounts payable and accrued interest - related party		1,025,288			677,039
Contract liability		77,124			77,124
Contract liability - related party		50,204			43,173
Contract liability		50,204			43,173
Asset-based loan liability		4,401,772			2,587,900
Notes payable		2,836,150			2,017,286
Operating lease liability		192,497			119,272
Total current liabilities		13,819,315			12,219,356

Total Liabilities		13,819,315			12,219,356

Commitments and contingencies		-			-

Stockholders’ Equity
Preferred Stock: 5,000,000 shares authorized; $0.0001 par value; no shares issued and outstanding
Series A convertible preferred stock: 2,000 shares authorized; 0 and 372 shares issued and outstanding, respectively		-			-
Preferred stock, value		-			-
Common stock: 210,000,000 authorized; $0.0001 par value Class A common stock: 200,000,000 shares authorized; 4,081,344 and 983,173 shares issued and outstanding, respectively		409			98
Class B common stock: 10,000,000 shares authorized; 100,000 shares issued and outstanding		10			10
Common stock, value		10			10
Additional paid-in capital		63,955,422			49,918,441
Accumulated deficit		(54,678,341	)		(42,786,793	)
Total Stockholders’ Equity		9,277,500			7,131,756
Total Liabilities and Stockholders’ Equity	$	23,096,815		$	19,351,112

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

-3-

SIDUS SPACE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	2024			2023			2024			2023
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023

Revenue	$	1,757,251		$	762,231		$	3,437,160		$	3,852,571
Revenue - related parties		111,707			223,289			409,523			766,985
Total - revenue		1,868,958			985,520			3,846,683			4,619,556
Cost of revenue		1,830,787			1,081,801			4,565,549			3,312,261
Gross profit (loss)		38,171			(96,281	)		(718,866	)		1,307,295

Operating expenses
Selling, general and administrative expense		3,210,069			3,778,460			9,912,466			10,881,111
Total operating expenses		3,210,069			3,778,460			9,912,466			10,881,111

Net loss from operations		(3,171,898	)		(3,874,741	)		(10,631,332	)		(9,573,816	)

Other income (expense)
Other income		3,000			-			4,613			17,950
Interest expense		(642,355	)		(186,282	)		(982,056	)		(561,476	)
Interest income		23			-			12,336			-
Asset-based loan expense		(91,359	)		(21,062	)		(252,734	)		(100,629	)
Finance expense		-			-			-			(806,754	)
Total other expense		(730,691	)		(207,344	)		(1,217,841	)		(1,450,909	)

Loss before income taxes		(3,902,589	)		(4,082,085	)		(11,849,173	)		(11,024,725	)
Provision for income taxes		-			-			-			-
Net loss	$	(3,902,589	)	$	(4,082,085	)	$	(11,849,173	)	$	(11,024,725	)

Dividend on Series A preferred Stock		-			-			(42,375	)		-
Net loss attributed to stockholders		(3,902,589	)		(4,082,085	)		(11,891,548	)		(11,024,725	)

Basic and diluted loss per common share	$	(0.93	)	$	(5.49	)	$	(3.21	)	$	(21.25	)
Basic and diluted weighted average number of common shares outstanding		4,181,344			743,049			3,695,944			518,803

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 Nine months Ended September 30, 2024

										Additional
	Class A Common Stock					Class B Common Stock				Paid-In		Accumulated
	Shares			Amount		Shares		Amount		Capital		Deficit			Total

Balance - December 31, 2023		983,173		$	98		100,000	$	10	$	49,918,441	$	(42,786,793	)	$	7,131,756

Class A common stock issued for conversion of Series A preferred stock and dividend		106,748			11		-		-		58,930		-			58,941
Class A common stock units issued		2,572,700			258		-		-		12,110,528		-			12,110,786
Class A common stock issued for exercise of warrants		418,724			42		-		-		1,631,483		-			1,631,525
Vested Board Compensation		-			-		-		-		37,500		-			37,500
Stock option expense		-			-		-		-		41,698		-			41,698
Common stock issue for reverse split adjustment		(1	)		-		-		-		-		-			-
Dividend on Series A preferred Stock		-			-		-		-		-		(42,375	)		(42,375	)
Net loss		-			-		-		-		-		(3,810,500	)		(3,810,500	)
Balance - March 31, 2024		4,081,344		$	409		100,000	$	10	$	63,798,580	$	(46,639,668	)	$	17,159,331

Vested Board Compensation		-			-		-		-		36,484		-			36,484
Stock option expense		-			-		-		-		44,346		-			44,346
Net loss		-			-		-		-		-		(4,136,084	)		(4,136,084	)
Balance - June 30, 2024		4,081,344		$	409		100,000	$	10	$	63,879,410	$	(50,775,752	)	$	13,104,077

Vested Board Compensation		-			-		-		-		31,666		-			31,666
Stock option expense		-			-		-		-		44,346		-			44,346
Net loss		-			-		-		-		-		(3,902,589	)		(3,902,589	)
Balance - September 30, 2024		4,081,344		$	409		100,000	$	10	$	63,955,422	$	(54,678,341	)	$	9,277,500

-5-

For the Three and Nine months Ended September 30, 2023

									Additional
	Class A Common Stock				Class B Common Stock				Paid-In		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit			Total

Balance - December 31, 2022		80,235	$	8		100,000	$	10	$	32,131,041	$	(28,255,846	)	$	3,875,213

Class A common stock units issued		172,500		17		-		-		4,615,448		-			4,615,465
Warrants issued for finance expense		-		-		-		-		566,229		-			566,229
Net loss		-		-		-		-		-		(3,441,059	)		(3,441,059	)
Balance - March 31, 2023		252,735	$	25		100,000	$	10	$	37,312,718	$	(31,696,905	)	$	5,615,848

Class A common stock units issued		123,599		12		-		-		10,170,471		-			10,170,483
Class A common stock issued for exercise of warrants		221,624		22		-		-		1,541		-			1,563
Warrants issued for finance expense		-		-		-		-		240,525		-			240,525
Debt forgiveness related party		-		-		-		-		-		-			-
Net loss		-		-		-		-		-		(3,501,581	)		(3,501,581	)
Balance - June 30, 2023		597,958	$	59		100,000	$	10	$	47,725,255	$	(35,198,486	)	$	12,526,838
Balance		597,958	$	59		100,000	$	10	$	47,725,255	$	(35,198,486	)	$	12,526,838

Class A common stock issued for exercise of warrants		111,705		11		-		-		599		-			610
Vested Board Compensation		-		-		-		-		25,000		-			25,000
Stock option expense		-		-		-		-		13,275		-			13,275
Net loss		-		-		-		-		-		(4,082,085	)		(4,082,085	)
Balance - September 30, 2023		709,663	$	70		100,000	$	10	$	47,764,129	$	(39,280,571	)	$	8,483,638
Balance		709,663	$	70		100,000	$	10	$	47,764,129	$	(39,280,571	)	$	8,483,638

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

-6-

SIDUS SPACE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	2024			2023
	Nine Months Ended
	September 30,
	2024			2023

Cash Flows From Operating Activities:
Net loss	$	(11,849,173	)	$	(11,024,725	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation		236,040			845,029
Depreciation and amortization		1,494,449			148,166
Bad debt		-			15,000
Changes in operating assets and liabilities:
Accounts receivable		(320,263	)		258,493
Accounts receivable - related party		(202,510	)		(77,796	)
Inventory		(482,685	)		(717,645	)
Contract asset		-			(16,192	)
Contract asset - related party		(7,031	)		(15,956	)
Prepaid expenses and other assets		987,099			(2,511,912	)
Accounts payable and accrued liabilities		(495,734	)		3,087,470
Accounts payable and accrued liabilities - related party		348,249			29,553
Contract liability		-			16,192
Contract liability - related party		7,031			15,956
Changes in operating lease assets and liabilities		(3,700	)		(6,613	)
Net Cash provided by (used in) Operating Activities		(10,288,228	)		(9,954,980	)

Cash Flows From Investing Activities:
Purchase of property and equipment		(5,102,661	)		(4,836,249	)
Cash paid for asset acquisition		-			(468,663	)
Net Cash used in Investing Activities		(5,102,661	)		(5,304,912	)

Cash Flows From Financing Activities:
Proceeds from issuance of common stock units		13,742,311			14,788,121
Proceeds from asset-based loan agreement		3,990,957			3,487,982
Repayment of asset-based loan agreement		(2,177,085	)		(3,490,144	)
Repayment of notes payable		(150,000	)		(223,995	)
Net Cash provided by (used in) Financing Activities		15,406,183			14,561,964

Net change in cash		15,294			(697,928	)
Cash, beginning of period		1,216,107			2,295,259
Cash, end of period	$	1,231,401		$	1,597,331

Supplemental cash flow information
Cash paid for interest	$	524,015		$	20,353
Cash paid for taxes	$	-		$	-

Non-cash Investing and Financing transactions:
Class A common stock issued for conversion of Series A convertible preferred stock	$	16,566		$	-
Recognition of right-of-use asset and lease liability	$	284,861		$	135,235
Class A common stock issued for exercised cashless warrant	$	-		$	1,160

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

September 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, Sidus Space is a space mission enabler that provides flexible, cost-effective solutions including custom satellite design, payload hosting, mission management, space manufacturing and AI enhanced space-based sensor data-as-a-service for government, defense, intelligence, and commercial companies around the globe. With our mission of Space Access Reimagined™, Sidus is committed to rapid innovation, adaptable and cost-effective solutions, and the optimization of space system and data collection performance.

We plan to offer on-orbit services as the space economy expands. Our recent launch of our inaugural 3D printed, AI enhanced multi mission satellite resulted in flight heritage for our on-orbit infrastructure and demonstrates our expansion of our business 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, our products and services are offered through several business units: Space-as-a-Service, Space-Based Data Solutions, Artificial Intelligence/Machine Learning (AI/ML) Products and Services, Mission Planning and Management Operations, 3D Printing Products and Services, Satellite Manufacturing and Payload Integration, and Space and Defense Hardware Manufacturing. Our vertically integrated model is complementary across each line of business aiming to expand existing and unlock new potential revenue generating opportunities.

Note 2. Summary of Signification Accounting Policies

Basis of Presentation

The Company prepares its financial statements in accordance with rules and regulations of the Securities and Exchange Commission (“SEC”) and GAAP in the United States of America. The accompanying interim financial statements have been prepared in accordance with GAAP for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the Company’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 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/A filed on October 11, 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 nine months ended September 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 no cash equivalents at September 30, 2024 and December 31, 2023.

Periodically, the Company may carry cash balances at financial institutions more than the federally insured limit of $250,000 per institution. The amount in excess of the FDIC insurance as of September 30, 2024, was approximately $0.9 million. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. The Company has also mitigated some of the risk through the use of a premium savings account. This account is used for amounts that are over a set balance maintained in the Company’s general operating account. Balances in the premium savings account are insured up to $150 million.

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 nine months ended September 30, 2024 and 2023, the Company did not record any bad debt.

-9-

Fair Value Measurements

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows:

	●	Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;

	●	Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and

	●	Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

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 September 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, are summarized below:

Revenues from fixed price manufacturing related 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 primarily related to satellite payload related contracts 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-

Stock Based Compensation

The Company accounts for stock-based compensation awards in accordance with ASC Topic 718, “Compensation – Stock Compensation.” The cost of services received from employees and non-employees in exchange for awards of equity instruments is recognized in the consolidated statements of operations and comprehensive income based on the estimated fair value of those awards on the grant date and amortized on a straight-line basis over the requisite service period or vesting period. The Company records forfeitures as they occur.

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.

Net Income (Loss) Per Share of Common Stock

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.

For the nine months ended September 30, 2024 and 2023, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive.

Schedule of Diluted Net Loss Per Share

	September 30,		September 30,
	2024		2023
	(Shares)		(Shares)
Warrants		260,213		125,998

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Note 3. Variable Interest Entity

The consolidated financial statements include Aurea Alas Limited, which is a variable interest entity of which we are the primary beneficiary, and on August 26, 2020, the Company entered into a licensing agreement with Aurea. Aurea is a Limited company organized in the Isle of Man, which entered into a license agreement with a third-party vendor, whereby they licensed the rights to use certain available radio frequency spectrum for satellite communications. The Company is responsible for 100% of the operations of Aurea and derives 100% of the net profits or losses derived from the business operations. The assets, liabilities and the operations of Aurea from the date of inception (July 20, 2020), were included in the Company’s consolidated financial statements.

Through a declaration of trust, 100% of the voting rights of Aurea’s shareholders have been transferred to the Company so that the Company has effective control over Aurea and has the power to direct the activities of Aurea that most significantly impact its economic performance. There are no restrictions on the consolidated VIE’s assets and on the settlement of its liabilities and all carrying amounts of VIE’s assets and liabilities are consolidated with the Company’s financial statements.

If facts and circumstances change such that the conclusion to consolidate the VIE has changed, the Company shall disclose the primary factors that caused the change and the effect on the Company’s financial statements in the periods when the change occurs.

As of September 30, 2024 and December 31, 2023, Aurea’s assets and liabilities are as follows:

	September 30,		December 31,
	2024		2023
Assets
Cash	$	69,728	$	52,492
Prepaid and other current assets		8,151		13,164
Total Assets	$	77,879	$	65,656

Liability
Accounts payable and other current liabilities	$	76,728	$	74,219

For the nine months ended September 30, 2024 and 2023, Aurea’s net loss was $125,288 and $115,087 respectively.

Note 4. Prepaid expense and Other current assets

As of September 30, 2024 and December 31, 2023, prepaid expense and other current assets are as follows:

September 30,

SEC Form 10-Q filed by Sidus Space Inc.