Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

Forward-Looking Statements and Industry Data

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements may be identified by such forward-looking terminology as "may," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue" or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:

	●	our projected financial position and estimated cash burn rate;
	●	our estimates regarding expenses, future revenues and capital requirements;
	●	our ability to continue as a going concern;
	●	our need to raise substantial additional capital to fund our operations;
	●	our ability to compete in the global space industry;
	●	our ability to obtain and maintain intellectual property protection for our current products and services;
	●	our ability to protect our intellectual property rights and the potential for us to incur substantial costs from lawsuits to enforce or protect our intellectual property rights;
	●	the possibility that a third party may claim we have infringed, misappropriated or otherwise violated their intellectual property rights and that we may incur substantial costs and be required to devote substantial time defending against these claims;
	●	our reliance on third-party suppliers and manufacturers;
	●	the success of competing products or services that are or become available;
	●	our ability to expand our organization to accommodate potential growth and our ability to retain and attract key personnel; and
	●	the potential for us to incur substantial costs resulting from lawsuits against us and the potential for these lawsuits to cause us to limit our commercialization of our products and services.

All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the "SEC") could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.

This Quarterly Report on Form 10-Q may contain estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. We obtained the industry and market data in this Quarterly Report on Form 10-Q from our own research as well as from industry and general publications, surveys and studies conducted by third parties. This data involves a number of assumptions and limitations and contains projections and estimates of the future performance of the industries in which we operate that are subject to a high degree of uncertainty, including those discussed in "Risk Factors." We caution you not to give undue weight to such projections, assumptions, and estimates. Further, industry and general publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that these publications, studies, and surveys are reliable, we have not independently verified the data contained in them. In addition, while we believe that the results and estimates from our internal research are reliable, such results and estimates have not been verified by any independent source.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited interim consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as may be amended, supplemented or superseded from time to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.

Throughout this Quarterly Report on Form 10-Q, references to "we," "our," "us," the "Company," "Sidus," or "Sidus Space" refer to Sidus Space, Inc., individually, or as the context requires, collectively with its subsidiary.

Overview of Operations

Founded in 2012, we are an innovative, space mission enabler providing flexible, cost-effective solutions to government, defense, intelligence and commercial companies around the globe. Our products and services include satellite manufacturing and technology integration, AI-driven space-based data solutions, mission planning and management operations, AI/ML products and services, and space and defense hardware manufacturing. With our mission of Space Access Reimagined®, we are committed to rapid innovation, adaptable and cost-effective solutions, and the optimization of space system and data collection performance.

We offer customers a variety of mission options whether the ability to host a technology, procure a satellite bus, or simply purchase data as a service. Our flight proven modular satellite, LizzieSat® is a hybrid 3D printed, multi-sensor, multi-mission satellite, which is the first of its kind, offering a flexible, cost-effective platform that can be easily adapted to integrate new technologies or customized and scaled to create a new satellite design to meet mission requirements.

As a forward-thinking mission partner, we excel at responding swiftly to change. We work closely with global clients to co-develop mission solutions tailored to both technical requirements and budget constraints. Our Cielo™ AI data processing algorithms can be updated while in orbit, which provides additional mission flexibility. By leveraging our vertically integrated in-house capabilities-engineering, manufacturing, and mission management-we are able to rapidly pivot and deliver at the pace of innovation.

Through our Sidus Orlaith™ AI ecosystem, we enable near real-time on-orbit & terrestrial data processing, enhancing the speed and efficiency of data delivery from sensors. Orlaith™ offers high-performance on-orbit edge computing and data processing from diverse sensor sets leveraging Sidus' proprietary FeatherEdge™ hardware and Cielo™ software. Orlaith's systemic capabilities provide industry-leading and differentiated data delivery for a wide range of end uses. Orlaith's data processing can also be seamlessly customized for new and/or esoteric missions.

As a forward-thinking mission partner, we excel at responding swiftly to change. We work closely with global clients to co-develop mission solutions tailored to both technical requirements and budget constraints. Our Cielo™ AI data processing algorithms can be updated while in orbit, which provides additional mission flexibility. By leveraging our vertically integrated in-house capabilities, engineering, manufacturing, and mission management, we are able to rapidly pivot and deliver at the pace of innovation.

We have demonstrated proven space heritage, successfully launching three hybrid, additively manufactured LizzieSat® satellites equipped with advanced AI edge-computing capabilities in just over 12 months. This achievement underscores our position as a leader in space technology, artificial intelligence, and innovation. This success is built on more than a decade of experience delivering flight-proven systems, platforms, devices, and hardware for customers such as NASA, the Department of Defense (DoD), SpaceX, and Blue Origin. We are strategically headquartered on Florida's Space Coast, which provides easy access to nearby launch facilities, and we operate a 35,000-square-foot manufacturing, assembly, integration, and testing facility which reduces production time. We have an experienced team with expertise in multi-disciplinary engineering, mission-critical hardware manufacturing, satellite design, production, launch planning, mission operations, and in-orbit support.

We continue to focus on innovation and agility. In October of 2024, we received approval from the U.S. Federal Communications Commission (FCC) to operate a micro constellation of remote sensing, multi-mission satellites in Low Earth Orbit (LEO), and we continue to enhance the capabilities of our LizzieSat® platform. Planned enhancements include:  

	●	Open VPX/ SOSA compatible architecture with simplified assembly and integration, reduced mass, and better performance
	●	Integration of AI processor capable of handling 248 trillion or Tera Operations Per Second (TOPS)
	●	Upgraded payload processor with Field Programmable Gate Array (FPGA) capable of handling payloads at high speed up to 12 Gb/s; also includes five times more computing power and more speed with a 1.8 GHz quad core processor
	●	Up to 4 Tb memory storage
	●	Upgraded 2nd generation FeatherEdgetm AI/ML processor that incorporates a space-to-space data relay module, enabling rapid, direct-to-user data transfer for time-sensitive missions.

Products and Services

We provide adaptable yet cost efficient solutions with the full understanding and experience of the entire space life cycle from hardware manufacturing to mission planning and operations to space-based data delivery.

Custom satellite design and manufacturing: We provide custom satellite design services, working closely with clients to develop satellite solutions aligned with specific mission objectives. Using the modular LizzieSat^® platform, which can be adapted for various technologies and mission requirements, we support the design and integration process from concept to completion. This flexible approach is intended to deliver tailored satellite designs that can meet a broad range of operational and data collection needs. We currently have three variations of our LizzieSat^® platform:

	●	LizzieSat® (Gen 1: LS1-3): Multi-mission satellite for a multi-mission micro constellation
	●	LizzieSat-XL (Gen 2: LS4+):Upgraded VPX Technology for Next Generation Communication
	●	Lunar Lizzie: Expanded battery capacity and atomic clock for precise and accurate clocking

We also offer fully customized satellite design services for any mission in Leo, Geo, Cislunar or Lunar.

Technology hosting and mission management: We offer technology hosting and mission management services designed to simplify clients' path to space and enable clients to focus on their mission goals without the complexities of satellite operation. We provide integration for a variety of payloads using our LizzieSat^® platform. While on-orbit, we provide 24/7/365 real-time routine and non-real-time mission operations, including satellite monitoring, control, and data management. Our support includes:

	●	Amazon Web Services cloud-based servers for data transfer and archival
	●	Backup control center capability
	●	In-house designed C2 routing, encryption, and customer API integration
	●	Multiple ground station providers available for use to meet customer needs
	●	Physical and cyber security to ensure satellite and onboard technologies are protected

AI enhanced space-based sensor Data-as-a-Service: We offer AI-enhanced Data-as-a-Service, utilizing the Orlaith^tm AI ecosystem, which includes our FeatherEdge™ AI processor and Cielo™ AI solutions from space, on the LizzieSat® platform to deliver timely data insights from space. The LizzieSat® design enables simultaneous on-orbit data collection from multiple sensors, with the flexibility to combine data streams in unique ways to support diverse applications and missions from the same platform.

By processing onboard sensor data directly and transmitting only crucial information, the Orlaith^tm AI ecosystem reduces downlink costs and significantly bolsters response times for critical events. Additionally, Cielo™ AI algorithms can be upgraded while in orbit, providing adaptability for evolving mission needs. The data-as-a-service approach is designed to support applications in environmental monitoring, disaster response, security, and more, offering customers access to near real-time data that can aid in informed decision-making. The data-as-a-service is a subscription-based model with multiple price tiers based on span of data accessed and is applicable to multiple customers including government (e.g., climate change, environmental disasters), defense (e.g., border security), and commercial (e.g., insurance).

Space and Defense Manufacturing: We provide a range of space products and manufacturing services, including mission-critical components and systems engineered for space environments. Our 35,000-square-foot ISO 9001:2015, AS9100 Rev. D certified facility supports the manufacturing, testing, and assembly of space-grade hardware. We work to deliver high-quality, reliable space products for government, defense, and commercial clients by leveraging its expertise in engineering and mission-critical manufacturing. Our space offerings include:

	●	Multi-material 3D printing technology for the fabrication of a complex satellite bus and parts. 3D printing revolutionizes the space manufacturing process by reducing production costs and lead times while reducing the weight of the satellite bus. The technology has been successfully used on-orbit.
	●	Precision machining
	●	Multi-discipline engineering and design services
	●	Program management including supply chain management

We have an approximately 10,000 square-foot reconfigurable avionics lab that produces a wide range of space system flight and ground cables, medical and mission critical wire harnesses, military harness assemblies, electronic chassis, and electro-mechanical assemblies. Additionally, our 864 square foot, ISO-8 clean room allows us to offer highly differentiated manufacturing and assembly.

Our manufacturing capabilities combine our design engineering, precision machining, waterjet cutting, and wire harness fabrication experience to provide the highest quality and performance for mission critical systems.

Precision Machining and Assembly

Our growing team of engineers and technicians, combined with state-of-the-art equipment support precision machining, fabrication, and assembly for prototypes, test articles, one-offs, low-rate initial production up through high volume Swiss screw machining production. We utilize the latest CNC machining and turning processes to deliver high-quality, complex and on-demand parts for specialized industries including the space sector.

	●	CNC Swiss Screw Machining
	●	CMM, VCMM Quality Inspection
	●	EDM Wire and Waterjet Cutting
	●	3-D Printing
	●	Welding

3D Printing

From early-stage product development to functional finished parts, we offer commercial and industrial-grade additive manufacturing solutions. Our 3D printers enable us to provide rapid manufacturing with industrial micron-level laser scanning accuracy and 50 µm repeatability. Using Continuous Fiber Fabrication technology, we can produce parts at an enhanced schedule that are stronger than 6061 Aluminum and 40% lighter. We provide internal engineering support to optimize the functional performance, product life cycle, and accuracy of its customers' specific 3D printed technology to ensure repeatability and consistency across prints. Our 3D printing capabilities include:

	●	Functional Prototypes and Models
	●	Production Parts
	●	End-life Production
	●	Tool Development
	●	Patterns and Molds
	●	Jigs and Fixtures
	●	Fly-Away Parts

Mechanical/Electrical Assembly and Test

	●	Flight/Ground Cable and Wire Harnesses
	●	Ground Support Equipment
	●	Manned Spaceflight Rated Hardware
	●	Satellite Components
	●	Part Task Trainer Hardware

As part of our 35,000 square foot manufacturing facility, we have a reconfigurable electronics and cable harness fabrication lab with the necessary equipment, staff and square footage to produce space flight and ground cables and electronic chassis. Our experience and capabilities include manufacturing, assembly and testing of a wide selection of electrical control cabinet and electronic cabinet modification and fabrication processes. We have extensive experience assembling electronics, including soldering, crimping, multi-pinned connector terminations, fusion splicing, molding, potting, and testing.

Certifications include NASA 8739.4, NASA 8739.5, J STD 001 and IPC A 610. Our IPC-J-STD-001 accredited technicians adhere to NASA work standards KSC-E-165, KSC-GP-864, KSC-STD-132, all required for NASA 8739.4 credentials with other industry-standard certifications.

Design Engineering

We provide quality in-house design engineering services from up-front analysis to integration, assembly, and test. Our ISO 9001:2015 / AS9100D certified engineering capabilities include the ability to perform initial design concepts or value-add engineering change recommendations to existing engineering. Our multidisciplinary engineering experience and talent cover a broad spectrum of capabilities, enabling an even more comprehensive range of projects. Our design engineering capabilities include:

	●	Requirements Definition - Product development and process optimization
	●	Verification/Validation (multiple checks and balance) - Meets specification and intended purpose
	●	Model Based Systems Engineering - Use of visual modeling vs document-based information exchange
	●	3D CAD & 2D Engineering Release - Managing, planning, scheduling, and controlling
	●	Test Procedures and Performance - Meets customer driven requirements

	●	Operations/Maintenance Manuals - Fully integrated and procedurally driven
	●	System Integration - Horizontal sub-system integration approach to projects and programs
	●	Design for Life Cycle Cost & Manufacturing - Incorporation of innovative design manufacturing
	●	Model Based Data Control - Complex design verification/validation
	●	Finite Element and Failure Mode & Effects Analysis
	●	Design for Manufacturability

Our broad range of support of international and domestic governments and commercial companies includes the Netherlands Organization, U.S. Department of State, the U.S. Department of Defense, NASA, Collins Aerospace, Lockheed Martin, Teledyne Marine, Bechtel, Sierra Space, Intuitive Machines, OneWeb Satellites, Parsons Corporation, and L3Harris in areas that include but are not limited to launch vehicles, satellites, and autonomous underwater vehicles.

Technology Design and Integration: We leverage our manufacturing and technology expertise to address critical space supply chain challenges with initiatives that are expected to further our mission of Space Access Reimagined®, providing flexible and cost-effective solutions to an expanding global customer base.

	●	Orlaithtm AI Ecosystem which includes FeatherEdgetm hardware, a compact data processing unit tailored for AI applications in orbit, and Cielotm, AI solutions from space, for delivering insights from diverse sensor sets
	●	FeatherEdge™ is a compact data processing unit tailored for AI applications in orbit. Its small size and low power design enable compatibility with diverse satellite platforms or as a standalone product. In addition to satellites, it can be integrated in the most remote and challenging environments such as drones, ships, aircraft, and high altitude balloons to provide high-performance computing and communications at the edge
	●	Reusable flight software
	●	Flight computer simulator software
	●	Lab-based integration and test-bed platform
	●	VPX System including OBC/GPU
	●	Printed Circuit Board for GPS, radio, microcontrollers

Key Achievements to date

	●	Successfully launched LizzieSat®-1 in March 2024 and LizzieSat®-2 in December 2024, establishing our micro-constellation for delivering near real-time solutions for our customers' mission critical needs. In Q1 2025, we completed the build and launch of our third commercial satellite, LizzieSat®-3, equipped with both Sidus and customer-hosted technologies
	●	Signed an extended and amended preliminary contract valued at $120M for the previously executed contract to exclusively design and build the first-generation lunar fleet of Data Storage Spacecraft for Lonestar Data Holdings, a provider of premium data storage and Resiliency-as-a-Service (RAAS), which reinforces the adaptability of the LizzieSat® platform
	●	Established a fully operational mission control center to manage satellite operations, orchestrate collection management tasks and satisfy data distribution requests for our own constellations and others utilizing Neuraspace to provide space traffic management and LEOP (Launch and Early Operations) support services, enhancing Sidus' constellation operation capabilities
	●	Received approval by the U.S. Federal Communications Commission (FCC) for operation of a micro constellation of remote sensing, multi-mission satellites in Low Earth Orbit (LEO) as well as FCC Approval for Space-to-Space Data Relay Capability for LizzieSat®
	●	Awarded second contract to integrate HEO Holmes Imager aboard LizzieSat®-3
	●	Awarded contract with Xiomas Technologies to supply FeatherEdge™ computing system for fire detection via high-altitude infrared imaging
	●	Awarded $2 million contract from Craig Technologies to manufacture two fleet interactive display equipment (FIDE) pre-production unit main panels for U.S. Navy Propulsion systems
	●	Awarded subcontract on the $30M Intuitive Machines-led Moon RACER team for the NASA Lunar Terrain Vehicle Services (LTVS) contract in support of the Agency's Artemis Campaign and begun work

	●	Expanded capabilities related to Lunar missions following award of the NASA Lunar Terrain Vehicle Services Contract as a member of the Intuitive Machines-led Moon Reusable Autonomous Crewed Exploration Rover team
	●	Announced strategic partnerships with international partners in support of the Sidus International Space Center, to include German satellite manufacturing startup Reflex Aerospace, Japanese space-tech company Warpspace specializing in next-generation optical communication technologies and NamaSys Bahrain, a multi discipline Technology & Electronic Security Consultancy supporting Saudi Arabia space initiatives
	●	Awarded follow on contract for additional support to NAA Stennis Space Center for Autonomous Satellite Technology for Resilient Application (ASTRA) historic in-space payload mission with NASA Stennis Space Center and secured follow-on contract for additional ASTRA support
	●	Demonstrated Sidus Orlaithtm on-orbit capability with an AI enhanced, thermal sensing firefighting software solution, showcasing the ability to process large sets of raw data in space and deliver only relevant information to end users. This achievement established flight heritage, which is the history of successful operation of a particular component, subsystem, or system in a space environment, for our Sidus Orlaithtm AI Ecosystem edge computing hardware and software solutions
	●	Incorporated space-to-space data relay module, enabling rapid, direct-to-user data transfer for time-sensitive missions into LizzieSat®-3 communication system
	●	Completed the critical design review for LizzieSat® NL, a laser communication satellite contracted by The Netherlands Organization
	●	Demonstrated manufacturing excellence by producing and delivering thousands of unique parts to 14 customers across commercial, government and defense sectors, reinforcing Sidus' role as a trusted provider of mission-critical hardware
	●	Strengthened intellectual property portfolio with the approval of new patents and the publication of a patent application protecting enhanced functionality of the LizzieSat® Modular Satellite Platform System
	●	Developed and achieved flight heritage for the Sidus low voltage differential signaling (LVDS) switch card, which extends the capabilities of the payload processor, enabling communication with multiple optical sensors through high speed LVDS data connections
	●	Extended partnership as protégé with L3Harris under Department of Defense Mentor-Protégé Program
	●	Continue to leverage our multi-year, multi-launch agreement with Space-X thereby offering customers by extension a reliable, cost-effective launch service with a steady cadence of launches.
	●	Signed a Memorandum of Understanding (MOU) with Reflex Aerospace to form a U.S.-based Joint Venture focused on delivering flexible, cost-effective, and high-performance solutions to meet diverse customer needs while strengthening their presence in global markets
	●	Unveiled near real-time vessel detection and classification capability, enabled by our hybrid 3D printed LizzieSat® satellite platform. This involves processing data directly onboard LizzieSat® through the Sidus Orlaith™ AI Ecosystem which includes FeatherEdge™ edge computing hardware, the OrbitfyEdge software from Little Place Labs
	●	Received a Notice of Allowance of U.S. Patent Application Serial No. 17/828,233, titled System for a Modular Satellite Testing Platform. This patent application is directed to the structural elements of the LizzieSat® Satellite
	●	Signed a Memorandum of Understanding (MOU) with Saturn Satellite Networks, Inc., to outline a strategic collaboration to support the development and deployment of Saturn's SBN-X platform - a new low-cost, high-performance GEO satellite solution
	●	Achieved successful on-orbit operation of FeatherEdge™ Gen-2 aboard LizzieSat®-3
	●	Launched Fortis™ VPX, a ruggedized, modular, SOSA™ aligned computing system engineered for high-reliability command and data handling (C&DH), advanced artificial intelligence/machine learning (AI/ML) processing, and precision navigation in extreme environments
	●	Established partnership with VORAGO Technologies to validate and integrate next-generation radiation-hardened microcontroller (MCU) technology through VORAGO's Alpha Customer Program
	●	Unveiled LunarLizzie™: A next-generation 800kg-class lunar platform designed with proven edge AI for near real-time intelligence
	●	Achieved successful on-orbit operation of our Automatic Identification System (AIS) sensor onboard LizzieSat®-3
	●	Awarded a five-year Indefinite Delivery/Indefinite Quantity (IDIQ) contract under the Tobyhanna Army Depot (TYAD) Industrial Multiple Award Task Order Contract (MATOC) program

Differentiation:

Our LizzieSat® satellite platform has been designed to provide a standard, modular satellite platform that serves as the foundation for multiple missions for Leo, Geo, Cislunar, Lunar and beyond. Additionally, our platform provides differentiated data collection when compared to industry alternatives. The LizzieSat® multi-mission satellite for a multi-mission constellation leads the next generation of earth and space data collection by:

	●	Collecting on-orbit coincident data: LizzieSat® is capable of hosting multiple-sensors on the same satellite to collect varying data types at the same time and with the same collection geometry. On-orbit coincident collection provides the opportunity to develop higher value data by creating derivative products through data fusion of multiple types of sensor outputs.
	●	Analyzing data on the satellite on-orbit: Our satellites are Sidus' proprietary artificial intelligence ecosystem, Sidus Orlaith™. Sidus Orlaith™ enables on-orbit data processing for critical applications such as Space Situational Awareness (SSA), maritime monitoring and disaster response. The Sidus Orlaith AI Platform™ is powered by the edge computer, FeatherEdge™ GEN 2, featuring the NVIDIA Jetson NX Orin module which is capable of 100 trillion or Tera Operations per Second (TOPS). This advanced space-rated AI processing system is optimized for delivering high-performance, near real-time data analytics directly from space. Enhancements to future satellites include an upgraded FeatherEdgetm processor that can 248 trillion or Tera Operations Per Second (TOPS).

	●	Space to Space Data Relay: By processing data at the edge on-board LizzieSat®, we can reduce the file size and transmit only the processed solution, not the entire raw dataset. This enables us to move data from low-earth orbit to higher orbit data relay services for a lower-cost and more continual data transmission option to our customers. Additionally, it significantly reduces downlink costs and enhances response times critical to customer applications. LizzieSat™-3 is upgraded to harness the powerful combination of rapid direct-to-user data transfer capability and on-orbit Artificial Intelligence by integrating a space-to-space data relay module to provide data vital to organizations utilizing direct-to-device hardware.
	●	Post-launch mission additions: Our LizzieSat® satellites have been designed with a system flexible enough to support new customer missions post-launch (through software and algorithm updates) to allow Sidus to generate additional revenue on LizzieSat® platforms that have already launched and are operating on orbit.

The net value of data collected from our planned LizzieSat® constellation is expected to allow organizations to make better decisions with higher confidence, and increased accuracy and speed. We expect to enrich this processed data with customizable analytics users control for their own use case, and in turn provide data as a subscription across industries to organizations so they can improve decision-making and mitigate risk.

Planned services that benefit current and future customers include delivering space-based data that can provide critical insight for agriculture, commodities tracking, disaster assessment, illegal trafficking monitoring, energy, mining, oil and gas, fire monitoring, classification of vegetation, soil moisture, carbon mass, Maritime Automatic Identification System (AIS), Air Traffic Control Automatic Dependent Surveillance, and weather monitoring; providing the ability for customers to demonstrate that a technology (hardware or software) performs successfully in the harsh environment of space and delivering space services. Our operating strategy is to continue to capitalize on our smart vertical integration to enhance the capabilities of our multi-mission satellite constellation, to design and manufacture satellites for government and commercial customers utilizing our advanced and proprietary technologies, to increase our international and domestic partnerships and to expand our coincident data analytics offerings in order to increase the value we deliver to our customers. Our two primary operating assets-our satellite constellation and our manufacturing facility and capability - complement each other and are the result of years of experience and innovation.

Key Factors Affecting Our Results and Prospects

We believe that our performance and future success depend on several factors that present significant opportunities but also pose risks and challenges, including competition from better known and well-capitalized companies, the risk of actual or perceived safety issues and their consequences for our reputation and the other factors discussed under "Risk Factors." We believe the factors discussed below are key to our success.

Expanding Commercial Satellite Operations

Our goal is to enable customers to meet their mission objectives with cost-effective solutions and to help them understand how space-based data can be impactful to day-to-day business. Our strategy includes increasing the demand downstream by starting out as end user focused. While others are focused on a data verticalization strategy specializing in key sectors or a problem set, we believe that flexibility in production, low-cost, standardized design and offering 'Space Access Reimagined' for consumers will provide a scalable model for growth. In just over twelve months, we successfully launched and began operations with three LizzieSat® multi-mission satellites for a multi-mission constellation. Designed to be modular, flexible, and cost-effective, our proven LizzieSat® platform enables rapid mission configuration and scalability across a wide range of satellite sizes, efficiently addressing unique mission requirements. Built with several proprietary Sidus designs for reusable core components, our smart vertical integration provides greater control over the supply chain, ensuring seamless integration of all components-whether developed in-house or sourced externally. This integrated approach offers a distinct advantage over competitors who rely on purchasing and integrating hardware, software, and subsystems from multiple vendors.

Our existing, proven manufacturing facility and infrastructure provides scalable and streamlined manufacturing with flexible and efficient cycles tailored to both internal and external end-users. We ensure controlled product quality and service through the use of space-qualified Commercial Off-the-Shelf (COTS) components, along with our AS9100 certified capability to manufacture our own space supply chain products. Our modular design supports flexible technology integration, enabling rapid incorporation of variable sensors and mission-specific technologies. By spreading fixed costs across multiple customers and capabilities, we offer a more cost-effective solution. As a full-stack space services provider, our offerings are anchored by a state-of-the-art Mission Control Center (MCC), ensuring end-to-end mission support.

In Q2 2024, we announced the successful on-orbit activation of the FeatherEdge™ processer which enables us to deliver near real-time intelligence derived from earth observation data. Further expanding the capabilities of our constellation, we implemented the SatLab A/S second-generation automated identification system (AIS) technology into the LizzieSat® satellite constellation. AIS technology uses sophisticated systems on board marine vessels to identify and track ships to prevent collisions and protect life at sea. The integration of this technology, combined with data from optical sensors on board LizzieSat®, enables unique vessel tracking and monitoring solutions while providing valuable information about ship movements in real time. In addition to AIS technology, we have integrated visual spectrum and multispectral imagers into our sensor suite and expect to expand the sensors to include software defined multispectral or hyperspectral sensors for future satellite missions.

We have previously been approved for our X-band and S-band radio frequencies licensing through a published filing by the ITU on April 6, 2021. Such licenses are held through Aurea Alas, Ltd., an Isle of Man company, which is a Variable interest entity to us. The ITU filing contains approved spectrum use for multiple X-Band and S-Band frequencies and seven different orbital planes, including 45 degrees. In August 2023, the FCC granted Sidus a LizzieSat® experimental launch and operating license for launch and deploy on a SpaceX Falcon 9 Transporter 10 mission. This license includes approval for orbital operations utilizing the previously approved ITU S-band and X-band frequencies and ground station coverage. We also received FCC Part 25 license approval for the LizzieSat® satellite constellation missions two through five in October of 2024. The National Oceanic and Atmospheric Administration (NOAA), an agency of the U.S. Department of Commerce, granted a Tier 1 license authorizing Sidus to operate LizzieSat, a private remote-sensing space system in 2024.

We currently have several satellites in production and expect to launch four to six more LizzieSat® satellites ranging from 100kg to 400kg over the next 24 months. In addition, we expect to begin building satellites for other customers including lunar missions.

Any delays in commencing our commercial launch operations, including delays or cost overruns in obtaining NOAA licenses or other regulatory approvals for future operations or frequency requirements, could adversely impact our results and growth plans. The exact timing of launches is contingent on several factors, including satisfactory and timely completion of assembly, integrating and testing of the satellites, regulatory approvals, confirmation of the launch slot timing by the launch provider, logistics, weather conditions, and other factors, many of which are beyond our control.

Growing and expanding our experienced space hardware operations

We are seeking to grow our space and defense hardware operations, with a goal of expanding from one shift to two and a half shifts and increasing our customer base in the future. Additionally, we are specifically targeting growth in our avionics and wire harness division to meet the needs of the commercial and government space industry. With current customers in the space, marine, and defense industries, our contract revenue is stable, and we are in active discussions with numerous potential customers, including government agencies, large defense contractors and private companies, to add to our contracted revenue. In the past decade, we have fabricated ground and flight products for the NASA SLS Rocket and Mobile Launcher as well as other commercial space and satellite companies. We have supported customers such as Boeing, Lockheed Martin, Northrop Grumman, Dynetics/Leidos, Blue Origin, United Launch Alliance, Collins Aerospace, L3Harris, OneWeb and Space Systems Loral/Maxar. We have manufactured various products including fluid, hydraulic and pneumatic systems, electrical control systems, cable harnesses, hardware lifting frames, umbilical plates, purge and hazardous gas disconnects, frangible bolts, reef cutters, wave guides, customized platforms, and other precision machined and electrical component parts for all types of launch vehicles, ground, flight and satellite systems.

Vertically Integrated Space Infrastructure Manufacturing

We are designing, developing, manufacturing, and operating a constellation of proprietary smallsats in addition to designing and building variations of our satellites for other customer missions. These satellites are designed for multiple missions and customers and form the foundation of our satellite platform. Our initial satellites weigh approximately 100 kilograms each and are designed to be more functional than cubesats and nanosatellites and less expensive to manufacture than our competitors. In addition to our own hybrid 3D printed, modular satellites, we are designing and manufacturing customized satellites using our standard design for LEO and lunar applications for customers that include government and commercial entities.

Our cost-effective smallsats are designed from the ground-up to optimize performance per unit cost. Our model is a movement from highly bespoke, costly satellite manufacturing techniques to standardized bus with integration of customer requirements at lower costs. We can integrate technologies and deliver data on demand at lower costs than legacy providers due to our vertical integration, use of commercial off the shelf (COTS) proven systems, cost-efficiencies, capital efficient satellite design, and adaptable pricing models.

We design and manufacture satellites at our Cape Canaveral facility. Our current configuration and facility is designed to manufacture multiple satellites per month. Our vertical integration enables us to control our satellites through the entire design, manufacturing, and operation process. Our years of experience manufacturing space hardware means we can leverage our manufacturing expertise and commercial best practices for satellite production. Additionally, leveraging both in-house and partner-provided subsystem components and in-house design and integration services as well as operational support of satellites on orbit, provides turn-key delivery of satellites to offer "concept to constellation" in months instead of years. Specifically, our offerings are expected to encompass all aspects of hosted satellite and constellation services, including hosting customer technologies onto our satellites, and delivering data and constellation services to customers from our space platform. These services are expected to allow customers to focus on developing innovative technologies rather than having to design or develop complete satellite buses or constellations. Additionally, we provide ancillary services that include telemetry, tracking and control, communications, processing, as well as software development and maintenance.

Our patented space-related technologies include a print head for regolith-polymer mixture and associated feedstock; a heat transfer system for regolith; a method for establishing a wastewater bioreactor environment; vertical takeoff and landing pad and interlocking pavers to construct same; and high-load vacuum chamber motion feedthrough systems and methods. Regolith is a blanket of unconsolidated, loose, heterogeneous superficial deposits covering solid rock. It includes dust, broken rocks, and other related materials and is present on earth, the moon, Mars, some asteroids, and other terrestrial planets and moons. We continue to patent our products including our satellites, external platforms and other innovations. Sidus holds 14 granted patents and 13 pending applications.

Revenue Generation

We generate revenue by selling technology space on our satellite platform, providing engineering and systems integration services to strategic customers on a project-by-project basis, and manufacturing space hardware for other space and defense entities to include satellites. Additionally, we intend to add to our revenue by selling geospatial data and actionable intelligence captured through our constellation. This support is typically contracted to both commercial and government customers under fixed price contracts and often includes other services. Due to the size and capacity of our satellite, we plan to expand the diverse array of sensors on each satellite such as Multispectral and Hyperspectral Earth Observing Imagers, Maritime Vessel RF Tracking receivers, UHF IoT Transceivers, Optical Communications systems, and others. Integrating multiple sensors and technologies on a single multi-mission satellite can simultaneously address the needs of multiple customers and their requirements.

Lowering Manufacturing Cost and Schedule

We have developed a manufacturing model that provides rapid response to customer requirements including integration of customers technologies for space-based data delivery. Our satellites are designed to integrate COTS subsystems that are space-proven, can be rapidly integrated into the satellite and replaced rapidly when customer needs change or evolve. Our vertically integrated manufacturing processes give us the flexibility to make changes during the production cycle without impacting launch or costs.

Environmental, social, and corporate governance

We have been in business for over ten years manufacturing space hardware and components, and in that time, implementation of policies and processes to mitigate environmental impact have been of upmost importance. Furthermore, since our inception, we have recognized the value of our employees and have always prioritized employee well-being through facets such as excellent benefits, programs, educational assistance, and insurance of a safe and healthy work environment. We also understand that our efforts to promote value and well-being are not limited to our employees. We are committed to the communities we belong to both locally and professionally. We recently started to formalize this commitment, providing tangible benefits back to the community that supports us.

Our Growth Strategies

We are focused on empowering end users, developers, channel partners and the organizations they serve to quickly and easily access and integrate real-time geospatial intelligence into their daily operations and prove out technologies to further grow the space ecosystem. Our growth strategy is driven by the following objectives:

Increase our overall customer base. As an established heritage aerospace firm, we are positioned at the forefront of the ongoing political and secular shift toward space-based communications and data derived from commercial satellite and intelligence providers. This evolving landscape presents a significant opportunity to expand our customer base through a combination of direct and indirect sales strategies. To support this growth, we are actively scaling both our direct sales teams and our global network of indirect sales channels.

Expand within our current customer base. As our satellite design and manufacturing and space-based data offerings grow and deliver results, we expect that our current customers will increase their spending on our expanded services.

Continue to penetrate international markets. We have expanded our strategic focus to include international markets, actively building a pipeline of prospective partnerships with small, underrepresented governments and global companies that can benefit from our expertise and services. As part of this initiative, we have signed partnership agreements with companies in Germany, Japan, Bahrain, and India to explore potential joint venture opportunities.

Grow distribution channels and channel partner ecosystem. We have strategically invested resources to expand our sales reach by developing robust distribution channels and forging partnerships with technology providers, solution partners, strategic global system integrators, and value-added resellers. These collaborations are designed to help us enter and grow in new markets while effectively complementing our direct sales efforts.

Global Space Industry Overview

The space economy has experienced significant growth in recent years, driven by technological advancements in satellites and terrestrial technologies that have enabled new commercial applications. These applications encompass satellite broadband, remote imaging, Internet-of-Things (IoT)/Machine-to-Machine (M2M) communications, defense-related uses, and more. Consequently, numerous operators have announced plans for new satellite constellations, predominantly comprising small Low Earth Orbit (LEO) satellites rather than traditional large Geostationary Orbit (GEO) satellites. This influx of new entrants across various segments has led to an evolving small satellite value chain, particularly in launch services, downstream value-added applications, mergers and acquisitions, and consolidation among stakeholders.

The rapid pace of innovation continues to drive the commercialization of space-based data, analytics, and insights, enhancing their relevance to businesses, governments, and the public. The demand for space-derived data is growing rapidly, while the cost of accessing space is decreasing. Key trends in the new space economy include the expansion of satellite constellations, increased availability of space-based data, a shift in user demand toward analytics and insights, climate change adaptation, global security concerns, and advancements in on-board technologies.

According to a McKinsey report published in January 2025, the space economy is projected to reach $1.8 trillion by 2035, up from $630 billion in 2023, with an average annual growth rate of 9%, outpacing global GDP growth. This growth is expected to be driven by satellites, increased government space budgets, and new applications and industries in space exploration.

The small satellite market is also experiencing substantial growth. According to The Business Research Company and a 2025 Global Market Insights report, the global small satellite market size was valued at $6.9 billion in 2024 and is projected to grow at a compound annual growth rate (CAGR) of 16.4% from 2025 to 2034, reaching approximately $30.6 billion by 2034. This growth is attributed to factors such as cost-effectiveness in space missions, advances in miniaturization, rapid development cycles, improved access to space, and the commercialization of space operations.

Private investment in the commercial space industry has surged, leading to the emergence of new companies reinventing major elements of the traditional space industry, including human spaceflight, satellites, and launch services, as well as unlocking entirely new market segments. Government agencies have recognized the value of the private commercial space industry and have become increasingly supportive and reliant on private companies to catalyze innovation and advance national space objectives. In the United States, this is evidenced by notable policy initiatives and the growing share of space activities conducted by commercial contractors.

Overall, the space economy is poised for significant growth, with both established and emerging players contributing to an increasingly dynamic and competitive landscape.

Launch Market

Historically, access to space was constrained by high capital requirements, with launch costs serving as the primary bottleneck for orbital activities. Launch availability-adequate for traditional, large-scale missions occurring only a few times a year-was often insufficient and limiting for operators of small satellites. While emerging launch providers have aimed to increase launch frequency and flexibility for smallsat missions, financial barriers have continued to pose challenges for new entrants.

Today, the landscape is shifting rapidly. After years of limited launch opportunities, small satellites now benefit from a wider range of launch solutions, including dedicated small launch vehicles, rideshare programs, brokers, and deployment systems. According to Euroconsult, the small satellite launch market-valued at $7.6 billion-is projected to grow by over 279% to reach $28.4 billion. However, a significant portion of that market remains dominated by national programs and vertically integrated providers like SpaceX. Previously overlooked due to fragmented demand and lower perceived profitability, the smallsat sector is now receiving increased attention, as launch supply adapts to meet rising demand with greater responsiveness and innovation.

Small Satellite Market

Since 2018, the commercial space market has experienced a significant paradigm shift, leading to an increased demand for small satellites (smallsats). According to Euroconsult, smallsats have become more compact over the past few years while enhancing their performance. Technological advancements have expanded their mission capabilities, making them more resilient, effective, and cost-effective. This miniaturization trend allows customers to choose between lighter satellites with unchanged capabilities or larger, more powerful satellites offering greater functionalities. Key technical enablers include:

	●	Extended use of electric propulsion
	●	Miniaturization of attitude sensors
	●	Improvements in solar cell and battery efficiency
	●	Commercial off-the-shelf (COTS) solutions for bus electronics
	●	3D printing technologies

The demand for large geosynchronous satellites has declined as companies focus on deploying constellations of smaller, cost-effective broadband satellites in low and medium Earth orbits. Advancements in space-related sectors, particularly computational technologies and data analytics, have facilitated the miniaturization of satellite systems, thereby enhancing the market. Consequently, smallsats now provide operational services previously exclusive to larger satellites. Euroconsult projects that approximately 26,104 smallsats (under 500 kg) will be launched between 2023 and 2032, averaging a daily launch mass of 1.5 tons over the decade.

Moreover, this market growth has led to the emergence of new segments, such as nanosatellites (weighing less than 10 kg) and microsatellites (weighing between 10 and 100 kg). These satellites can operate individually or as part of constellations-large groups of interconnected satellites providing services like global internet connectivity, exemplified by SpaceX's Starlink constellation. Euroconsult reports that the smallsat manufacturing market, valued at $15.5 billion from 2012 to 2021, is expected to grow by 258% to $55.6 billion over 2022 to 2031, driven by numerous constellation projects from both commercial and government stakeholders. The next decade will primarily feature the rollout of multiple constellation projects, accounting for 81% of smallsat launches, mainly by commercial operators. Notably, 3,335 smallsats under 10 kg are anticipated to launch in the next decade, more than doubling the 1,656 launched between 2012 and 2021. Satellites in this category, especially CubeSats, have gained momentum recently, with 1,187 launched in the past five years alone.

The growth in low Earth orbit (LEO) satellite constellations is driven by technological advances in ground equipment, new business models, expanded funding, and increasing demand for high bandwidth and lower latency. Although the satellite constellations market remains in its early stages, significant growth is anticipated in the launch industry as companies seek versatile and cost-effective methods to deploy single satellites to specific orbits or establish their satellite constellations. Furthermore, the expansion of the satellite constellations market is expected to benefit satellite services offerings. LEO satellite constellations have relatively short lifespans on orbit, necessitating the launch of replenishment satellites every few years

Results of Operations

Comparison of quarter ended September 30, 2025, to quarter ended September 30, 2024

The following table provides certain selected financial information for the periods presented:

		Three Months Ended
		September 30,
		2025				2024				Change				%
Revenue		$	1,298,058			$	1,868,958			$	(570,900	)			(31	)%
Cost of revenue			2,597,023				1,830,787				766,236				42	%
Gross Profit (Loss)			(1,298,965	)			38,171				(1,337,136	)			(3503	)%
Gross Profit (Loss) Percentage			(100	)%			2	%
Selling, General & Administrative Expense			4,332,441				3,210,069				1,122,372				35	%
Other income (expense)			(402,193	)			(730,691	)			328,498				(45	)%
Net loss		$	(6,033,599	)		$	(3,902,589	)		$	(2,131,010	)			55	%

Revenue

Total revenue for the three months ended September 30, 2025 decreased $570,900 compared to the three months ended September 30, 2024. Non-related party revenue decreased by approximately 68% for the three months ended September 30, 2025, to approximately $559,000 as compared to approximately $1.8 million for the three months ended September 30, 2024. This was primarily driven by the timing of fixed price milestone contracts revenue. Related party revenue increased 562% to approximately $739,000 for the three months ended September 30, 2025 versus approximately $112,000 for the three months ended September 30, 2024. This was influenced by the timing of fixed-price milestone contracts.

Cost of Revenue

Cost of revenue increased 42% for the three months ended September 30, 2025 to approximately $2.6 million as compared to approximately $1.8 million for the three months ended September 30, 2024 and included approximately $654,000 related party cost of sales as of September 30, 2025 and approximately $58,000 as of September 30, 2024. The overall increase in cost of revenue was primarily driven by a mix of contracts of varying types, satellite and related software depreciation expense increase of approximately $500,000 versus 2024, and approximately $250,000 increased direct labor costs due to the contracts processed in the quarter were more labor intensive.

Gross Profit (Loss)

The 3503% decrease in our gross profit for the three months ended September 30, 2025 to a loss of approximately $1.3 million as compared to a profit of approximately $38,000 for the three months ended September 30, 2024, was driven primarily by higher satellite and related depreciation costs, our mix of varying types of contracts with higher labor expenses and a decrease in our higher margin business.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses increased approximately $1.1 million when compared with the same period in 2024. This was primarily due to the following:

	●	An increase of approximately $505,000 in general and administrative labor costs and benefits to $2.2 million compared to $1.7 million in 2024. This increase was primarily driven by approximately $658,000 related to increased headcount to support the needs of the business partially offset by a reduction of $130,000 based on company performance related to expense accruals associated with equity-based compensation and bonus plans implemented in Q1 2025 and $23,000 lower employee severance costs.
	●	An increase of approximately $293,000 fundraising related expenses versus none in 2024 due to timing of capital raises each year.
	●	An increase of approximately $80,000 rebooking expense related to timing of satellite launches to approximately $89,000 compared to approximately $9,000 in 2024.

	●	An increase of approximately $77,000 in mission operations related expenses to $335,000 compared to $258,000 in 2024 related to ground support required for tracking and communicating with our multiple satellites in orbit.
	●	An increase of approximately $61,000 in consulting outside services expense to $287,000 compared to $226,000 in 2024 due to business development and sales consulting services as well as temporary office and operations related labor.
	●	An increase of approximately $22,000 depreciation expense to approximately $95,000 compared to approximately $72,000 in 2024.

These increases were partially offset by the following decreases:

	●	A decrease of approximately $20,000 in insurance expense to approximately $161,000 compared to approximately $182,000 in 2024 primarily related to a reduction in our D&O insurance rates
	●	A decrease of $21,000 in business taxes primarily due to timing of an increase in 2024 franchise taxes.

Total other income (expenses)

Other income and (expenses) showed a decrease of $328,498 to $402,193 compared to $730,691 in 2024 primarily due to a decrease in interest expense related to the Note Payable which was paid off in January 2025, and an increase in interest income. This was partially offset by an increase in interest expense related our asset-based loan.

Nine Months Ended September 30, 2025 compared to the Nine Months Ended September 30, 2024

		Nine Months Ended
		September 30,
		2025				2024				Change				%
Revenue		$	2,797,575			$	3,846,683			$	(1,049,108	)			(27	)%
Cost of revenue			6,752,160				4,565,549				2,186,611				48	%
Gross Profit (Loss)			(3,954,585	)			(718,866	)			(3,235,719	)			450	%
Gross Profit Percentage			(141	)%			(19	)%
Selling, General & Administrative Expense			13,040,152				9,912,466				3,127,686				32	%
Other expense			(1,078,559	)			(1,217,841	)			139,282				(11	)%
Net loss		$	(18,073,296	)		$	(11,849,173	)		$	(6,224,123	)			53	%

Revenue

Total revenue for the nine months ended September 30, 2025 decreased approximately $1.0 million compared to the nine months ended September 30, 2024. Non-related party revenue decreased by approximately 59% for the nine months ended September 30, 2025, to approximately $1.4 million as compared to approximately $3.4 million for the nine months ended September 30, 2024. This was primarily driven by the timing of fixed price milestone contracts revenue. Related party revenue increased 239% to approximately $1.4 million for the nine months ended September 30, 2025 versus approximately $410,000 for the nine months ended September 30, 2024. This was influenced by the timing of fixed-price milestone contracts and an increased number of contracts our related party entered into with its customers, requiring increased outsourcing of its work to us.

Cost of Revenue

Cost of revenue increased 48% for the nine months ended September 30, 2025 to approximately $6.8 million as compared to approximately $4.6 million for the nine months ended September 30, 2024 and included approximately $1.1 million related party cost of sales as of September 30, 2025 and approximately $272,000 as of September 30, 2024. The overall increase in cost of revenue was primarily driven by a mix of contracts of varying types, satellite and related software depreciation expense increase of approximately $1.6 million versus 2024 and higher labor costs associated with more labor-intensive contracts processed in 2025.related to the manufacturing side of our business.

Gross Profit (Loss)

The 450% decrease in our gross profit for the nine months ended September 30, 2025 to a loss of approximately $3.9 million as compared to a loss of approximately $719,000 for the nine months ended September 30, 2024, was driven primarily by higher satellite and related depreciation costs, our mix of varying types of contracts with higher labor expenses and a decrease in our higher margin business.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses increased approximately $3.1 million when compared with the same period in 2024. This was primarily due to the following:

	●	An increase of approximately $2.6 million in general and administrative labor costs and benefits to $7.5 million compared to $4.8 million in 2024. This increase was primarily driven by approximately $1.8 million related to increased headcount to support the needs of the business, $652,000 related to expense accruals associated with equity-based compensation and bonus plans implemented in Q1 2025 and $203,000 related to employee severance costs.
	●	An increase of approximately $347,000 in mission operations related expenses to $952,000 compared to $604,000 in 2024 related to ground support required for tracking and communicating with our multiple satellites in orbit.
	●	An increase of approximately $177,000 in consulting and outside services expense due to business development and sales consulting services as well as temporary office and operations related labor.
	●	An increase of approximately $151,000 in fees related to rebooking and payment timing with our launch provider and fees related to the January 2025 payoff of our note payable. Total fees were $188,000 compared to $36,000 in 2024.
	●	An increase of approximately $129,000 in depreciation expense to approximately $292,000 compared to approximately $163,000 in 2024.

These increases were partially offset by the following decreases:

	●	A decrease of approximately $252,000 in professional and outside consulting services to $527,000 compared to $778,000 in 2024 primarily related to lower outside accounting related expenses.
	●	A decrease of $138,000 in insurance expense primarily related to a decrease in our D&O insurance rates.
	●	A decrease of approximately $113,000 in fundraising related expense to $298,000 in 2025 due to timing of capital raises.

Total other income (expenses)

Other income and (expenses) showed a net decrease of $139,282 to $1,078,559 compared to $1,217,841 in 2024 primarily due to a decrease in interest expense related to the Note Payable which was paid off in January 2025 and an increase in interest income. This was partially offset by increase in interest expense related to our asset-based loan.

NON-GAAP MEASURES

To provide investors with additional information in connection with our results as determined in accordance with GAAP, we use non-GAAP measures of adjusted EBITDA. We use adjusted EBITDA in order to evaluate our operating performance and make strategic decisions regarding future direction of the company since it provides a meaningful comparison to our peers using similar measures. We define adjusted EBITDA as net income (as determined by U.S. GAAP) adjusted for interest expense, depreciation and amortization expense, acquisition deal costs, severance costs, capital market and advisory fees, equity-based compensation and warrant costs. These non-GAAP measures may be different from non-GAAP measures made by other companies since not all companies will use the same measures. Therefore, these non-GAAP measures should not be considered in isolation or as a substitute for relevant U.S. GAAP measures and should be read in conjunction with information presented on a U.S. GAAP basis.

The following table reconciles adjusted EBITDA to net loss (the most comparable GAAP measure) for the three months ended September 30, 2025 and 2024:

		Three Months Ended
		September 30,
		2025				2024				Change				%
Net Income / (Loss)		$	(6,033,599	)		$	(3,902,589	)		$	(2,131,010	)			55	%
Interest Income/Expense (i)			402,552				733,714				(331,162	)			(45	)%
Depreciation and Amortization (ii)			1,157,840				636,416				521,424				82	%
Fundraising expense (iii)			307,950				-				307,950				N/A
Severance Costs			-				3,192				(3,192	)			N/A
Equity based compensation (iv)			188,615				76,013				112,602				148	%
Total Non-GAAP Adjustments			2,056,957				1,449,335				607,622				42	%
Adjusted EBITDA			(3,976,642	)			(2,453,254	)			(1,523,388	)			(62	)%

(i)	Sidus Space incurred decreased interest income/expense due to decreased interest expense from a short-term note payable due in Q4 2024 and increased interest income, partially offset by increased interest expense related to an asset based loan.
(ii)	Sidus Space incurred increased depreciation expense in 2025 with the launch and deployment of satellite fixed assets and related satellite software, as well as new ERP software capitalization.
(iii)	Sidus Space incurred internal Fundraising expense related to multiple 2025 capital raises
(iv)	Sidus Space incurred increased equity based compensation expense due to incentive programs implemented by the Board in 2025.

		Nine Months Ended
		September 30,
		2025				2024				Change				%
Net Income / (Loss)		$	(18,073,296	)		$	(11,849,173	)		$	(6,224,123	)			52	%
Interest Income/Expense (i)			1,078,918				1,234,789				(155,871	)			(12	)%
Depreciation and Amortization (ii)			3,224,809				1,494,448				1,730,361				116	%
Fundraising expense (iii)			323,270				560,322				(237,052	)			(42	)%
Severance Costs			213,743				10,701				203,042				1897	%
Equity based compensation (iv)			625,305				236,040				389,265				165	%
Total Non-GAAP Adjustments			5,466,044				3,536,300				1,929,744				55	%
Adjusted EBITDA			(12,607,252	)			(8,312,873	)			(4,294,379	)			51	%

(i)	Sidus Space incurred decreased interest income/expense due to lower interest expense from a short-term note payable due in Q4 2024 and increased interest income, partially offset by increased interest expense related to an asset based loan.
(ii)	Sidus Space incurred increased depreciation expense in 2025 with the launch and deployment of satellite fixed assets and related satellite software, as well as new ERP software capitalization.
(iii)	Sidus Space incurred lower internal Fundraising expense related to timing of capital raises in 2025 versus 2024.
(iv)	Sidus Space incurred increased equity based compensation expense due to incentive programs implemented by the Board in 2025.

Liquidity and Capital Resources

The following table provides selected financial data about us as of September 30, 2025, and December 31, 2024.

		September 30,				December 31,
		2025				2024				Change				%
Current assets		$	21,133,582			$	22,252,552			$	(1,118,970	)			(5	)%
Current liabilities		$	15,363,768			$	14,209,502			$	1,154,266				8	%
Working capital (deficiency)		$	5,769,814			$	8,043,050			$	(2,273,236	)			(28	)%

Liquidity is the ability of a company to generate funds to support asset growth, satisfy disbursement needs, maintain reserve requirements, and otherwise operate on an ongoing basis. We had insufficient operating revenues, so we are currently dependent on debt financing and sale of equity to fund operations.

We had an accumulated deficit of approximately $78.4 million and working capital of approximately $5.8 million as of September 30, 2025 compared to accumulated deficit of approximately $60.3 million and working capital of approximately $8.0 million as of December 31, 2024. As of September 30, 2025, we had approximately $12.7 million of cash as compared to approximately $15.7 million as of December 31, 2024.

As of September 30, 2025 working capital is primarily due to funds raised in our September capital raise partially offset by the build out of our LizzieSat satellites in anticipation of additional upcoming launches. As of December 31, 2024, our working capital was primarily due to funds raised in our capital raises completed Q4 2024.

Current assets decreased by approximately $1.1 million to approximately $21.1 million as of September 30, 2025 from approximately $22.2 million as of December 31, 2024. The decrease is primarily attributable to a decrease in cash partially offset by an increase in related party accounts receivable and an increase in prepayments primarily related to satellite components.

Current liabilities are $1.1 million higher at $15.4 million as of September 30, 2025 versus $14.2 million December 31, 2024 primarily related to an increase in our Asset-based loan liability.

Cash Flow

		Nine Months Ended
		September 30,
		2025				2024				Change				%
Cash used in operating activities		$	(14,065,111	)		$	(10,288,228	)		$	(3,776,883	)			37	%
Cash used in investing activities		$	(5,789,805	)		$	(5,102,661	)		$	(687,144	)			13	%
Cash provided by financing activities		$	16,885,424			$	15,406,183			$	1,479,241				10	%
Cash on hand		$	12,734,087			$	1,231,401			$	11,502,686				934	%

Nine Months ended September 30, 2025 and 2024

Cash Flow from Operating Activities

For the nine months ended September 30, 2025, net cash flows used in operating activities was approximately $14.1 million compared to approximately $10.3 million during the nine months ended September 30, 2024.

Cash flows used in operating activities for the nine months ended September 30, 2025 of approximately $14.1 million is comprised of a net loss of approximately $18.1 million, which was reduced by non-cash expenses of approximately $625,000 for stock-based compensation, approximately $3.2 million for depreciation, and a decrease in working capital of approximately $158,000.

Cash flows used in operating activities for the nine months ended September 30, 2024 of approximately $10.3 million is comprised of a net loss of approximately $11.8 million, which was reduced by non-cash expenses of $236,040 for stock-based compensation and approximately $1.5 million for depreciation, and an increase in working capital of approximately $170,000.

Cash Flows from Investing Activities

During the nine months ended September 30, 2025 and 2024, we invested approximately $5.8 million and $5.1 million respectively in property and equipment primarily related to purchasing satellite related components and software.

Cash Flows from Financing Activities

During the nine months ended September 30, 2025, net cash provided in financing activities of $16.9 million included proceeds from multiple capital raises of approximately $15.5 million, proceeds from the exercise of warrants from our December 2024 capital raise of approximately $2.4 million and net proceeds of approximately $2.1 million from an asset-based loan and repayment of a note payable approximately $3.1 million.

During the nine months ended September 30, 2024, net cash provided in financing activities of approximately $15.4 million included multiple capital raises of approximately $13.7 million net proceeds from an asset-based loan of approximately $1.8 million and repayment of a note payable of $150,000.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities.

Critical Accounting Policies and Significant Judgments and Estimates

This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere in this annual report on Form 10-K, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.

We believe our most critical accounting policies and estimates relate to the following:

	●	Revenue Recognition
	●	Inventory
	●	Credit losses
	●	Lease Accounting
	●	Stock Option and Warrant Valuation

Revenue Recognition

We 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. Our 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.

Our revenue 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 our customers that we believe 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 we satisfy each performance obligation.

These five elements, as applied to each of the Company's revenue category, are summarized below:

Revenues primarily from manufacturing related 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.

Revenues from fixed price contracts primarily related to the satellite side of the business that require milestone payments are recognized at the time of the milestone being met. This method is used because management considers that the payments are nonrefundable unless the Company fails to perform as promised. If the customer terminates the contract, we are entitled to retain any progress payments received from the customer and we have 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 us for performance completed to date. Accordingly, we account for the progress under the contract as a performance obligation satisfied at a point in time.

The Company accounts for the majority of its fixed price or time and materials contracts as performance obligations satisfied over times, due to the Company's enforceable right to collect based on services provided through any applicable date of termination. Amounts recognized as revenue over time due to this, but in which the Company does not yet have the right to invoice for due to contractual arrangements are reflected as contract assets until such time as they are invoiced, and the Company has the right to receive payment.

Inventory

Inventory consists of work in progress and finished goods and consists of estimated revenue calculated on a percentage of completion based on direct labor and materials in relation to the total contract value. We do not maintain raw materials.

Credit Losses

The provision for expected credit losses on trade receivables is estimated based on historical information, customer solvency and changes in customer payment terms and practices. The Company calibrates its provision matrix to adjust the historical credit loss experience with forward-looking information. The amount of expected credit losses is sensitive to changes in circumstances and of forecast economic conditions. The Company's historical credit loss experience and forecast of economic conditions may also not be representative of the customer's actual default in the future. The company utilizes the Allowance Method based on the accounts receivable aging in order to accrue bad debt expense.

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The standard requires lessees to recognize the assets and liabilities that arise from leases in the balance sheet. Additionally, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) - Targeted Improvements, which, among other things, provides an additional transition method that would allow entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use ("ROU") assets, operating lease liabilities - current, and operating lease liabilities - noncurrent on the balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Leases with a lease term of 12 months or less at inception are not recorded on our balance sheet and are expensed on a straight-line basis over the lease term in our statement of operations.

Stock Option and Warrant Valuation

We use the Black-Scholes option-pricing model to value all options and Class A common stock warrants. Estimating the fair value of stock options using the Black-Scholes option-pricing model requires the application of significant assumptions, such as the fair value of our Class A common stock, the estimated term of the options, risk-free interest rates, the expected volatility of the price of our Class A common stock, and an expected dividend yield. Each of these assumptions is subjective, requires significant judgment, and is based upon management's best estimates. If any of these assumptions were to change significantly in the future, equity-based compensation related to future awards may differ significantly, as compared with awards previously granted.

JOBS Act

On April 5, 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended ("Securities Act") for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for complying with new or revised accounting standards.

We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an "emerging growth company," we intend to rely on certain of these exemptions, including without limitation, (i) providing an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board ("PCAOB") regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an "emerging growth company" until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of our initial public offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.