UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to _____________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
As of May 2, 2022, the registrant had
Table of Contents
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Page |
PART I. |
1 |
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Item 1. |
1 |
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1 |
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2 |
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4 |
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6 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
7 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
26 |
Item 3. |
34 |
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Item 4. |
35 |
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PART II. |
36 |
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Item 1. |
36 |
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Item 1A. |
37 |
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Item 2. |
37 |
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Item 3. |
37 |
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Item 4. |
37 |
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Item 5. |
37 |
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Item 6. |
38 |
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39 |
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PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)
ASTRA SPACE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
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As of |
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March 31, 2022 |
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December 31, 2021 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Trade accounts receivable |
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Inventories |
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Prepaid and other current assets |
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Total current assets |
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Non-current assets: |
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Property, plant and equipment, net |
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Right-of-use asset |
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Goodwill |
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Intangible assets, net |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Operating lease obligation, current portion |
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Accrued expenses and other current liabilities |
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Total current liabilities |
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Non-current liabilities: |
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Operating lease obligation, net of current portion |
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Other non-current liabilities |
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Total liabilities |
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STOCKHOLDERS’ EQUITY |
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Founders convertible preferred stock, $ |
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Class A common stock, $ |
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Class B common stock, $ |
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Additional paid in capital |
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Accumulated other comprehensive loss |
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( |
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Accumulated deficit |
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( |
) |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
ASTRA SPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
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For The Three Months Ended March 31, |
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2022 |
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2021 |
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Revenues |
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$ |
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$ |
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Cost of revenues |
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Gross loss |
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( |
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Operating expenses: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Loss on change in fair value of contingent consideration |
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Total operating expenses |
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Operating loss |
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( |
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( |
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Interest income (expense), net |
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( |
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Other income (expense), net |
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Loss on extinguishment of convertible notes |
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( |
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Loss on extinguishment of convertible notes attributable |
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( |
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Loss before taxes |
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( |
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( |
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Income tax (benefit) provision |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustment to redemption value on Convertible Preferred Stock |
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( |
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Net loss attributable to common stockholders |
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$ |
( |
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$ |
( |
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Net loss per share: |
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Weighted average number of shares of Class A |
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Net loss per share of Class A common |
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$ |
( |
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$ |
( |
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Weighted average number of shares of Class B |
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Net loss per share of Class B common |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
ASTRA SPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
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For The Three Months Ended March 31, |
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2022 |
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2021 |
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Net loss |
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$ |
( |
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$ |
( |
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Other comprehensive loss: |
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Unrealized loss on available-for-sale marketable securities |
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( |
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Total comprehensive loss |
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$ |
( |
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$ |
( |
) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
ASTRA SPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Three Months Ended March 31, 2022
(In thousands, except share data)
(Unaudited)
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Class A Common Stock |
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Class B Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Total Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balance as of December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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( |
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— |
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— |
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— |
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Issuance of common stock under equity plans |
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— |
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— |
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— |
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— |
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— |
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Unrealized loss on available-for-sale |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance as of March 31, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
ASTRA SPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT
Three Months Ended March 31, 2021
(In thousands, except share data)
(Unaudited)
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Convertible Preferred Stock |
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Common Stock |
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Founders Preferred Stock |
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Additional |
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Accumulated |
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Total Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Deficit |
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Balance as of December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Cumulative effect adjustment due to |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of options |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of Series C Convertible |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Conversion of Founders Convertible |
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— |
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— |
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— |
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( |
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— |
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— |
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Adjustment to redemption value on |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance as of March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
ASTRA SPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Three Months Ended March 31, |
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2022 |
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2021 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to cash flows used in operating activities |
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Stock-based compensation |
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Depreciation |
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Amortization of intangible assets |
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Inventory net realizable value write downs |
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Non-cash lease expense |
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Accretion (amortization) of marketable securities purchased at a premium (discount) |
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Loss on change in fair value of contingent consideration |
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Loss on extinguishment of convertible notes |
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Loss on extinguishment of convertible notes attributable to related parties |
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Amortization of convertible note discounts |
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Amortization of convertible note discounts attributable to related parties |
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Changes in operating assets and liabilities: |
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Trade accounts receivable |
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Inventories |
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( |
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( |
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Prepaid and other current assets |
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( |
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Other non-current assets |
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Accounts payable |
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Lease liabilities |
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( |
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Accrued expenses and other current liabilities |
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( |
) |
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Other non-current liabilities |
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Net cash used in operating activities |
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$ |
( |
) |
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$ |
( |
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Cash flows from investing activities: |
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Acquisition of trademark |
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( |
) |
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( |
) |
Purchases of marketable securities |
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( |
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Purchases of property, plant and equipment |
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( |
) |
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( |
) |
Net cash used in investing activities |
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$ |
( |
) |
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$ |
( |
) |
Cash flows from financing activities: |
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Proceeds from issuance of Series C preferred stock |
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Issuance cost of Series C preferred stock |
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( |
) |
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Repayments on term loans |
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( |
) |
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Repayments on equipment advances |
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( |
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Proceeds from stock issued under equity plans |
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Proceeds from Employee Stock Purchase Plan |
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Net cash provided by financing activities |
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$ |
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$ |
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Net increase (decrease) in cash and cash equivalents |
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$ |
( |
) |
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$ |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Non-cash activities: |
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Assets acquired included in accounts payable and accrued expenses and other |
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$ |
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$ |
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Change in redemption value of Convertible Preferred Stock |
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Supplemental disclosures of cash flow information: |
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Cash paid for interest |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
6
ASTRA SPACE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Description of Business, Basis of Presentation and Significant Accounting Policies
Description of Business
Astra Space, Inc. designs, tests, manufactures and operates the next generation of launch services and space services and products that it expects to enable a new generation of global communications, earth observation, precision weather monitoring, navigation, and surveillance capabilities. Astra Space, Inc.'s mission is to Improve Life on Earth from SpaceTM through greater connectivity and more regular observation and to enable a wave of innovation in low Earth orbit by expanding our space platform offerings.
Holicity Inc. (“Holicity”) was originally incorporated in Delaware and was established as a special purpose acquisition company, which completed its initial public offering in August 2020. On June 30, 2021 (the “Closing Date”), Holicity consummated a business combination (the “Business Combination”) pursuant to the Business Combination Agreement dated as of February 2, 2021 (the “BCA”), by and among Holicity, Holicity Merger Sub Inc., a wholly owned subsidiary of Holicity (“Merger Sub”), and Astra Space Operations, Inc. (“pre-combination Astra”). Immediately upon the consummation of the Business Combination, Merger Sub merged with and into pre-combination Astra with pre-combination Astra surviving the merger as a wholly owned subsidiary of Holicity. Holicity changed its name to “Astra Space, Inc.” and pre-combination Astra changed its name to “Astra Space Operations, Inc.”
Unless the context otherwise requires, “we”, “us”, “our”, “Astra” and the “Company” refers to Astra Space, Inc., the combined company and its subsidiaries following the Business Combination and Astra Space Operations, Inc. prior to the Business Combination. See Note 3 — Acquisitions for further discussion of the Business Combination. The Company’s Class A common stock is listed on the Nasdaq under the symbol “ASTR”.
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of Astra and its subsidiaries, and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for financial reporting. The condensed consolidated financial statements included herein are unaudited, and reflect all adjustments which are, in the opinion of management, of a normal recurring nature and necessary for a fair statement of the results for the periods presented. The December 31, 2021 condensed consolidated balance sheet data were derived from Astra’s audited consolidated financial statements included in its Annual Report on Form 10-K for year ended December 31, 2021 as filed with the SEC. All intercompany transactions and balances have been eliminated in consolidation. The operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022, or for any other future period.
Business Combination
On June 30, 2021, the Business Combination pursuant to the BCA, by and among Holicity, Merger Sub, and pre-combination Astra, was accounted for as a reverse recapitalization as pre-combination Astra was determined to be the accounting acquirer under ASC 805. The determination is primarily based on the evaluation of the following facts and circumstances:
In connection with the Business Combination, outstanding common stock and preferred convertible stock of the pre-combination Astra was converted into common stock of the Company, par value of $
7
Liquidity
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis. The Company has historically funded its operations primarily by equity financings and convertible promissory notes prior to the Business Combination and subsequently funded its operations through cash proceeds obtained as part of the Business Combination and related private placement. As of March 31, 2022, the Company’s existing sources of liquidity included cash and cash equivalents of $
Impact of the COVID-19 Pandemic
The Company has been actively monitoring the ongoing COVID-19 pandemic situation and its impact on the Company’s business. The COVID-19 pandemic had disrupted everyday life and markets worldwide, leading to significant business and supply-chain disruption, as well as broad-based changes in supply and demand. The Company has been diligent in testing and monitoring our employees, and there have been disruptions in productivity, although these disruptions have not resulted in suspension of our manufacturing facilities. However, beginning in the first quarter of 2021, there has been a trend in many parts of the world of increasing availability and administration of vaccines against COVID-19, as well as an easing of restrictions on social, business, travel and government activities and functions. On the other hand, infection rates and regulations continue to fluctuate in various regions and there are ongoing global impacts resulting from the pandemic, including challenges and increases in costs for logistics and supply chains, such as increased intermittent supplier delays and a shortfall of semiconductor supply. Ultimately, we cannot predict the duration of the COVID-19 pandemic. We will continue to monitor macroeconomic conditions to remain flexible and to optimize and evolve our business as appropriate and deploy our production, workforce and other resources accordingly.
Use of Estimates and Judgements
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the condensed consolidated financial statements and accompanying notes. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ significantly from those estimates. Significant items subject to such estimates and assumptions include the valuation of goodwill and intangible assets, inventory valuation, stock-based compensation, pre-combination Astra common stock, useful lives of intangible assets and fixed assets, deferred tax assets, income tax uncertainties, contingent consideration and other contingencies.
Significant Accounting Policies
Other than those described below, there have been no changes to the Company’s significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, that have had a material impact on its unaudited condensed consolidated financial statements and related notes.
Marketable securities. Marketable securities consist of U.S. Treasury securities, corporate debt securities, commercial paper, and asset backed securities. The Company classifies marketable securities as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date. Interest receivable on these securities is presented in other current assets on the condensed consolidated balance sheets. All marketable securities are recorded at their estimated fair values. When the fair value of a marketable security declines below its amortized cost basis, the carrying value of the security will be reduced to its fair value if it is more likely than not that management is required to sell the impaired security before recovery of its amortized basis, or management has the intention to sell the security. If neither of these conditions are met, the Company determines whether any portion of the decline is due to credit losses. Any portion of that decline attributable to credit losses, to the extent expected to be nonrecoverable before the sale of the security, is recognized in the Company’s condensed consolidated statement of operations. When the fair value of the security declines below its amortized cost basis due to changes in interest rates, such amounts are recorded in accumulated other comprehensive income (loss) and are recognized in the Company’s condensed consolidated statement of operations only if the Company sells or intends to sell the security before recovery of its cost basis. Realized gains and losses are determined based on the specific identification method and are reported in other income (expense), net in the Company’s condensed consolidated statements of operations.
Note 2 — Revenues
8
The Company recognizes revenue to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Through its current and anticipated offerings, the Company expects to generate revenue by providing the following goods or services:
Launch Services — To provide rapid, global, and affordable launch services to satellite operators and governments in partnership with third-party spaceport providers globally. Our launch services include services tied directly to our launch along with complementary services that are not part of our fixed pricing for which we charge a separate fee. The Company currently operates its launches from Pacific Spaceport Complex in Kodiak, Alaska and Cape Canaveral Space Force Station in Cape Canaveral, Florida. The Company plans to add additional launch sites in diverse locations based on its customers' inclination requirements and as the Company increases the frequency of launches.
Space Products — To design and provide space products based on the customers' needs for a successful satellite launch and other products that the Company may sell in the future. Currently the Company offers two in-space electric propulsion systems.
Space Services — To invest in building the Company's portfolio of space services, which includes communication service and constellation services, which will be based on the Company's network of spacecraft that customers can access for use in their business. Specifically, the Company's space services encompass all aspects of hosted satellite and constellation services, including hosting customer payloads onto its spacecraft, and delivering services, such as communication and other services, to customers from its space platform.
As of March 31, 2022, the Company has only entered into contracts for launch services and space products. As of March 31, 2022, the Company is in early stages of developing its space services offerings which includes communication service and constellation services. The Company’s contracts may provide customers with termination for convenience clauses, which may or may not include termination penalties. In some contracts, the size of the contractual termination penalty increases closer to the scheduled launch date. At each balance sheet date, the Company evaluates each contract’s termination provisions and the impact on the accounting contract term, i.e., the period in which the Company has enforceable rights and obligations. This includes evaluating whether there are termination penalties and if so, whether they are considered substantive. The Company applies judgment in determining whether the termination penalties are substantive.
Recognition of Revenue
The work performed by the Company in fulfilling launch services and space products performance obligations is not expected to create an asset to the customer since the launch vehicle that is built to deliver the customer’s payload into orbit will not be owned by the customer or the propulsion systems that are built to thrust the customers' satellite into orbit will not be owned by the customer until they are delivered to the customer. The Company recognizes revenue at a point in time upon satisfaction of the performance obligations under its launch services and space products agreements. The Company recognized $
Contracts with governmental entities involving research and development milestone activities do not represent contracts with customers under ASC 606 and as such, amounts received are recorded in other income (expense), net in the condensed consolidated statements of operations. The Company recorded $
Contract Balances and Remaining Performance Obligations
Contract balances. Contract assets and liabilities represent the differences in the timing of revenue recognition from the receipt of cash from the Company’s customers and billings. Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. Receivables represent rights to consideration that are unconditional. Such rights are considered unconditional if only the passage of time is required before payment of that consideration is due. The Company had no contract assets as of March 31, 2022 and December 31, 2021. The Company had contract liabilities of $
Remaining performance obligations. Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied. It includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods and does not include contracts where the customer is not committed. Customers are not considered committed when they are able to terminate their contractual obligations to us without payment of a substantive penalty under the contract. Many of the Company’s contracts allow the customer to terminate the contract prior to launch or delivery without a substantive penalty, and therefore the enforceable contract is for a period less than the stated contractual term. Further, the Company has elected not to disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or
9
less. The Company had unsatisfied performance obligations of $
Note 3 — Acquisitions
Acquisition of Apollo Fusion, Inc.
On July 1, 2021, or the Apollo Acquisition Date, the Company, through its wholly owned indirect subsidiary, merged with Apollo Fusion, Inc. ("Apollo"). The results of Apollo’s operations have been included in the unaudited condensed consolidated financial statements since that date. Apollo designs, tests, manufactures and operates propulsion modules to enable satellites to orbit in space.
The fair value of the consideration paid as of July 1, 2021, was $
Purchase Consideration (in thousands) |
|
|
|
|
Cash paid for outstanding Apollo common stock and options |
|
$ |
|
|
Fair value of Astra Class A common stock issued |
|
|
|
|
Fair value of contingent consideration |
|
|
|
|
Total purchase consideration |
|
|
|
|
Less: cash acquired |
|
|
|
|
Total purchase consideration, net of cash acquired |
|
$ |
|
|
The fair value of the shares of Class A common stock issued in the Apollo Merger was determined based on the closing market price of the Company’s Class A common stock on the Apollo Acquisition Date.
The vesting of all unvested stock options of Apollo granted prior to the Apollo Acquisition Date were accelerated prior to the acquisition and were then cancelled in exchange for a right of each option-holder to cash, equity and contingent consideration based on their pro-rata percentage, assuming all stock options of Apollo had been exercised.
The contingent consideration requires the Company to pay $
An additional $
In addition, the Company awarded
We allocated the fair value of the purchase consideration to the tangible assets, liabilities and intangible assets acquired, based on their fair values. The excess purchase price over those fair values is recorded as goodwill. Our valuation assumptions of acquired assets and assumed liabilities require significant estimates, especially with respect to intangible assets. The final purchase consideration allocation is presented in the following table.
10
(in thousands) |
|
Fair Value |
|
|
Inventory |
|
$ |
|
|
Prepaid and other current assets |
|
|
|
|
Property, plant and equipment |
|
|
|
|
Right of use assets |
|
|
|
|
Goodwill |
|
|
|
|
Intangible assets |
|
|
|
|
Other non-current assets |
|
|
|
|
Total assets acquired |
|
|
|
|
Accounts payable |
|
|
( |
) |
Accrued expenses and other current liabilities |
|
|
( |
) |
Operating lease obligation |
|
|
( |
) |
Other non-current liabilities |
|
|
( |
) |
Total liabilities assumed |
|
|
( |
) |
Fair value of net assets acquired |
|
$ |
|
|
Goodwill is primarily attributable to the assembled workforce and anticipated synergies expected from the integration of the Apollo business. The synergies include operating efficiencies, and other strategic benefits projected to be achieved as a result of the Apollo Merger. Goodwill is not deductible for tax purposes.
There were
Intangible Assets |
|
|
|
|
|
|
|
|
Fair Value |
|
|
Weighted-Average Amortization Periods |
|
|
|
(in thousands) |
|
|
(in years) |
|
Developed technology |
|
$ |
|
|
||
Customer contracts and related relationships |
|
|
|
|
||
Order backlog |
|
|
|
|
||
Tradename |
|
|
|
|
||
Total identified intangible assets |
|
$ |
|
|
|
|
Developed technology relates to propulsion modules. The Company valued the developed technology using the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue that are expected to be generated by developed technology. The economic useful life was determined based on the technology cycle related to the developed technology, as well as the cash flows over the forecast period.
Customer contracts and related relationships represent the fair value of future projected revenue that will be derived from sales of products to existing customers of Apollo. Customer contracts and related relationships were valued using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the customer contracts and related relationships less charges representing the contribution of other assets to those cash flows. The economic useful life was determined based on historical customer turnover rates.
Order backlog represents business under existing contractual obligations. The fair value of backlog was determined using the multi-period excess earnings method under the income approach based on expected operating cash flows from future contractual revenue. The economic useful life was determined based on the expected life of the backlog and the cash flows over the forecast period.
Trade name relates to the “Apollo” trade name. The fair value was determined by applying the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue under the trade name. The economic useful life was determined based on the expected life of the trade name and the cash flows anticipated over the forecast period.
The Company believes the amounts of purchased intangible assets recorded above represent the fair values of, and approximate the amounts a market participant would pay for, these intangible assets as of the Apollo Acquisition Date.
Reverse Recapitalization.
On June 30, 2021, pre-combination Astra Space, Inc. and Holicity Inc. consummated the Business Combination contemplated by the BCA, with pre-combination Astra surviving the merger as a wholly owned subsidiary of Holicity. Upon consummation of the
11
Business Combination, Holicity changed its name to Astra Space, Inc., and pre-combination Astra changed its name to Astra Space Operations, Inc.
Immediately following the Business Combination, there were
The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP as pre-combination Astra has been determined to be the accounting acquirer. Under this method of accounting, while Holicity was the legal acquirer, it has been treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination was treated as the equivalent of pre-combination Astra issuing stock for the net assets of Holicity, accompanied by a recapitalization. The net assets of Holicity were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of pre-combination Astra. Reported shares and earnings per share available to holders of the Company’s common stock, prior to the Business Combination, have been retroactively restated as shares reflecting the exchange ratio established in the BCA (
The most significant change in the post-combination Company’s reported financial position and results was an increase in cash, net of transactions costs, of $
Upon closing of the Business Combination, the shareholders of Holicity, including Holicity founders, were issued
The number of shares of Class A common stock issued immediately following the consummation of the Business Combination were:
Common stock of Holicity |
|
|
|
|
Holicity founder shares |
|
|
|
|
Shares issued in PIPE |
|
|
|
|
Business Combination and PIPE shares |
|
|
|
|
Pre-combination Astra shares |
|
|
|
|
Total shares of Class A common stock immediately after Business Combination |
|
|
|
Note 4 — Supplemental Financial Information
Inventories
in thousands |
|
As of March 31, 2022 |
|
|
As of December 31, 2021 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in progress |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Inventories |
|
$ |
|
|
$ |
|
||
There were $
Property, Plant and Equipment, net
Presented in the table below are the major classes of property, plant and equipment:
12
in thousands |
|
As of March 31, 2022 |
|
|
As of December 31, 2021 |
|
||
Construction in progress |
|
$ |
|
|
$ |
|
||
Computer and software |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Research equipment |
|
|
|
|
|
|
||
Production equipment |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Total property, plant and equipment |
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property, plant and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense amounted to $
Accrued Expenses and Other Current Liabilities
in thousands |
|
As of March 31, 2022 |
|
|
As of December 31, 2021 |
|
||
Employee compensation and benefits |
|
$ |
|
|
$ |
|
||
Contract liabilities, current portion |
|
|
|
|
|
|
||
Fair value of contingent consideration, current portion |
|
|
|
|
|
|
||
Construction in progress related accruals |
|
|
|
|
|
|
||
Accrued expenses |
|
|
|
|
|
|
||
Other (miscellaneous) |
|
|
|
|
|
|
||
Accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
Other Non-Current Liabilities
in thousands |
|
As of March 31, 2022 |
|
|
As of December 31, 2021 |
|
||
Fair value of contingent consideration, net of current portion |
|
$ |
|
|
$ |
|
||
Contract liabilities, net of current portion |
|
|
|
|
|
|
||
Other (miscellaneous) |
|
|
|
|
|
|
||
Other non-current liabilities |
|
$ |
|
|
$ |
|
||
Note 5 — Intangible Assets
in thousands |
|
Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Book Value |
|
|||
As of March 31, 2021: |
|
|
|
|
|
|
|
|
|
|||
Definite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|||
Developed technology |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Customer contracts and related relationship |
|
|
|
|
|
|
|
|
|
|||
Order backlog |
|
|
|
|
|
|
|
|
|
|||
Trade names |
|
|
|
|
|
|
|
|
|
|||
Intangible assets subject to amortization |
|
|
|
|
|
|
|
|
|
|||
Indefinite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|||
Trademarks |
|
|
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
13
in thousands |
|
Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Book Value |
|
|||
As of December 31, 2021: |
|
|
|
|
|
|
|
|
|
|||
Definite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|||
Developed technology |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Customer contracts and related relationship |
|
|
|
|
|
|
|
|
|
|||
Order backlog |
|
|
|
|
|
|
|
|
|
|||
Trade names |
|
|
|
|
|
|
|
|
|
|||
Intangible assets subject to amortization |
|
|
|
|
|
|
|
|
|
|||
Indefinite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|||
Trademarks |
|
|
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Based on the amount of intangible assets as of March 31, 2022, the expected amortization expense for each of the next five years and thereafter is as follows:
in thousands |
|
Expected Amortization Expense |
|
|
2022 (remainder) |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
Total intangible assets |
|
$ |
|
|
Note 6 — Long-Term Debt
There is no short-term and long-term debt outstanding as of March 31, 2022 and December 31, 2021. In connection with the Business Combination, all outstanding debt with the exception of the Paycheck Protection Program note was paid on June 30, 2021. Refer to Note – 3 Acquisitions. In August 2021, the Company's application for forgiveness of Paycheck Protection Program was approved in the full amount of the outstanding principal balance and accrued interest.
Term Loan and Equipment Advances
On December 25, 2018, the Company entered into a loan agreement (the “2018 Loan Agreement”) with Silicon Valley Bank (“SVB”). Pursuant to the 2018 Loan Agreement, the Company could borrow up to a total of $
In connection with the execution of the 2018 Loan Agreement, the Company entered into a 2018 warrant agreement which granted certain warrants to SVB (the “Warrants”). The Warrants were issued in one initial tranche on December 25, 2018 and three subsequent tranches in 2019 each time the Company made an additional debt draw under the 2018 Loan Agreement. Pursuant to the warrant agreement, SVB had the option to purchase an aggregate of
Paycheck Protection Program Note (“PPP Note”)
On April 20, 2020, the Company received loan proceeds of approximately $
14
The Company used the PPP Note amount intended for Qualifying Expenses. In the first quarter of the year ended December 31, 2021, the Company submitted a forgiveness application to its lender seeking full forgiveness of the PPP Note. On August 24, 2021, the Company received notice from the lender that the Small Business Administration has approved the application for forgiveness of the PPP Note in the full amount.
Convertible Notes
Issuance of Convertible Notes
From June 2019 through July 2019, the Company issued $
From October 2019 through December 2020, the Company issued $
Settlement of Convertible Notes
On January 28, 2021, the Company entered a stock purchase agreement with certain investors to close the issuance of Series C convertible preferred stock at a cash purchase price of $
The June 2019 Convertible Notes were settled pursuant to the contractual conversion upon the Next Equity Financing feature with such financing yielding at least $
The October 2019 Convertible Notes were settled based on negotiated terms between the Company and the note holders as the Series C Financing did not meet the definition of Next Equity Financing for the October 2019 Convertible Notes. The Company assessed the economics of the settlement of the October 2019 Convertible Notes and concluded that it should be treated as a privately negotiated debt redemption/settlement transaction where debt extinguishment accounting should be applied. Therefore, the Company derecognized the net carrying amount, including any unamortized debt discount, of the October 2019 Convertible Notes of $
The Company issued in aggregate
Note 7 — Warrant Liabilities
As part of Holicity’s initial public offering ("IPO") in 2020, Holicity issued
The Private Placement Warrants and the shares of common stock issuable upon the exercise of the Private Placement Warrants were not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants were exercisable for cash or on a cashless basis, at the holder’s option, and were non-redeemable so long as they were held by the initial purchasers or their permitted transferees. If the Private Placement Warrants were
15
held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrant.
The Company accounted for Public Warrants and Private Placement Warrants as 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"). Specifically, the exercise of the Public and Private Placement Warrants may be settled in cash upon the occurrence of a tender offer or exchange that involves
On November 26, 2021, the Company issued a notice of redemption to redeem all of its Public Warrants and Private Placement Warrants ("Redeemable Warrants") outstanding as of December 27, 2021. Under the Warrant Agreement, the Company was entitled to redeem not less than all of the outstanding Redeemable Warrants at a Redemption Price of $
Under the notice of redemption, Company required holders of the Redeemable Warrants to exercise their Warrants on a cashless basis, (the “Cashless Exercise Option”) and holders were not permitted to exercise Redeemable Warrants by paying the $
In connection with the redemption, the holders of
Note 8 — Income Taxes
We compute our provision for income taxes by applying the estimated annual effective tax rate to year-to-date income from recurring operations and adjust the provision for discrete tax items recorded in the period.
There has historically been no federal or state provision for income taxes because the Company has incurred operating losses and maintains a full valuation allowance against its net deferred tax assets. For the three months ended March 31, 2022 and 2021, the Company recognized
Utilization of net operating loss carryforwards, tax credits and other attributes may be subject to future annual limitations due to the ownership change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions.
The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is not currently under examination by income tax authorities in federal, state or other jurisdictions. All tax returns will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss or credits.
Note 9 — Leases
16
termination options. The Company does not expect to exercise the majority of termination options and generally excludes such options when determining the term of leases.
The operating lease costs were $
The weighted average remaining lease term was
Cash flows arising from lease transactions for the three months ended March 31, 2022 and 2021 were as follows (in thousands):
in thousands |
|
2022 |
|
|
2021 |
|
||
Cash paid for amounts included in the measurements of lease liabilities — operating cash flows |
|
$ |
( |
) |
|
$ |
( |
) |
Right-of-use assets obtained in exchange for operating leases liabilities |
|
$ |
|
|
$ |
— |
|
|
Future minimum lease payments under non-cancellable leases in effect as of March 31, 2022 are as follows (in thousands):
Year Ended December 31, |
|
Operating |
|
|
2022 (remainder) |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
Total future undiscounted minimum lease payments |
|
$ |
|
|
Less: imputed Interest |
|
|
|
|
Total reported lease liability |
|
$ |
|
|
Note 10 — Fair Value Measurements
The Company measures its financial assets and liabilities at fair value each reporting period using a fair value hierarchy that prioritizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. A financial instrument’s
17
classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value, as follows:
Level 1 Observable inputs, such as quoted prices in active markets for identical assets or liabilities;
Level 2 Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3 Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The Company uses the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
The carrying amounts of Company's financial instruments, which include cash equivalents, accounts receivable, prepaid expenses, other current assets, accounts payable, accrued liabilities and certain other current liabilities approximate fair value because of their short-term maturities.
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis (in thousands):
|
|
As of March 31, 2022 |
|
|||||||||||||
Description |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market account |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
US Treasury securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate Debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial Paper |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset Backed Securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total financial assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total financial liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
As of December 31, 2021 |
|
|||||||||||||
Description |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market account |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total financial assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total financial liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table presents a summary of the changes in fair value of the Company's Level 3 financial instruments:
in thousands |
|
Contingent Consideration |
|
|
Fair value as of December 31, 2021 |
|
$ |
|
|
Loss on change in fair value of contingent consideration |
|
|
|
|
Fair value as of March 31, 2022 |
|
$ |
|
|
The fair value of contingent consideration related to Apollo acquisition is classified as Level 3 financial instruments. To determine the fair value of the contingent consideration, the Company used a Monte Carlo simulation model. The Monte Carlo simulation considered assumptions including revenue volatilities, risk free rates, discount rates and additional revenue discount rate. Additionally,
18
other key assumptions included forecasted revenues from new customers and probability of achieving it.
|
|
As of March 31, 2022 |
|
|
As of December 31, 2021 |
|
||
Risk-free interest rate |
|
|
% |
|
|
% |
||
Expected revenue volatility |
|
|
% |
|
|
% |
||
Revenue discount rate |
|
|
% |
|
|
% |
||
Discount rate |
|
|
% |
|
|
% |
||
Note 11 — Commitments and Contingencies
Legal Proceedings
The Company is party to ordinary and routine litigation incidental to its business. On a case-by-case basis, the Company engages inside and outside counsel to assess the probability of potential liability resulting from such litigation. After making such assessments, the Company makes an accrual for the estimated loss only when the loss is probable, and an amount can be reasonably estimated.
On February 9, 2022, a putative class action was filed in the United States District Court for the Eastern District of New York styled Artery v. Astra Space, Inc. et al., Case No. 1:22-cv-00737 (E.D.N.Y.) (the “Artery Action”). The complaint alleges that the Company and certain of its current and former officers violated provisions of the Securities Exchange Act of 1934 with respect to certain statements concerning the Company's capabilities and business prospects. The complaint seeks unspecified damages on behalf of a purported class of purchasers of the Company's securities between February 2, 2021 and December 29, 2021. On March 23, 2022, a second putative class action was filed in the United States District Court for the Eastern District of New York styled Riley v. Astra Space, Inc., et al., Case No. 1:22-cv-01591 (E.D.N.Y.) (the “Riley Action,” with the Artery Action, the “Securities Actions”). The Riley Action alleges the same claims, based upon similar facts, against the same defendants, and seeks the same damages. The Company expects that the two cases will be consolidated into a single action. Defendants intend to move to dismiss once the Court appoints a lead plaintiff and an amended complaint is filed. The Company believes that the Securities Actions are without merit and intend to defend them vigorously. Due to the early stage of the cases, neither the likelihood that a loss, if any, will be realized, nor an estimate of the possible loss or range of loss, if any, can be determined.
On March 8, 2022, a stockholder derivative suit was filed in the United States District Court for the State of Delaware styled Meyer, et al., v. Kemp, et al., Case No. 22-cv-00308 (D. Del.). The complaint asserts claims against the current members of our board of directors and certain of our current and former officers, for breach of their fiduciary duty, waste, unjust enrichment, and contribution under the Securities Exchange Act of 1934, based upon the conduct alleged in the Artery Action. The plaintiffs seek monetary damages in favor of the Company in an unstated amount, reformation of the Company’s corporate governance and internal procedures, restitution including a disgorgement of any compensation, profits or other benefits achieved, and reimbursement of the plaintiffs’ reasonable fees and costs, including attorney's fees. The Company believes that the case is without merit and intends to defend it vigorously. Due to the early stage of the case, neither the likelihood that a loss, if any, will be realized, nor an estimate of the possible loss or range of loss, if any, can be determined.
The Company has tendered defense of each of the three foregoing claims under its Directors' and Officers’ policy. The retention under this policy is $
Purchase Commitments
On May 25, 2021, the Company entered a contract with a supplier to purchase components. The Company is obligated to purchase $
Note 12 — Convertible Preferred Stock
Convertible Preferred Stock
From pre-combination Astra’s inception until the consummation of the Business Combination, approximately $
19
The three classes of convertible preferred stock of pre-combination Astra were: Series A convertible preferred stock, Series B convertible preferred stock and Series C convertible preferred stock (collectively, the “Convertible Preferred Stock”). Immediately before the consummation of the Business Combination, the Convertible Preferred Stock of pre-combination Astra consisted of:
Series |
|
Shares Outstanding (pre-combination Astra) |
|
|
Liquidation |
|
|
Conversion |
|
|
Annual |
|
||||
A |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
B |
|
|
|
|
|
|
|
|
|
|
|
|
||||
C |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Upon the consummation of the Business Combination in June 2021,
On January 28, 2021, concurrent with Series C Financing, the Company amended its certificate of incorporation to add a merger with a special purpose acquisition company (“SPAC Transaction”) as one of the defined Deemed Liquidation events. In addition, upon triggering of the Deemed Liquidation events, the holders of the Convertible Preferred Stock were entitled to receive the greater of their liquidation preference per share and the as converted value per share. As of March 31, 2021, the Company assessed the probability of a SPAC Transaction to be probable and therefore, the Convertible Preferred Stock were considered probable of becoming redeemable.
Subsequent measurement of Convertible Preferred Stock was then required for the three months ended March 31, 2021. The Company elected to apply the current redemption value method to measure the redeemable Convertible Preferred Stock. Under the method, changes in the redemption value were recognized immediately as they occurred and the carrying value of the Convertible Preferred Stock was adjusted to the redemption value at the end of each reporting date. In the absence of retained earnings, adjustments to redemption value were recorded against additional paid-in capital, if any, and then to accumulated deficit. As of March 31, 2021, adjustments to the carrying amount of the Convertible Preferred Stock of $
On the Closing Date of the Business Combination, all outstanding Convertible Preferred Stock converted into Class A common stock of the Company, therefore, the Company applied conversion accounting to derecognize the existing carrying amount of the Convertible Preferred Stock and increased additional paid-in capital.
Note 13 — Stockholders’ Equity
Common and Preferred Stock
As of March 31, 2022, the Company had authorized a total of
Holders of the Class A and Class B common stock have identical distribution rights, except that holders of the Class A common stock are entitled to one vote per share and holders of the Class B common stock are entitled to ten votes per share. Each share of Class B common stock can be converted into one share of Class A common stock at any time at the option of the stockholder and automatically convert upon sale or transfer, except for certain transfers specified in the Company's amended and restated certificate of incorporation.
In connection with the Business Combination, the Company’s executive officers and founders, Chris Kemp and Adam London, converted an aggregate
20
pre-combination Astra, which were entitled to
Founders Convertible Preferred Stock
The Company issued
Note 14 — Stock-based Compensation
Stock-based incentive awards are provided to employees under the terms of various Astra equity incentive plans.
2021 Omnibus Incentive Plan
In June 2021, the Board of Directors approved the 2021 Omnibus Incentive Plan (the “2021 Plan”), which reserved
2021 Employee Stock Purchase Plan
In June 2021, the Board of Directors approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP”) to reserve
2016 Equity Incentive Plan
In 2016, pre-combination Astra adopted the 2016 Equity Incentive Plan (the “2016 Plan”). Under this Plan, the Board of Directors or a committee appointed by the Board of Directors is authorized to provide stock-based compensation in the form of stock options, stock appreciation rights, restricted stock, and other performance or value-based awards within parameters set forth in the Plan to employees, directors, and non-employee consultants.
In connection with the Business Combination, the Company assumed the 2016 Plan upon closing. Each outstanding and unexercised option (“Astra Option”) was converted, at the exchange ratio established in the BCA, into an option (“New Astra Option”) to acquire shares of the Company’s Class A common stock with the same terms and conditions as applicable to the Astra Option immediately prior to the Business Combination. As of March 31, 2022, there were no shares available for issuance under the plan.
The following table summarizes stock-based compensation expense that the Company recorded in the condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021:
21
|
|
For The Three Months |
|
|||||
in thousands |
|
2022 |
|
|
2021 |
|
||
Cost of revenues |
|
$ |
|
|
$ |
— |
|
|
Research and development |
|
|
|
|
|
|
||
Sales and marketing |
|
|
|
|
|
|
||
General and administrative |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
$ |
|
|
$ |
|
||
On November 22, 2021, under the 2021 Plan, the Company's compensation committee issued
Certain performance conditions for PSUs are subjective and the number of PSUs related to these performance conditions do not meet the criteria for the grant date. Accordingly,
As of March 31, 2022, the Company assessed the probability of success for the performance conditions that are not subjective and determined that the Company has achieved certain of these performance conditions within the requisite period. Therefore, the Company recognized $
On September 20, 2021, under the 2021 Plan, the Company’s compensation committee granted
PSOs, only eligible to the executive officers of the Company, are subject to performance conditions as follows, and the milestones do not need to be achieved in any specific order or sequence:
Milestone A: The Company has had a successful orbital delivery.
Milestone B: The Company has had six orbital launches during a six consecutive month period.
Milestone C: The Company has completed a prototype for a spacecraft that has achieved an orbital launch.
Milestone D: The Company has conducted twenty-six orbital launches during a six consecutive month period.
Milestone E: The Company has achieved an orbital launch for an aggregate of 100 spacecraft.
These PSOs also require the volume weighted average share price for a period of thirty trading days meet share price thresholds of $15.00, $20.00, $30.00, $40.00 and $50.00 following the achievement of the first milestone, second milestone, third milestone, fourth milestone and fifth milestone, respectively, before a milestone will be deemed achieved. After each milestone is achieved,
22
In February 2021, the Board of Directors approved the acceleration in vesting of
As of March 31, 2022, the Company had $
Secondary Sales
In , concurrent with Series C Financing,
Stock Options Awards
The following is a summary of stock option activity for the three months ended March 31, 2022:
|
|
No. of |
|
|
Weighted- Average Exercise Price |
|
|
Weighted- Average |
|
|
Aggregate Intrinsic |
|
||||
Outstanding – December 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Forfeited |
|
|
( |
) |
|
|
|
|
— |
|
|
|
|
|||
Expired |
|
|
( |
) |
|
|
|
|
— |
|
|
|
|
|||
Outstanding – March 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unvested – March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercisable – March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|||||
The company uses the Black-Scholes option pricing-model to calculate the grant date fair value of time-based options. The following table summarizes the assumptions used in estimating the fair value of options granted in the three months ended March 31, 2022:
|
|
Time Based Stock Options |
|
|
|
|
|
|
|
Expected terms (years)(1) |
|
|
|
|
Expected volatility(2) |
|
|
% |
|
Risk-free interest rate(3) |
|
|
% |
|
Expected dividend rate(4) |
|
|
|
|
Grant-date fair value |
|
$ |
|
|
____________
23
Restricted Stock Units Awards
The following is a summary of restricted stock units for the three months ended March 31, 2022:
|
|
Number of RSUs Outstanding |
|
|
Weighted- Average Grant Date Fair Value Per Share |
|
||
Outstanding – December 31, 2021 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding – March 31, 2022 |
|
|
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Total fair value as of the respective vesting dates of restricted stock units vested for the three months ended March 31, 2022 was approximately $
Note 15 — Loss per Share
Founders Convertible Preferred Stock and Convertible Preferred Stock were participating securities in periods of income, as the Founders Convertible Preferred Stock and Convertible Preferred Stock participated in undistributed earnings on an as-if-converted or as-vested basis. However, the Founders Convertible Preferred Stock and Convertible Preferred Stock, did not share in losses.
The Company computes earnings per share of Common Stock using the two-class method required for participating securities and does not apply the two-class method in periods of net loss. Basic and diluted earnings per share were the same for the periods presented as the inclusion of all potential Common Stock outstanding would have been anti-dilutive. Earnings per share calculations for all periods prior to the Business Combination have been retrospectively restated to the equivalent number of shares reflecting the exchange ratio established in the BCA. Subsequent to the Business Combination, earnings per share was calculated based on weighted average number of shares of common stock then outstanding.
The following tables set forth the computation of basic and diluted loss for the three months ended March 31, 2022 and 2021:
|
|
For The Three Months Ended March 31, |
|
|||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||
(in thousands, except share and per share amounts) |
|
Class A |
|
|
Class B |
|
|
Class A |
|
|
Class B |
|
||||
Net loss attributed to common stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustment to redemption value on Convertible Preferred Stock |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Net loss attributed to common stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Basic weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and Diluted loss per share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
There were
|
|
As of March 31, |
|
|||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||
|
|
Class A |
|
|
Class B |
|
|
Class A |
|
|
Class B |
|
||||
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
||||
RSUs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Convertible Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
||||
24
Note 16 — Related Party Transactions
Cue Health, Inc.
The Company began purchasing COVID-19 test readers and related test cartridges from Cue Health Inc. in the late second quarter 2021, at its standard pricing. In August 2021, the Company entered into a six-month subscription arrangement with Cue Health Inc. for the purchase of COVID-19 test readers and the related test cartridges. Under Cue Health Inc.’s standard subscription arrangement, the Company receives a twenty percent (
Convertible Promissory Notes
In June 2019, the Company issued promissory convertible notes to A/NPC Holdings LLC and Sherpa Ventures Fund, II LP for gross proceeds of $
On January 28, 2021, the Company settled the promissory convertible notes through the issuance of Series C convertible preferred stock.
Note 17 — Subsequent Events
On
25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the financial condition and results of operations of Astra Space, Inc. should be read together with our audited consolidated financial statements as of and for the years ended December 31, 2021 and 2020 and unaudited interim condensed consolidated financial statements as of and for the three months ended March 31, 2022 and 2021, together with related notes thereto. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those projected in these forward-looking statements as a result of various factors, including those set forth in the risk factors previously disclosed in our annual report on Form 10-K for the year ended December 31, 2021, and filed with the SEC on March 31, 2022. Certain amounts may not foot due to rounding. Unless the context otherwise requires, all references in this section to “the Company” “Astra,” “us,” “our” or “we” refer to Astra Space, Inc. after the closing of the Business Combination on June 30, 2021, and Astra Space Operations, Inc, formerly known as Astra Space, Inc, prior to the Business Combination.
Overview
Our mission is to launch a new generation of launch services and space services and products to Improve Life on Earth from SpaceTM. These services and products are enabled by new constellations of small satellites in Low Earth Orbit (“LEO”), which have rapidly become smaller, cheaper, and many times more numerous than legacy satellites. Launch vehicles, however, have not evolved in the same way — most rockets remain focused on serving legacy satellites and human spaceflight missions and we aim to provide the world’s first mass-produced orbital launch system. While our primary focus remains the growth and development of our launch services offerings, we continue to develop other product and service offerings to support our overall mission to improve life on Earth from space and are also focus on the acquisition, license or development of core space technology to support the growth and development of our product and service offerings. For example, on June 2, 2021, we announced the acquisition of Apollo Fusion, Inc. and acquired its ACE propulsion system and, on November 4, 2021, we announced the filing of an application with the Federal Communications Commission for V-band spectrum assets to support a future constellation to further enable communications and connectivity.
COVID-19 Impact
On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide. The extent of the impact of the coronavirus pandemic on Astra’s operational and financial performance will depend on various future developments, including variants of the disease, the duration and spread of the outbreak and impact on its customers, suppliers, and employees, all of which is uncertain at this time. Astra believes the COVID-19 pandemic may adversely impact future revenue and results of operations, but Astra is unable to predict at this time the size and duration of this adverse impact. Astra has seen some signs of positive effects for its long-term business prospects and partnerships as a result of the pandemic. The COVID-19 pandemic has created an even greater need for broadband internet access, and businesses are thinking differently about how their workforce can stay connected. There have also been recent government and commercial announcements about continuous investments in this area and we believe this will continue to support the growth of the small satellite market for the foreseeable future.
Key Factors Affecting Our Results and Prospects
We believe that our performance and future success depend on a number of factors that present significant opportunities for us 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” in our Annual Report on Form 10-K for the period ended December 31, 2021, filed with the SEC on March 31, 2022. We believe the factors discussed below are key to our success.
Commencing and Expanding Commercial Launch Operations
We commenced paid commercial launch services in 2022, with our launch on February 10, 2022, of launch vehicle LV0008. After a nominal first stage flight, the payload fairing did not fully deploy prior to the upper stage ignition due to an electrical issue which, together with a software issue, resulted in the upper stage not reaching orbit and the end of the mission. Through our investigation process, we identified and have since corrected the issues that caused the error in the payload fairing’s deployment and addressed the software issue. On March 15, 2022, we conducted an orbital launch for three customers of Spaceflight, Inc. and confirmed our first delivery of customer payloads into Earth orbit. To conduct our launches, we are required to receive commercial space transportation licenses from the FAA. Any delays in commencing our commercial launch operations, including due to delays or cost overruns in obtaining FAA licenses or other regulatory approvals for future versions of our launch vehicles or at future spaceports, could adversely impact our results and growth plans.
26
We are on track to achieve a monthly launch capability by accelerating production of our launch vehicles by the end of 2022, with a goal of reaching an even more frequent launch capability in the future. When we refer to a “commercial launch,” we mean a launch conducted under an FAA commercial launch license.
Lowering Manufacturing Costs and Increasing Payloads
We aim to be a cost-efficient dedicated orbital launch system provider. We plan to increase the maximum payload capacity of our launch vehicle to meet customer needs and demands through a process of iterative development and improvement. We have made significant investment in our manufacturing facility through March 31, 2022, and we expect this facility will be at full capacity by the end of 2024. Please see risk factors previously disclosed in our Annual Report on Form 10-K for the period ended December 31, 2021, filed with the SEC on March 31, 2022, for factors that could affect our ability to realize benefits from the investment in our manufacturing facility. While we believe that our estimate is reliable, the development and build-out of our manufacturing facility may take longer than planned, including due to delays in obtaining federal and state regulatory approvals of our final construction plans or any changes that are required to be made to those plans. Any delays in our achieving full manufacturing capacity could adversely impact our results and growth plans.
Leveraging Core Technologies
We plan to develop, license or acquire core space technologies that we expect to commercialize and incorporate into our launch vehicles, spacecrafts and other infrastructure that we will use to deliver our product and space service offerings. These core technologies including, among other things, electric propulsion and solar power. For example, we acquired propulsion technology through our merger with Apollo Fusion, which we announced on June 2, 2021, and closed on July 1, 2021.
Expand Our Space Services Offerings
We are in the preliminary stages of developing our space services offering, providing modular configurable satellite buses for customers, 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, to turn-key provision of entire constellations, offering "concept to constellation" in months instead of years. Specifically, our space services encompass all aspects of hosted satellite and constellation services, including hosting customer payloads onto our satellites, and delivering services, such as communication services. These services are expected to allow customers to focus on developing innovative payloads rather than having to design or develop complete satellite buses or satellites or constellations, which we will provide, along with ancillary services that are likely to include telemetry, tracking and control ("TT&C"), communications, processing, as well as software development and maintenance.
On November 4, 2021, we filed an application with the FCC, under which we requested authority to launch and operate a non-geostationary orbit satellite system using V-band frequencies (the "Constellation") as we work to build out our space services offering to enable communications.
We expect to make significant investments in our space services programs. Although we believe that our financial resources will be sufficient to meet our capital needs for at least 12 months from the date of this Quarterly Report on Form 10-Q, our timeline and budgeted costs for these offerings are subject to substantial uncertainty, including due to compliance requirements of U.S. federal export control laws and applicable foreign and local regulations, the impact of political and economic conditions, and, particularly in the case of our anticipated Spaceport offering, the need to identify opportunities and negotiate long-term agreements with customers for these services, among other factors.
Key Components of Results of Operations
We are an early-stage company and our historical results may not be indicative of our future results for reasons that may be difficult to anticipate. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical or future results of operations.
Revenues
We commenced our first paid commercial launch, which occurred in February 2022, followed by a second paid commercial launch which occurred in March 2022. These launches represent the start of our paid commercial launch operations. We expect to generate a significant portion of our revenues in launch services from delivering customers' payloads into orbit. We also expect to generate revenues by delivering space products and space services to our customers in the future. Over time, we expect space services to grow more quickly and to represent a significant portion of our revenues after 2025.
27
Cost of Revenues
Cost of revenues consist primarily of direct material, direct labor, manufacturing overhead, other personnel-related expenses, which include salaries, bonuses, benefits and stock-based compensation expense and depreciation expense. Cost of revenues also includes charges to write-down the carrying value of inventory when it exceeds its estimated net realizable value. We anticipate recording write-downs to our inventory over the foreseeable future as we continue to ramp production of our launch vehicles. We expect our cost of revenues to increase in absolute dollars in future periods as we sell more launch services and space products. As we grow into our current capacity and execute on cost-reduction initiatives, we expect our cost of revenues as a percentage of revenue to decrease over time.
Operating Expenses
Research and Development Expense
Our research and development expenses consist primarily of internal and external expenses incurred in connection with our research activities and development programs. These expenses include, but are not limited to, development supplies, testing materials, personnel and personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation expense), depreciation expense, amortization of intangible assets, overhead allocation (consisting of various support and facility costs) and consulting fees. Research and development costs are expensed as incurred.
We allocate research and development costs by function rather than by project, as a significant majority of our historical research and development spending was related to the initial development and testing of our underlying technology, including preparation for multiple test launches.
Our current primary research and development objectives focus on the development and finalization of our offerings. The successful development of these offerings involves many uncertainties, including:
A change in the outcome of any of these variables could delay the development of our launch and space systems, which in turn could impact the timing of commercialization of our offerings.
As we are developing and building our launch services, we have expensed all research and development costs associated with developing and building our launch services offering. We expect that our research and development expenses will increase in the short-term as we invest in improving and further reducing the costs of our launch system as well as developing and improving our space services offering.
Sales and Marketing Expense
Sales and marketing expenses consist of personnel and personnel-related expenses (including stock-based compensation) for our business development team as well as advertising and marketing expenses. We expect to increase our sales and marketing activities in order to grow our customer base and increase market share. We also expect that our sales and marketing expenses will increase over time as we continue to hire additional personnel to scale the business.
28
General and Administrative Expense
General and administrative expenses consist primarily of personnel and personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation expense) for personnel in executive, finance, accounting, corporate development and other administrative functions. General and administrative expenses also include legal fees, professional fees paid for accounting, auditing, consulting, tax, and investor relations services, insurance costs, and facility costs not otherwise included in research and development expenses and costs associated with compliance with the rules and regulations of the SEC and the stock exchange.
Income Tax (Benefit) Expense
Our income tax provision consists of an estimate for U.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. We maintain a valuation allowance against the full value of our U.S. and state net deferred tax assets because we believe the recoverability of the tax assets is not more likely than not.
Other Income (Expense), Net
Other income (expense), net primarily consists of income from government research and development contracts.
Critical Accounting Estimates
Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. Preparation of the financial statements requires our management to make a number of judgments, estimates and assumptions relating to the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on our consolidated financial statements. Our significant accounting policies are described in Note 2 in our Annual Report on Form 10-K for the year ended December 31, 2021, as updated as applicable in Note 1 to the condensed consolidated financial statements herein.
There were no significant changes in our critical accounting estimates during the three months ended March 31, 2022 compared to those previously disclosed in “Critical Accounting Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2021 Annual Report on Form 10-K
29
Results of Operations
Comparison of the Three Months Ended March 31, 2022 and 2021
|
|
For The Three Months |
|
|
Period over |
|
||||||||||
(in thousands, except percentages) |
|
2022 |
|
|
2021 |
|
|
($) |
|
|
(%) |
|
||||
Revenues |
|
$ |
3,911 |
|
|
$ |
— |
|
|
$ |
3,911 |
|
|
n.m. |
|
|
Cost of revenues |
|
|
11,014 |
|
|
|
— |
|
|
|
11,014 |
|
|
n.m. |
|
|
Gross loss |
|
|
(7,103 |
) |
|
|
— |
|
|
|
(7,103 |
) |
|
n.m. |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
37,927 |
|
|
$ |
12,196 |
|
|
$ |
25,731 |
|
|
|
211 |
% |
Sales and marketing |
|
|
4,764 |
|
|
|
64 |
|
|
|
4,700 |
|
|
|
7,344 |
|
General and administrative |
|
|
20,986 |
|
|
|
12,394 |
|
|
|
8,592 |
|
|
|
69 |
|
Loss on change in fair value of contingent consideration |
|
|
15,500 |
|
|
|
— |
|
|
|
15,500 |
|
|
n.m. |
|
|
Total operating expenses |
|
|
79,177 |
|
|
|
24,654 |
|
|
|
54,523 |
|
|
|
221 |
|
Operating loss |
|
|
(86,280 |
) |
|
|
(24,654 |
) |
|
|
(61,626 |
) |
|
|
250 |
|
Interest (expense) income, net |
|
|
174 |
|
|
|
(535 |
) |
|
|
709 |
|
|
|
(133 |
) |
Other income (expense), net |
|
|
393 |
|
|
|
— |
|
|
|
393 |
|
|
n.m. |
|
|
Loss on extinguishment of convertible notes |
|
|
— |
|
|
|
(131,908 |
) |
|
|
131,908 |
|
|
n.m. |
|
|
Loss on extinguishment of convertible notes attributable |
|
|
— |
|
|
|
(1,875 |
) |
|
|
1,875 |
|
|
n.m. |
|
|
Loss before taxes |
|
|
(85,713 |
) |
|
|
(158,972 |
) |
|
|
73,259 |
|
|
|
(46 |
) |
Income tax (benefit) expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
n.m. |
|
|
Net loss |
|
$ |
(85,713 |
) |
|
$ |
(158,972 |
) |
|
|
73,259 |
|
|
|
(46 |
) |
Adjustment to redemption value on Convertible Preferred Stock |
|
|
— |
|
|
|
(1,011,726 |
) |
|
|
1,011,726 |
|
|
n.m. |
|
|
Net loss attributable to common stockholders |
|
$ |
(85,713 |
) |
|
$ |
(1,170,698 |
) |
|
$ |
1,084,985 |
|
|
|
-93 |
% |
____________
n.m. = not meaningful.
Revenues
Revenues were $3.9 million for the three months ended March 31, 2022, all of which were related to launch services as we commenced paid commercial launch services during the period. We launched launch vehicles LV0008 and LV0009 on February 10, 2022 and March 15, 2022, respectively, both of which were paid launches. The orbital launch of LV0009 conducted on March 15, 2022, represents our first paid delivery of customer payloads into Earth orbit. No revenues were recognized for the three months ended March 31, 2021.
Cost of Revenues
Cost of revenues were $11.0 million for the three months ended March 31, 2022. which was primarily driven by recording of $5.5 million of cost of launch services related to our launches of launch vehicles: LV0008 and LV0009 and a $5.5 million of inventory net realizable value write downs. In the first quarter, we conducted our first paid commercial launch and have not yet achieved economies of scale in our manufacturing processes. As a result, we may continue to incur negative gross margins for the remainder of 2022.
Research and Development
Research and development costs were $37.9 million for the three months ended March 31, 2022, compared to $12.2 million for the three months ended March 31, 2021. The $25.7 million increase mainly reflected a $11.9 million increase in personnel-related costs due to headcount increases in research and development departments, a $3.8 million increase in stock-based compensation expense, a $3.8 million increase in research and development materials expense, a $1.8 million increase in third party consulting and recruitment costs, a $1.3 million increase in depreciation and amortization expense and a $0.7 million increase in technology licensed and software subscription licenses related expenses with the remainder due to changes in other research and development expenses. These increases were to support our product roadmap and launch services.
30
Sales and Marketing
Sales and marketing expenses were $4.8 million for the three months ended March 31, 2022, compared to $0.1 million for the three months ended March 31, 2021. The $4.7 million increase mainly reflected a $1.9 million increase in personnel-related costs, a $1.6 million in stock-based compensation expense, a $0.4 million increase in depreciation expense and a $0.4 million increase in third-party consulting and recruitment costs due to increased headcount in sales and marketing departments with the remainder due to changes in other sales and marketing expenses. These increases were to support business development and marketing activities.
General and Administrative
General and administrative expenses were $21.0 million for the three months ended March 31, 2022, compared to $12.4 million for the three months ended March 31, 2021. The $8.6 million increase was primarily due to a $5.4 million increase in employee costs due to increased headcount, a $2.0 million increase in insurance related expenses, a $1.4 million increase in accounting, audit and legal related fees and a $1.3 million increase in stock-based compensation expense which is partially offset by a decrease in the remainder of general and administrative expense due to changes in facilities costs, IT equipment fees, and software subscription fees.
Loss on Change in Fair Value of Contingent Consideration
Loss on change in fair value of contingent consideration of $15.5 million for the three months ended March 31, 2022 was due to higher revenues forecasted in estimating the fair value of contingent consideration. No loss on change in fair value of contingent consideration was recorded for the three months ended March 31, 2021.
Interest (Expense) Income, Net
Interest income was $0.2 million for the three months ended March 31, 2022, compared to interest expense of $0.5 million for the three months ended March 31, 2021. The $0.7 million increase in interest expense (income), net was primarily due to the settlement of outstanding debt during the year ended December 31, 2021. Therefore, we did not incur any interest expense during the period and an increase of $0.2 million in interest income related to investment in marketable securities during the three months ended March 31, 2022.
Other Income (expense), Net
Other income (expense), net of $0.4 million related to income from government research and development contracts for the three months ended March 31, 2022. There was no such other income (expense) for the three months ended March 31, 2021.
Loss on Extinguishment of Convertible Notes
No loss on extinguishment of convertible notes was recorded for the three months ended March 31, 2022. Loss on extinguishment of convertible notes of $131.9 million for the three months ended March 31, 2021 was due to the settlement of convertible notes on January 28, 2021.
Loss on Extinguishment of Convertible Notes Attributable to Related Parties
No loss on extinguishment of convertible notes attributable to related parties was recorded for the three months ended March 31, 2022. Loss on extinguishment of convertible notes attributable to related parties of $1.9 million for the three months ended March 31, 2021 was due to the settlement of convertible notes attributable to related parties on January 28, 2021.
Adjustment to redemption value on Convertible Preferred Stock
No adjustment to redemption value on convertible preferred stock was recorded for the three months ended March 31, 2022. Adjustment to redemption value on Convertible Preferred Stock of $1,011.7 million for the three months ended March 31, 2021, was due to the re-measurement of Convertible Preferred Stock to its redemption value due to the likelihood of a redemption event becoming probable.
Liquidity and Capital Resources
Liquidity
The following section discusses our principal liquidity and capital resources as well as our primary liquidity requirements and uses of cash. Our cash and cash equivalents are maintained in highly liquid investments with remaining maturities of 90 days or less at the time of purchase. We believe our cash equivalents are liquid and accessible.
31
We measure liquidity in terms of our ability to fund the cash requirements of our research and development activities and our current business operations, including our capital expenditure needs, contractual obligations and other commitments. Our current liquidity needs relate to business operations, research and development activities, mainly in connection with the ongoing development of our technology, lease obligations and capital expenditures, which primarily relate to the development of our manufacturing facility.
The condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q have been prepared on a going concern basis. We have historically funded our operations primarily by equity financings and convertible promissory notes prior to the Business Combination and subsequently funded its operations through cash proceeds obtained as part of the Business Combination and related private placement. As of March 31, 2022, our existing sources of liquidity included cash and cash equivalents of $161.5 million and marketable securities of $93.7 million. We have a limited history of operations and have incurred negative cash flows from operating activities and loss from operations in the past as reflected in the accumulated deficit of $1,494.1 million as of March 31, 2022. We expect to continue to incur operating losses due to the investments it intends to make in its business, including the development of our products and services. Management continuously evaluates opportunities to strengthen our financial position, including through the issuance of additional equity securities or by entering into new financing arrangements, as appropriate, and we will need to raise additional capital to achieve our space services goals. However, we have adequate liquidity that we expect will be sufficient to fund operating and capital expenditure requirements through at least 12 months from the date of filing this Quarterly Report on Form 10-Q. The Company’s current liquidity may not be sufficient to meet the required long-term liquidity needs associated with continued use of cash from operating activities at historical levels, in addition to its other liquidity needs associated with its capital expenditures, and other investing requirements. For additional information regarding our cash requirements from contractual obligations and lease obligations, see Note 11 — Commitments and Contingencies and Note 9 — Leases in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Summary Statement of Cash Flows for the Three Months Ended March 31, 2022 and 2021
The following table sets forth the primary sources and uses of cash and cash equivalents for the periods presented below:
|
|
For The Three Months |
|
|
Period over |
|
||||||||||
(in thousands) |
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||
Net cash used in operating activities |
|
$ |
(48,274 |
) |
|
$ |
(13,677 |
) |
|
$ |
(34,597 |
) |
|
|
253 |
% |
Net cash used in investing activities |
|
|
(115,683 |
) |
|
|
(3,524 |
) |
|
|
(112,159 |
) |
|
|
3,183 |
|
Net cash provided by financing activities |
|
|
471 |
|
|
|
29,138 |
|
|
|
(28,667 |
) |
|
|
(98 |
) |
Net increase (decrease) in cash and cash equivalents and restricted cash |
|
$ |
(163,486 |
) |
|
$ |
11,937 |
|
|
$ |
(175,423 |
) |
|
|
(1470 |
)% |
Cash Flows used in Operating Activities
Our cash flows from operating activities are significantly affected by our cash investments to support the growth of our business in areas such as research and development and general and administrative and working capital. Our operating cash inflows include cash from milestone billing under certain launch services contracts. These cash inflows are offset by our payments to suppliers for production materials and parts used in our manufacturing process as we ramp up our production, payments to our employees and other operating expenses.
For the three months ended March 31, 2022, net cash used in operating activities was $48.3 million. The primary factors affecting the Company’s operating cash flows during the period were a net loss of $85.7 million. This is offset by non-cash charges including stock-based compensation expense of $17.0 million, loss on change in fair value of contingent consideration of $15.5 million, inventory net realizable value write-downs of $5.5 million, depreciation and amortization expense of $2.8 million, non-cash lease expense of $0.4 million and accretion of marketable securities purchased at premium of $0.1 million. Changes in operating working capital items is mainly due to increased headcount and ramp-up of our production and primarily reflect the increase in inventories of $6.5 million, accounts payable of $0.1 million and other non-current liabilities of $0.5 million. Changes in operating working capital items was partially offset by a decrease in trade accounts receivable of $1.4 million, prepaid and other current assets of $1.0 million, Other non-current assets of $0.1 million, lease liabilities of $0.3 million and accrued expenses and other current liabilities of $0.1 million.
For the three months ended March 31, 2021, net cash used in operating activities was $13.7 million, which was comprised of net loss of $159.0 million, offset by non-cash charges including non-cash loss on extinguishment of convertible notes of $133.8 million, stock-based compensation expense of $10.3 million, depreciation expense of $0.9 million, amortization of convertible note debt discounts of $0.4 million and non-cash lease expense of $0.2 million. Changes in operating working capital items primarily reflect the increase in inventories of $0.4 million, prepaid and other current assets of $4.2 million, accounts payable of $0.7 million, lease liabilities of $0.1 million, accrued expenses and other current liabilities of $3.3 million and other non-current liabilities of $0.2 million.
32
Cash Flows used in Investing Activities
For the three months ended March 31, 2022, net cash used in investing activities was $115.7 million, which was comprised mainly of purchases of marketable securities of $93.9 million, purchases of property, plant and equipment of $20.9 million mainly related to the construction of our manufacturing facility and acquisition of an indefinite-lived intangible trademark asset of $0.9 million.
For the three months ended March 31, 2021, net cash used in investing activities was $3.5 million, which was comprised of acquisition of an indefinite-lived intangible trademark asset of $3.2 million and purchases of property, plant and equipment of $0.3 million.
Cash Flows from Financing Activities
For the three months ended March 31, 2022, net cash provided by financing activities amounted to $0.5 million and consisted primarily of proceeds from employee stock purchase plan of $0.4 million and issuance of stock under equity plans of $0.1 million.
For the three months ended March 31, 2021, net cash provided by financing activities amounted to $29.1 million and consisted primarily of issuance of Series C of $29.1 million and issuance of stock under equity plans of $0.2 million, offset by repayments on borrowings of $1.0 million.
Commitments and Contractual Obligations
We are a party to operating leases primarily for land and buildings (e.g., office buildings, manufacturing and testing facilities and spaceport) and certain equipment (e.g., copiers) under non-cancellable operating leases. The following table summarizes our lease commitments as of March 31, 2022:
Year Ended December 31 |
|
Minimum Lease |
|
|
|
|
(in thousands) |
|
|
2022 (remainder) |
|
$ |
1,412 |
|
2023 |
|
|
1,790 |
|
2024 |
|
|
1,677 |
|
2025 |
|
|
1,655 |
|
2026 |
|
|
1,642 |
|
Thereafter |
|
|
2,840 |
|
Total future undiscounted minimum lease payments |
|
$ |
11,016 |
|
Less: Imputed Interest |
|
|
2,187 |
|
Total reported lease liability |
|
$ |
8,829 |
|
On May 25, 2021, the Company entered a contract with a supplier to purchase components. The Company is obligated to purchase $22.5 million of components over 60 months. The Company may terminate the supply agreement by paying 50% of the remaining purchase commitment at any point during the contract term. The Company made total purchases of $0.8 million under the contract of which $0.4 million related to purchases made during the three months ended March 31, 2022. We also made advance payments of $0.4 million under the contract during the three months ended March 31, 2022.
Apart from the aforementioned leases and purchase commitments, we do not have any other material contractual obligations, commitments or contingent obligations.
Compliance With Continued Listing Standards of NASDAQ Global Select Market ("Nasdaq")
In conjunction with preparing our annual report on Form 10-K for the year ended December 31, 2021, we became aware that at the end of 2021 our filer status changed from non-accelerated filer to large-accelerated filer. As a result of this change in status, our annual report on Form 10-K was filed late. Under the Nasdaq listing standards, we are required to file our reports timely with the Securities and Exchange Commission. When we discovered the change in our filing status, we promptly notified Nasdaq.
33
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We have not, to date, been exposed to material market risks given our early stage of operations. As we expand our commercial operations, we expect to be exposed to foreign currency exchange rate and commodity price risks, particularly related to rocket propellants, helium, and aluminum, among others, and potentially other market risks, including those related to interest rates or valuation of financial instruments, among others.
Interest Rate Risk
As of March 31, 2022, we had $6.1 million of cash equivalents invested in money market funds and $93.7 million invested in marketable securities, which consisted of U.S. Treasury securities, corporate debt securities, commercial paper and asset backed securities. Our cash and cash equivalents are held for working capital purposes. We do not enter into investments for trading or speculative purposes. There was no material interest rate risk for the three months ended March 31, 2022 and year ended December 31, 2021.
Inflation Risk
We are exposed to inflation risk. Inflationary factors, such as increases in raw material and overhead costs, could impair our operating results. Although there has been a significant increase in inflation recently, it has not had a substantial impact on our results of operations for the three months ended March 31, 2022. However, a higher rate of inflation in the future may have an adverse effect on our ability to recover increasing costs and we might not be able to pass along cost increases to our customers.
Foreign Currency Risk
There was no material foreign currency risk for the three months ended March 31, 2022 and year ended December 31, 2021. Our activities to date have been limited and were conducted in the United States.
34
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, who serves as our principal executive officer, and Chief Financial Officer, who serves as our principal financial officer, as appropriate, to allow for timely decisions regarding required disclosures. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this quarterly report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of March 31, 2022 due to the material weaknesses in our internal control over financial reporting described below.
Material Weaknesses and Remediation Plan
As previously disclosed, we have identified material weaknesses in our internal control over financial reporting and these material weaknesses continued to exist as of March 31, 2022. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, material weaknesses identified are:
Control Environment
We did not maintain an effective control environment to enable the identification and mitigation of risks of material accounting errors based on the following control deficiencies:
Risk Assessment
We did not design and maintain controls over an effective risk assessment, including: (i) identifying, assessing, and communicating appropriate objectives, (ii) identifying and analyzing risks to achieve these objectives, and (iii) identifying and assessing changes in the business that could impact our system of internal controls.
Control Activities
We did not design and maintain effective control activities as the control activities did not adequately (i) address relevant risks, (ii) provide evidence of performance, (iii) provide appropriate segregation of duties, or (iv) operate at a level of precision to identify all potentially material errors.
Information and Communication
We did not design and implement controls over information and communication relating to communicating accurate information internally and externally, including providing information pursuant to objectives, responsibilities, and functions of internal control.
Monitoring Activities
35
We did not design and implement effective monitoring controls to ascertain whether the components of internal control are present and functioning.
These material weaknesses resulted in a restatement to Additional paid-in-capital, Accumulated deficit and Adjustment to redemption value on Convertible Preferred Stock as well as audit adjustments to substantially all of our accounts and disclosures, which were recorded as of and for the year ended December 31, 2021. Additionally, these material weaknesses could result in a misstatement of substantially all of our account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
We have begun the process of, and are focused on, designing and implementing effective internal control measures to improve our internal control over financial reporting and remediate the material weaknesses. Our efforts include a number of actions:
While these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period, we are committed to continuous improvement and will continue to diligently review our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
Discussion of legal matters is incorporated by reference from Part I, Item 1, Note 11, “Commitments and Contingencies,” and Note 17, “Subsequent Events” of this Quarterly Report on Form 10-Q, and should be considered an integral part of Part II, Item 1, “Legal Proceedings.”
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Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the period ended December 31, 2021, filed with the SEC on March 31, 2022, and investors are encouraged to review these risk factors prior to making an investment in the Company and in conjunction with their review of this Quarterly Report on Form 10-Q.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
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Item 6. Exhibits
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Incorporated by Reference |
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Exhibit Number |
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Description |
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Form |
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SEC File No. |
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Exhibit |
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Filing Date |
31.1* |
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31.2* |
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32.1** |
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32.2** |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Astra Space, Inc. |
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Date: May 5, 2022 |
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By: |
/s/ Chris C. Kemp |
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Chris C. Kemp |
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Chief Executive Officer |
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Date May 5, 2022 |
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By: |
/s/ Kelyn J. Brannon |
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Kelyn J. Brannon |
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Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer |
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