Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~September~~June 30, ~~2021~~2022

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: 001-39426

ASTRA SPACE, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware	85-1270303
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1900 Skyhawk Street Alameda, CA	94501
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (866) 278-7217

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


Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share		ASTR		~~The NASDAQ Global Select Market~~
~~Warrants to purchase one share of common Stock, each at an exercise price of $11.50~~		~~ASTRW~~		The NASDAQ Global Select Market

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

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

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


Large accelerated filer		☐☒		Accelerated filer		☐
Non-accelerated filer		☒☐		Smaller reporting company		☐
Emerging growth company		☒☐

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

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

As of ~~November 12, 2021,~~August 2, 2022, the registrant had ~~202,076,073~~209,891,782 shares of Class A common stock, $0.0001 par value per share, outstanding and ~~56,239,189~~55,539,188 shares of Class B common stock, $0.0001 par value per share, outstanding.

Table of Contents

Table of Contents


		Page

PART I.	FINANCIAL INFORMATION	1

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	~~Condensed Consolidated Balance Sheets~~
	Condensed Consolidated Statements of ~~Operations~~Stockholders' Equity	4
	~~Condensed Consolidated Statements of Temporary Equity and Stockholders' Equity (Deficit)~~
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3730
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4640
Item 4.	Controls and Procedures	4740

PART II.	OTHER INFORMATION	4943

Item 1.	Legal Proceedings	4943
Item 1A.	Risk Factors	4943
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50
Signatures		51

i

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PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial ~~Statements.~~Statements (unaudited)

ASTRA SPACE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

(Unaudited)


		As of
		June 30, 2022				December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents		$	104,315			$	325,007
Marketable securities			96,368				0
Trade accounts receivable			3,447				1,816
Inventories			3,155				7,675
Prepaid and other current assets			3,931				12,238
Total current assets			211,216				346,736
Non-current assets:
Property, plant and equipment, net			88,223				66,316
Right-of-use asset			8,601				9,079
Goodwill			58,251				58,251
Intangible assets, net			16,292				17,921
Other non-current assets			3,114				721
Total assets		$	385,697			$	499,024

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	14,331			$	9,122
Operating lease obligation, current portion			1,759				1,704
Accrued expenses and other current liabilities			45,182				29,899
Total current liabilities			61,272				40,725
Non-current liabilities:
Operating lease obligation, net of current portion			6,745				7,180
Other non-current liabilities			18,757				14,599
Total liabilities			86,774				62,504

Commitments and Contingencies (Note 11)

STOCKHOLDERS’ EQUITY
Founders convertible preferred stock, $0.0001 par value; 1,000,000 shares authorized; NaN issued and outstanding as of June 30, 2022 and December 31, 2021			0				0
Class A common stock, $0.0001 par value; 400,000,000 shares authorized; 209,408,425 and 207,451,107 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively			22				22
Class B common stock, $0.0001 par value; 65,000,000 shares authorized; 55,539,188 and 55,539,189 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively			6				6
Additional paid in capital			1,875,527				1,844,875
Accumulated other comprehensive loss			(233	)			0
Accumulated deficit			(1,576,399	)			(1,408,383	)
Total stockholders’ equity			298,923				436,520
Total liabilities and stockholders’ equity		$	385,697			$	499,024

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

1

Table of Contents

ASTRA SPACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)

(Unaudited)

As of

September 30, 2021

December 31, 2020

ASSETS

Current assets:

Cash and cash equivalents

$
378,652

$
10,611

Inventories

5,027

649

Prepaid and other current assets

15,215

485

Total current assets

398,894

11,745

Non-current assets:

Property, plant and equipment, net

43,576

24,069

Right-of-use asset

9,425

0

Goodwill

58,893

0

Intangible assets, net

19,263

0

Other non-current assets

253

77

Total assets

$
530,304

$
35,891

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

Accounts payable

$
4,921

$
2,474

Operating lease obligation, current portion

1,746

0

Accrued expenses and other current liabilities

28,658

4,390

Long-term debt, current portion

0

41,132

Long-term debt, current portion due to related parties

0

10,503

Total current liabilities

35,325

58,499

Non-current liabilities:

Long-term debt

0

7,286

Warrant liabilities

36,339

0

Operating lease obligation, net of current portion

7,433

0

Other non-current liabilities

14,275

1,685

Total liabilities

93,372

67,470

Commitments and Contingencies (Note 11)

TEMPORARY EQUITY

Series A convertible preferred stock, $0.0001 par value; NaN authorized, issued and outstanding as of
   September 30, 2021; 44,017,454 shares authorized, and 43,744,059 shares issued and outstanding as of
   December 31, 2020, net of issuance cost

0

15,922

Series B convertible preferred stock, $0.0001 par value; NaN authorized, issued and outstanding as of
   September 30, 2021; 47,406,862 shares authorized and 47,024,227 shares issued and outstanding as of
   December 31, 2020, net of issuance costs

0

92,907

Total temporary equity

0

108,829

STOCKHOLDERS’ EQUITY (DEFICIT)

Founders convertible preferred stock, $0.0001 par value; NaN authorized, issued and outstanding as of
   September 30, 2021; 12,302,500 shares authorized, issued and outstanding as of December 31, 2020

1

Class A common stock, $0.0001 par value; 400,000,000 and 176,225,000 shares authorized as of September 30,
   2021 and December 31, 2020, respectively; 202,034,520 and 15,679,758 shares issued and outstanding as of
   September 30, 2021 and December 31, 2020, respectively

21

2

Class B common stock, $0.0001 par value; 65,000,000 and 61,512,500 shares authorized as of
   September 30, 2021 and December 31, 2020; 56,239,189  and 47,281,500 shares issued and outstanding as of
   September 30, 2021 and December 31, 2020, respectively

6

4

Additional paid in capital

1,794,023

50,282

Accumulated deficit

(1,357,118
)

(190,697
)
Total stockholders’ equity (deficit)

436,932

(140,408
)
Total liabilities, temporary equity and stockholders’ equity (deficit)

$
530,304

$
35,891


		Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
Revenues		$	2,682			$	0			$	6,593			$	0
Cost of revenues			17,445				0				28,459				0
Gross loss			(14,763	)			0				(21,866	)			0
Operating expenses:
Research and development			40,798				10,458				78,725				22,435
Sales and marketing			4,636				1,125				9,400				1,189
General and administrative			20,608				18,318				41,594				30,931
Loss on change in fair value of contingent consideration			1,800				0				17,300				0
Total operating expenses			67,842				29,901				147,019				54,555
Operating loss			(82,605	)			(29,901	)			(168,885	)			(54,555	)
Interest income (expense), net			356				(678	)			530				(1,213	)
Other income (expense), net			(54	)			(718	)			339				(718	)
Loss on extinguishment of convertible notes			0				0				0				(131,908	)
Loss on extinguishment of convertible notes attributable to related parties			0				0				0				(1,875	)
Loss before taxes			(82,303	)			(31,297	)			(168,016	)			(190,269	)
Income tax (benefit) provision			0				0				0				0
Net loss		$	(82,303	)		$	(31,297	)		$	(168,016	)		$	(190,269	)
Adjustment to redemption value on Convertible Preferred Stock			0				0				0				(1,011,726	)
Net loss attributable to common stockholders		$	(82,303	)		$	(31,297	)		$	(168,016	)		$	(1,201,995	)

Net loss per share:
Weighted average number of shares of Class A common stock outstanding – basic and diluted			209,021,924				20,035,183				208,569,794				18,131,574
Net loss per share of Class A common stock – basic and diluted		$	(0.31	)		$	(0.47	)		$	(0.64	)		$	(18.52	)
Weighted average number of shares of Class B common stock outstanding – basic and diluted			55,539,188				46,722,244				55,539,188				46,783,559
Net loss per share of Class B common stock – basic and diluted		$	(0.31	)		$	(0.47	)		$	(0.64	)		$	(18.52	)

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

2

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ASTRA SPACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~COMPREHENSIVE LOSS
(In thousands)

(Unaudited)


		For The Three Months Ended June 30,								For The Six Months Ended June 30,
		2022				2021				2022				2021
Net loss		$	(82,303	)		$	(31,297	)		$	(168,016	)		$	(190,269	)
Other comprehensive loss:
Unrealized loss on available-for-sale marketable securities			(78	)			0				(233	)			0
Total comprehensive loss		$	(82,381	)		$	(31,297	)		$	(168,249	)		$	(190,269	)

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

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ASTRA SPACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Six Months Ended June 30, 2022

(In thousands, except share ~~and per share~~ data)

(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Operating expenses:

Research and development

$
21,724

$
5,423

$
44,159

$
20,955

Sales and marketing

1,090

0

2,229

0

General and administrative

19,730

2,358

50,712

9,341

Total operating loss

(42,544
)

(7,781
)

(97,100
)

(30,296
)
Interest (expense) income, net

18

(1,312
)

(1,194
)

(3,564
)
Other income, net

25,895

3,891

25,177

7,852

Loss on extinguishment of convertible notes

0

0

(131,908
)

0

Loss on extinguishment of convertible notes attributable
   to related parties

0

0

(1,875
)

0

Loss before taxes

(16,631
)

(5,202
)

(206,900
)

(26,008
)
Income tax (benefit) expense

(383
)

0

(383
)

0

Net loss

$
(16,248
)

$
(5,202
)

$
(206,517
)

$
(26,008
)
Adjustment to redemption value on Convertible Preferred Stock

0

0

(1,011,726
)

0

Net loss attributable to common stockholders

$
(16,248
)

$
(5,202
)

$
(1,218,243
)

$
(26,008
)

Net loss per share:

Weighted average number of shares of Class A
   common stock outstanding – basic and diluted

201,080,003

6,367,490

79,784,524

6,334,324

Net loss per share of Class A common
   stock – basic and diluted

$
(0.06
)

$
(0.09
)

$
(9.39
)

$
(0.47
)
Weighted average number of shares of Class B
   common stock outstanding – basic and diluted

56,239,188

49,210,000

49,970,071

48,722,577

Net loss per share of Class B common
   stock – basic and diluted

$
(0.06
)

$
(0.09
)

$
(9.39
)

$
(0.47
)



		Class A Common Stock								Class B Common Stock								Additional Paid in				Accumulated Other Comprehensive				Accumulated				Total Stockholders'
		Shares				Amount				Shares				Amount				Capital				Loss				Deficit				Equity

Balance as of December 31, 2021			207,451,107			$	22				55,539,189			$	6			$	1,844,875			$	—			$	(1,408,383	)		$	436,520
Stock-based compensation			—				—				(1	)			—				17,041				—				—				17,041
Issuance of common stock under equity plans			1,159,383				—				—				—				793				—				—				793
Unrealized loss on available-for-sale marketable securities			—				—				—				—				—				(155	)			—				(155	)
Net loss			—				—				—				—				—				—				(85,713	)			(85,713	)
Balance as of March 31, 2022			208,610,490			$	22				55,539,188			$	6			$	1,862,709			$	(155	)		$	(1,494,096	)		$	368,486
Stock-based compensation			—				—				—				—				12,791				—				—				12,791
Issuance of common stock under equity plans			797,935				—				—				—				27				—				—				27
Unrealized loss on available-for-sale marketable securities			—				—				—				—				—				(78	)			—				(78	)
Net loss			—				—				—				—				—				—				(82,303	)			(82,303	)
Balance as of June 30, 2022			209,408,425			$	22				55,539,188			$	6			$	1,875,527			$	(233	)		$	(1,576,399	)		$	298,923

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

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ASTRA SPACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OFOF TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY ~~(DEFICIT)~~(DEFICIT)
Six Months Ended June 30, 2021

(In thousands, except ~~share and per~~ share data)

(Unaudited)

Temporary Equity

Permanent Equity

Convertible Preferred Stock

Common Stock

Class A Common Stock
( New Astra)

Class B Common Stock
(New Astra)

Founders Preferred Stock

Additional
Paid in

Accumulated

Total Equity

Shares

Amount

Shares

Amount

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Deficit

(Deficit)

Balance as of December 31, 2020 (as
   previously reported)

136,493,663

$
108,829

94,678,583

$
—

—

—

—

—

18,500,000

$
—

$
50,289

$
(190,697
)

$
(140,408
)
Retroactive application of
   recapitalization

(45,725,377
)

—

(31,717,325
)

6

—

—

—

—

(6,197,500
)

1

(7
)

—

—

Balance as of December 31, 2020,
   effect of reverse recapitalization
   (refer to Note 3)

90,768,286

$
108,829

62,961,258

$
6

—

—

—

—

12,302,500

$
1

$
50,282

$
(190,697
)

$
(140,408
)
Cumulative effect adjustment due to
   adoption of ASU 2020-06

—

—

—

—

—

—

—

—

—

—

(9,719
)

691

(9,028
)
Stock-based compensation

—

—

—

—

—

—

—

—

—

—

2,177

—

2,177

Exercise of options

—

—

498,807

—

—

—

—

—

—

—

228

—

228

Issuance of Series C Convertible
   Preferred Stock, net of issuance
   costs

28,498,141

221,943

—

—

—

—

—

—

—

—

—

—

—

Conversion of Founders Convertible
   Preferred Stock to Series C
   Convertible Preferred Stock

5,073,576

—

—

—

—

—

—

—

(5,073,576
)

—

8,156

—

8,156

Adjustment to redemption value on
   Convertible Preferred Stock

—

1,011,726

—

—

—

—

—

—

—

—

(51,131
)

(960,595
)

(1,011,726
)
Net loss

—

—

—

—

—

—

—

—

—

—

—

(158,972
)

(158,972
)
Balance as of March 31, 2021

124,340,003

$
1,342,498

63,460,065

$
6

—

—

—

$
—

7,228,924

$
1

$
(7
)

$
(1,309,573
)

$
(1,309,573
)
Stock-based compensation

—

$
—

—

$
—

—

—

—

$
—

—

$
—

$
7,444

$
—

$
7,444

Exercise of options

—

—

1,812,081

—

—

—

—

—

—

—

1,081

—

1,081

Adjustment to redemption value on
   Convertible Preferred Stock

—

(1,011,726
)

—

—

—

—

—

—

—

—

1,011,726

—

1,011,726

Merger recapitalization- Class A

(124,340,003
)

(330,772
)

(16,261,881
)

(2
)

140,601,884

14

—

—

330,751

—

330,763

Merger recapitalization- Class B

—

—

(49,010,265
)

(4
)

—

—

56,239,189

6

(7,228,924
)

(1
)

—

—

1

Private offering and merger financing,
   net of redemptions and equity
   issuance costs of $23,337

—

—

—

—

57,489,019

6

—

—

—

—

406,863

—

406,869

Net loss

—

—

—

—

—

—

—

—

—

—

—

(31,297
)

(31,297
)
Balance as of June 30, 2021

—

$
—

—

$
—

198,090,903

$
20

56,239,189

$
6

—

$
—

$
1,757,858

$
(1,340,870
)

$
417,014

Stock-based compensation

—

$
—

—

$
—

—

—

—

$
—

—

$
—

$
2,688

$
—

$
2,688

Exercise of options

—

—

—

—

912,760

1

—

—

—

—

469

—

470

Exercise of warrants

—

—

—

—

472,113

—

—

—

—

—

—

—

—

Issuance of common stock upon acquisition of Apollo Fusion, Inc.

—

—

—

—

2,558,744

—

—

—

—

—

33,008

—

33,008

Net loss

—

—

—

—

—

—

—

—

—

—

—

(16,248
)

(16,248
)
Balance as of September 30, 2021

—

$
—

—

$
—

202,034,520

$
21

56,239,189

$
6

—

$
—

$
1,794,023

$
(1,357,118
)

$
436,932

4

Convertible Preferred Stock

Common Stock

Founders Preferred Stock

Additional
Paid in

Accumulated

Total

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Deficit

Deficit

Balance as of December 31, 2019
   (as previously reported)

136,493,663

$
108,829

80,294,900

$
—

18,500,000

$
—

$
7,490

$
(122,404
)

$
(114,914
)
Retroactive application of recapitalization

(45,725,377
)

—

(26,898,791
)

5

(6,197,500
)

1

(6
)

—

—

Balance as of December 31, 2019,
   effect of reverse recapitalization
   (refer to Note 3)

90,768,286

$
108,829

53,396,109

$
5

12,302,500

$
1

$
7,484

$
(122,404
)

$
(114,914
)
Stock-based compensation

—

—

1,508,720

—

—

—

372

—

372

Exercise of options

—

—

173,729

—

—

—

19

—

19

Net loss

—

—

—

—

—

—

—

(11,981
)

(11,981
)
Balance as of March 31, 2020

90,768,286

$
108,829

55,078,558

$
5

12,302,500

$
1

$
7,875

$
(134,385
)

$
(126,504
)
Stock-based compensation

—

—

482,125

—

—

—

141

—

141

Exercise of options

—

—

10,640

—

—

—

5

—

5

Net loss

—

—

—

—

—

—

—

(8,825
)

(8,825
)
Balance as of June 30, 2020

90,768,286

$
108,829

55,571,323

$
5

12,302,500

$
1

$
8,021

$
(143,210
)

$
(135,183
)
Stock-based compensation

—

—

—

—

—

—

95

—

95

Exercise of options

—

—

41,077

—

—

—

9

—

9

Net loss

—

—

—

—

—

—

—

(5,202
)

(5,202
)
Balance as of September 30, 2020

90,768,286

$
108,829

55,612,400

$
5

12,302,500

$
1

$
8,125

$
(148,412
)

$
(140,281
)


		Temporary Equity									Permanent Equity
		Convertible Preferred Stock									Common Stock (Pre-combination Astra)								Class A Common Stock ( New Astra)								Class B Common Stock (New Astra)								Founders Preferred Stock								Additional Paid in				Accumulated				Total Stockholders'
		Shares				Amount					Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Capital				Deficit				Equity (Deficit)
Balance as of December 31, 2020			90,768,286			$	108,829					62,961,258			$	6				—			$	—				—			$	—				12,302,500			$	1			$	50,282			$	(190,697	)		$	(140,408	)
Cumulative effect adjustment due to adoption of ASU 2020-06			—				—					—				—				—				—				—				—				—				—				(9,719	)			691				(9,028	)
Stock-based compensation			—				—					—				—				—				—				—				—				—				—				2,177				—				2,177
Exercise of options			—				—					498,807				—				—				—				—				—				—				—				228				—				228
Issuance of Series C Convertible Preferred Stock, net of issuance costs			28,498,141				221,943					—				—				—				—				—				—				—				—				—				—				—
Conversion of Founders Convertible Preferred Stock to Series C Convertible Preferred Stock			5,073,576				—					—				—				—				—				—				—				(5,073,576	)			—				8,156				—				8,156
Adjustment to redemption value on Convertible Preferred Stock			—				1,011,726					—				—				—				—				—				—				—				—				(51,131	)			(960,595	)			(1,011,726	)
Net loss			—				—					—				—				—				—				—				—				—				—				—				(158,972	)			(158,972	)
Balance as of March 31, 2021			124,340,003			$	1,342,498					63,460,065			$	6				—			$	—				—			$	—			$	7,228,924			$	1			$	(7	)		$	(1,309,573	)		$	(1,309,573	)
Stock-based compensation			—				—					—				—				—				—				—				—				—				—				7,444				—				7,444
Exercise of options			—				—					1,812,081				—				—				—				—				—				—				—				1,081				—				1,081
Adjustment to redemption value on Convertible Preferred Stock			—				(1,011,726	)				—				—				—				—				—				—				—				—				1,011,726				—				1,011,726
Merger recapitalization- Class A			(124,340,003	)			(330,772	)				(16,261,881	)			(2	)			140,601,884				14				—				—				—								330,751				—				330,763
Merger recapitalization- Class B			—				—					(49,010,265	)			(4	)			—				—				56,239,189				6				(7,228,924	)			(1	)			—				—				1
Private offering and merger financing, net of redemptions and equity issuance costs of $23,337			—				—					—				—				57,489,019				6				—				—				—				—				406,863				—				406,869
Net loss			—				—					—				—				—				—				—				—				—				—				—				(31,297	)			(31,297	)
Balance as of June 30, 2021			—			$	—					—			$	—				198,090,903			$	20				56,239,189			$	6				—			$	—			$	1,757,858			$	(1,340,870	)		$	417,014

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

5

Table of Contents

ASTRA SPACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

(Unaudited)


		Six Months Ended June 30,
		2022				2021
Cash flows from operating activities:
Net loss		$	(168,016	)		$	(190,269	)
Adjustments to reconcile net loss to cash flows used in operating activities
Stock-based compensation			29,832				17,777
Depreciation			6,004				1,918
Amortization of intangible assets			1,629				0
Inventory write-downs			18,828				0
Non-cash lease expense			729				426
Accretion (amortization) of marketable securities purchased at a premium (discount)			132				0
Loss on change in fair value of contingent consideration			17,300				0
Loss on extinguishment of convertible notes			0				131,908
Loss on extinguishment of convertible notes attributable to related parties			0				1,875
Amortization of convertible note discounts			0				315
Amortization of convertible note discounts attributable to related parties			0				55
Changes in operating assets and liabilities:
Trade accounts receivable			(1,632	)			0
Inventories			(13,446	)			(1,182	)
Prepaid and other current assets			7,447				(4,893	)
Other non-current assets			(2,393	)			0
Accounts payable			6,268				3,617
Lease liabilities			(631	)			(547	)
Accrued expenses and other current liabilities			1,153				2,334
Other non-current liabilities			4,934				2,011
Net cash used in operating activities		$	(91,862	)		$	(34,655	)
Cash flows from investing activities:
Acquisition of trademark			(850	)			(3,200	)
Purchases of marketable securities			(102,010	)			0
Maturities of marketable securities			5,277				0
Purchases of property, plant and equipment			(32,064	)			(8,796	)
Net cash used in investing activities		$	(129,647	)		$	(11,996	)
Cash flows from financing activities:
Proceeds from business combination and private offering, net of transaction costs of $23,337			0				463,648
Borrowings on Pendrell bridge loan			0				10,000
Repayment on Pendrell bridge loan			0				(10,000	)
Proceeds from issuance of Series C preferred stock			0				30,000
Issuance cost of Series C preferred stock			0				(94	)
Repayments on term loans			0				(2,800	)
Repayments on equipment advances			0				(3,636	)
Proceeds from stock issued under equity plans			106				1,309
Proceeds from Employee Stock Purchase Plan			711				0
Net cash provided by financing activities		$	817			$	488,427

Net increase (decrease) in cash and cash equivalents		$	(220,692	)		$	441,776
Cash and cash equivalents at beginning of period			325,007				10,611
Cash and cash equivalents at end of period		$	104,315			$	452,387

Non-cash activities:
Conversion of Series A, Series B, Series C, and Founders' convertible preferred into common stock		$	0			$	330,764
Assets acquired included in accounts payable and accrued expenses and other current liabilities			4,983				537
Public and private placement of warrants acquired as part of business combination			0				56,786
Change in redemption value of Convertible Preferred Stock			0				1,011,726
Supplemental disclosures of cash flow information:
Cash paid for interest		$	0			$	691

6

Nine Months Ended
September 30,

2021

2020

Cash flows from operating activities:

Net Loss

$
(206,517
)

$
(26,008
)
Adjustments to reconcile net loss to cash flows used in operating activities

Stock-based compensation

20,465

608

Depreciation

2,958

2,479

Amortization of intangible assets

938

0

Non-cash lease expense

767

0

Deferred income taxes

(383
)

Change in fair value of warrant liabilities

(20,447
)

0

Gain on forgiveness of PPP note

(4,850
)

0

Loss on extinguishment of convertible notes

131,908

0

Loss on extinguishment of convertible notes attributable to related parties

1,875

0

Amortization of convertible note discounts

315

2,242

Amortization of convertible note discounts attributable to related parties

55

464

Gain on mark to market derivatives

0

(4,474
)
Gain on mark to market derivatives attributable to related parties

0

(914
)
Changes in operating assets and liabilities:

Inventories

(4,246
)

0

Prepaid and other current assets

(13,935
)

(576
)
Other non-current assets

(101
)

61

Accounts payable

1,333

(743
)
Change in lease liabilities

(861
)

0

Accrued expenses and other current liabilities

11,355

1,627

Other non-current liabilities

(205
)

338

Net cash used in operating activities

$
(79,576
)

$
(24,896
)
Cash flows from investing activities:

Acquisition of Apollo, net of cash acquired

(19,360
)

0

Acquisition of trademark

(3,200
)

0

Purchases of property, plant and equipment

(18,546
)

(992
)
Investment made in leasehold improvements

(174
)

(1,231
)
Net cash used in investing activities

$
(41,280
)

$
(2,223
)
Cash flows from financing activities:

Proceeds from business combination and private offering, net of transaction costs of $23,337

463,648

0

Borrowings on Pendrell bridge loan

10,000

0

Repayment on Pendrell bridge loan

(10,000
)

0

Proceeds from issuance of Series C preferred stock

30,000

0

Issuance cost of Series C preferred stock

(94
)

0

Proceeds from issuance of convertible notes

0

17,900

Repayments on term loans

(2,800
)

0

Repayments on equipment advances

(3,636
)

(933
)
Borrowings on economic injury disaster loan

0

500

Repayments on economic injury disaster loan

0

(500
)
Borrowings on paycheck protection program loan

0

4,850

Proceeds from stock issued under equity plans

1,779

33

Net cash provided by financing activities

$
488,897

$
21,850

Net increase (decrease) in cash, cash equivalents and restricted cash

$
368,041

$
(5,269
)
Cash, cash equivalents and restricted cash at beginning of period

10,611

10,519

Cash, cash equivalents and restricted cash at end of period

$
378,652

$
5,250

Non-cash activities:

Conversion of Series A, Series B, Series C, and Founders' convertible preferred into
Class A common stock

$
330,764

$
0

Assets acquired included in accounts payable and accrued expenses

4,903

449

Public and private placement of warrants acquired as part of business combination

56,786

0

Change in redemption value of Convertible Preferred Stock

1,011,726

0

Issuance of Class A common stock upon acquisition of Apollo Fusion, Inc.

33,008

0

Fair value of contingent consideration provided upon acquisition of Apollo Fusion, Inc.

23,000

0

Supplemental disclosures of cash flow information:

Cash paid for interest

$
691

$
313

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

76

Table of Contents

ASTRA SPACE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(Unaudited)~~

Note 1 — Description of Business, Basis of Presentation and Significant Accounting Policies

Description of Business

Astra Space, ~~Operations,~~ Inc. ~~(formerly Astra Space, Inc., and herein “Astra Space Operations”)~~ designs, tests, manufactures and operates the next generation of launch services and space products and services that ~~will~~it expects to enable a new generation of global communications, earth observation, precision weather monitoring, navigation, and surveillance capabilities. Astra Space, ~~Operations’ goal~~Inc.'s mission is to ~~improve life~~Improve Life on ~~our planet~~Earth from Space® through greater connectivity and more regular observation and to enable a wave of innovation in low Earth orbit by expanding ~~our~~its 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 ~~Space Operations~~ with pre-combination Astra ~~Space Operations~~ 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”.~~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. ~~Refer to~~See Note 3 — Acquisitions for further discussion of the Business Combination. The Company’s Class A common stock ~~and warrants to purchase Class A common stock are now~~is listed on the Nasdaq under the ~~symbols~~symbol “ASTR” ~~and “ASTRW”~~.

~~Note 2 — Basis of Presentation and Summary of Significant Accounting Policies~~

Basis of Presentation and Principles of Consolidation

The ~~Company’s~~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 ~~interim~~ financial reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interimThe condensed consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes for the years ended December 31, 2020 and 2019. The Condensed Consolidated Balance Sheet as of December 31, 2020, included herein ~~was derived from the audited financial statements of the Company as of that date.~~

~~The~~are unaudited, ~~condensed consolidated interim financial statements,~~and reflect all adjustments which are, in the opinion of management, ~~reflect all adjustments, consisting only~~ of a normal recurring ~~adjustments,~~nature and necessary ~~to present fairly our financial position, our~~for a fair statement of the results ~~of operations, cash flows and stockholders’ equity (deficit)~~ 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 and six months ended June 30, 2022 are not necessarily indicative of the results ~~of operations to~~that may be ~~anticipated~~expected for the year ending December 31, 2022, or for any other future ~~annual or interim~~ period.

Business Combination

On ~~July 1,~~June 30, 2021, ~~we, through our wholly owned indirect subsidiary, merged with Apollo Fusion, Inc. ("Apollo"). The fair value of~~ the ~~consideration paid as of July 1, 2021, was $75.4~~ million, net of cash acquired (the "Apollo Merger"). Apollo designs, tests, manufactures and operates propulsion modules to enable satellites to orbit in space. The results of operations of Apollo are included in the unaudited condensed consolidated financial statements commencing as of July 1, 2021, or the Apollo Acquisition Date. See Note 3 — Acquisitions for additional information.

~~The~~ Business Combination pursuant to the BCA, by and among Holicity, Merger Sub, and pre-combination Astra, iswas accounted for as a reverse recapitalization as pre-combination Astra was determined to be the accounting acquirer under ~~FASB’s~~ ASC ~~Topic 805, Business Combination ("ASC 805").~~805. The determination is primarily based on the evaluation of the following facts and circumstances:

•

the equity holders of pre-combination Astra hold the majority of voting rights in the Company;

•

the board of directors of pre-combination Astra represent a majority of the members of the board of directors of the Company;

•

the senior management of pre-combination Astra became the senior management of the Company; and

•

the operations of pre-combination Astra comprise the ongoing operations of the Company.

8

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 $0.0001 per share, representing a recapitalization, and the net assets of the Company were acquired and recorded at historical cost, with no goodwill or intangible assets recorded. Pre-combination Astra was deemed to be the predecessor and the condensed consolidated assets and liabilities and results of operations prior to the Closing Date are those of pre-combination Astra. Reported shares and earnings per share available to common stockholders, prior to the Business Combination, have been retroactively restated as shares reflecting the exchange ratio established in the BCA. The number of shares of preferred stock was also retroactively restated based on the exchange ratio. See Note 3 — Acquisitions for additional ~~information~~information.

~~Principles~~7

Table of ~~Consolidation and~~ Contents

Liquidity

The accompanying unaudited condensed consolidated financial statements ~~include the accounts for the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions~~ have been ~~eliminated in consolidation.~~

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 ~~reverse recapitalization.~~Business Combination and related private placement. As of ~~September~~June 30, ~~2021,~~2022, the Company’s existing sources of liquidity included cash and cash equivalents of $~~379~~104.3 million and marketable securities of $96.4 million. The Company has a limited history of operations and has incurred negative cash flows from operating activities and loss from operations in the past as reflected in the accumulated deficit of $~~1,357~~1,576.4 million as of ~~September~~June 30, ~~2021.~~2022. The Company expects to continue to incur operating losses due to the investments it intends to make in its business, including the development of ~~products.~~its products and services. The Company ~~has adequate~~remains focused on managing its cash ~~balances~~expenditures, including but not limited to, reducing its capital expenditures, consulting services and re-focusing its hiring efforts. In addition, the Company continues to evaluate opportunities to strengthen the Company’s financial position, including through the issuance of additional equity securities or by entering into new financing arrangements, as appropriate. As an example, on August 2, 2022, the Company entered into a Common Stock Purchase Agreement with B. Riley Principal Capital II LLC ("B. Riley"), which would allow the Company to sell newly issued shares of its Class A Common Stock to B. Riley in aggregate amount not to exceed $100,000,000 or 19.99% of the aggregate outstanding Class A and Class B Common Stock of the Company as of August 2, 2022. See Note 17 — Subsequent Events for additional information about this financing arrangement. The Company expects that its existing sources of liquidity will be sufficient to fund operating and capital expenditure requirements through at least 12twelve (12) months from the date of issuance of these financial statements.

~~Emerging Growth Company~~

~~Section 102(b)(1)~~Impact of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised, and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison of the Company’s condensed consolidated financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

~~Risks and Uncertainties~~COVID-19 Pandemic

The Company ~~is subject~~has been actively monitoring the ongoing COVID-19 pandemic situation and its impact on the Company’s business while keeping abreast of the latest developments, particularly the variants of the virus, to ~~those risks common in the technology industry~~ensure preparedness for Astra’s employees and ~~also those risks common to early stage companies including, but not limited to, the possibility of not being able to successfully develop or market~~ its products or services, competition, dependence on key personnel and key external alliances, the successful protection of its proprietary technologies, compliance with government regulations, and the possibility of not being able to obtain additional financing when needed.

~~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.~~business. The COVID-19 pandemic ~~has~~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. ~~Many~~The Company has been diligent in testing and monitoring its employees, and there have been disruptions in productivity, although these disruptions have not resulted in suspension of its manufacturing facilities. However, there has been a trend in many parts of the ~~Company’s customers worldwide were impacted by~~world of increasing availability and administration of vaccines against COVID-19, as well as an easing of restrictions on social, business, travel and ~~temporarily closed their facilities which impacted~~government activities and functions. On the ~~speed of research~~other hand, infection rates and ~~development. Additionally, we implemented cost-cutting measures~~regulations continue to fluctuate in ~~response to~~various regions and there are ongoing global impacts resulting from the ~~anticipated impact of the COVID-19~~ pandemic, including challenges and increases in ~~early 2020, including employee layoffs~~costs for logistics and temporary furloughs. Further, the Company’s fund raising was negatively impacted in the first half of 2020 as a result of a number of factors surrounding the COVID-19 pandemic. As the global outbreak of COVID-19 continues to rapidly evolve, future impacts on the Company’s business depend on future developments, which remain highly uncertain and cannot be predicted with confidence. This includes factorssupply chains, such as increased intermittent supplier delays and a shortfall of semiconductor supply. Ultimately, the ~~ultimate geographic spread of the disease,~~Company cannot predict the duration of the ~~outbreak, travel restrictions~~COVID-19 pandemic. The Company will continue to monitor macroeconomic conditions to remain flexible and ~~social distancing in the United States~~to optimize and evolve its business as appropriate and deploy its production, workforce and other countries, business closures or business disruptions, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. While the masking, social distancing and other regulatory measures instituted or recommended in response to COVID-19 are expected to be temporary, the duration of the business disruptions, and related financial impact on the Company, cannot be estimated at this time.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

9

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, ~~derivatives and warrants,~~ useful lives of intangible assets and fixed assets, deferred tax assets, income tax uncertainties, contingent ~~considerations~~consideration and other contingencies.

~~Concentration of Credit Risk~~Significant Accounting Policies

~~Financial instruments~~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 ~~potentially subject~~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 ~~concentrations~~credit losses. Any portion of that decline attributable to credit ~~risk consist~~losses, to the extent expected to be nonrecoverable before the sale of ~~cash and cash equivalents. The Company maintains cash and cash equivalent balances in bank accounts with one bank. All cash accounts are located~~the security, is recognized in the ~~United States~~Company’s condensed consolidated statement of operations. When the fair value of the security declines below its

8

Table of Contents

amortized cost basis due to changes in interest rates, such amounts are recorded in accumulated other comprehensive income (loss) and ~~insured by~~are recognized in the ~~Federal Deposit Insurance Corporation (“FDIC”). Although balances may exceed amounts insured by the FDIC,~~Company’s condensed consolidated statement of operations only if the Company ~~believes there is no exposure~~sells or intends to ~~any significant credit risks related to~~sell the security before recovery of its ~~cash or cash equivalents~~cost basis. Realized gains and ~~has not experienced any~~ losses are determined based on the specific identification method and are reported in ~~such accounts.~~other income (expense), net in the Company’s condensed consolidated statements of operations.

~~Segment Reporting~~Note 2 — Revenues

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker (“CODM”) in making decisions regarding resource allocation and assessing performance. All of the Company’s assets are maintained in the United States. The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources and evaluating financial performance.

~~Revenue Recognition~~

~~In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ (~~Topic 606~~) (“ASU 2014-09”). ASU 2014-09, combined with all subsequent amendments, which is collectively Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from Contracts with Customers, provides guidance outlining a single five-step comprehensive revenue model in accounting for revenue from contracts with customers which supersedes all existing revenue recognition guidance, including industry-specific guidance. ASC 606 also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. The Company adopted the new accounting guidance and related amendments (collectively, the “new revenue accounting standard”) on January 1, 2020 using the modified retrospective method. As the Company did not have any revenue from contracts with any customers prior to the Company’s adoption date, there was no accounting impact upon adoption.

~~Under ASC 606, the Company will recognize~~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.~~governments in partnership with third-party spaceport providers globally. The launch services include services tied directly to launch along with complementary services that are not part of the Company's fixed pricing for which we charge a separate fee. The Company operated its launches from Pacific Spaceport Complex in Kodiak, Alaska and Cape Canaveral Space Force Station in Cape Canaveral, Florida. The Company is in discussions with SaxaVord UK Spaceport regarding an opportunity to launch from the United Kingdom.

~~Design and Production of Propulsion Systems~~Space Products — To design and provide ~~the propulsion modules~~space products based on the ~~customer's~~customers' needs for a successful satellite ~~launch. The~~launch and other products that the Company may sell in the future. Currently the Company offers two in-space electric propulsion ~~module consists of a thruster, a power processing unit, tank and a feed system.~~

~~Spaceport Services~~ — To offer turn-key spaceports with the capability to launch Astra rockets for key government customers. Spaceports will require minimal on-site infrastructure and will leverage Astra’s highly automated launch operations.systems.

Space Services — To ~~provide modular configurable satellite buses~~invest in building the Company's portfolio of space services, which includes communication service and constellation services, which will be based on a network of spacecraft that we intend to build and allow customers to access for ~~customers, leveraging both in-house and partner-provided subsystem components and in-house design and integration~~use in their business. Specifically, the Company's space 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,~~its spacecraft, and delivering services, such as communication ~~and other services, to customers from our space platform.~~services.

As of ~~September~~June 30, ~~2021,~~2022, the Company has only entered into contracts for ~~Launch Services~~launch services and ~~Design and Production of Propulsion Systems.~~space products. As of ~~September~~June 30, ~~2021,~~2022, the Company ~~has not completely achieved commercial viability~~is in early stages of ~~the technology required to perform spaceport~~developing its space services ~~or space~~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. ~~NaN~~ ~~revenue has been recognized for~~In July 2022, the ~~three~~Company decided to focus on the development and ~~nine months ended September 30, 2021 and 2020.~~

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~~Revenue for Launch Services and Design and Production~~production of ~~Propulsion Systems is expected to be recognized at~~the next version of its launch system. As a ~~point in time when~~result, the Company has ~~delivered~~discontinued the ~~promised services to customers. Although the Company’s contracts are anticipated to last anywhere from 6 to 24 months, depending on the number~~production of launch ~~services or propulsion units ordered,~~vehicles supported by its current launch system and does not plan to conduct any further commercial launches in 2022. The Company has begun discussions with customers for whom it agreed to launch payloads on launch vehicles supported by its old launch system and the ~~delivery~~shift of ~~services leading up~~those flights to launch vehicles supported by our new launch vehicle. If a customer terminates its contract with the Company due to the launch within the contracts is short-term in nature, generally between 30 to 60 days. The timing of revenue recognition may differ from contract billing or payment schedules, resulting in revenues that have been earned but not billed (“unbilled revenue”) or amounts that have been collected, but not earned (“contract liabilities”).

~~Typical Contractual Arrangements~~

The Company expects to provide its services based upon a combination of a Statement of Work ("SOW") and an executed contract detailing the General Terms & Conditions. Services are expected to be provided based on a fixed price per launch service or units identified in the contract.

~~Performance Obligations and Transaction Price~~

~~At contract inception, an assessment~~shifting of the ~~goods and services promised in the contracts with customers is performed and a performance obligation is identified for each distinct promise to transfer to~~flights, the customer ~~a good or service (or bundle of goods or services). To identify~~may not be obligated to pay the performance obligations, the Company considers all the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. A contracttermination for Launch Services generally requires the Company to provide an integrated service for each launch, which includes launch vehicle analysis and design, development and production, payload integration, launch preparation and launch support execution. The intention of contract is to provide a full-service launch to the customer rather than providing separate deliverables of each of the services outlined above, and these services are interdependent and interrelated. The Company believes that each dedicated launch will represent one single performance obligation.convenience penalties.

The transaction price is defined as the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, which is a fixed price stated in the contract.

When a contract involves multiple launches, the Company will account for each launch as a separate performance obligation, because the customer can benefit from each launch on its own or with other readily available resources and the launch is separately identifiable. The transaction price will be allocated to each performance obligation on an estimated relative standalone selling price basis. The Company’s process to estimate standalone selling prices will involve management’s judgment and will consider multiple factors such as prices charged for similar goods and services and the Company’s ongoing pricing strategy and policies.

Recognition of Revenue

The work performed by the Company in fulfilling ~~the~~ launch services and space products performance ~~obligation~~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 ~~expects to recognize~~recognizes revenue at a point in time upon ~~completion~~satisfaction of the performance obligations under its ~~Launch Services~~launch services and space products agreements. The following table presents revenue disaggregated by type of revenue for the periods presented:


		Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
Launch services		$	1,988			$	0			$	5,899			$	0
Space products			694				0				694				0
Total revenues		$	2,682			$	0			$	6,593			$	0

Contracts ~~related to~~with governmental entities involving research and development milestone activities do not represent contracts with customers under ASC 606 and as such, amounts received are ~~recognized as~~recorded in other ~~income. See~~income (expense), net in the condensed consolidated statements of operations. ~~Other Income, net~~NaN. such income was recorded for the three months ended June 30, 2022. The Company recorded $0.4 million in other income for the six months ended June 30, 2022. NaN such income was recorded for the three and six months ended June 30, 2021.

~~Other Policies, Judgments~~9

Table of Contents

Contract Balances and ~~Practical Expedients~~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 ~~of $3.8~~ ~~million~~ as of ~~September~~June 30, ~~2021~~2022 and0~~ne as of~~ December 31, ~~2020.~~2021. The Company had contract liabilities of $~~5.6~~12.7 million and $10.4 million as of ~~September~~June 30, ~~2021~~2022 and0~~ne as of~~ December 31, ~~2020. Payment terms are expected to vary by customer~~2021, respectively. The Company recognized revenue of $2.7 million and ~~type~~$4.9 million during the three and six months ended June 30, 2022, respectively, that was included in the contract liabilities balance at the beginning of the period. No revenue ~~contract.~~was recognized for the three and six months ended June 30, 2021.

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 less. The Company had unsatisfied performance obligations of $~~16.3~~30.7 million as of ~~September~~June 30, ~~2021, which are expected to be recognized in~~ 2022. ~~The Company had~~ 0 ~~unsatisfied performance obligations as of December 31, 2020.~~

~~Costs to obtain a contract.~~ The Company recognizes an asset for the incremental costs of obtaining a contract with a customer. These costs will be ascribed to or allocated to the underlying performance obligations in the contract and amortized consistent with the

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~~recognition timing of the revenue for the underlying performance obligations. During the three months and nine months ended September 30, 2021 and 2020, the Company did~~ 0~~t recognize any expenses related to contract costs. The Company had~~ 0 ~~assets related to costs to obtain contracts as of September 30, 2021 and December 31, 2020.~~

For contract costs related to performance obligations with an amortization period of one year or less, the Company applies the practical expedient to expense these sales commissions when incurred. These costs are recognized as incurred within sales and marketing expenses on the accompanying Condensed Consolidated Statements of Operations.

~~Significant financing component.~~ In certain arrangements, the Company may receive payment from a customer either before or after the performance obligation has been satisfied. Depending on the expected timing difference between the payment and satisfaction of performance obligations, the Company will assess whether a significant financing component exists.

For the three and nine months ended September 30, 2021 and 2020, the Company has not recognized any revenues with respect to the Company’s launch services business of delivering payloads into low-earth orbit. 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, net in the Condensed Consolidated Statements of Operations. The company recorded $0.6 million for the three and nine months ended September 30, 2021. The Company recorded $1.1 million and $2.2 million for the three and nine months ended September 30, 2020, respectively.

~~Other Income, net~~

Other income, net, primarily consists of changes in fair value of mark to market derivative liabilities of convertible notes, fair value of warrant liabilities, funding received from governmental entities, and one-time charges incurred during the period. The remaining balance is non-recurring charges that are outside of the Company’s operations. The Company recognizes all derivative instruments and warrant liabilities in the Condensed Consolidated Balance Sheets at their respective fair value at each reporting date, with measurement adjustments recorded in other income, net within the Company’s Condensed Consolidated Statements of Operations. See Note 5 — Supplemental Financial Information.

~~Loss on Extinguishment of Convertible Notes~~

~~NaN~~ loss was recognized for the extinguishment of convertible notes for the three months ended September 30, 2021. For the nine months ended September 30, 2021, the Company recognized a total loss on extinguishment of convertible notes of $~~133.8~~ million. On January 28, 2021, the Company settled all convertible notes outstanding as of December 31, 2020 through its Series C financing. Given that certain convertible notes were settled based on negotiated terms between the Company and the note holders, the Company concluded that such settlement should be treated as a privately negotiated debt settlement transaction where debt extinguishment accounting should be applied. Therefore, the Company recognized the loss on extinguishment of convertible notes, which represents the difference between the net carrying amount of the convertible notes at the time of extinguishment and the fair value of Series C convertible preferred stock issued to settle these convertible notes. See Note 7 — Long-Term Debt.

~~Research and Development~~

The Company incurs various direct costs in relation to the research and development of launch vehicles along with costs to build the facility to test such vehicles. Research and development costs consist primarily of production supplies, testing materials, personnel costs (including salaries and benefits), depreciation expense, overhead allocation (consisting of various support and facility costs), stock-based compensation and consulting fees. Research and development costs are expensed as incurred. For the three months ended September 30, 2021 and 2020, the Company expensed research and development costs of $~~21.7~~ ~~million and $5.4~~ ~~million, respectively. For the nine months ended September 30, 2021 and 2020, the Company expensed research and development costs of $44.2~~ ~~million and $21.0~~ ~~million, respectively.~~

~~Inventories~~

Inventories consist of materials expected to be used for customer specific contracts. Inventories are stated at the lower of cost or net realizable value determined by the first-in, first-out method. The Company assesses inventories quarterly for events or changes in circumstances indicating that the utility of our inventories have diminished through damage, deterioration, obsolescence, changes in price or other causes and records write-downs of inventories to cost of sales or research and development expense in the period for which they occur.

~~Property, Plant and Equipment~~

Property, plant and equipment is measured at cost less any impairment losses and represents those assets with estimated useful lives exceeding one year. Repairs and maintenance are expensed as incurred. Costs for research and development equipment include amounts related to design, construction, launch and commissioning. Costs for production equipment include amounts related to

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construction and testing. Interest expense is capitalized on certain qualifying assets that take a substantial period of time to prepare for their intended use. Capitalized interest is not material for the period ended September 30, 2021 and December 31, 2020.

When the costs of certain components of an item of property, plant and equipment are significant in relation to the total cost of the item and the components have different useful lives, they are accounted for and depreciated separately.

~~Depreciation expense is recognized in income on a straight-line basis over the estimated useful life of the related asset to its residual value.~~

~~The estimated useful lives are as follows:~~


~~Asset Class~~		~~Estimated useful life~~
~~Leasehold improvements~~		~~Lesser of lease term or useful life~~
~~Research and development equipment~~		~~5 years~~
~~Production equipment~~		~~10 years~~
~~Furniture and fixtures~~		~~5 years~~
~~Computer and software~~		~~3 years~~

~~Business Combinations~~

We account for business combinations under the acquisition method of accounting, which requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in our consolidated statements of operations. Accounting for business combinations requires our management to make significant estimates and assumptions, especially at the acquisition date including our estimates for intangible assets, contractual obligations assumed, pre-acquisition contingencies, and contingent consideration, where applicable. Although we believe the assumptions and estimates we have made are reasonable and appropriate, they are based, in part, on historical experience and information obtained from the management of the acquired company and are inherently uncertain. Critical estimates in valuing certain acquired intangible assets under the income approach include growth in future expected cash flows from product sales, revenue growth rate, technology royalty rate, expected life of the technology acquired, customer retention rate and discount rates. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

~~Goodwill~~

Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. Goodwill is not amortized but is reviewed annually (or more frequently if impairment indicators arise) for impairment. To review for impairment, we first assess qualitative factors to determine whether events or circumstances lead to a determination that it is more likely than not that the fair value of our reporting unit is less than its carrying amount. Our qualitative assessment of the recoverability of goodwill, whether performed annually or based on specific events or circumstances, considers various macroeconomic, industry-specific and company-specific factors. Those factors include: (i) severe adverse industry or economic trends; (ii) significant company-specific actions; (iii) current, historical or projected deterioration of our financial performance; or (iv) a sustained decrease in our market capitalization below our net book value. After assessing the totality of events and circumstances, if we determine that it is not more likely than not that the fair value of our reporting unit is less than its carrying amount, no further assessment is performed. If we determine that it is more likely than not that the fair value of our reporting units is less than its carrying amount, we calculate the fair value of that reporting unit and compare the fair value to the reporting unit’s net book value. If the fair value of the reporting unit is greater than its net book value, there is no impairment. Otherwise, we calculate the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit. The implied fair value of goodwill is compared to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference. ~~Determining the fair value of a reporting unit involves the use of significant estimates and assumptions.~~

~~Long-lived Assets~~

Purchased finite-lived intangible assets are carried at cost less accumulated amortization. Amortization is recognized over the useful life on a straight-line method. Purchased indefinite-lived intangible asset are capitalized at fair value and assessed for impairment thereafter. On a quarterly basis, we monitor factors and changes in circumstances that could indicate carrying amounts of long-lived assets, including purchased intangible assets and property, plant and equipment, may not be recoverable. Factors we consider important which could trigger an impairment review include (i) significant under-performance relative to historical or projected future operating

13

results, (ii) significant changes in the manner of our use of the acquired assets or the strategy for our overall business, and (iii) significant negative industry or economic trends. An impairment loss must be measured if the sum of the expected future cash flows (undiscounted and before interest) from the use and eventual disposition of the asset (or asset group) is less than the net book value of the asset (or asset group). The amount of the impairment loss will generally be measured as the difference between the net book value of the asset (or asset group) and the estimated fair value.

~~Leases~~

~~On January 1, 2021, the Company adopted ASU 2016-02,~~ ~~Leases (Topic 842)~~ ("ASC 842"). Under the adoption of the new lease accounting standard, the Company elected practical expedients that allow entities to not reassess 1) initial direct costs, 2) lease classification for existing or expired leases and 3) lease definition for existing or expired contracts as of the effective date of January 1, 2021.

Upon adoption of ASC 842, the Company determines whether a contract is or contains a lease at contract inception by evaluating whether substitution rights exist and whether the Company obtains substantially all of the benefits and directs the use of the identified asset. When the Company determined a lease exists, the Company records a right-of-use asset (“ROU asset”) and corresponding lease liability in the Condensed Consolidated Balance Sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term. Lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are recognized at the commencement date of the lease at the value of the lease liability, adjusted for any prepayments, lease incentives received, and initial direct costs incurred. Lease liabilities are recognized at the commencement date of the lease based on the present value of remaining lease payments over the lease term. As the discount rate implicit in the lease is not readily determinable in most leases, the Company uses its incremental borrowing rate based on the information available at the commencement date of the lease in determining the present value of lease payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

The Company does not record lease contracts with a lease term of 12 months or less on its Condensed Consolidated Balance Sheets. Fixed lease costs associated with these short-term contracts are expensed on a straight-line basis over the lease term.

The Company does not record lease contracts acquired in a business combination with a remaining lease term of 12 months or less on its Condensed Consolidated Balance Sheets. Fixed lease costs associated with these short-term contracts are expensed on a straight-line basis over the lease term.

The Company recognizes lease expense for operating leases on a straight-line basis over the lease term. For finance leases, the Company recognizes amortization expense on the ROU asset and interest expense on the lease liability over the lease term.

The Company has lease agreements with non-lease components that relate to the lease components. The Company accounts for each lease component and any non-lease components associated with that lease component as a single lease component for all underlying asset classes. Accordingly, all costs associated with a contract that is or contains a lease are accounted for as lease costs.

Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance and tax payments. These variable lease costs are recognized as incurred over the lease term.

~~The Company does not include significant restrictions or covenants in lease agreements, and residual value guarantees are generally not included within the Company’s leases. See Note 9 — Leases.~~

~~Fair Value Measurements~~

The carrying amounts of cash, prepaid expenses, other current assets, accounts payable, accrued liabilities and certain other current liabilities approximate fair value because of their short-term maturities. The carrying amounts of the 2018 Term Loans and 2018 Equipment Advances (as defined in Note 7 — Long-Term Debt) approximate fair value as the interest rate varies with the Prime Rate.

According to ASC 820, Fair Value Measurements and Disclosures, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three tiers, which prioritize the inputs used in measuring 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.~~

Entities are permitted to choose to measure certain financial instruments and other items at fair value. The Company has not elected the fair value measurement option for any of the assets or liabilities that meet the criteria for this election.

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~~Derivative Instruments~~

The Company recognizes all derivative instruments as either assets or liabilities in the Consolidated Balance Sheets at their respective fair values. The Company evaluates its debt and equity issuances to determine if those contracts or embedded components of those contracts qualify as derivatives requiring separate recognition in the Company’s condensed consolidated financial statements. The result of this accounting treatment is that the fair value of the embedded derivative is revalued as of each reporting date and recorded as a liability, and the change in fair value during the reporting period is recorded in other income, net in the Condensed Consolidated Statements of Operations.

The classification of derivative instruments, including whether such instruments should be recorded as assets/liabilities or as equity, is reassessed at the end of each reporting period. Derivative instrument assets and liabilities are classified in the Condensed Consolidated Balance Sheets as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within twelve months of the Condensed Consolidated Balance Sheets dates. When a derivative instrument is sold, terminated, exercised or expires, the gain or loss is recorded in the Consolidated Statements of Operations.

The Company did not have a derivative liability related to the share settlement obligation of the Company’s convertible notes as of September 30, 2021 and December 31, 2020, respectively. See Note 7 — Long-Term Debt.

~~Stock-Based Compensation~~

We recognize compensation expense for time-based restricted stock units (“RSUs”) using the straight-line amortization method based on the fair value of RSUs on the date of grant. The fair value of RSUs is the closing market price of Astra common stock on the date of grant. We recognize compensation expense for time-based stock options and employee stock purchase plan rights under the 2021 Employee Stock Purchase Plan, based on the estimated grant-date fair value determined using the Black-Scholes valuation model with a straight-line amortization method.

Certain equity awards include service, market and performance conditions ("Performance-based awards"). The fair value of Performance-based awards is estimated on the date of grant using the Monte Carlo simulation technique. Compensation expense for Performance-based awards is amortized based upon a graded vesting method over the requisite service period which is defined as the longest explicit, implicit or derived service period based on management’s estimate of the probability of the performance criteria being satisfied, adjusted at each balance sheet date.

~~The Company does not apply an expected forfeiture rate and accounts for forfeitures as they occur. See Note 14 — Stock-Based Compensation.~~

~~Convertible Preferred Stock~~

Series A, B and C convertible preferred stock ("Convertible Preferred Stock") are classified in temporary equity as they contain terms that could require the Company to redeem them for cash at the option of the holder or the occurrence of other events not solely within the Company’s control. The shares of Series A, B and C Convertible Preferred Stock were converted into Class A common stock upon consummation of the Business Combination.

~~Accrued Expenses and Other Current Liabilities~~

Accrued expenses and other current liabilities are recognized when events or circumstances have occurred, and amounts are probable and estimable. The Company’s accrued expenses and other current liabilities balances relate to accruals that are recurring in nature to the company's operations and primarily include payments on corporate credit cards used for routine operational and travel related expenses, accrued payroll and other employee related liabilities, accrued interest related to debt and the current portion of the fair value of the contingent consideration. The Company also recognizes legal accruals in accrued expenses and other current liabilities for material litigation when payments are probable and estimable.

~~Warrant Liabilities~~

~~As part of Holicity’s initial public offering ("IPO") in 2020, Holicity issued~~ ~~9,999,976~~ ~~warrants to third party investors, and each whole warrant entitles the holder to purchase one share of the Company's Class A common stock at an exercise price of $11.50~~ ~~per share (the “Public Warrants”). Simultaneously with the closing of the IPO, Holicity completed the private sale of~~ ~~5,333,333~~ ~~warrants to Holicity’s sponsor (“Private Placement Warrants”) and each Private Placement Warrant allows the sponsor to purchase one share of the Company's Class A common stock at $11.50~~ ~~per share. All~~ ~~9,999,976~~ ~~Public Warrants and~~ ~~5,333,333~~ ~~Private Placement Warrants remained outstanding as of September 30, 2021.~~

The Private Placement Warrants and the shares of common stock issuable upon the exercise of the Private Placement Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable for cash or on a cashless basis, at the holder’s option, and are

15

non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are 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 accounts 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 50% or more of the Company’s Class A shareholders. Because not all of the Company’s shareholders need to participate in such tender offer or exchange to trigger the potential cash settlement and the Company does not control the occurrence of such an event, the Company concluded that the Public Warrants and Private Placement Warrants do not meet the conditions to be classified in equity. Since the Public and Private Placement Warrants meet the definition of a derivative under ASC 815, the Company recorded these warrants as liabilities on the balance sheet at fair value upon the closing of the Business Combination, with subsequent changes in their respective fair values recognized in the consolidated statement of operations at each reporting date. For the three and nine months ended September 30, 2021, the Company recorded a gain of $~~20.4~~ ~~million related to change in fair value of warrant liability in other income, net.~~

~~Income Taxes~~

The Company follows the asset and liability method of accounting for income taxes under ASC 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between consolidated financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company determines whether it is more likely than not that a tax position will be sustained upon examination. If it is not more likely than not that a position will be sustained, no amount of benefit attributable to the position is recognized. The tax benefit to be recognized of any tax position that meets the more likely than not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon resolution of the contingency.

It is the Company’s policy to include interest and penalties related to unrecognized tax benefits as a component of income tax expense. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. See Note 8 — Income Taxes.

~~Earnings (Loss) per Share~~

Net loss per share is calculated using the two-class method required for participating securities and multiple classes of common stock. The Company considers convertible preferred stock to be participating securities as the holders have the right to participate in dividends with the common stockholders on a pro-rata, as converted basis. Prior to any dividends or earnings distribution to common stock, the holders of the Convertible Preferred Stock have a right to preferential dividends. Thus, losses are allocated to common stock and convertible preferred stock on a pro-rata, as converted basis following distribution of the preferential dividends to convertible preferred stockholders. Since application of the if-converted method results in anti-dilution, the two-class method is not applied to convertible preferred stock in the diluted earnings (loss) per share calculation. The dilutive effect of warrants, RSUs and stock options is computed using the treasury stock method. Diluted earnings (loss) per share excludes all dilutive potential shares if their effect is anti-dilutive. See Note 15 — Loss per Share.

~~Commitments and Contingencies~~

The Company accrues for claims and litigation when they are both probable and the amount can be reasonably estimated. Where timing and amounts cannot be reasonably determined, a range is estimated, and the lower end of the range is recorded. Legal costs incurred in the connection with loss contingencies are expensed as incurred. See Note 11 — Commitments and Contingencies.

Note 3 — Acquisitions

Acquisition of Apollo Fusion, Inc.

On July 1, 2021, or the Apollo Acquisition Date, ~~we,~~the Company, through ~~our~~its wholly owned indirect subsidiary, merged with ~~Apollo.~~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 ~~acquisition-date~~ fair value of the consideration ~~transferred totaled~~paid as of July 1, 2021, was $~~75.4~~70.8 million, net of cash acquired (the "Apollo Merger"), which consisted of the following:

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Purchase Consideration (in thousands)
Cash paid for outstanding Apollo common stock and options		$	19,926			$	19,926
Fair value of Astra Class A common stock issued			33,008				33,008
Fair value of contingent consideration			23,000				18,400
Total purchase consideration			75,934				71,334
Less: cash acquired			566				566
Total purchase consideration, net of cash acquired		$	75,368			$	70,768

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 $75.0 million of additional consideration to Apollo’s former shareholders and option-holders, if Apollo meets certain customer revenue related milestones over a two and a half year period ending on December 31, 2023. The contingent consideration is earned, which is a combination of total contract value and relevant payout ratio, if the contract with the customer is entered into after the acquisition date and 25% of revenue under the contract is recognized by December 31, 2023 under ASC 606. Contingent consideration is payable on a quarterly basis based on the milestones achieved. The fair value of the contingent consideration arrangement at the acquisition date was $~~23.0~~18.4 million. WeThe Company estimated the fair value of the contingent consideration using a Monte Carlo simulation model. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. As of ~~September~~June 30, ~~2021, there were no significant changes in the fair value and range of outcomes for~~2022, the contingent consideration recognized increased to $31.0 million as a result of changes in forecasted revenues subject to milestone payments and the ~~acquisition~~passage of ~~Apollo.~~time. The Company has recognized $12.6 million in cumulative net losses on changes in fair value of contingent consideration from the Apollo Acquisition Date, of which $1.8 million and $17.3 million in loss was recognized in the condensed consolidated statement of operations for the three and six months ended June 30, 2022, respectively.

~~In addition, an~~10

Table of Contents

An additional $10.0 million of cash ("Cash ~~Payment"~~Earnout") and options to purchase shares of the Company’s Class A common stock, having a value of $10.0 million ("Incentive Shares"), at a reference price per share equal to the then volume weighted average trading price over a five day trading period prior to the business day prior to issuance, will be ~~issued or issuable~~paid to employees of Apollo that ~~join~~joined Astra, subject to certain ~~performance-based milestones and other~~ vesting ~~provisions. This consideration~~conditions, as amended. The Cash Earnout is accounted for as compensation expense over the requisite service period in the post-acquisition period as the ~~cash~~ payment ~~and vesting of incentive shares~~ is subject to the employee's continued employment with the ~~company until~~Company. The Company has recognized $8.4 million in compensation cost from the ~~satisfaction~~Apollo Acquisition Date, of ~~certain performance-based milestones~~which $1.2 million and $2.6 million in compensation cost was recognized in research and development expense in the condensed consolidated statement of operations for the three and six months ended June 30, 2022, respectively. The earned, but unpaid, amount of the Cash Earnout of $3.6 million and $3.9 million is recorded within accrued expenses and other ~~vesting provisions. As~~current liabilities in the condensed consolidated balance sheet as of ~~September~~June 30, 2022 and December 31, 2021, ~~no Incentive Shares were granted~~respectively.

In addition, the Company awarded 1,047,115 Performance Stock Units ("PSUs") to employees of Apollo that joined ~~the Company subsequent~~Astra, subject to ~~the acquisition~~certain performance-based milestones, as certain key terms and conditions of the Incentive Shares were not finalized. The Company assessed the probability of success of performance milestones related to the Cash Payment and determined that it is probable that certain milestones will be met. Therefore, the Company recognized $~~1.4~~ ~~million in compensation cost which was included in research and development expense for the three months and nine months ended September 30, 2021 and $1.4~~ ~~million was accrued in accrued expenses~~amended, and other ~~current liabilities~~vesting provisions. The PSUs are accounted for as compensation expense over the requisite service period in the post-acquisition period as the vesting of ~~September 30, 2021.~~PSUs is subject to time-based and performance-based vesting conditions. See Note 14 — Stock-based Compensation for additional information.

WeThe Company allocated the fair value of the purchase consideration to the tangible assets, liabilities and intangible assets acquired, based on ~~their estimated~~the fair values. The excess purchase price over those fair values is recorded as goodwill. ~~Our~~The valuation assumptions of acquired assets and assumed liabilities require significant estimates, especially with respect to intangible assets. ~~Our preliminary allocation of the~~The final purchase ~~price of Apollo, based on the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date, is as follows~~:

(in thousands)

Estimated Fair Value

Inventory

$
131

Prepaid and other current assets

796

Property, plant and equipment

996

Right of use assets

163

Goodwill

58,893

Intangible assets

17,000

Other non-current assets

75

Total assets acquired

78,054

Accounts payable

(950
)
Accrued expenses and other current liabilities

(836
)
Operating lease obligation

(163
)
Other non-current liabilities

(737
)
Total liabilities assumed

(2,686
)
Fair value of net assets acquired

$
75,368

~~The merger~~ consideration allocation ~~set forth herein~~ is ~~preliminary and may be revised as additional information becomes available during~~presented in the ~~measurement period which could be up to 12 months from the closing date of the acquisition. Any such revisions~~following table.

17


(in thousands)		Fair Value
Inventory		$	131
Prepaid and other current assets			796
Property, plant and equipment			996
Right of use assets			163
Goodwill			58,251
Intangible assets			15,350
Other non-current assets			75
Total assets acquired			75,762
Accounts payable			(950	)
Accrued expenses and other current liabilities			(1,939	)
Operating lease obligation			(163	)
Other non-current liabilities			(1,942	)
Total liabilities assumed			(4,994	)
Fair value of net assets acquired		$	70,768

~~or changes may be material. The primary areas that remain provisional are determining the fair values of intangible assets and contingent consideration and the identification of contingencies.~~

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 no$0.7 million of revenues recorded during the three and six months ended ~~September~~June 30, ~~2021~~2022 related to Apollo. It was impracticable to determine the effect on net income attributable to Apollo as wethe Company had integrated a substantial portion of Apollo into ~~our~~its ongoing operations during the year. ~~Transaction costs related to the Apollo Merger of $3.1~~ ~~million and $4.0~~ ~~million, respectively, were included in general and administrative expense for the three months and nine months ended September 30, 2021.~~


Intangible Assets
		Fair Value				Weighted-Average Amortization Periods		Fair Value				Weighted-Average Amortization Periods
		(in thousands)				(in years)		(in thousands)				(in years)
Developed technology		$	13,400			6		$	12,100			6
Customer contracts and related relationships			2,900			3			2,900			3
Order backlog			400			1			200			1
Tradename			300			2			150			2
Total identified intangible assets		$	17,000					$	15,350

Developed technology relates to ~~Propulsion~~propulsion modules. WeThe 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.

11

Table of Contents

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.

~~We believe~~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.

~~Unaudited Pro Forma Information~~

The following unaudited pro forma financial information presents combined results of operations for each of the periods presented, as if Apollo had been acquired as of the beginning of fiscal year 2020. The unaudited pro forma results include certain pro forma adjustments to revenue and net loss that were directly attributable to the acquisition including transaction costs and amortization of intangible assets. Transactions costs of approximately $~~4.4~~ ~~million are assumed to have occurred on January 1, 2020 and are recognized as if incurred in the first quarter of 2020. Of these transaction costs, $0.4~~ ~~million are incurred by Apollo and $4.0~~ million are incurred by the Company. Intangible assets are assumed to be recognized at their assigned fair values as of the pro forma close date of January 1, 2020 and are amortized over their estimated useful lives. The amortization expenses were $~~0.8~~ ~~million and $2.5~~ ~~million for the three and nine months ended September 30, 2021, respectively, and $0.9~~ ~~million and $2.8~~ ~~million for the three and nine months ended September 30, 2020, respectively.~~ The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2020 or of the results of our future operations of the combined business.

18

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in thousands)
2021

2020

2021

2020

Pro forma net revenue
$
0

$
88

$
1,485

$
322

Pro forma net loss and net loss attributable to common stockholders
$
(13,367
)

$
(7,602
)

$
(206,501
)

$
(36,277
)

Reverse ~~Recapitalization.~~Recapitalization

On June 30, 2021, pre-combination Astra Space, Inc. and Holicity Inc. consummated the ~~merger~~Business Combination contemplated by the BCA, with pre-combination Astra ~~Space, Inc.~~ surviving the merger as a wholly owned subsidiary of ~~Holicity, or the Business Combination.~~Holicity. Upon consummation of the ~~merger,~~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,~~Business Combination, there were 198,090,903 shares of Class A common stock and 56,239,189 shares of Class B common stock issued and outstanding with a par value of $0.0001. Additionally, there were outstanding options to purchase an aggregate of 5,993,412 ~~share~~shares of Class A common stock and outstanding warrants to purchase 15,813,829 shares of Class A common stock.

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 ~~Business Combination~~BCA (approximately one pre-combination Astra share to 0.665 of the Company's shares).

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 $463.6 million, including $200.0 million in gross proceeds from the private placements (the “PIPE”). In connection with the Business Combination, $25.2 million of transaction costs were paid on the Closing Date. Additionally, on the Closing Date, the Company repaid the short-term promissory notes with Pendrell (the “Bridge Loan”) of $10.4 million, which included principal of $10.0 million and end of term fee of $0.4 ~~million.~~million as of June 30, 2021. The Company also repaid the outstanding principal and interest of $4.6 million for the term loan and equipment advances with Silicon Valley Bank. Refer to Note 76 – Long-term Debt.

The Company incurred $25.5 million in transaction costs relating to the merger with Holicity, of which $23.3 million has been recorded against additional paid-in capital in the Condensed Consolidated Balance Sheets and the remaining amount of $2.2 million was recognized as general and administrative expenses on the Condensed Consolidated Statements of ~~Operations.~~Operations for the three and six months ended June 30, 2021. On the date of the Business Combination, the Company recorded a liability related to the Public and Private Placement Warrants of $56.8 million, with an offsetting entry to additional paid-in capital. In relation to the Public and Private Placement Warrants, the Company recognized a portion of pre-combination Astra’s capitalizable transaction costs relating to the merger with Holicity, using the relative fair value method, as general and administrative expenses in the Condensed Consolidated Statements of ~~Operations.~~Operations for the three and six months ended June 30, 2021.

Upon closing of the Business Combination, the shareholders of Holicity, including Holicity founders, were issued 37,489,019 shares of Class A common stock. In connection with the Closing, holders of 10,981 shares of common stock of Holicity were redeemed at a price per share of $10.00. In connection with the Closing 20,000,000 shares were issued to PIPE investors at a price per share of $10.00.

12

Table of Contents

The number of shares of Class A common stock issued immediately following the consummation of the Business Combination were:


Common stock of Holicity			29,989,019
Holicity founder shares			7,500,000
Shares issued in PIPE			20,000,000
Business Combination and PIPE shares			57,489,019
Pre-combination Astra shares			140,601,884
Total shares of Class A common stock immediately after Business Combination			198,090,903

In addition, in connection with the consummation of the Business Combination, 56,239,189 shares of Class B common stock were issued to two executive officers and founders of the Company: Chris Kemp and Adam London in exchange for an aggregate 73,699,647 shares of common stock and an aggregate 10,870,562 shares of Founders Preferred Stock of pre-combination Astra.

19

~~Note 4 — Recently Issued Accounting Pronouncements~~

As an emerging growth company (“EGC”), the JOBS Act allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company elected to use this extended transition period under the JOBS Act until such time the Company is no longer considered to be an EGC. The adoption dates discussed below reflect this election.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. It also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. This guidance is effective for the Company for fiscal year beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted with simultaneous adoption of all provisions of the new standard. The Company is currently evaluating the impact of adopting this guidance.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This temporary guidance provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. ASU 2020-04 is effective from March 12, 2020 and may be applied prospectively through December 31, 2022. The Company is currently evaluating the impact of adopting this guidance.

~~Recently Adopted Accounting Guidance~~

In February 2016, the Financial Accounting Standards Board issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"), and since that date has issued subsequent amendments to the initial guidance intended to clarify certain aspects of the guidance and to provide certain practical expedients entities can elect upon adoption. The principle of ASU 2016-02 is that a lessee should recognize assets and liabilities that arise from leases. Lessees will need to recognize a right-of-use asset and a lease liability for all leases (other than leases that meet the definition of a short-term lease). The lease liability will be equal to the present value of lease payments. The right-of-use asset will be based on the liability, with differences related to deferred rent and initial direct costs, etc. For income statement purposes, ASU 2016-02 requires leases to be classified as either operating or finance. Operating leases will result in a straight-line expense pattern while finance leases will result in a front-loaded expense pattern. ASU 2016-02 is effective for the Company beginning January 1, 2022. As of January 1, 2021, the Company early adopted Topic 842 using the modified retrospective approach and as a result will not restate prior periods. The cumulative effect of the changes made to the January 1, 2021 Condensed Consolidated Balance Sheet for the adoption of ASU 2016-02 was the addition of a right-of-use asset of $~~4.6~~ ~~million and a lease liability of $4.7~~ ~~million. See Note 9 — Leases.~~

In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for convertible instruments by removing the separation models for (1) convertible instruments with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature (“BCF”). As a result, a convertible debt instrument can be accounted for as a single liability measured at its amortized cost under certain circumstances. These changes may reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument where the embedded conversion option was separated according to beneficial conversion or cash conversion guidance. ASU 2020-06 also requires the application of the if-converted method for calculating diluted earnings per share for convertible instruments and the treasury stock method will be no longer available. This standard will be effective for the Company’s fiscal years beginning in the first quarter of 2022, with early adoption permitted in 2021. The Company elected to early adopt ASU 2020-06 as of January 1, 2021 using a modified retrospective transition method. In transition, the Company was required to apply the guidance to all impacted financial instruments that were outstanding as of January 1, 2021 with the cumulative effect recognized as an adjustment to the opening balance of accumulated deficit. As a result of early adopting ASU 2020-06, the Company made certain adjustments to its accounting for certain outstanding convertible notes issued in 2020 with separately recognized BCFs. The adoption of ASU 2020-06 resulted in the re-combination of the liability and equity components of these convertible notes into a single liability instrument, which required the Company to record a $~~9.7~~ ~~million decrease in additional paid in capital from the derecognition of the BCFs, a $9.0~~ ~~million increase in debt from the derecognition of the discount associated with the BCFs, and a $0.7~~ million cumulative effect, net of tax effects, decrease to the opening balance of its accumulated deficit as of January 1, 2021 upon transition. Since the Company had a net loss for the three months and nine months ended September 30, 2021, the convertible notes were determined to be anti-dilutive and therefore had no impact to basic or diluted net loss per share for the period as a result of adopting ASU 2020-06.

20

Note 54 — Supplemental Financial Information

~~Inventory~~Inventories


in thousands		As of September 30, 2021				As of December 31, 2020				As of June 30, 2022				As of December 31, 2021
Raw materials			4,810				649			$	0			$	5,775
Work in progress			217				0				3,155				941
Finished goods			0				0				0				959
Total inventory			5,027				649
Inventories										$	3,155			$	7,675

~~The Company’s inventories included materials~~There were $13.3 million and $18.8 million of inventory write downs recorded within cost of revenues during the three and six months ended June 30, 2022, respectively, of which ~~are necessary to construct the Company’s launch vehicles for customer-specific contracts. Costs~~$10.2 million of inventory write-downs related to the ~~construction~~discontinuance of ~~research and development~~production of the current version of its launch ~~vehicles are recorded~~vehicle as ~~research and development expenses when incurred. Under~~ the ~~Company’s business model,~~Company focuses on developing the new version of its launch ~~vehicles are manufactured to deliver customer payloads of various sizes to various locations in low-earth orbit. There were $0.4~~ ~~million inventory write downs as of September 30, 2021.~~system. There were 0 inventory write downs ~~as of December 31, 2020.~~recorded during the three and six months ended June 30, 2021.

Property, Plant and Equipment, net

Presented in the table below are the major classes of property, plant and equipment:


in thousands		As of September 30, 2021				As of December 31, 2020				As of June 30, 2022				As of December 31, 2021
Construction in progress		$	19,316			$	0			$	6,809			$	39,246
Computer and software			2,178				1,440				6,539				3,092
Leasehold improvements			13,975				13,873				56,444				14,177
Research and development equipment			7,882				4,903
Research equipment											11,731				8,935
Production equipment			8,855				8,174				21,708				10,442
Furniture and fixtures			825				466				1,573				1,001
Kodiak Spaceport			0				2,079
Total property, plant and equipment			53,031				30,935				104,804				76,893
Less: accumulated depreciation			(9,455	)			(6,866	)			(16,581	)			(10,577	)
Total property, plant and equipment, net		$	43,576			$	24,069
Property, plant and equipment, net										$	88,223			$	66,316

Depreciation expense ~~is recorded within operating costs in the Condensed Consolidated Statements of Operations and~~ amounted to $~~0.8~~4.0 million and $1.0 million for the three months ended ~~September~~June 30, 2022 and 2021, ~~and 2020, respectively, and~~respectively. Depreciation expense amounted to $~~3.0~~6.0 million and $~~2.5~~1.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. NaN impairment charges were recorded for the three ~~months~~ and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.

~~Kodiak Spaceport~~

On June 19, 2019, the Company entered into an agreement with Alaska Aerospace Corporation (“AAC”) to develop a commercial launch pad site (“Launch Pad”) in Kodiak, Alaska. The Launch Pad development includes construction of the Launch Pad and obtaining Federal Aviation Agency spaceport license approval for launch operations beginning in August 2019. The Launch Pad’s costs were jointly funded by AAC and the Company. Throughout the term of the agreement, the State of Alaska retains ownership of the developed Launch Pad site.

The Company’s involvement in the construction of the Launch Pad, inclusive of the land, resulted in the Company being recognized as the owner of the Launch Pad during the lease term. Prior to the adoption of ASC 842, the arrangement was accounted for as a build-to-suit lease under ASC 840 — Leases. The total construction costs of $~~2.1~~ million were capitalized within property, plant and equipment, net on the Consolidated Balance Sheet, and were depreciated on a straight-line basis over the life of the lease term. AAC’s contributions of $~~0.8~~ million were recorded as a financing obligation which was included in other non-current liabilities on the Company’s Condensed Consolidated Balance Sheets to be released at the end of the lease term.

~~Upon adoption of ASC 842 on January 1, 2021, the Company derecognized the Kodiak Spaceport asset of $2.1~~ ~~million, the accumulated depreciation of $0.4~~ ~~million, and the financing obligation of $0.8~~ ~~million, with an adjustment to equity for the difference. The Company also recognized a right-of-use asset of $0.9~~ ~~million for the Kodiak Spaceport lease.~~ ~~NaN~~ ~~lease payments remained to be paid as of the transition date. As such, equity was adjusted against the right-of-use asset. See Note 9 — Leases.~~

2113

Table of Contents

Accrued Expenses and Other Current Liabilities


in thousands		As of September 30, 2021				As of December 31, 2020				As of June 30, 2022				As of December 31, 2021
Fair value of contingent consideration		$	9,000			$	0
Employee compensation and benefits			5,839				484			$	9,102			$	9,927
Contract liabilities			5,343				0
Contract liabilities, current portion											6,196				10,162
Fair value of contingent consideration, current portion											19,800				0
Construction in progress related accruals			4,296				0				577				3,726
Accrued expenses			3,548				2,751				6,745				3,464
Other (miscellaneous)			632				1,155				2,762				2,620
Accrued expenses and other current liabilities		$	28,658			$	4,390			$	45,182			$	29,899

Other Non-Current Liabilities

in thousands

As of
September 30,
2021

As of
December 31,
2020

Fair value of contingent consideration

$
14,000

$
0

Contract liabilities

275

0

Other (miscellaneous)

0

1,685

Other non-current liabilities

$
14,275

$
1,685

~~Other Income, Net~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

in thousands

2021

2020

2021

2020

Change in fair value of warrant liabilities

$
20,447

$
0

$
20,447

$
0

Gain on forgiveness of PPP note

4,850

0

4,850

0

Gain on mark to market derivatives

0

2,570

0

5,388

Other (miscellaneous)

598

1,321

(120
)

2,464

Other income, net

$
25,895

$
3,891

$
25,177

$
7,852


in thousands		As of June 30, 2022				As of December 31, 2021
Fair value of contingent consideration, net of current portion		$	11,200			$	13,700
Contract liabilities, net of current portion			6,541				149
Other (miscellaneous)			1,016				750
Other non-current liabilities		$	18,757			$	14,599

Note 65 — ~~Goodwill and~~ Intangible Assets


in thousands		Carrying Amount				Accumulated Amortization				Net Book Value
As of June 30, 2022:
Definite-lived intangible assets
Developed technology		$	12,100			$	2,017			$	10,083
Customer contracts and related relationship			2,900				966				1,934
Order backlog			200				200				—
Trade names			150				75				75
Intangible assets subject to amortization			15,350				3,258				12,092
Indefinite-lived intangible assets
Trademarks			4,200				—				4,200
Total		$	19,550			$	3,258			$	16,292

~~Goodwill~~


in thousands		Carrying Amount				Accumulated Amortization				Net Book Value
As of December 31, 2021:
Definite-lived intangible assets
Developed technology		$	12,100			$	1,008			$	11,092
Customer contracts and related relationship			2,900				483				2,417
Order backlog			200				100				100
Trade names			150				38				112
Intangible assets subject to amortization			15,350				1,629				13,721
Indefinite-lived intangible assets
Trademarks			4,200				—				4,200
Total		$	19,550			$	1,629			$	17,921

14

in thousands

Balance as of December 31, 2020

$
0

Apollo Merger

58,893

Balance as of September 30, 2021

$
58,893

Table of Contents

~~Intangible Assets~~

in thousands

Carrying Amount

Accumulated Amortization

Net Book Value

As of September 30, 2021:

Developed technology

$
13,400

$
558

$
12,842

Customer contracts and related relationship

2,900

242

2,658

Order backlog

400

100

300

Trade names

300

37

263

Intangible assets subject to amortization

17,000

937

16,063

Trademark

3,200

0

3,200

Total

$
20,200

$
937

$
19,263

~~There were~~ 0 ~~intangible assets as of December 31, 2020.~~ Based on the amount of intangible assets ~~at September~~as of June 30, ~~2021,~~2022, the expected amortization expense for each of the next five years and thereafter ~~was~~is as follows:

22


in thousands		Expected Amortization Expense				Expected Amortization Expense
2021 (remainder)		$	938
2022			3,550
2022 (remainder)						$	1,529
2023			3,275				3,021
2024			2,717				2,500
2025			2,233				2,017
2026							2,017
Thereafter			3,350				1,008
Total intangible assets		$	16,063			$	12,092

Note 76 — Long-Term Debt

~~The Company’s debt obligations consist of the following:~~

As of

September 30, 2021

December 31, 2020

in thousands

Principal

Unamortized
Discount

Principal

Unamortized
Discount

Term loan

$
0

$
0

$
2,800

$
0

Equipment advances

0

0

3,636

0

Paycheck Protection Program note

0

0

4,850

0

Convertible notes

0

0

59,835

12,200

Total debt

0

71,121

Less: debt discount

0

(12,200
)

Less: current portion

0

(51,635
)

Total long-term debt book value, net

$
0

$
7,286

There is no short-term and long-term debt outstanding as of ~~September~~June 30, 2021. Debt issuance costs were not material for any debt obligations individually, or in the aggregate, for the issuances of the above debt obligations. Therefore, debt issuance costs were expensed upon the issuance of respective debt obligations.

~~Current portion of long-term debt outstanding as of~~2022 and December 31, ~~2020 includes those principal balances and unamortized debt discount expected to be repaid within twelve months from December 31, 2020.~~

2021, respectively. In connection with the Business Combination, all outstanding debt ~~at the Closing Date~~ with the exception of the Paycheck Protection Program note ~~were settled~~was paid on June 30, 2021. Refer to Note – 3 Acquisitions. In August 2021, the Company's application for forgiveness of the Paycheck Protection Program note was approved in the full ~~amount.~~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 ~~can~~could borrow up to a total of $3.0 million term loans (“2018 Term Loans”) and $7.0 million equipment loans (“2018 Equipment Advances”) with access period ~~ending~~ended on April 30, 2020 for 2018 Term Loans and June 30, 2019 for 2018 Equipment Advances. For the 2018 Term Loans, monthly payments of interest only were required to be made commencing on the first day of the month following the month in which the funding occurs with respect to such term loan, and continuing thereafter on the first day of each successive calendar month, through April 30, 2020. Commencing May 1, 2020 and continuing thereafter on the first day of each successive calendar month through its maturity date, monthly payments of equal principal and accrued interest are required to be remitted. For each equipment advance, commencing on the first day of the month following the month in which the funding date occurs with respect to such equipment advance, and continuing thereafter on the first day of each successive calendar month through its equipment maturity dates, monthly payments of equal principal and accrued interest are required to be remitted. The 2018 Term Loans bear an interest rate equal to the greater of (i) ~~5.25% or (ii)~~ ~~1.5% above the Prime Rate. The 2018 Equipment Advances bear an interest rate equal to the greater of (i)~~ ~~5.25% or (ii)~~ ~~1.0% above the Prime Rate. As of June 30, 2021 and December 31, 2020, the interest rate for the 2018 Term Loans and the 2018 Equipment Advances is~~ ~~5.25~~%. The Prime Rate is defined as the rate of interest per annum from time to time published in the money rates section of The Wall Street Journal or any successor publication. Interest is payable monthly and compounded monthly based on a 360-day year.

~~Borrowings~~Amounts borrowed under the 2018 Loan Agreement ~~are secured by a security interest in all goods, equipment, inventory, contract rights~~were repaid prior to or rights to payment of money, leases, license agreements, franchise agreements, general intangibles, accounts, documents, instruments, chattel paper, cash, deposit accounts, fixtures, letters of credit rights, securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located.

23

on June 30, 2021.

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 ~~has~~had the option to purchase an aggregate of 480,520 shares of Class A common stock. The warrants ~~have~~had a weighted average exercise price of $0.24 per share and ~~are~~were exercisable for a period of 10 years. The Company accounted for all the Warrants issued as equity instruments since the Warrants ~~are~~were indexed to the Company’s common shares and ~~meet~~met the criteria for classification in stockholders’ equity. In July 2021, SVB exercised all the outstanding Warrants and the Company issued 472,113 shares of Company's Class A Common Stock, net of exercise price.

~~The issuances under the 2018 Term Loan and 2018 Equipment Advances are as follows:~~

in thousands

Principal

Maturity Date
Term Loan

$
3,000

April 1, 2023
Equipment Advances – January 31, 2019 Issuance

2,410

January 1, 2022
Equipment Advances – April 29, 2019 Issuance

2,428

April 1, 2022
Equipment Advances – June 27, 2019 Issuance

2,162

June 1, 2022
Total

$
10,000

Paycheck Protection Program Note (“PPP Note”)

On April 20, 2020, the Company received loan proceeds of approximately $4.9 million under the Paycheck Protection Program (“PPP”), offered by the U.S. Small Business Administration (the “SBA”) pursuant to Title 1 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The PPP Note proceeds were available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves, rent and utilities, and mortgage interest payments. The PPP Note was subject to forgiveness to the extent proceeds were used for payroll costs, including payments required to continue group health care benefits, and certain rent, utility, and mortgage interest expenses (collectively, “Qualifying Expenses”), pursuant to the terms and limitations of the PPP Note.

The Company used the PPP Note amount intended for Qualifying Expenses. InDuring the ~~first quarter of the year~~three months ended ~~December~~March 31, 2021, the Company submitted a forgiveness application to its lender seeking full forgiveness of the PPP Note. On August 24, 2021, wethe Company received notice from the lender that the Small Business Administration has approved ~~our~~the application for forgiveness of the PPP Note in the full amount. ~~For the three and nine months ended September 30, 2021, the Company recorded a gain of $4.9~~ ~~million related to forgiveness of PPP Note in other income, net.~~ ~~NaN~~ ~~such gain was recorded for the three and nine months ended September 30, 2020.~~

Convertible Notes

Issuance of Convertible Notes

From June 2019 through July 2019, the Company issued $14.8 million of convertible promissory notes (the “June 2019 Convertible Notes”) to certain investors. The June 2019 Convertible Notes ~~mature~~matured on June 10, 2021 and ~~accrue~~accrued interest at 2.37% or 2.13%, compounded annually on basis of 360-days year of twelve 30-day months. Principal and any accrued but unpaid interest ~~are~~were due and payable at maturity.

15

Table of Contents

From October 2019 through December 2020, the Company issued $45.0 million of convertible promissory notes (the “October 2019 Convertible Notes” and collectively with the June 2019 Convertible Notes, the “Convertible Notes”) to certain investors. The October 2019 Convertible Notes ~~mature~~matured on October 1, 2021 and ~~accrue~~accrued interest at 1.69%, 1.59% or 1.85%, compounded annually on basis of 360-days year of twelve 30-day months. Principal and any accrued but unpaid interest ~~are~~were due and payable at maturity.

Pursuant to the terms of the Convertible Notes, the Convertible Notes will convert, including outstanding principal and any accrued but unpaid interest, with no fractional shares and proper notice based on the below:

~~Maturity: Upon maturity, convert into the shares issued in the then most recent Preferred Stock financing at the lowest price per share of such shares in such financing at the option of the holders.~~

~~Next Equity Financing:~~ ~~Upon the Company’s next equity financing yielding at least $~~20 ~~million in a single transaction for the June 2019 Convertible Notes and $~~50 million in a single transaction for the October 2019 Convertible Notes (“Next Equity Financing”), the Convertible Notes shall automatically convert into those equity securities issued at a price lesser of 80~~% of the qualified financing price or a per share price reflecting a pre-money, fully-diluted valuation of $350~~ ~~million for the June 2019 Convertible Notes and $450~~ ~~million for the October 2019 Convertible Notes.~~

~~Change of Control~~: In the event of a change of control, immediately prior, the note shall convert into cash equal to 1.5 times the outstanding principal and any accrued but unpaid interest or at the option of the holder convert into common stock at a price per

24

~~share equal to the lesser of 80% of the change of control price per common stock or a per share price reflecting a pre-money, fully-diluted valuation of $500~~ ~~million for the June 2019 Convertible Notes and $450~~ ~~million for the October 2019 Convertible Notes.~~

~~Upon maturity, the holders of the Convertible Notes have the option to extend the maturity date for another~~ 2 ~~years.~~

The Company determined that the contingent share-settled redemption upon the Next Equity Financing or Change of Control at 80% of the next round price and the contingent redemption upon Change of Control at 1.5 times of the outstanding principal and accrued interest were embedded derivatives (“Redemption Obligation”) that required bifurcation as derivative liabilities as well as upon issuance a reduction in the carrying value of the underlying note. The Company measures the bifurcated compound derivative at fair value based on significant inputs not observable in the market, which causes them to be classified as Level 3 measurements within the fair value hierarchy. Redemption Obligation derivatives are determined to be material at each issuance date. The bifurcated derivative was bifurcated from each note at the amount of the fixed premium, and the expected premium based on likelihood of the Next Equity Financing at different dates which result in differing levels of premium.

~~The bifurcated embedded derivative had a zero fair value as of December 31, 2020 and through the settlement of the Convertible Notes in January 2021.~~ ~~The following tables present changes in fair value of the embedded compound derivative (associated with the Company’s Convertible Notes) for the nine months ended September 30, 2021 and 2020:~~

Embedded Derivative in Convertible Notes

September 30,

in thousands

2021

2020

Balance – December 31

$
0

$
4,698

Additions

0

3,261

Measurement adjustments

0

(5,388
)
Balance – September 30

$
0

$
2,571

The measurement adjustments are recognized in other income, net within the Company’s Condensed Consolidated Statements of Operations. To determine the fair value of the embedded derivatives, the Company used an income approach considering potential future conversion and calibrated a discount rate to be consistent with the price paid at Issuance. The income approach considered assumptions including preferred stock values, volatilities, risk free rates, and discount rates/additional discount factors calibrated to be consistent with the price paid at Issuance. Additionally, other key assumptions included probability and timing of financing or the note remaining outstanding through maturity. ~~The following table sets forth the range of inputs for the significant assumptions utilized to determine the fair value of embedded derivatives at each issuance:~~

At Issuance

June 2019
Convertible
Notes

October 2019
Convertible
Notes

Q4 2020
Convertible
Notes

Preferred stock value

$
1.30

$
1.30

$1.98 – 2.32

Risk free rates

1.8% – 2.0%

0.9% – 1.8%

0.1
%
Risk-adjusted discount rate

15.0
%

15.0
%

15.0
%
Additional discount factor

0.1% – 0.9%

0.9% – 4.7%

4.7
%
Preferred volatility

15.3
%

15.3
%

20
%

Prior to the adoption of ASU 2020-06 on January 1, 2021 and upon issuance of the Convertible Notes, the Company assessed whether an immediate beneficial conversion feature (“BCF”) existed with regards to the non-contingent conversion option upon maturity to convert the Convertible Notes into the shares issued in the most recent Preferred Stock financing (i.e., Series B Preferred Stock) at the issuance of the Convertible Notes. A beneficial conversion feature exists when convertible instruments are issued with an initial “effective conversion price” that is less than the fair value of the underlying stock. The Company determined that there was no BCF associated with such conversion feature upon issuance except for the Convertible Notes issued on October 29, 2020, November 12, 2020, November 16, 2020, November 19, 2020, December 1, 2020 and December 11, 2020 (“Q4 2020 Convertible Notes”). At the commitment dates, the Company determined the conversion feature related to the Q4 2020 Convertible Notes to be beneficial to the investors. The following table summarizes the calculation of the BCFs as of the issuance dates of these Q4 2020 Convertible Notes, which continued to be presented in additional paid in capital as of December 31, 2020:

25

As of
December 31, 2020

Effective
Conversion
Price

Fair Value of
Series B
Preferred Stock

Number of Shares upon Conversion (pre-combination)

BCF
in thousands

October 29, 2020

$
1.33

$
2.32

1,125,281

$
1,113

November 12, 2020

1.33

2.32

4,456,114

4,407

November 16, 2020

1.33

2.32

871,378

862

November 19, 2020

1.33

2.32

2,504,466

2,476

December 1, 2020

1.33

2.32

120,030

119

December 11, 2020

1.33

2.32

750,188

742

Total

$
9,719

~~Prior to the adoption of ASU 2020-06 on January 1, 2021, the Company recorded a total BCF of $9.7~~ million, representing the intrinsic value of the in-the-money portion of the non-contingent conversion option upon maturity, in equity, with an offsetting reduction to the carrying amount of the Q4 2020 Convertible Notes as a debt discount upon issuance. The equity component of $~~9.7~~ million was not re-measured as long as it continued to meet the conditions for equity classification. The debt discounts resulting from the accounting for a beneficial conversion option and the fair value of embedded derivative at issuance were amortized using the effective interest method over the term of the Q4 2020 Convertible Notes.

For all other Convertible Notes, the debt discount resulting from the bifurcation of the embedded derivatives at issuance was amortized into interest expense using the effective interest method over the term of the Convertible Notes. All Convertible Notes were classified as current liabilities as of December 31, 2020.

On January 1, 2021, the Company elected to adopt ASU 2020-06 based on a modified retrospective transition method. Under such transition, prior-period information has not been retrospectively adjusted. In accounting for the Q4 2020 Convertible Notes after the adoption of ASU 2020-06, the BCFs and unamortized debt discount associated with the recognition of such BCFs were derecognized from the Condensed Consolidated Balance Sheets as of January 1, 2021, resulting in a $~~9.0~~ ~~million increase in the carrying amount of the Q4 2020 Convertible Notes, a $9.7~~ ~~million decrease in additional paid in capital, and a $0.7~~ ~~million cumulative decrease to the opening balance of its accumulated deficit as of January 1, 2021, net of tax effects.~~

~~The issuances under the Convertible Notes are as follows:~~

Maturity Date of June 10, 2021

in thousands

Principal

Interest Rate

June 10, 2019

$
12,950

2.37
%
June 12, 2019

500

2.37
%
June 13, 2019

400

2.37
%
July 19, 2019

235

2.13
%
July 25, 2019

750

2.13
%
Total

$
14,835

Maturity Date of October 01, 2021

in thousands

Principal

Interest Rate

October 1, 2019

$
14,000

1.69
%
February 6, 2020

6,000

1.59
%
February 12, 2020

5,000

1.59
%
February 28, 2020

6,900

1.59
%
October 29, 2020

1,500

1.85
%
November 12, 2020

5,940

1.85
%
November 16, 2020

1,162

1.85
%
November 19, 2020

3,338

1.85
%
December 1. 2020

160

1.85
%
December 11, 2020

1,000

1.85
%
Total

$
45,000

26

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 $6.62 per share and settle all outstanding Convertible Notes through Series C convertible preferred stock at a conversion price of $1.33 or $1.71 per share (“Series C Financing”). The Company issued 38,323,292 shares of Series C Convertible Preferred Shares (pre-combination) for conversion of outstanding Convertible Notes of $61.0 million.

The June 2019 Convertible Notes were settled pursuant to the contractual conversion upon the Next Equity Financing feature with such financing yielding at least $2020.0 million in a single transaction. The Company credited the net carrying amount of the June 2019 Convertible Notes of $14.5 million, including any unamortized debt discount, to Series C convertible preferred stock with no gain or loss recognized.

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 $42.6 million and recognized the Series C convertible preferred stock issued specifically to settle the October 2019 Convertible Notes at fair value as the reacquisition consideration. Accrued and unpaid interest of $0.6 million was settled and not paid in cash and therefore it was included in calculating the extinguishment loss. The difference between the net carrying amount of the October 2019 Convertible Notes, plus accrued and unpaid interest, and the reacquisition consideration was recorded as a loss on extinguishment ~~within other income, net~~ in the ~~Condensed Consolidated Statement~~condensed consolidated statement of ~~Operations.~~operations for the six months ended June 30, 2021.

The Company issued in aggregate 26,727,308 shares of Series C convertible preferred stock (pre-combination) to settle the October 2019 Convertible Notes. The fair value of the Series C convertible preferred stock was determined to be $176.9 million using the cash purchase price of $6.62 per share on January 28, 2021. These October 2019 Convertible Notes had a carrying amount plus accrued and unpaid interest of $43.2 million upon settlement. The difference of $133.8 million was recognized as a loss on extinguishment on the Company’s ~~Condensed Consolidated Statement~~condensed consolidated statement of ~~Operations~~operations for the ~~nine~~six months ended ~~September~~June 30, 2021.

Bridge Loan

On May 20, 2021, the Company entered into a short-term promissory note (the “Bridge Loan”) with Pendrell as the lender, pursuant to which Pendrell agreed to make available to the Company up to $20.6 million in borrowings. Pendrell is the parent of X-icity Holdings Corporation, the sponsor of Holicity. The interest rate on the Bridge Loan borrowings iswas a fixed rate of 5.00% per annum. However, if repaid in full in connection with the closing of the Business Combination, then no interest ~~shall~~will be due and payable. The Company iswas required to pay an upfront fee in the amount of 1.00% of the principal amount and an end of term fee in the amount of 2.00% of the principal amount. The funds drawn on the Bridge Loan may be prepaid by the Company at any time. The Bridge Loan matures upon the earliest of (a) the closing of the Business Combination, (b) 60 days following the abandonment of the Business Combination and (c) the date when the commitment amount is otherwise paid in full or accelerated pursuant to the terms of the Bridge Loan. Under the terms of the Bridge Loan, the Company borrowed $10.0 million in June 2021, and subsequently paid off the outstanding principal and end of term fee totaling $10.4 million on June 30, 2021. Refer to Note – 3 Acquisitions.

Note 7 — Warrant Liabilities

As part of Holicity’s initial public offering ("IPO") in 2020, Holicity issued 9,999,976 warrants to third party investors, and each whole warrant entitled the holder to purchase one share of the Company's Class A common stock at an exercise price of $11.50 per share (the “Public Warrants”). Simultaneously with the closing of the IPO, Holicity completed the private sale of 5,333,333 warrants to Holicity’s sponsor (“Private Placement Warrants”) and each Private Placement Warrant allowed the sponsor to purchase one share of the Company's Class A common stock at $11.50 per share.

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 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.

16

Table of Contents

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 50% or more of the Company’s Class A shareholders. Because not all of the Company’s shareholders needed to participate in such tender offer or exchange to trigger the potential cash settlement and the Company did not control the occurrence of such an event, the Company concluded that the Public Warrants and Private Placement Warrants did not meet the conditions to be classified in equity. Since the Public and Private Placement Warrants met the definition of a derivative under ASC 815, the Company recorded these warrants as liabilities on the balance sheet at fair value upon the closing of the Business Combination, with subsequent changes in their respective fair values recognized in the consolidated statement of operations at each reporting date.

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 $0.10 per Redeemable Warrant, provided that the last reported sales price of the Class A common stock had been at least $10.00 per share on the trading day prior to the date on which notice of redemption is given, and further provided that there is an effective registration statement covering the shares of Class A common stock issuable upon exercise of the Redeemable Warrants and a current prospectus relating thereto, available through the Redemption Date.

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 $11.50 per share exercise price in cash. Pursuant to the Cashless Exercise Option, an exercising holder of the Redeemable Warrants received a number of shares of Class A common stock (the “Exercise Shares”) equal to the quotient obtained by dividing the product of the number of shares of Class A common stock underlying the Redeemable Warrants, multiplied by the excess of the fair market value of the Class A common stock over the exercise price of the Redeemable Warrants by the fair market value. Since the fair market value was less than the exercise price of the Redeemable Warrants, no Exercise Shares would have been issued if a holder would have elected to exercise its Redeemable Warrant pursuant to the Cashless Exercise Option. Alternatively, holders of the Redeemable Warrants were entitled to elect to receive, in lieu of the redemption price or exercising their Redeemable Warrants pursuant to the Cashless Exercise Option, 0.2560374 shares of Class A common stock for each Redeemable Warrants.

In connection with the redemption, the holders of 9,413,895 Public Warrants and 5,333,333 Private Placement Warrants elected to receive, in lieu of the redemption price, an aggregate 3,775,709 shares of Class A common stock at 0.2560374 shares of Class A Common Stock per Warrant. A total of 586,075 Public Warrants remained unexercised as of December 27, 2021 and the Company redeemed the Public Warrants for a redemption price of $0.10 per Redeemable Warrant on December 27, 2021.

Note 8 — Income Taxes

~~We compute our~~The Company computes its 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 and ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, ~~the Company recognized a tax benefit of $0.4~~ ~~million primarily due to the change in the realizability of certain U.S. deferred tax assets as a result of the Apollo Fusion Inc. acquisition. For the period ended September 30, 2020,~~ the Company recognized 0 provision for income taxes consistent with the losses incurred and the valuation allowance against the deferred tax assets.

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.

27

Note 9 — Leases

The Company has operating leases for warehouse, production, and office facilities and equipment. Lease contracts have remaining lease terms of less than one year to ~~eight~~seven years, some of which include options to extend the term by up to 5 years. The Company included renewal options that are reasonably certain to be exercised as part of the lease term. Additionally, some lease contracts include termination options. The Company does not expect to exercise the majority of termination options and generally ~~exclude~~excludes such options when determining the term of leases.

~~See Note 2 — Basis~~17

Table of ~~Presentation and Summary of Significant Accounting Policies for the Company’s lease accounting policy.~~Contents

The ~~components of~~operating lease costs ~~for three and nine months ended September 30, 2021 are as follows (in thousands):~~

Three Months Ended
September 30, 2021

Nine Months
Ended
September 30, 2021

Operating lease costs

$
510

$
1,159

Finance lease costs:

Amortization of right-of-use assets

0

0

Interest on lease liabilities

0

0

Short-term lease costs

37

—

Variable lease costs

0

0

Sublease income

0

0

Total lease costs

$
547

$
1,159

~~For the three and nine months ended September 30, 2020, rent expense recognized under ASC 840 amounted to~~were $~~0.2~~0.5 million and $~~0.5~~0.4 million ~~respectively.~~

~~There were~~ 0 ~~losses or gains on sale and leaseback transactions~~ for the three months ended June 30, 2022 and ~~nine~~2021, respectively. The operating lease costs were $1.0 million and $0.6 million for the six months ended ~~September~~June 30, ~~2021.~~2022 and 2021, respectively.

The weighted average remaining lease term ~~as of September 30, 2021 is~~ was 6~~6.90~~.12 years and ~~the~~6.68 years as of June 30, 2022 and December 31, 2021, respectively. The weighted average discount rate iswas ~~7.35~~7.34%. as of each of June 30, 2022 and December 31, 2021.

Cash flows arising from lease transactions for the three and ~~nine~~six months ended ~~September~~June 30, 2022 and 2021 were as follows (in thousands):

Three Months Ended
September 30, 2021

Nine Months
Ended
September 30, 2021

Cash paid for amounts included in the measurements of lease liabilities:

Operating cash inflows/(outflows) from operating leases

$
(484
)

$
(1,254
)
Operating cash inflows/(outflows) from finance leases

0

0

Financing cash inflows/(outflows) from finance leases

0

0

Supplemental non-cash information on lease liabilities arising from obtaining
right-of-use assets

0

0

Operating leases

0

0

Finance leases

0

0


			For the Three Months Ended June 30,							Six Months Ended June 30,
in thousands			2022				2021			2022				2021
Cash paid for amounts included in the measurements of lease liabilities — operating cash flows			$	(482	)		$	(760	)	$	(942	)		$	(770	)
Right-of-use assets obtained in exchange for operating leases liabilities			$	—			$	—		$	251			$	—

Future minimum lease payments under non-cancellable leases in effect as of ~~September~~June 30, ~~2021~~2022 are as follows (in thousands):


Year Ending December 31,		Operating Leases				Finance Leases
2021 (excluding the nine months ended September 30, 2021)		$	458			$	0
2022			1,761				0
										Operating Leases
2022 (remainder)										$	930
2023			1,655				0				1,790
2024			1,655				0				1,677
2025			1,655				0				1,655
2026											1,642
Thereafter			4,481				0				2,840
Total future undiscounted minimum lease payments		$	11,665			$	0			$	10,534
Less: imputed Interest			(2,486	)			0				2,030
Total reported lease liability		$	9,179			$	0			$	8,504

~~The following table summarizes our lease commitments as of December 31, 2020:~~

2818

Table of Contents

Year Ending December 31,

Minimum Lease
Commitment

(in thousands)

2021

$
712

2022

766

2023

763

2024

762

2025

762

Thereafter

1,708

Total

$
5,473

Note 10 — Fair Value Measurements

The Company ~~measured Level 1~~measures its financial ~~instruments~~assets and liabilities at fair value ~~based on~~each reporting period using a fair value hierarchy that prioritizes the use of observable inputs ~~including unadjusted, quoted prices in active markets for identical assets~~ and ~~liabilities. Financial instruments classified~~minimizes the use of unobservable inputs when measuring fair value. A financial instrument’s classification within ~~Level 2 of~~ the fair value hierarchy ~~are valued~~is based ~~on other observable~~upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs ~~including broker or dealer quotation, alternative pricing sources or U.S. Government Treasury yield of appropriate term. When~~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~~liabilities;

Level 2 Inputs, other than quoted prices in active markets, that are ~~not available, the Company relies on non-binding quotes from its investment managers,~~observable either directly or indirectly; and

Level 3 Unobservable inputs in which ~~are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable~~there is little or no market data, ~~quoted market prices for similar instruments, historical pricing trends of a security as relative~~which require the reporting entity to develop its peers. To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers. The Company performs routine procedures such as comparing prices obtained from independent source to ensure that appropriate fair values are recorded. The Public Warrants of $~~23.7~~ ~~million are classified as Level 1 instruments as the Public Warrants are actively traded in public markets.~~

own assumptions.

The ~~Private Placement Warrants are classified as Level 2 financial instruments. The~~ Company ~~estimated~~uses the market approach to measure fair value ~~of the Private Placement Warrants using a Monte Carlo simulation based on observable inputs including implied volatility from short term options, common stock price, Public Warrants price~~for its financial assets and ~~risk-free rate.~~

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 contingent consideration related to Apollo acquisition is classified as Level 3 financial instruments. The company estimated the fair value of the contingent consideration using a Monte Carlo simulation based on non observable inputs including forecasted revenue and risk adjusted rate.

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 ~~as of September 30, 2021~~ (in thousands):

Description

Level 1

Level 2

Level 3

Total

Liabilities:

Public Warrants

$
23,700

$
0

$
0

$
23,700

Private Placement Warrants

0

12,640

0

12,640

Contingent Consideration

0

0

23,000

23,000

Total

$
23,700

$
12,640

$
23,000

$
59,340


		As of June 30, 2022
Description		Level 1				Level 2				Level 3				Total
Assets
Cash equivalents:
Money market account		$	3,417			$	0			$	0			$	3,417
Marketable securities
US Treasury securities			22,959				0				0				22,959
Corporate debt securities			0				21,967				0				21,967
Commercial paper			0				40,912				0				40,912
Asset backed securities			0				10,530				0				10,530
Total financial assets		$	26,376			$	73,409			$	0			$	99,785
Liabilities:
Contingent consideration		$	0			$	0			$	31,000			$	31,000
Total financial liabilities		$	0			$	0			$	31,000			$	31,000


		As of December 31, 2021
Description		Level 1				Level 2				Level 3				Total
Assets
Cash equivalents:
Money market account		$	100,000			$	0			$	0			$	100,000
Total financial assets		$	100,000			$	0			$	0			$	100,000
Liabilities:
Contingent consideration		$	0			$	0			$	13,700			$	13,700
Total financial liabilities		$	0			$	0			$	13,700			$	13,700

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 January 1, 2021

$
0

Recognition of contingent consideration liability upon acquisition

23,000

Change in the fair value included in other income, net

0

Fair value as of September 30, 2021

$
23,000


in thousands		Contingent Consideration
Fair value as of December 31, 2021		$	13,700
Loss on change in fair value of contingent consideration			17,300
Fair value as of June 30, 2022		$	31,000

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Table of Contents

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 ~~method.~~model. The Monte Carlo simulation considered assumptions including revenue volatilities, risk free rates, discount rates and additional revenue discount rate.

29

Additionally, other key assumptions included forecasted ~~revenue~~revenues from new customers and probability of achieving it.The following table sets forth the range of inputs for the significant assumptions utilized to determine the fair value of contingent ~~consideration:~~consideration as of June 30, 2022 and December 31, 2021:


		As of June 30, 2022				As of December 31, 2021
Risk-free interest rate			2.62	%			0.56	%
Expected revenue volatility			19.0	%			20.0	%
Revenue discount rate			7.50	%			5.50	%
Discount rate			4.80	%			3.25	%

The Company began investing in available-for-sale marketable securities in the first quarter of 2022. These marketable securities are classified as short term investments on the condensed consolidated balance sheets. The following is a summary of available-for-sale marketable securities as of June 30, 2022 (in thousands):


		As of June 30, 2022
Description		Amortized Cost				Gross Unrealized Loss				Fair Value
U.S. Treasury securities		$	23,006			$	(47	)		$	22,959
Corporate debt securities			22,093				(126	)			21,967
Commercial paper			40,912				0				40,912
Asset backed securities			10,590				(60	)			10,530
Total available-for-sale marketable securities		$	96,601			$	(233	)		$	96,368

The following table presents the breakdown of the available-for-sale marketable securities in an unrealized loss position as of June 30, 2022 (in thousands).


		June 30, 2022
		Fair Value				Gross Unrealized Loss
U.S. Treasury securities
Less than 12 months		$	22,959			$	47
Total		$	22,959			$	47

Corporate debt securities
Less than 12 months		$	21,967			$	126
Total		$	21,967			$	126

Commercial paper
Less than 12 months		$	40,912			$	0
Total		$	40,912			$	0

Asset backed securities
Less than 12 months		$	2,828			$	25
Greater than 12 months			7,702				35
Total		$	10,530			$	60

The Company does not believe these available-for-sale marketable securities to be other-than-temporarily impaired as of June 30, 2022.There were no realized gains or losses on available-for-sale marketable securities during the three and six months ended June 30, 2022.


		As of June 30, 2022
in thousands		Amortized Cost				Fair Value
Due in 1 year or less		$	88,864			$	88,666
Due in 1-2 years		$	7,737			$	7,702

20

Table of Contents

~~Contingent Consideration~~

~~Risk-free interest rate~~

~~0.18~~

%

~~Expected revenue volatility~~

~~20.0~~

%

~~Revenue discount rate~~

~~5.50~~

%

~~Discount rate~~

~~3.25~~

%

Note 11 — Commitments and Contingencies

Legal Proceedings

The Company is party to ordinary and routine litigation incidental to ~~our~~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.

AsOn February 9, 2022, a putative class action was filed in the United States District Court for the Eastern District of ~~September 30,~~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 ~~there~~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 ~~no material litigation, arbitration~~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 ~~governmental proceeding currently pending or to Astra’s knowledge, threatened~~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 ~~us or any~~the current members of ~~Astra’s management team~~the Company's board of directors and certain of its 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. See Note 17 — Subsequent events for information regarding the status of this lawsuit.

On April 27, 2022, a stockholder derivative suit was filed in the United States District Court for the Eastern District of New York styled Gonzalez v. Kemp, et al., Case No. 22-cv-02401 (E.D.N.Y.). The complaint asserts claims against the current members of the Company’s board of directors and certain of its current and former officers for alleged breaches of their ~~capacity as such~~fiduciary duties, unjust enrichment, abuse of control, mismanagement, and waste of corporate assets, alleged violations of Section 14(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), and for contribution under Section 10(b) and 21D of the Exchange Act based upon the conduct alleged in the Artery Action described above. The plaintiff seeks monetary damages in favor of the Company in an unstated amount, reforms to the Company’s corporate governance and internal procedures, restitution including disgorgement of any compensation, profits or other benefits received, and reimbursement of the plaintiff's reasonable fees and costs, including attorney's fees. The Company believes that ~~could have~~the case is without merit and intends to defend it vigorously. Due to the early stage of the case, neither the likelihood that a ~~material effect~~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 $20.0 million.

Indemnification Obligations to former Company Board Members

On May 20, 2022, a putative class action was filed in the Court of Chancery of the State of Delaware styled Newbold v. McCaw et. al., Case No. 2022-0439 (the “Newbold Action”). The complaint alleges that Pendrell Corporation, X-icity Holdings Corporation f/k/a Pendrell Holicity Holdings and certain former officers, directors or controlling stockholders of Holicity, Inc. n/k/a Astra Space, Inc., breached their fiduciary duties to the Company in closing on the ~~Condensed Consolidated Balance Sheets, Condensed Consolidated Statements~~Business Combination. The complaint seeks unspecified damages on behalf of ~~Operations,~~a purported class of stockholders of the Company's securities from June 28, 2021 through June 30, 2021.

Neither the Company nor any of its board members are parties in this action. The Company’s former board member, Mr. McCaw, is a defendant in this action, but the allegations relate to periods prior to the Business Combination. Astra is obligated to indemnify certain of the defendants in the Newbold Action. The Company has tendered defense of this action under its Directors’ and Officers' Policy. The Company tendered defense of this claim under the tail policy it was required to purchase in connection with the Business Combination. The retention under that policy is $1.5 million. Due to the early stage of this case, neither the likelihood that a loss, if any, will be realized, nor an estimate of the possible loss or ~~Condensed Consolidated Statements~~range of ~~Cash Flows.~~loss, if any, can be determined.

21

Table of Contents

Purchase Commitments

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. ~~There were~~ 0 ~~purchases made during the three months ended September 30, 2021.~~ The Company made total purchases of $0.8 million under the contract from the contract date of which $0.4 million related to purchases made during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The Company also made advance payments of $0.4 million under the contract during the six months ended June 30, 2022.

Note 12 — Convertible Preferred Stock

Convertible Preferred Stock

From pre-combination Astra’s inception until the consummation of the Business Combination, approximately $100.2 million of cash capital contributions was raised, net of issuance costs, through the issuance of three rounds of convertible preferred equity.

The three classes of convertible preferred stock of pre-combination Astra ~~are:~~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)				Liquidation Price Per Share				Conversion Price Per Share				Annual Noncumulative Dividend Rights Per Share				Shares Outstanding (pre-combination Astra)				Liquidation Price Per Share				Conversion Price Per Share				Annual Noncumulative Dividend Rights Per Share
A			65,780,540			$	0.243233			$	0.243233			$	0.019459				65,780,540			$	0.243233			$	0.243233			$	0.019459
B			70,713,123				1.333008				1.333008				0.106640				70,713,123				1.333008				1.333008				0.106640
C			50,483,785				6.620970				6.620970				0.529680				50,483,785				6.620970				6.620970				0.529680
Total			186,977,448																186,977,448

Upon the consummation of the Business Combination in June 2021, 186,977,448 shares of Convertible Preferred Stock ~~(pre-combination)~~(pre-combination Astra) converted into 124,340,003 shares of Class A common stock of the Company. The Company no longer had Convertible Preferred Stock authorized, issued or outstanding subsequent to the close of ~~business combination~~Business Combination in June 2021. ~~The terms and rights of the Convertible Preferred Stock described below represent the terms and rights of the Convertible Preferred Stock prior to the closing of the Business Combination.~~

~~Voting Rights and Dividends~~

Each holder of the Convertible Preferred Stock is entitled to a number of votes equal to the number of whole shares of Class A common Stock into which such holder’s shares are convertible as defined in the amended and restated certificate of incorporation. The holders of outstanding Convertible Preferred Stock are entitled to receive defined dividends per share, when, if, and as declared by the board of directors. These rights are not cumulative, and no right accrues by reason of the fact that dividends on said shares are not

30

declared in any period, nor any undeclared or unpaid dividend bears or accrues interest. After payment of such dividends, and additional dividends or distributions are distributed to all holders of Common Stock, Founders Convertible Preferred Stock and Convertible Preferred Stock in proportion to the number of shares of common stock what would be held on an “as converted” basis.

~~Liquidation~~

In the event of a liquidation event (as defined), the holders of the Convertible Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of Founders Convertible Preferred Stock and Common Stock, by reason of their ownership, an amount per share equal to the liquidation price per share for each outstanding share of the Convertible Preferred Stock, plus any declared but unpaid dividends thereon to the date fixed for such distribution. If the assets of the Company legally available for distribution are insufficient to permit the payment of the full preferential amounts to the holders of the Convertible Preferred Stock, then the entire assets available for distribution to stockholders are distributed ratably among the holders of the Convertible Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive.

Upon the completion of the distribution to the holders of Series A, Series B and Series C Convertible Preferred Stock, the holders of outstanding shares of Founders Convertible Preferred Stock and Common Stock are entitled to receive all of the remaining assets of the Company pro rata based on the number of shares of Common Stock held by each assuming conversion of all such Founders Convertible Preferred Stock into Common Stock.

Each of the Convertible Preferred Stock shares are conditionally puttable by the holders upon Deemed Liquidation events, which includes a change of control or a sale of substantially all the Company’s assets. The Company determined that triggering events that could result in a Deemed Liquidation are not solely within the control of the Company. Therefore, the Convertible Preferred Stock is classified outside of permanent equity (i.e., temporary equity). The Convertible Preferred stock is subject to standard protective provisions, none of which provide creditor rights. As of December 31, 2020, the Company is not required to remeasure the Convertible Preferred Stock to the redemption value as none of the Deemed Liquidation events were probable at the time.

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 ~~are~~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 ~~are~~were considered probable of becoming redeemable.

Subsequent measurement of Convertible Preferred Stock iswas 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 ~~this~~the method, changes in the redemption value ~~are~~were recognized immediately as they ~~occur~~occurred and the carrying value of the Convertible Preferred Stock iswas 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 $1.1 billion, reflecting the estimated redemption value of $7.18 per share as of March 31, 2021, ~~are~~were treated as deemed dividends and ~~are~~were recognized against additional paid-in capital and accumulated deficit on the ~~Condensed Consolidated Balance Sheet as of March 31, 2021.~~consolidated balance sheet.

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.~~

~~Conversion~~

~~The holders~~capital as of ~~the Convertible Preferred Stock shall have conversion rights as follows:~~

~~Right to Convert~~: Each of the Company’s Convertible Preferred Stock shall be convertible at the option of the holder thereof into a number of fully paid and nonassessable shares of Class A common Stock as is determined by dividing the liquidation preference by the conversion price for each series, respectively.

~~Automatic Conversion~~: Each share of the Convertible Preferred Stock shall automatically be converted into fully paid and nonassessable shares of Class A common Stock, at the then-effective conversion rates upon the earlier of (i) the vote or written consent of holders of at least a majority of the voting power represented by the then-outstanding shares of Convertible Preferred Stock, voting as a separate class on an as-converted basis or (ii) the closing of a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of common stock at an offering price of not less than $~~19.9~~ ~~per share and with aggregate gross proceeds to the Company (prior to deduction of underwriters’ commissions and expenses) of not less than $30.0~~ ~~million.~~

31

~~Redemption~~

~~Convertible Preferred Stock are not mandatorily redeemable.~~June 30, 2021.

Note 13 — Stockholders’ Equity

Common and Preferred Stock

As of ~~September~~June 30, ~~2021,~~2022, the Company had authorized a total of 466,000,000 shares of stock, consisting of (i) 400,000,000 shares of Class A common stock, par value $0.0001 per share (“Class A common stock”), (ii) 65,000,000 shares of Class B common stock, par value $0.0001 per share (“Class B common stock”), and (iii) 1,000,000 shares of preferred stock, par value $0.0001 per share (“Preferred

22

Table of Contents

Stock”). As of ~~September~~June 30, ~~2021,~~2022, the Company had ~~202,034,520~~209,408,425 and ~~56,239,189~~55,539,188 shares of Class A and Class B common stock issued and outstanding, respectively. There ~~was~~were 0 ~~share~~shares of preferred stock outstanding as of ~~September~~June 30, ~~2021.~~2022.

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. ~~Shares~~Each share of Class B common stock can be converted ~~to shares~~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 ~~our~~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 10,870,562 shares of Founders Preferred Stock and an aggregate 3,599,647 shares of Class A common stock of pre-combination Astra, which were entitled to one vote per share, into 9,622,689 shares of Class B common stock of the Company, which are entitled to ten votes per share.

Founders Convertible Preferred Stock

The Company issued 18,500,000 shares of pre-combination Astra’s Founders Convertible Preferred Stock in 2016. Upon vesting, the compensation expense associated with the Founders Convertible Preferred Stock was recorded as stock-based compensation based on the fair value of the Founders Convertible Preferred Stock on the grant date fair value. Immediately before the closing of the Business Combination, 10,870,562 shares of pre-combination Astra’s Founders Convertible Preferred Stock were outstanding. Upon closing of the Business Combination, the shares of Founders Convertible Preferred Stock were converted into shares of Class B common stock of the ~~Company.~~Company, which are entitled to ten votes per share. Refer to Note 3 – Acquisitions.

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 36.8 million shares of Class A common stock for issuance for awards in accordance with the terms of the 2021 Plan. ~~In addition,~~On January 1, 2022, pursuant to the ~~pool will increase~~terms of the 2021 Plan, the number of shares of Class A common stock available for issuance under the 2021 Plan increased by 13.1 million. Similarly, the share reserve increases on January 1 of each year from ~~2022~~2023 to 2031 by the lesser of (i) 5% of the sum of number of shares of (x) Class A common stock and (y) Class B common stock outstanding as of the close of business on the immediately preceding December 31 and (ii) the number of shares of Class A common stock as determined by the Board. On June 1, 2022, the shareholders of the Company approved the amendment of 2021 Plan to increase the Class A common stock available for issuance under the 2021 plan by 6 million. The purpose of the 2021 Plan is to advance the Company’s interests by providing for the grant to employees, directors, consultants and advisors of stock and stock-based awards. As of ~~September~~June 30, ~~2021,~~2022, 1120.5 million shares remain available for issuance under the plan.

2021 Employee Stock Purchase Plan

In June 2021, the Board of Directors approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP”) to reserve 55.0 million shares of Class A common stock for issuance for awards in accordance with the terms of the ESPP. ~~In addition,~~On January 1, 2022, pursuant to the terms of the 2021 ESPP, the number of shares of Class A common stock available for issuance under the 2021 ESPP increased by 2.6 million. Similarly, the number of shares of Class A common stock reserved for issuance under the 2021 ESPP will ultimately increase on January 1 of each year from ~~2022~~2023 to 2031 by the lesser of (i) 1% of the sum of number of shares of ~~(x)~~ Class A common stock and ~~(y)~~ Class B common stock outstanding as of the close of business on the immediately preceding December 31 and (ii) the number of shares of Class A common stock as determined by the Board. The purpose of the 2021 ESPP is to enable eligible employees to use payroll deductions to purchase shares of Class A common stock and thereby acquire an interest in the company. Eligible employees are offered shares through a 24-month offering period, which consists of four consecutive 6-month purchase periods. Employees may purchase a limited amount of shares of ~~our~~the Company's stock at a discount of up to 15% of the lesser of the fair market value at the beginning of the offering period or the end of each 6-month purchase period. ~~NaN~~0.2 million shares were issued under the Employee Stock Purchase Plan during the ~~three~~six months ended ~~September~~June 30, ~~2021.~~2022. As of ~~September~~June 30, ~~2021,~~2022, 57.5 million shares remain available for issuance under the ~~Employee Stock Purchase Plan.~~2021 ESPP. As of ~~September~~June 30, ~~2021,~~2022, the Company had $~~0.6~~1.5 million of

32

unrecognized stock-based compensation expense related to the 2021 ESPP. This cost is expected to be recognized over a weighted-average period of ~~0.9~~1.09 ~~years~~years.

2016 Equity Incentive Plan

23

Table of Contents

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 ~~September~~June 30, ~~2021,~~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~~condensed consolidated statements of ~~Operations~~operations for the three and ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, respectively:


		For the Three Months Ended June 30,								For The Six Months Ended June 30,
in thousands		2022				2021				2022				2021
Cost of revenues		$	456			$	—			$	697			$	—
Research and development			4,832				125				11,568				3,304
Sales and marketing			1,417				42				2,997				54
General and administrative			6,086				7,277				14,570				14,419
Stock-based compensation expense		$	12,791			$	7,444			$	29,832			$	17,777

On November 22, 2021, under the 2021 Plan, the Company's compensation committee issued 1,047,115 PSUs to the employees of Apollo who joined Astra. PSUs are subject to certain performance-based and service-based vesting conditions and would vest over four years with 25% of awards vesting on July 1, 2022, and the remaining 75% vesting quarterly over the remaining 12 quarters beginning on November 15, 2022, only for the portion of PSUs that is eligible to become vested which will be determined based upon timely satisfaction of performance conditions. The number of PSUs vested will be determined by multiplying the total number of PSUs granted by the percentage of milestones achieved and by the percentage of PSUs that satisfy the time-based vesting condition on such time-vesting date.

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, 523,557 PSUs and 52,355 PSUs related to the performance conditions that are not subjective are considered granted as of November 22, 2021 and ~~2020:~~January 21, 2022, respectively. The remaining PSUs issued did not meet the grant date criteria as of June 30, 2022. The Company will re-assess at the end of each reporting period if any further PSUs has met the grant date criteria and account for it in the period in which it meets the grant date criteria.

As of June 30, 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 $

Three Months Ended
September 30,

Nine Months Ended
September 30,

in thousands

2021

2020

2021

2020

Research and development

$
1,334

$
49

$
4,638

$
254

Sales and marketing

15

0

70

0

General and administrative

1,339

46

15,757

354

Stock-based compensation expense

$
2,688

$
95

$
20,465

$
608

0.3 million and $1.2 million compensation costs related to PSUs for the three and six months ended June 30, 2022, respectively.

On September 20, 2021, under the 2021 Plan, the Company’s compensation committee granted 3,972,185 restricted stock units (“RSUs”), 3,426,094 time-based stock options and 13,016,178 ~~performance-based~~performance stock options ("PSOs") to its executive officers. RSUs and time-based stock options granted have service-based vesting conditions only. The service conditions vary for each executive ~~officer’s~~officer and is based on their continued service to the Company. ~~Typically, these RSUs and time-based stock options vest over~~ ~~four years~~ ~~with~~ 25~~% of awards vesting on the first anniversary of the grant date and the remaining~~ 75~~% vesting quarterly over the remaining 12 quarters.~~ Option holders have a 10-year period to exercise their options before options expire. Forfeitures are recognized in the period of occurrence and stock-based compensation costs are recognized based on grant-date fair value as RSUs and time-based stock options vest. ~~Refer to disclosures below for the Company’s RSUs and option activities for the nine months ended September 30, 2021.~~

~~Performance-based stock options,~~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.

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Table of Contents

These ~~performance-based stock options~~PSOs also require the volume weighted average share price for a period of thirty trading days meet ~~certain~~ 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, 20% of the ~~performance-based stock options~~PSOs will vest on the vesting date immediately following the date at which the price thresholds are met. For this purpose, a "vesting date" is February 15, May 15, August 15 and November 15 of any applicable year. The milestones must be achieved over a period of approximately five years, with the earliest vesting date of November 15, 2022, and the last vesting date no later than November 15, 2026, if all vesting conditions are met. No unvested portion of the ~~performance-based stock options~~PSOs shall vest after November 15, 2026. As of ~~September~~June 30, ~~2021,~~2022, the Company assessed the probability of success for the five milestones mentioned above and determined that it is probable that the Company will achieve ~~all five milestones~~Milestone A and Milestone B within the requisite period. Therefore, the Company recognized $~~0.9~~4.1 million and $9.0 million compensation costs related to ~~performance-based stock options~~PSOs for the three and ~~nine-months~~six months ended ~~September~~June 30, ~~2021.~~2022, respectively. As of June 30, 2022, we had unrecognized stock-based compensation expense of $32.8 million for the milestones that were not considered probable of achievement.

In April 2021, the Board of Directors ~~has~~ approved the acceleration of the vesting of 1,900,000 pre-combination Astra stock options issued to two executive officers: Kelyn Brannon and Martin Attiq, on December 27, 2020. The Company recognized the

33

remaining stock-based compensation expense of $7.2 million on its Condensed Consolidated Statements of Operations for the ~~nine~~three and six months ended ~~September~~June 30, 2021.

In February 2021, the Board of Directors approved the acceleration in vesting of 206,250 pre-combination Astra stock options that were issued to one employee on May 15, 2020. The remaining unvested options were fully vested upon acceleration. The Company recorded a $1.4 million stock-based compensation expense related to the modification for the ~~nine~~three months ended ~~September 30,~~March 31, 2021.

As of ~~September~~June 30, ~~2021,~~2022, the Company had $~~164~~119.1 million of unrecognized stock-based compensation expense related to all of the Company's stock-based awards. This cost is expected to be recognized over a weighted-average period of ~~3.08~~3.0 years.

Secondary Sales

In April 2021, four executive officers, Chris Kemp, CEO, Adam London, CTO, Kelyn Brannon, Chief Financial Officer (“CFO”), and Martin Attiq, Chief Business Officer (“CBO”), entered into stock purchase agreements with new investors to sell 2,534,793, 865,560, 1,500,000 and 400,000 shares, respectively, of Class A common stock of pre-combination Astra, at a purchase price per share of $5.66 (“April 2021 Secondary Sales”). No additional stock-based compensation expense was recognized for the three and six months ended June 30, 2021 as the purchase price was below fair market value of Class A common stock of pre-combination Astra at the time of the sales.

In January 2021, concurrent with Series C Financing, 2 executive officers, Chris Kemp, founder and Chief Executive Officer (“CEO”), and Adam London, founder and Chief Technology Officer (“CTO”), entered into stock purchase agreements with certain investors including ACME SPV AS, LLC to sell 3,775,879 and 2,265,529 shares, respectively, of Founders Convertible Preferred Stock at purchase prices in excess of the estimated fair value at the time of the transactions (“January 2021 Secondary Sales”) to certain investors. Upon the sale, the Founders Convertible Preferred Stock automatically converted into Series C Convertible Preferred Stock. The Company’s board member, Scott Stanford, is a member of ACME SPV AS, LLC and the Company facilitated the January 2021 Secondary Sales. As a result, for the ~~nine~~three months ended ~~September 30,~~March 31, 2021, the Company recorded a total of $8.2 million in stock-based compensation expense for the difference between the price paid by these investors and the estimated fair value of the Founders Convertible Preferred Stock on the date of the transaction.

~~In April 2021,~~ 25

4 executive officers, Chris Kemp, CEO, Adam London, CTO, Kelyn Brannon, Chief Financial Officer (“CFO”), and Martin Attiq, Chief Business Officer (“CBO”), entered into stock purchase agreements with new investors to sell ~~2,534,793~~, ~~865,560~~, ~~1,500,000~~ ~~and~~ ~~400,000~~ ~~shares, respectively,~~Table of ~~Class A common stock of pre-combination Astra, at a purchase price per share of $~~Contents

~~5.66~~ (“April 2021 Secondary Sales”). No additional stock-based compensation expense was recognized for the nine months ended September 30, 2021 as the purchase price was below fair market value of Class A common stock of pre-combination Astra at the time of the sales.

Stock Options Awards

The following is a summary of stock option activity for the ~~nine~~six months ended ~~September~~June 30, ~~2021:~~

No. of
Options

Weighted- Average Exercise Price

Weighted- Average
Remaining
Term
(in Years)

Aggregate Intrinsic
Value

Outstanding – December 31, 2020

8,546,017

$
0.85

8.6

$
52,120,105

Granted

16,442,272

9.04

10.0

Exercised

(3,524,943
)

0.49

5.2

32,369,971

Forfeited

(690,398
)

1.05

—

Expired

(20,005
)

0.59

—

Outstanding – September 30, 2021

20,752,943

$
7.38

9.6

$
33,039,517

Unvested – September 30, 2021

18,946,136

Exercisable – September 30, 2021

1,806,807

2022:


		No. of Options				Weighted- Average Exercise Price				Weighted- Average Remaining Term (in Years)				Aggregate Intrinsic Value
Outstanding – December 31, 2021			20,326,384			$	7.52				9.4			$	22,782,654
Granted			1,142,027				5.21
Exercised			(231,491	)			0.45
Forfeited			(49,394	)			1.69
Expired			(5,067	)			6.75
Outstanding – June 30, 2022			21,182,459			$	7.48			8.94				$	2,733,826

Unvested – June 30, 2022			18,525,741			$	8.23				9.11			$	1,037,708
Exercisable – June 30, 2022			2,656,718			$	2.26			7.76				$	1,696,117

The ~~company~~Company uses the Black-Scholes option pricing-model to calculate the grant date fair value of ~~time based options and Monte Carlo simulation model to calculate the grant date fair value of performance based~~time-based options. The following table summarizes the assumptions used in estimating the fair value of options granted in the ~~nine~~six months ended ~~September~~June 30, ~~2021:~~2022:


		Time Based Stock Options

Expected terms (years)(1)			5.81
Expected volatility(2)			68.9	%
Risk-free interest rate(3)			1.70	%
Expected dividend rate(4)			0
Grant-date fair value		$	3.20

____________

Time Based Options

Performance Based Options

Expected terms (years)

6

2.5 - 4.4

Expected volatility

68.8
%

68.9
%
Risk-free interest rate

0.98
%

1.31
%
Expected dividend rate

0
%

0
%

(1)

The expected term is the length of time the grant is expected to be outstanding before it is exercised or terminated. This number is calculated as the midpoint between the vesting term and the original contractual term (contractual period to exercise). If the option contains graded vesting, then the vesting term would be based on the vesting pattern.

(2)

Expected volatility, or the standard deviation of annualized returns, was calculated based on comparable companies’ reported volatilities.

(3)

Risk-free interest was obtained from US treasury notes for the expected terms noted as of the valuation date.

(4)

The Company has assumed a dividend yield of zero as it has no plans to declare dividends in the foreseeable future.

Restricted Stock Units Awards

The following is a summary of restricted stock units for ~~time-based awards~~the six months ended June 30, 2022:


		Number of RSUs Outstanding				Weighted- Average Grant Date Fair Value Per Share
Outstanding – December 31, 2021			10,678,818			$	9.20
Granted			7,859,084				3.38
Vested			(1,570,858	)			8.76
Forfeited			(1,341,095	)			8.62
Outstanding – June 30, 2022			15,625,949			$	6.36

Total fair value as of the respective vesting dates of restricted stock units vested for the ~~nine~~six months ended ~~September~~June 30, ~~2021:~~2022 was approximately $4.9 million. As of June 30, 2022, the aggregate intrinsic value of unvested restricted stock units was $20.3 million.

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Number of RSUs Outstanding

Weighted- Average Grant Date Fair Value Per Share

Outstanding – December 31, 2020

—

$
—

Granted

9,352,100

9.04

Vested

—

—

Forfeited

—

—

Outstanding – September 30, 2021

9,352,100

$
9.04

Note 15 — Loss per Share

Founders Convertible Preferred Stock and Convertible Preferred Stock ~~and unvested Restricted Stock Awards (“RSA’s”) are~~were participating securities in periods of income, as the Founders Convertible Preferred Stock and Convertible Preferred Stock ~~and unvested RSAs participate~~participated in undistributed earnings on an as-if-converted or as-vested basis. However, the Founders Convertible Preferred Stock and Convertible Preferred Stock, dodid 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 ~~years~~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 ~~September~~June 30, 2022 and 2021, and ~~2020, and~~ the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,																For The Three Months Ended June 30,
		2021								2020								2022								2021
(in thousands, except share and per share amounts)		Class A Common				Class B Common				Class A Common				Class B Common				Class A Common				Class B Common				Class A Common				Class B Common
Net loss attributed to common stockholders		$	(12,697	)		$	(3,551	)			(596	)			(4,606	)		$	(65,025	)		$	(17,278	)		$	(9,393	)		$	(21,904	)
Adjustment to redemption value on Convertible Preferred Stock																			0				0				0				0
Net loss attributed to common stockholders																		$	(65,025	)		$	(17,278	)		$	(9,393	)		$	(21,904	)
Basic weighted average common shares outstanding			201,080,003				56,239,188				6,367,490				49,210,000				209,021,924				55,539,188				20,035,183				46,722,244
Dilutive weighted average common shares outstanding			201,080,003				56,239,188				6,367,490				49,210,000				209,021,924				55,539,188				20,035,183				46,722,244
Loss per share attributable to common stockholders:
Basic and Diluted loss per share		$	(0.06	)		$	(0.06	)		$	(0.09	)		$	(0.09	)		$	(0.31	)		$	(0.31	)		$	(0.47	)		$	(0.47	)

Nine Months Ended September 30,

2021

2020

(in thousands, except share and per share amounts)

Class A
Common

Class B
Common

Class A
Common

Class B
Common

Net loss attributed to common stockholders

$
(126,985
)

$
(79,532
)

$
(2,992
)

$
(23,016
)
Adjustment to redemption value on Convertible Preferred Stock

(622,098
)

(389,628
)

0

0

Net loss attributed to common stockholders

$
(749,083
)

$
(469,160
)

$
(2,992
)

$
(23,016
)
Basic weighted average common shares outstanding

79,784,524

49,970,071

6,334,324

48,722,577

Dilutive weighted average common shares outstanding

79,784,524

49,970,071

6,334,324

48,722,577

Loss per share attributable to common stockholders:

Basic and Diluted loss per share

$
(9.39
)

$
(9.39
)

$
(0.47
)

$
(0.47
)


		For The Six Months Ended June 30,
		2022								2021
(in thousands, except share and per share amounts)		Class A Common				Class B Common				Class A Common				Class B Common
Net loss attributed to common stockholders		$	(132,684	)		$	(35,332	)		$	(53,144	)		$	(137,125	)
Adjustment to redemption value on Convertible Preferred Stock			0				0				(282,587	)			(729,139	)
Net loss attributed to common stockholders		$	(132,684	)		$	(35,332	)		$	(335,731	)		$	(866,264	)
Basic weighted average common shares outstanding			208,569,794				55,539,188				18,131,574				46,783,559
Dilutive weighted average common shares outstanding			208,569,794				55,539,188				18,131,574				46,783,559
Loss per share attributable to common stockholders:
Basic and Diluted loss per share		$	(0.64	)		$	(0.64	)		$	(18.52	)		$	(18.52	)

There were 0 preferred dividends declared or accumulated as of ~~September~~June 30, ~~2021 and December 31, 2020.~~ 2021. The following securities were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive:


		As of June 30,
		2022								2021
		Class A Common				Class B Common				Class A Common				Class B Common
Stock options			8,166,274				0				5,993,412				0
RSUs			15,558,491				0				0				0
Convertible Preferred Stock			0				0				0				0
Warrants			0				0				15,813,829				0
Total			23,724,765				0				21,807,241				0

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As of September 30,

2021

2020

Class A
Common

Class B
Common

Class A
Common

Class B
Common

Stock options

20,752,943

0

10,299,548

0

RSUs

9,352,100

0

0

0

Convertible Preferred Stock

0

0

103,070,786

0

Warrants

15,333,309

0

480,520

0

Total

45,438,352

0

113,850,854

0

For the Convertible Notes, before settlement, for purposes of diluted earnings (loss) per share, the Company applies the if-converted method. However, because the adjustment to the numerator for interest expense was anti-dilutive, the Convertible Notes were not included in diluted earnings (loss) per share. Refer to Note 7 — Long-Term Debt for the key terms of the Convertible Notes.

Note 16 — Related Party Transactions

Cue Health, Inc.

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 (20%) discount on each Cue Reader and fourteen percent (14%) discount on each test cartridge. Mr. Stanford, a member of the Board and the Company’s Lead Director, serves on the board of directors of Cue Health Inc. Funds affiliated with ACME Capital collectively beneficially own 10.4% of the outstanding common stock of Cue Health Inc. Mr. Stanford was not involved in the negotiation of the Company’s arrangement with Cue Health Inc. The Company conducted its independent evaluation of Cue’s services and determined in its sole judgment Cue’s product and services were the best option for the Company to ensure it could maintain a safe and productive work environment. The Company made purchases of $0.2 million and $0.6 million during the three and six months ended June 30, 2022. NaN such purchases were made during the three and six months ended June 30, 2021.

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 $10.0 million and $0.6 million, respectively. In November 2020, the Company issued promissory convertible notes to Sherpa Ventures Fund II, LP and Eagle Creek Capital LLC, for gross proceeds of $0.2 million and $0.5 million, respectively. Some of the Company’s board members at that time were or are related parties of these entities. Nomi Bergman, who was serving as ~~our~~the Company's director when the promissory convertible notes were issued, is a principal of A/NPC Holdings LLC and Scott Stanford, who serves as ~~our~~the Company's director, is a principal of Sherpa Ventures Fund II, LP and a member of Eagle Creek Capital, LLC. In all instances the terms of these transactions were the same as third-party investors.

On January 28, 2021, the Company settled the promissory convertible notes through the issuance of Series C convertible preferred stock. 7,819,887 and 469,193 shares of Series C convertible preferred stock were issued to A/NPC Holdings LLC and Sherpa Ventures Fund II, LP at a per share price of $1.33 to settle $10.4 million and $0.6 million outstanding principal and accrued interest, respectively. Additionally, 264,928 and 115,771 shares of Series C convertible preferred stock were issued to Eagle Creek Capital, LLC and Sherpa Ventures Fund II, LP at a per share price of $1.71 to settle $0.5 million and $0.2 million outstanding principal and accrued interest, respectively. See Note 76 — Long-Term Debt for mechanism of settlement.

Note 17 — Subsequent Events

On ~~November 9, 2021,~~July 8, 2022, the plaintiffs voluntarily dismissed their stockholder derivative suit 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 dismissal was without prejudice to plaintiffs’ right to re-file the lawsuit in the Court of Chancery of the State of Delaware.

On July 28, 2022, the Company ~~granted~~entered into a lease agreement for approximately ~~33,000~~60,000 ~~restricted stock units (the “RSUs”)~~square feet of manufacturing facility in Sunnyvale, California having a lease term of 36 months with an option to extend for a period of additional 36 months. The undiscounted base rent payments for the ~~spouse~~first year of ~~its chairman, chief executive officer and founder, Chris Kemp (“Ms. Kemp”) as compensation~~this lease is approximately $1.8 million with a 4% increase in base rent for ~~investor relations and marketing services Ms. Kemp provided~~each subsequent year. In addition to base rent, the Company ~~as a consultant. The RSUs vest in one installment on~~will be responsible for the management fee of ~~November 15, 2021~~5~~. The value~~% of the ~~RSUs~~base rent. In lieu of a cash security deposit, the Company is required to provide the landlord an irrevocable letter of credit in the amount of $0.3 ~~million,~~million. This new lease facility will enable expansion of space product production and development capacity, thermal testing capacity, as well as providing production and engineering space for future space services business.

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Table of Contents

On August 2, 2022, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”) with B. Riley Principal Capital II, LLC (“B. Riley Principal Capital”). Pursuant to the Purchase Agreement, the Company will have the right to sell to B. Riley Principal Capital up to the lesser of (i) $100,000,000 of newly issued shares (the “Shares”) of the Class A Common Stock, and (ii) 53,059,650 Shares of Class A Common Stock, which number of shares is ~~based on~~equal to 19.99% of the ~~closing per share~~sum of Class A Common Stock and Class B common stock issued and outstanding immediately prior to the execution of the Purchase Agreement (subject to certain conditions and limitations), from time to time during the term of the Purchase Agreement. Upon execution of the Purchase Agreement, the Company issued 359,098 shares of Class A Common Stock to B. Riley as consideration for its irrevocable commitment to purchase shares of our Class A Common Stock from time to time.

Sales of the Shares pursuant to the Purchase Agreement, and the timing of any sales, are solely at the option of the Company over the 24-month period from the date of initial satisfaction of the conditions to B. Riley Principal Capital's obligation to purchase the Shares of Class A Common Stock set forth in the Purchase Agreement, including that a registration statement registering the resale by B. Riley Principal Capital of the Class A Common Stock under the Securities Act that may be sold to B. Riley Principal Capital by the Company under the Purchase Agreement is declared effective by the Securities and Exchange Commission (the “SEC”) and a final prospectus relating thereto is filed with the SEC. The purchase price of the Class A Common Stock that the Company may sell to B. Riley Principal Capital pursuant to the Purchase Agreement will be 97% of the average of the volume weighted average price of the Company’s Class A ~~common stock on November 9, 2021. Ms. Kemp’s consulting agreement was ratified, and~~Common Stock as calculated per the ~~grant of RSUs was approved,~~terms set forth in the Purchase Agreement. The net proceeds from sales, if any, under the ~~Company’s related party transaction policy.~~Purchase Agreement, will depend on the frequency and prices at which the Company sells the Shares of Class A Common Stock. To the extent the Company sells the Shares of Class A Common Stock under the Purchase Agreement, the Company currently plans to use any proceeds for working capital and general corporate purposes.

The Purchase Agreement prohibits the Company from issuing or selling any shares of Class A Common Stock to B. Riley Principal Capital under the Purchase Agreement which, when aggregated with all other shares of Class A Common Stock then beneficially owned by B. Riley Principal Capital and its affiliates would result in B. Riley Principal Capital beneficially owning more than 4.99% of the outstanding shares of Class A Common Stock.

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Table of Contents

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

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF aSTRA~~

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, ~~2020~~2021 and ~~2019~~2020 and unaudited interim condensed consolidated financial statements as of and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~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 ~~under “Risk Factors”.~~in the risk factors previously disclosed in our annual report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022, as updated by factors disclosed in the section titled "Risk Factors" in this Quarterly Report on Form 10-Q. 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. ~~prior to~~after the ~~Business Combination, and to New Astra following the consummation~~closing of the Business Combination on June 30, ~~2021.~~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 products and services to ~~improve life~~Improve Life on ~~Earth.~~Earth from Space®. 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. As a result,~~missions and we ~~believe most existing launch vehicles are too large, expensive, infrequently launched, and insufficiently responsive to meet the needs of the evolving space market.~~

We aim to ~~solve this problem with~~provide the world’s first mass-produced orbital launch system.

In July 2022, we decided to focus on the development and production of the next version of our launch system, which we unveiled at our inaugural SpaceTech Day on May 12, 2022. As a result, we have discontinued the production of launch vehicles supported by our current launch system and do not plan to conduct any further commercial launches in 2022. As part of the development cycle for our new launch system, we expect to conduct test launches of our new launch system in 2023 but are not certain whether we will be able to conduct paid commercial launches in 2023 using this new launch system. Whether we will be able to conduct paid commercial launches in 2023 will depend in part upon the success of these test launches.

Our new launch system ~~consists~~is intended to support launch vehicles that will serve a market focused on populating mega constellations. We have designed this launch system to support more payload capacity and a more frequent launch cadence, which we believe will allow us to offer our customers more dependable services. We have begun discussions with customers for whom we agreed to launch payloads on our Rocket 3 series launch vehicles (aka launch system 1.0) and the shift of ~~a small~~those flights to our Rocket 4 series (aka launch ~~vehicle~~system 2.0). Please carefully review our Risk Factors contained in this quarterly report on Form 10-Q for information regarding possible risks and ~~mobile ground infrastructure~~uncertainties that ~~can fit inside standard shipping containers for rapid deployment anywhere in~~our decision to focus on the ~~world. Our rocket requires a~~development of our new launch ~~site with little more than a concrete pad and only six Astra employees on-site, leveraging~~system may have on our ~~highly automated launch~~business, results of operations and future prospects.

We have also been focusing on the growth of our ~~production system~~space products business with the sale of our Astra Spacecraft Engine. The Astra Spacecraft Engine is ~~designed~~a propulsion engine that assists satellites in achieving and maintaining targeted orbits. Including 14 units in Apollo Fusion’s backlog on July 1, 2021, we have received cumulative committed orders for 103 Astra Spacecraft Engines, an increase of 69% compared to scale efficiently to hundreds of launches per year. Our rocket’s payload capacity is tailored for the needs of modern LEO satellite constellations, allowing precise and rapid placement of individual satellites into their required orbits. We believe this makes Astra’s system more responsive and affordable than other launch alternatives, for thousands of LEO satellites planned in the coming decade.March 31, 2022.

While our primary focus remains the ~~growth and~~ development of our launch services ~~business,~~offerings and growth of our existing space products, we continue to develop other ~~product~~space products and service offerings to support our overall mission to ~~Improve Life~~improve life on Earth from ~~Space. On November 4, 2021, we announced~~space. We are also focused on adding to our core space technology to support the ~~filing~~growth and development of ~~an application with the Federal Communications Commission for V-band spectrum access, which, if approved, would allow us to offer a satellite constellation in the future.~~

~~Holicity Business Combination~~our product and ~~Public Company Costs~~

We entered into a business combination agreement with Holicity Inc. (“Holicity”) on February 2, 2021. On June 30, 2021 (the “Closing Date”), the previously announced business combination was consummated. Upon the consummation of the business combination, Holicity Merger Sub Inc. (“Merger Sub”), a wholly owned subsidiary of Holicity, merged with and into Astra with Astra surviving the merger as a wholly owned subsidiary of Holicity (the “Business Combination”). Astra became a wholly owned subsidiary of Holicity, which renamed to Astra Space, Inc. (“New Astra”), and Astra renamed to Astra Space Operations, Inc. upon the consummation of the Business Combination.

The Business Combination was accounted for as a reverse recapitalization. Astra was the predecessor and New Astra is the successor SEC registrant, meaning that Astra’s financial statements for previous periods will be presented in New Astra’s future periodic reports filed with the SEC. Holicity was treated as the acquired company for financial statement reporting purposes.

The most significant change in the post-combination Company’s reported financial position and results was a net increase in cash of $463.6 million. We paid $25.2 million in transaction costs relating to the Business Combination at the closing. We recorded a liability related to the Public and Private Placement Warrants of $56.8 million in the condensed consolidated balance sheet on Closing Date.

As a consequence of the Business Combination, the Company trades under the ticker symbol “ASTR” on the Nasdaq. We anticipate that we will need to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting and legal and administrative resources, including increased audit and legal fees.service offerings.

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

37

and impact on its customers, suppliers, and employees, all of which is uncertain at this time. Astra ~~expects~~believes the COVID-19 pandemic tomay 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, ~~from anywhere in the world,~~ 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.

~~For more information on Astra’s operations and risks related to health epidemics, including the COVID-19 pandemic, please see the section entitled “Risk Factors.”~~30

Table of Contents

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.”~~Factors” in our Annual Report on Form 10-K for the period ended December 31, 2021, filed with the SEC on March 31, 2022, as updated by factors disclosed in the section titled "Risk Factors" in this Quarterly Report on Form 10-Q. We believe the factors discussed below are key to our success.

Commencing and Expanding Commercial ~~Launch~~ Operations

We ~~are on track to monthly production of~~commenced paid commercial launch services in 2022, with our launch ~~vehicles,~~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 ~~goal of reaching a regular launch cadence~~software issue, resulted in the ~~future. When~~upper stage not reaching orbit and the end of the mission. Through our investigation process, we ~~refer to a “commercial launch,”~~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 ~~mean a launch~~ conducted ~~under~~ an FAA commercial launch license. With binding agreements for over 50 launches (as of September 30, 2021), our contracted revenue is significant, and we are in active discussions with numerous potential customers, including government agencies and private satellite companies, to add to our contracted revenue.

~~In December 2020, we successfully launched Rocket 3.2 to an altitude of 380 km, demonstrating~~ orbital launch capability. We improved propellant depletion controls to address the findings from the December 2020 flight. In August 2021, we launched Rocket LV0006 of which engine was aborted. During liftoff, fuel and liquid oxygen leaked from the propellant supply system attached to the rocket. The leaked propellants mixed and ignited, which disabled one of the five first-stage engines. We analyzed the cause of the anomaly and implemented certain design changes to avoid having this issue in future. Prior to commencing commercial launches, we must secure launch licenses with the Federal Aviation Administration (FAA). On August 18, 2021, the FAA issued us a license to launch the current version ofon our launch vehicle ~~(Rocket 3)~~LV0009 for three customers of Spaceflight, Inc. and confirmed our first delivery of customer payloads into Earth orbit. On June 12, 2022, we conducted our first launch for NASA’s TROPICS-1 mission on our launch vehicle LV0010. While we had a nominal first stage flight, our upper stage shut down early and we did not deliver the payloads into low Earth orbit. We have been working closely with NASA and the FAA to investigate the failure. We have reviewed all the flight data, and continue to eliminate branches and elements of the fault tree. To conduct our launches, we are required to receive commercial space transportation licenses from ~~our spaceport in Kodiak, Alaska through March 9, 2026.~~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.

We have made substantial progress towards demonstrating a monthly launch production capability during the first two quarters of 2022, with a goal of reaching an even more frequent launch production capability in the future. We have decided to focus on the development of our new launch system and thus, have discontinued the production of launch vehicles supported by our current launch system. When we refer to a “commercial launch,” we mean a launch conducted under an FAA commercial launch license.

We also commenced delivery of space products during the three months ended June 30, 2022. We expect the volume of delivery of our space products would increase in the future as we continue to fulfill our obligations under existing space products contracts and enter into contracts with potential new customers. In late July 2022, the Company entered into a lease agreement for approximately 60,000 square feet of manufacturing facility in Sunnyvale, California having a lease term of 36 months. This new lease facility will enable expansion of our space products production and development capacity, thermal testing capacity, as well as providing production and engineering space for future space services business.

Lowering Manufacturing Costs and Increasing Payloads

We aim to be ~~the most~~a cost-efficient dedicated orbital launch system provider. We plan to increase the maximum payload ~~capability~~capacity of our ~~rockets from approximately 50 kg for our first commercial flight~~launch vehicle to ~~up to 500 kg for~~meet customer needs and demands through a ~~mid-inclination 500 km orbit, which we believe will make Astra a compelling option for low Earth orbit constellation deployment~~process of iterative development and replenishment. Our affordable manufacturing processes use normally readily available materials and are highly scalable, while we believe our ongoing improvements in design and manufacturing will further reduce our per rocket manufacturing costs.improvement. We have ~~invested approximately $19.3 million~~made significant investment in our manufacturing facility ~~through September 30,~~located in Alameda, California. Please see risk factors previously disclosed in our Annual Report on Form 10-K for the period ended December 31, 2021, ~~and we expect~~filed with the ~~facility will be at full capacity~~SEC on March 31, 2022, as updated by factors disclosed in the ~~end of 2024, which we believe will enable us~~section titled "Risk Factors" in this Quarterly Report on Form 10-Q, for factors that could affect our ability to ~~increase~~realize benefits from the ~~pace of launch vehicle construction and~~investment in our ~~launch cadence.~~manufacturing facility. While we believe that our estimate is reliable, ~~the development 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 ~~Products and~~ Services Offerings

We are in the preliminary stages of developing our ~~Space Services~~space services offering, ~~(which we previously referred to as "Satellite Services"),~~ providing a 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~~space services encompass all aspects of hosted satellite and constellation services, including hosting customer payloads onto our satellites, and delivering services, such as communication ~~and other services, to customers from our space platform.~~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

31

Table of Contents

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.

38

On November 4, 2021, we filed an application with the ~~Federal Communication Commission,~~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~~space services offering to enable communications. We anticipate a response within 12 to 30 months from the date of application.

~~We also expect to launch our Spaceport Services offering, which may provide turn-key spaceports with~~In the capability to launch Astra rockets or contracting launch services through these spaceports. We envision that our spaceports will require minimal on-site infrastructure, will leverage our highly automated launch operations and can be installed for an initial cost of between approximately $10 million and $20 million. We anticipate this offering will lead to important additional opportunities, such as providing launch services for customers, both government and commercial, interested in launching out of a specific locale. Wefuture, we would expect to make significant investments in our ~~Space Services and Spaceport Services~~space services programs. Although we believe that our financial resources ~~including the proceeds of the Business Combination and the related private placement,~~ 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. ~~Please see the section entitled “Risk Factors”.~~

~~Acquisition of Apollo Fusion~~

On July 1, 2021, the Company completed its acquisition of Apollo Fusion, Inc. (“Apollo”), a designer and builder of thruster propulsion systems for satellite programs. The acquisition-date fair value of the consideration transferred totaled $75.4 million, net of cash acquired, consisting of approximately 2,558,744 shares of the Company’s Class A common stock worth $33.0 million which was determined based on the closing market price of the Company's common stock on the acquisition date, $19.9 million in cash and $23.0 million of the fair value of contingent consideration. The contingent consideration arrangement requires the Company to pay up to $75.0 million payable in $15.0 million of cash and $60.0 million of the Company’s Class A common stock, at a reference price per share equal to the then volume weighted average trading price over a five-day trading period prior to the business day prior to issuance, provided certain customer revenue-based milestones are achieved prior to December 31, 2023.

In addition, an additional $10.0 million of cash ("Cash Payment") and options to purchase shares of the Company’s Class A Common Stock, having a value of $10.0 million ("Incentive Shares"), at a reference price per share equal to the then volume weighted average trading price over a five day trading period prior to the business day prior to issuance, will be issued or issuable to employees of Apollo that join Astra, subject to certain performance-based milestones and other vesting provisions. This consideration is accounted for as compensation expense over the requisite service period in the post-acquisition period as the cash payment and vesting of Incentive Shares is subject to continued employment with the company until the satisfaction of certain performance-based milestones and other vesting provisions. As of September 30, 2021, no Incentive Shares were granted to employees of Apollo that joined the Company subsequent to the acquisition as certain key terms and conditions of the Incentive Shares were not finalized. The Company assessed the probability of success of performance milestones related to the Cash Payment and determined that it is probable that certain milestones will be met. Therefore, the Company recognized $1.4 million compensation costs which was included in research and development expense for the three months and nine months ended September 30, 2021 and $1.4 million was accrued in accrued expenses and other current liabilities as of September 30, 2021.

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 ~~have not generated any revenue to date. Following the~~commenced our first paid commercial launch, which occurred in February 2022, followed by subsequent paid commercial launches which occurred in March 2022 and June 2022. These launches represent the start of our ~~services,~~paid commercial launch operations. As discussed earlier, we ~~expect~~have discontinued the production of launch vehicles supported by our current launch system and do not plan to ~~generate a significant portion~~conduct any further commercial launches in 2022. See “Overview” for more information about our decision to stop producing launch vehicles supported by our current launch system.

We also commenced delivery of space products to our ~~revenues in Launch Services from delivering payloads into orbit.~~customers during the three months ended June 30, 2022. We also expect to generate revenues by ~~providing design and delivery of propulsion systems, Space Services and Spaceport Services~~delivering space services to our ~~customers. Over time,~~customers in the future.

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 inventory write-downs to reduce the carrying value of inventory related to launch services when the carrying value 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 launch vehicles supported by our new launch system. We expect our cost of revenues to increase 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 ~~Space Services~~our gross margins to ~~grow more quickly and to represent a significant portion of our revenues beyond 2025.~~improve 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 ~~benefits)~~stock-based compensation expense), depreciation expense, amortization of intangible assets, overhead allocation (consisting of various support and facility costs)~~, stock-based compensation~~ and consulting fees. Research and development costs are expensed as incurred.

39

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:

•

timing in finalizing launch and space systems design and specifications;

•

successful completion of analyses and ground test programs to validate that new or changed designs perform as expected;

•

successful completion of flight test programs, including flight safety tests;

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Table of Contents

•

our ability to obtain additional applicable approvals, licenses or certifications from regulatory agencies, if required, and maintaining current approvals, licenses or certifications;

•

performance of our manufacturing facilities despite risks that disrupt productions, such as natural disasters and hazardous materials;

•

performance of a limited number of suppliers for certain raw materials and components;

•

performance of our third-party contractors that support our research and development activities;

•

our ability to maintain rights from third parties for intellectual properties critical to research and development activities; and

•

our ability to continue funding and maintain our current research and development activities.

A change in the outcome of any of these variables could delay the development of our ~~rockets,~~launch and space systems, which in turn could impact ~~when we are able to commercialize~~the timing of commercialization of our offerings.

As we are ~~currently still in our final development~~developing and ~~testing stage of~~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~~space services offering.

Sales and Marketing Expense

Sales and marketing expenses consist of personnel and personnel-related expenses ~~including~~(including stock-based compensation expense) 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. ~~We did not begin incurring sales and marketing expenses until 2021.~~

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. We expect our general and administrative expenses will increase over time as we expand our business operations and product and service offerings.

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.

40

~~Results of Operations~~

~~Comparison of the Three Months and Nine Months Ended September 30, 2021 and 2020~~

Three Months Ended
September 30,

Period over
period change

Nine Months Ended
September 30,

Period over
period change

(in thousands, except percentages)

2021

2020

($)

(%)

2021

2020

($)

(%)

Operating expenses:

Research and development

$
21,724

$
5,423

$
16,301

301
%

44,159

20,955

$
23,204

111
%
Sales and marketing

1,090

—

1,090

n.m.

2,229

—

2,229

n.m.

General and administrative

19,730

2,358

17,372

737

50,712

9,341

41,371

443

Total operating expenses

(42,544
)

(7,781
)

(34,763
)

447

(97,100
)

(30,296
)

(66,804
)

221

Loss from operations

(42,544
)

(7,781
)

(34,763
)

447

(97,100
)

(30,296
)

(66,804
)

221

Interest (expense) income, net

18

(1,312
)

1,330

(101
)

(1,194
)

(3,564
)

2,370

(66
)
Other income, net

25,895

3,891

22,004

566

25,177

7,852

17,325

221

Loss on extinguishment of
   convertible notes

—

—

—

n.m.

(131,908
)

—

(131,908
)

n.m.

Loss on extinguishment of
   convertible notes attributable
   to related parties

—

—

—

n.m.

(1,875
)

—

(1,875
)

n.m.

Loss before taxes

(16,631
)

(5,202
)

(11,429
)

220

(206,900
)

(26,008
)

(180,892
)

696

Income tax (benefit) expense

(383
)

—

(383
)

n.m.

(383
)

—

(383
)

n.m.

Net loss

$
(16,248
)

$
(5,202
)

$
(11,046
)

212
%

$
(206,517
)

$
(26,008
)

$
(180,509
)

694
%

~~____________~~

~~n.m. = not meaningful.~~

~~Research and Development~~

Research and development costs were $21.7 million for the three months September 30, 2021, compared to $5.4 million for the three months ended September 30, 2020. The $16.3 million increase mainly reflected a $9.8 million increase in personnel-related costs and recruiting expenses for personnel in research and development departments, a $1.3 million increase in stock compensation expense, a $1.7 million increase in research and development materials expense, a $1.6 million increase in Technology licensed and software subscription licenses related expenses, a $0.7 million increase in depreciation and amortization expense with the remainder due to changes in freight and other research and development related expenses.

Research and development costs were $44.2 million for the nine months September 30, 2021, compared to $21.0 million for the nine months ended September 30, 2020. The $23.2 million increase mainly reflected a $12.4 million increase in personnel-related costs and recruiting expenses for personnel in research and development departments, a $4.4 million increase in stock compensation expense, a $2.4 million increase in research and development materials expense, a $1.8 million increase in Technology licensed and software subscription licenses related expenses and a $1.0 million increase in depreciation and amortization expense with the remainder due to changes in freight and other research and development expenses.

~~Sales and Marketing~~

Sales and Marketing expenses were $1.1 million for the three months ended September 30, 2021. There were no sales and marketing expenses in the three months ended September 30, 2020 as the Company was primarily focused on research and development activities.

Sales and Marketing expenses were $2.2 million for the nine months ended September 30, 2021. There were no sales and marketing expenses in the nine months ended September 30, 2020 as the Company was primarily focused on research and development activities. The sales and marketing expenses primarily consists of personnel-related costs and consulting charges.

~~General and Administrative~~

General and administrative expenses were $19.7 million for the three months ended September 30, 2021, compared to $2.4 million for the three months ended September 30, 2020. The $17.4 million increase was primarily due to a $5.7 million increase in employee-related costs, a $1.3 million increase in stock-based compensation expense, a $3.1 million increase from transaction costs incurred and expensed by the Company in relation to the Apollo Merger, a $1.5 million increase in third-party consulting and recruitment costs, a $2.1 million increase in accounting and legal related expenses, a $1.7 million increase in insurance related expenses with the remainder due to changes in facilities costs, software subscription fees and other general and administrative related expenses.

General and administrative expenses were $50.7 million for the nine months ended September 30, 2021, compared to $9.3 million for the nine months ended September 30, 2020. The $41.4 million increase was primarily due to a $15.4 million increase in stock-based

41

compensation expense, a $6.2 million increase from transaction costs incurred and expensed by the Company in relation to the business combination and Apollo Merger, a $7.9 million increase in employee costs, a $4.2 million increase in third-party consulting and recruitment costs, a $3.1 million increase in accounting, audit and legal related fees, a $1.8 million increase in insurance related expenses and a $1.5 million increase in facility and rent, with the remainder due to changes in facilities costs, IT equipment fees, and software subscription fees.

~~Interest (Expense) Income, Net~~

There was no interest expense for the three months ended September 30, 2021, compared to $1.3 million for the three months ended September 30, 2020. The $1.3 million decrease in interest expense was primarily due to the settlement of convertible notes on January 28, 2021, therefore we incurred no interest expense related to convertible notes for three months ended September 30, 2021 while we incurred $1.3 million interest expense related to convertible notes for three months ended September 30, 2020.

Interest expense, net was $1.2 million for the nine months ended September 30, 2021, compared to $3.6 million for the nine months ended September 30, 2020. The $2.3 million decrease in interest expense was primarily due to the settlement of convertible notes on January 28, 2021, therefore we incurred $0.5 million and $3.5 million interest expense related to convertible notes for nine months ended September 30, 2021 and 2020, respectively, offset by an increase of $0.6 million in interest expense related to Bridge Loan and SVB loan for nine months ended September 30, 2021.

Other Income (Expense), Net

Other income (expense), net ~~was $25.9 million for the three months ended September 30, 2021, compared to $3.9 million for the three months ended September 30, 2020. The $22.0 million increase in other income was~~ primarily ~~due to a $20.4 million in income from change in fair value~~consists of ~~warrant liability, a $4.9 million in income from a gain on forgiveness of PPP Note and a $0.6 million in~~ income from government research and development contracts for the three months ended September 30, 2021 offset by a $2.6 million in income from a gain on the mark to market derivative liability related to convertible notes and a $1.2 million in income from government research and development contracts for the three months ended September 30, 2020. The remaining $0.1 million was due to other nonrecurring income for three months ended September 30, 2021.

Other income, net was $25.2 million for the nine months ended September 30, 2021, compared to $7.9 million for the nine months ended September 30, 2020. The $17.3 million increase in other income was primarily due to a $20.4 million in income from change in fair value of warrant liability, a $4.9 million in income from a gain on forgiveness of PPP Note and a $0.6 million in income from government research and development contracts for the nine months ended September 30, 2021 offset by $0.8 million due to a nonrecurring payment to one of our investors for the nine months ended September 30, 2021 and a $5.4 million in income from a gain on the mark to market derivative liability related to convertible notes and a $2.2 million in income from government’s research and development contracts for the nine months ended September 30, 2020.

~~Loss on Extinguishment of Convertible Notes~~

~~There was no such loss for the three months ended September 30, 2021 and 2020.~~

Loss on extinguishment of convertible notes of $131.9 million for the nine months ended September 30, 2021 was due to the settlement of convertible notes on January 28, 2021. There was no such loss for the nine months ended September 30, 2020.

~~Loss on Extinguishment of Convertible Notes Attributable to Related Parties~~

~~There was no such loss for the three months ended September 30, 2021 and 2020.~~

Loss on extinguishment of convertible notes attributable to related parties of $1.9 million for the nine months ended September 30, 2021 was due to the settlement of convertible notes attributable to related parties on January 28, 2021. There was no such loss for the nine months ended September 30, 2020.

~~Income Tax (Benefit) Expense~~

We recorded an income tax benefit of $0.4 million as the result of Apollo acquisition for the three months and nine months ended September 30, 2021. We did not incur income tax expense for the three months and nine months ended September 30, 2020.

~~Adjustment to redemption value on Convertible Preferred Stock~~

~~There was no adjustment to redemption value on Convertible Preferred Stock for the three months ended September 30, 2021 and 2020.~~

42

Adjustment to redemption value on Convertible Preferred Stock of $1,011.7 million for the nine months ended September 30, 2021, was due to the remeasurement of Convertible Preferred Stock to its redemption value due to the likelihood of a redemption event becoming probable. There was no such adjustment for the nine months ended September 30, 2020.

~~Liquidity and Capital Resources~~

~~Liquidity~~

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 research and development activities, mainly in connection with the ongoing development of our rocket technology, lease obligations and capital expenditures, which primarily relate to the development of our manufacturing facility.

We had $378.7 million in cash and cash equivalents as of September 30, 2021 (compared to $10.6 million as of December 31, 2020). We had no debt as of September 30, 2021 (compared to $71.1 million as of December 31, 2020, of which $59.8 million represented outstanding principal on the Company’s convertible notes). On January 28, 2021, we settled the outstanding convertible notes into convertible preferred shares as part of the Series C financing, from which we also received $30.0 million in cash proceeds. In June 2021, we closed the Business Combination and private placement, from which we received $463.6 million in net cash proceeds. We believe our operating cash flows, together with our cash on hand and the net proceeds from the Business Combination and the related private placement will be sufficient to meet our working capital and capital expenditure requirements for a period of at least twelve months from the date of these financial statements.

While we expect to begin generating positive cash flows from our operating activities in 2024 (based on our anticipated Launch Services offering only), we may need additional cash due to changing business conditions or other developments, including unanticipated regulatory developments and competitive pressures.

~~Summary Statement of Cash Flows for the Nine Months Ended September 30, 2021 and 2020~~

~~The following table sets forth the primary sources and uses of cash and cash equivalents for the periods presented below:~~

Nine months ended September 30,

Period over Period Change

(in thousands)

2021

2020

$

%

Net cash used in operating activities

$
(79,576
)

$
(24,896
)

$
(54,680
)

220
%
Net cash used in investing activities

(41,280
)

(2,223
)

(39,057
)

1,757

Net cash provided by financing activities

488,897

21,850

467,047

2,138

Net increase (decrease) in cash and cash equivalents and restricted cash

$
368,041

$
(5,269
)

$
373,310

(7085
)%

~~Cash Flows used in Operating Activities~~

For the nine months ended September 30, 2021, net cash used in operating activities was $79.6 million. The primary factors affecting the Company’s operating cash flows during this period were net loss of $206.5 million and a non-cash gain of $20.4 million due to change in fair value of warrant liability and $4.9 million due to a gain on forgiveness of PPP Note, offset by non-cash charges including a non-cash loss on extinguishment of convertible notes of $133.8 million, stock-based compensation expense of $20.5 million, depreciation and amortization expense of $3.9 million, and amortization of convertible note debt discounts of $0.4 million. Changes in operating working capital items primarily reflect the increase in inventories of $4.2 million, prepaid and other current assets of $13.9 million, accounts payable of $1.3 million, accrued expenses and other current liabilities of $11.3 million and decrease in other non-current liabilities of $0.2 million.

For the nine months ended September 30, 2020, net cash used in operating activities was $24.9 million, which was comprised of net loss of $26.0 million and a non-cash gain on mark to market derivatives of $5.4 million, offset by non-cash charges including stock-based compensation expense of $0.6 million, depreciation expense of $2.5 million, and amortization of convertible note debt discounts of $2.7 million. Changes in operating working capital items primarily reflect the increase in accrued expenses and other current liabilities of $1.6 million and decreases in accounts payable of $0.7 million.

~~Cash Flows used in Investing Activities~~

For the nine months ended September 30, 2021, net cash used in investing activities was $41.3 million, which was comprised mainly of cash paid as purchase price consideration in the acquisition of Apollo Fusion, Inc., net of cash acquired of $19.4 million, acquisition of an indefinite-lived intangible trademark asset of $3.2 million and purchases of property, plant and equipment of $18.7 million.

43

For the nine months ended September 30, 2020, net cash used in investing activities was $2.2 million, which was comprised mainly of purchases of tooling equipment, manufacturing equipment and furniture and fixtures of $1.0 million and leasehold improvements of $1.2 million.

~~Cash Flows from Financing Activities~~

For the nine months ended September 30, 2021, net cash provided by financing activities amounted to $488.9 million and consisted primarily of proceeds from the Business Combination and private offering, net of transaction costs, of $463.6 million, proceeds from the issuance of Series C of $30.0 million and borrowings of $10.0 million, proceeds from the issuance of stock under equity plans of $1.8 million, offset by repayments on borrowings of $16.4 million.

For the nine months ended September 30, 2020, net cash provided by financing activities amounted to $21.9 million and consisted primarily of proceeds from the issuance of convertible notes of $17.9 million and borrowings of $5.4 million, partially offset by repayments on borrowings of $1.4 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 September 30, 2021:

Year Ending December 31

Minimum Lease
Commitment

(in thousands)

2021 (excluding the nine months ended September 30, 2021)

$
458

2022

1,761

2023

1,655

2024

1,655

2025

1,655

Thereafter

4,481

Total future undiscounted minimum lease payments

$
11,665

Less: Imputed Interest

(2,486
)
Total reported lease liability

$
9,179

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. No purchases were made under the contract for the three months ended September 30, 2021. For the nine months ended September 30, 2021, the Company made total purchases of $0.4 million.

~~Apart from the aforementioned leases and purchase commitments, we do not have any other material contractual obligations, commitments or contingent obligations.~~

~~Off-Balance Sheet Arrangements~~

As of September 30, 2021, we did not have any off-balance sheet arrangements, as defined in the rules and regulations of SEC Regulation S-K, such as the use of unconsolidated subsidiaries, structured finance, special purpose entities or variable interest entities.contracts.

Critical Accounting ~~Policies and~~ Estimates

Our ~~consolidated~~ 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 ~~expenses,~~ assets and liabilities and ~~the~~ disclosure of contingent assets and ~~liabilities.~~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 ~~our~~the condensed consolidated financial statements herein.

There were no significant changes in our critical accounting estimates during the three and six months ended June 30, 2022 compared to those previously disclosed in “Critical Accounting Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included ~~elsewhere~~ in ~~this quarterly report~~the 2021 Annual Report on Form ~~10-Q. Our critical accounting policies are described below.~~10-K.

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Results of Operations

Comparison of the Three and Six Months Ended June 30, 2022 and 2021


		For The Three Months Ended June 30,								Period over period change								For The Six Months Ended June 30,								Period over period change
(in thousands, except percentages)		2022				2021				($)				(%)				2022				2021				($)				(%)
Revenues		$	2,682			$	—			$	2,682			n.m.				$	6,593			$	—			$	6,593			n.m.
Cost of revenues			17,445				—				17,445			n.m.					28,459				—				28,459			n.m.
Gross loss			(14,763	)			—				(14,763	)		n.m.					(21,866	)			—				(21,866	)		n.m.
Operating expenses:
Research and development			40,798			$	10,458			$	30,340				290	%			78,725			$	22,435			$	56,290				251	%
Sales and marketing			4,636				1,125				3,511				312				9,400				1,189				8,211				691
General and administrative			20,608				18,318				2,290				13				41,594				30,931				10,663				34
Loss on change in fair value of contingent consideration			1,800				—				1,800			n.m.					17,300				—				17,300			n.m.
Total operating expenses			67,842				29,901				37,941				127				147,019				54,555				92,464				169
Operating loss			(82,605	)			(29,901	)			(52,704	)			176				(168,885	)			(54,555	)			(114,330	)			210
Interest (expense) income, net			356				(678	)			1,034				(153	)			530				(1,213	)			1,743				(144	)
Other income (expense), net			(54	)			(718	)			664				(92	)			339				(718	)			1,057				(147	)
Loss on extinguishment of convertible notes			—				—				—			n.m.					—				(131,908	)			131,908			n.m.
Loss on extinguishment of convertible notes attributable to related parties			—				—				—			n.m.					—				(1,875	)			1,875			n.m.
Loss before taxes			(82,303	)			(31,297	)			(51,006	)			163				(168,016	)			(190,269	)			22,253				(12	)
Income tax (benefit) expense			—				—				—			n.m.					—				—				—			n.m.
Net loss		$	(82,303	)		$	(31,297	)			(51,006	)			163			$	(168,016	)		$	(190,269	)			22,253				(12	)
Adjustment to redemption value on Convertible Preferred Stock			—				—				—			n.m.					—				(1,011,726	)			1,011,726			n.m.
Net loss attributable to common stockholders		$	(82,303	)		$	(31,297	)		$	(51,006	)			163	%		$	(168,016	)		$	(1,201,995	)		$	1,033,979				(86	)

____________

n.m. = not meaningful.

Revenues

Revenues were $2.7 million for the three months ended June 30, 2022 of which $2.0 million related to launch services and $0.7 million related to space products. We launched launch vehicle LV0010 on June 12, 2022 which was a paid commercial launch. We also commenced delivery of space products to our customers during the three months ended June 30, 2022. No revenues were recognized during the three months ended June 30, 2021.

Revenues were $6.6 million for the six months ended June 30, 2022 of which $5.9 million related to launch services and $0.7 million related to space products. We commenced paid commercial launch services and delivery of space products during the six months ended June 30, 2022. We launched launch vehicles LV0008, LV0009 and LV0010 on February 10, 2022, March 15, 2022 and June 12, 2022, respectively, all 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 six months ended June 30, 2021.

Cost of Revenues

Cost of revenues were $17.4 million for the three months ended June 30, 2022 which was primarily driven by recording of $13.3 million of inventory write-downs and $4.1 million of cost of launch services and space products. The $13.3 million of inventory write-downs was driven by $10.2 million related to the discontinuance of launch vehicles supported by our current launch system and $3.1 million of other write-downs. The cost of launch services does not reflect the actual gross margins as certain inventory values were recorded at net realizable value. No cost of revenues were recognized for the three months ended June 30, 2021.

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Cost of revenues were $28.5 million for the six months ended June 30, 2022 which was primarily driven by recording of $18.8 million of inventory write-downs and $9.6 million of cost of launch services and space products. The $18.8 million of inventory write-downs was driven by $10.2 million related to the discontinuance of launch vehicles supported by our current launch system, $5.5 million related to the net realizable value write-downs and $3.1million of other write-downs. The cost of launch services does not reflect the actual gross margins as certain inventory values were recorded at net realizable value. In the first six months of 2022, we conducted our first paid commercial launch and have not yet achieved economies of scale in our manufacturing processes. We also decided to stop paid commercial launches for the remainder of 2022 so that we can focus on developing our new launch system. As a result, we will continue to incur negative gross margins for the remainder of 2022. No cost of revenues were recognized for the six months ended June 30, 2021.

Research and Development

We conduct research and development activities to develop existing and future technologies that advance our space platform offerings towards commercialization. Research and development activities include basic research, applied research, concept formulation studies, design, development, and related test program activities. Costs incurred for developing our spaceflight system and flight profiles

44

primarily include equipment, material, and labor hours used for development and testing. Costs incurred for performing ground tests and test flights primarily include rocket or spacecraft components, propellants and other consumables, shipping and transport costs, shipping and transport costs, and payroll and benefits for employees and ground crew. Research and development costs ~~also include rent, maintenance, and depreciation of facilities and equipment and other allocated overhead expenses. We expense all~~were $41.0 million for the three months ended June 30, 2022, compared to $10.5 million for the three months ended June 30, 2021. The $30.5 million increase mainly reflected a $14.2 million increase in personnel-related costs due to headcount increases in research and development departments, a $5.9 million increase in research and development materials expense, a $5.2 million increase in stock-based compensation expense, a $3.1 million increase in depreciation and amortization expense, a $2.9 million increase in third party consulting and recruitment costs ~~as incurred.~~and a $1.2 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.

~~Stock-Based Compensation~~Research and development costs were $78.9 million for the six months ended June 30, 2022, compared to $22.4 million for the six months ended June 30, 2021. The $56.5 million increase mainly reflected a $26.0 million increase in personnel-related costs due to headcount increases in research and development departments, a $9.7 million increase in research and development materials expense, a $9.0 million increase in stock-based compensation expense, a $4.8 million increase in third party consulting and recruitment costs, a $4.4 million increase in depreciation and amortization expense and a $1.9 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.

~~We recognize~~Sales and Marketing

Sales and marketing expenses were $4.6 million for the three months ended June 30, 2022, compared to $1.1 million for the three months ended June 30, 2021. The $3.5 million increase mainly reflected a $1.5 million increase in personnel-related costs, a $1.4 million in stock-based compensation expense and a $0.3 million increase in depreciation expense with the remainder due to changes in other sales and marketing expenses. These increases were to support business development and marketing activities.

Sales and marketing expenses were $9.4 million for ~~time-based restricted stock units (“RSUs”) using~~ the ~~straight-line amortization method based~~six months ended June 30, 2022, compared to $1.2 million for the six months ended June 30, 2021. The $8.2 million increase mainly reflected a $3.3 million increase in personnel-related costs, a $2.9 million in stock-based compensation expense and a $0.8 million increase in depreciation expense 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 $20.6 million for the three months ended June 30, 2022, compared to $18.3 million for the three months ended June 30, 2021. The $2.3 million increase was primarily due to a $5.0 million increase in employee costs due to increased headcount, a $1.7 million increase in insurance related expenses, a $1.1 million increase in technology licensed and software subscription licenses related expenses, a $0.5 million increase in third party consulting and recruitment costs and a $0.4 million increase in accounting, audit and legal related fees which is partially offset by a $2.2 million decrease from transaction costs incurred and expensed by the Company in relation to the Business Combination, a $1.2 million decrease in stock-based compensation expense with the remainder due to changes in facilities costs, IT equipment fees, and other services.

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General and administrative expenses were $41.5 million for the six months ended June 30, 2022, compared to $30.9 million for the six months ended June 30, 2021. The $10.6 million increase was primarily due to a $10.4 million increase in employee costs due to increased headcount, a $3.7 million increase in insurance related expenses, a $2.4 million increase in technology licensed and software subscription licenses related expenses, a $1.1 million increase in third party consulting and recruitment costs and a $1.7 million increase in accounting, audit and legal related fees which is partially offset by a $2.2 million decrease from transaction costs incurred and expensed by the Company in relation to the Business Combination with the remainder due to changes in facilities costs, IT equipment fees, and other services.

Loss on Change in Fair Value of Contingent Consideration

Loss on change in fair value of contingent consideration of $1.8 million and $17.3 million for the three and six months ended June 30, 2022, respectively, was due to higher revenues forecasted in estimating the fair value of ~~RSUs~~contingent consideration. No loss on the date of grant. The fair value of RSUs is the closing market price of Astra common stock on the date of grant. We recognize compensation expense for time-based stock options and employee stock purchase plan rights under the 2021 Employee Stock Purchase Plan, based on the estimated grant-date fair value determined using the Black-Scholes valuation model with a straight-line amortization method. We determine the fair value of stock options, which is impacted by the following assumptions:



Expected Term — We use the midpoint between the vesting term and the original contractual term (contractual period to exercise). If the option contains graded vesting, then the vesting term is based on the vesting pattern.



~~Expected Volatility — The volatility is based on a benchmark of comparable companies.~~



~~Expected Dividend Yield — The dividend rate used is zero as we have never paid any cash dividends on common stock and do not anticipate doing so in the foreseeable future.~~



Risk-Free Interest Rate — The interest rates used are based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.

Certain equity awards include service, market and performance conditions ("Performance-based awards"). The fair value of Performance-based awards is estimated on the date of grant using the Monte Carlo simulation technique. Compensation expense for Performance-based awards is amortized based upon a graded vesting method over the requisite service period.

~~We reverse previously recognized costs for unvested options in the period that forfeitures occur.~~

~~Income Taxes~~

We follow the asset and liability method of accounting for income taxes under ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between consolidated financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

We determine whether it is more likely than not that a tax position will be sustained upon examination. If it is not more likely than not that a position will be sustained, no amount of benefit attributable to the position is recognized. The tax benefit to be recognized for any tax position that meets the more likely than not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon resolution of the contingency. Changes in recognition or measurement are reflected in the period in which judgment occurs.

Our policy is to include interest and penalties related to the underpayment of income taxes as a component of the provision for income taxes. To date, there have been no interest or penalties recorded in relation to unrecognized tax benefits.

~~Derivative Instruments~~

We recognize all derivative instruments as either assets or liabilities in the balance sheet at their respective fair values. We evaluate our debt and equity issuances to determine if those contracts or embedded components of those contracts qualify as derivatives requiring separate recognition in our financial statements. The result of this accounting treatment is that the fair value of the embedded derivative is revalued as of each reporting date and recorded as a liability, and the change in fair value of contingent consideration was recorded for the three and six months ended June 30, 2021.

Interest (Expense) Income, Net

Interest income was $0.4 million for the three months ended June 30, 2022, compared to interest expense of $0.7 million for the three months ended June 30, 2021. The $1.1 million increase in interest (expense) income, net was primarily due to the settlement of outstanding debt during the ~~reporting~~year ended December 31, 2021. Therefore, we did not incur any interest expense during the period ~~is recorded~~and an increase of $0.4 million in interest income related to investment in marketable securities during the three months ended June 30, 2022.

Interest income was $0.5 million for the six months ended June 30, 2022, compared to interest expense of $1.2 million for the six months ended June 30, 2021. The $1.7 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 $0.5 million in interest income related to investment in marketable securities during the six months ended June 30, 2022.

Other Income (Expense), Net

Other expense, net was $0.1 million for the three months ended June 30, 2022, compared to $0.7 million for the three months ended June 30, 2021. The $0.6 million decrease in other income (expense), net was primarily due a non-recurring payment to one of Legacy Astra’s investors for the three months ended June 30, 2021. No such payment was made or due during the three months ended June 30, 2022.

Other income, net was $0.3 million for the six months ended June 30, 2022, compared to other expense, net of $0.7 million for the three months ended June 30, 2021. Other income, net for the six months ended June 30, 2022 of $0.3 million was primarily due to a $0.4 million in income from government research and development contracts which is partially offset by other miscellaneous expenses. There was no income from government research and development contracts recorded for the ~~Condensed Consolidated Statements~~six months ended June 30, 2021. Other expense, net for the six months ended June 30, 2021 of ~~Operations. In circumstances where~~$0.7 million was primarily due to a $0.6 million in expense of a nonrecurring payment to one of Legacy Astra’s investors with the ~~embedded conversion option in a~~remainder due to other miscellaneous expenses. No such payment was made or due during the six months ended June 30, 2022.

Loss on Extinguishment of Convertible Notes

No loss on extinguishment of convertible ~~instrument is required~~notes was recorded for the three months ended June 30, 2022 and 2021.

No loss on extinguishment of convertible notes was recorded for the six months ended June 30, 2022. Loss on extinguishment of convertible notes of $131.9 million was recorded for the six months ended June 30, 2021 due to ~~be bifurcated and there are also other embedded derivative instruments in~~ the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. Derivative instrument liabilities are classified in the Condensed Consolidated Balance Sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within twelve months of the balance sheet date. When a derivative instrument is sold, terminated, exercised or expires, the gain or loss is recorded in the Condensed Consolidated Statements of Operations.convertible notes on January 28, 2021.

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Loss on Extinguishment of Convertible Notes Attributable to Related Parties

~~Public~~No loss on extinguishment of convertible notes attributable to related parties was recorded for the three months ended June 30, 2022 and ~~Private Placement Warrants~~2021.

No loss on extinguishment of convertible notes attributable to related parties was recorded for the six months ended June 30, 2022. Loss on extinguishment of convertible notes attributable to related parties of $1.9 million was recorded for the six months ended June 30, 2021 due to the settlement of convertible notes attributable to related parties on January 28, 2021.

Income Tax (Benefit) Expense

We did not incur income tax expense for the three and six months ended June 30, 2022 and 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 June 30, 2022.

No adjustment to redemption value on convertible preferred stock was recorded for the six months ended June 30, 2022. Adjustment to redemption value on Convertible Preferred Stock of $1,011.7 million for the six months ended June 30, 2021 was recorded 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

The ~~Company accounts for Public Warrants~~following section discusses our principal liquidity and ~~Private Placement Warrants~~capital resources as ~~liability-classified instruments based on an assessment~~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 ~~warrant’s specific terms~~time of purchase. We believe our cash equivalents are liquid 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 50% or more of the Company’s Class A stockholders. Because not all of the Company’s stockholders need to participate in such tender offer or exchange to trigger the potential cash settlement and the Company does not control the occurrence of such an event, the Company concluded that the Public Warrants and Private Placement Warrants do not meet the conditions to be classified in equity. Since the Public and Private Placement Warrants meet the definition of a derivative under ASC 815, the Company recorded these warrants as liabilities on the balance sheet at fair value upon the closing of the Business Combination, with subsequent changes in their respective fair values recognized in the consolidated statement of operations at each reporting date.accessible.

~~Revenue Recognition~~

~~Astra adopted~~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 new revenue recognition standard, known as ASC 606, effective January 1, 2020, utilizing the modified retrospective method. Revenue for Launch Services is recognized at a point in time when the Company has delivered the promised services to customers.

~~At contract inception, an assessment~~ongoing development of ~~the goods~~our technology, lease obligations and ~~services promised in the contracts with customers is expected to be performed and a performance obligation is identified for each distinct promise to transfer~~capital expenditures, which primarily relate to the ~~customer a good or service (or bundle~~development of goods or services). To identify the performance obligations, the Company considers all the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.our manufacturing facility.

The transaction price will be defined as the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, which is a fixed price stated in the contract. When a contract involves multiple launches, the Company accounts for each launch as a separate performance obligation, because the customer can benefit from each launch on its own or with other readily available resources and the launch is separately identifiable. The transaction price is allocated to each performance obligation on an estimated relative standalone selling price basis. The Company’s process to estimate standalone selling prices involves management’s judgment and considers multiple factors such as prices charged for similar goods and services and the Company’s ongoing pricing strategy and policies.

~~Changes in judgments with respect to these assumptions and estimates could impact the timing or amount of revenue recognition.~~

~~Emerging Growth Company Accounting Election~~

Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and has elected to take advantage of the benefits of this extended transition period and expect to remain an emerging growth company at least through the end of 2021, thereby having the benefit of the extended transition period. This may make it difficult to compare our financial results with the financial results of other public companies that are either not emerging growth companies or emerging growth companies that have chosen not to take advantage of the extended transition period.

Astra will remain an emerging growth company under the JOBS Act until the earliest of (a) August 7, 2025, the fifth anniversary of our IPO, (b) the last date of Astra’s fiscal year in which it has total annual gross revenue of at least $1.07 billion, (c) the date on which Astra is deemed to be a “large accelerated filer” under the rules of the SEC or (d) the date on which Astra has issued more than $1.0 billion in non-convertible debt securities during the previous three years.

~~Recent Accounting Pronouncements~~

~~See Note 4 to our~~ condensed consolidated financial statements included elsewhere in this ~~quarterly report~~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 our operations through cash proceeds obtained as part of the Business Combination and related private placement. As of June 30, 2022, our existing sources of liquidity included cash and cash equivalents of $104.3 million and marketable securities of $96.4 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 $1,576.4 million as of June 30, 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 remains focused on managing its cash expenditures, including but not limited to, reducing its capital expenditures, consulting services and re-focusing its hiring efforts. In addition, Management continues to evaluate opportunities to strengthen our financial position, including through the issuance of additional equity securities or by entering into new financing arrangements, as appropriate. We expect that our existing sources of liquidity 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 and the Company is actively evaluating other sources of liquidity to further support its long-term business operations. 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.

Committed Equity Purchases

On August 2, 2022, we entered into an $100 million Class A common stock purchase agreement with B. Riley Principal Capital, LLC to support working capital and other general corporate needs. Under the terms of this agreement, we have the right, without obligation, to sell and issue up to $100 million of our Class A common stock over a period of 24 months to B. Riley Principal Capital, LLC at the Company’s sole discretion, subject to certain limitations and conditions. See Note 17 — Subsequent Events in Part I, Item 1 of this Quarterly Report on Form 10-Q for more ~~information about recently adopted accounting pronouncements~~details.

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Summary Statement of Cash Flows for the Six Months Ended June 30, 2022 and ~~recently issued accounting pronouncements not yet adopted,~~2021

The following table sets forth the primary sources and uses of cash and cash equivalents for the periods presented below:


		For The Six Months Ended June 30,								Period over period change
(in thousands)		2022				2021				$				%
Net cash used in operating activities		$	(91,862	)		$	(34,655	)		$	(57,207	)			165	%
Net cash used in investing activities			(129,647	)			(11,996	)			(117,651	)			981
Net cash provided by financing activities			817				488,427				(487,610	)			(100	)
Net increase (decrease) in cash and cash equivalents		$	(220,692	)		$	441,776			$	(662,468	)			(150	)%

Cash Flows used in Operating Activities

Our cash flows from operating activities are significantly affected by our cash expenditures 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 space products and launch services. 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 for space products, payments to our employees and other operating expenses.

For the six months ended June 30, 2022, net cash used in operating activities was $91.9 million. The primary factors affecting the Company’s operating cash flows during the period were a net loss of $168.0 million. This is offset by non-cash charges including stock-based compensation expense of $29.8 million, inventory reserves including write-offs and net realizable value write-downs of $18.8 million, loss on change in fair value of contingent consideration of $17.3 million, depreciation and amortization expense of $7.6 million and non-cash lease expense of $0.7 million. Changes in operating working capital items is mainly due to increased headcount and ramp-up of our production and primarily reflect the ~~timing~~increase in trade accounts receivable of ~~their adoption,~~$1.6 million, inventories of $13.4 million, other non-current assets of $2.4 million, accounts payable of $6.3 million, accrued expense and ~~our assessment,~~other current liabilities of $1.2 million and other non-current liabilities of $4.9 million. Changes in operating working capital items was partially offset by a decrease in prepaid and other current assets of $7.4 million and lease liabilities of $0.6 million.

For the six months ended June 30, 2021, net cash used in operating activities was $34.7 million. The primary factors affecting the Company’s operating cash flows during this period were net loss of $190.3 million, offset by non-cash charges including a non-cash loss on extinguishment of convertible notes of $133.8 million, stock-based compensation expense of $17.8 million, depreciation expense of $1.9 million, and amortization of convertible note debt discounts of $0.4 million. Changes in operating working capital items primarily reflect the increase in inventories of $1.2 million, prepaid and other current assets of $4.9 million, accounts payable of $3.6 million, accrued expenses and other current liabilities of $2.3 million and other non-current liabilities of $2.0 million. This was partially offset by a decrease in lease liabilities of $0.5 million.

Cash Flows used in Investing Activities

For the six months ended June 30, 2022, net cash used in investing activities was $129.6 million, which was comprised mainly of purchases of marketable securities of $102.0 million, purchases of property, plant and equipment of $32.1 million mainly related to the ~~extent~~construction of our manufacturing facility and acquisition of an indefinite-lived intangible trademark asset of $0.9 million. This was partially offset maturities of marketable securities of $5.3 million.

For the six months ended June 30, 2021, net cash used in investing activities was $12.0 million, which was comprised mainly of the acquisition of an indefinite-lived intangible trademark asset of $3.2 million and purchases of tooling equipment, manufacturing equipment and furniture and fixtures of $8.8 million.

Cash Flows from Financing Activities

For the six months ended June 30, 2022, net cash provided by financing activities amounted to $0.8 million and consisted primarily of proceeds from employee stock purchase plan of $0.7 million and issuance of stock under equity plans of $0.1 million.

For the six months ended June 30, 2021, net cash provided by financing activities amounted to $488.4 million and consisted primarily of proceeds from Business Combination and private offering, net of transaction costs, of $463.6 million, proceeds from the issuance of Series C of $30.0 million and borrowings of $10.0 million, offset by repayments on borrowings of $16.4 million.

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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 June 30, 2022:


Year Ended December 31		Minimum Lease Commitment
		(in thousands)
2022 (remainder)		$	930
2023			1,790
2024			1,677
2025			1,655
2026			1,642
Thereafter			2,840
Total future undiscounted minimum lease payments		$	10,534
Less: Imputed Interest			2,030
Total reported lease liability		$	8,504

On July 28, 2022, the Company entered into a lease agreement for approximately 60,000 square feet of manufacturing facility in Sunnyvale, California having a lease term of 36 months with an option to extend for a period of additional 36 months. The undiscounted base rent payments for the first year of this lease is approximately $1.8 million with a 4% increase in base rent for each subsequent year. In addition to base rent, the Company will be responsible for the management fee of 5% of the base rent. In lieu of a cash security deposit, the Company is required to provide the landlord an irrevocable letter of credit in the amount of $0.3 million. This new lease facility will enable expansion of space product production and development capacity, thermal testing capacity, and is expected to provide production and engineering space for our future space services business.

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 six months ended June 30, 2022. We also made advance payments of $0.4 million under the contract as of June 30, 2022.

Apart from the aforementioned leases and purchase commitments, we do not have ~~made one yet,~~any other material contractual obligations, commitments or contingent obligations.

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Table of ~~their potential impact on our financial condition and our results of operations.~~Contents

Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk.~~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

46

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 June 30, 2022, we had $3.4 million of cash equivalents invested in money market funds and $96.4 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 ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~the~~ year ended December 31, ~~2020. We do not have any interest-bearing instruments as of the period end.~~2021.

Inflation Risk

We doare 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 ~~believe that inflation has~~ had a ~~material~~substantial impact on our results of operations for the three and six months ended June 30, 2022, respectively. However, a higher rate of inflation in the future may have an adverse effect on our ~~business, results of operations or financial condition. Nonetheless, if our~~ability to recover increasing costs ~~were to become subject to significant inflationary pressures,~~and we ~~may~~might not be able to ~~fully offset such higher costs. Our inability or failure~~pass along cost increases to ~~do so could harm~~ our ~~business, results of operations or financial condition.~~customers.

Foreign Currency Risk

There was no material foreign currency risk for the ~~nine~~three and six months ended ~~September~~June 30, ~~2021~~2022 and ~~the~~ year ended December 31, ~~2020.~~2021. Our activities to date have been limited and were conducted in the United States.

Item 4. Controls and ~~Procedures.~~Procedures

~~Limitations on effectiveness~~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.

~~Evaluation of disclosure controls and procedures~~

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 ~~September~~June 30, ~~2021~~2022 due to the material weaknesses in our internal control over financial reporting described below.

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Material Weaknesses and Remediation Plan

As previously ~~reported in Part I, Item 4 of our quarterly report on Form 10-Q/A for the period ended June 30, 2021,~~disclosed, we concluded that the Company did not maintain effective internal control over financial reporting as of June 30, 2021, due to a material weakness of ineffective controls over accounting for complex transactions and instruments. The material weakness related to the classification of Public and Private Placement Warrants, issued in connection with Holicity’s initial public offering, as components of equity instead of as derivative liabilities. As the Public and Private Placement Warrants met the definition of a derivative as contemplated in ASC 815, the Public and Private Placement Warrants should have been recorded as derivative liabilities on the balance sheet and measured at fair value at inception and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the statement of operations in the period of change.

~~Inclusive of the previously reported material weakness above, we~~ identified ~~four~~ material weaknesses in our internal control over financial reporting ~~including the~~and these material ~~weakness identified in connection with the restatement~~weaknesses continued to exist as of ~~our quarterly financial statements for the period ended~~ June 30, ~~2021.~~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:

•

We did not design and maintain effective controls over segregation of duties and related conflicts with respect to our information technology systems, including administrative access to our financially relevant information technology systems.

•

We did not design and maintain effective controls over formalizing our accounting policies and procedures.

47

•

We did not design and maintain effective controls over preparing and recording journal entries within our accounting systems related thereto.

•

We did not design and maintain effective controls over accounting for complex transactions and instruments, including, the inaccurate accounting for Public and Private Placement Warrants and the inaccurate application of conversion accounting related to our convertible instruments in connection with the restatement of our financial statements for the period ended June 30, 2021 as set forth in our Form 10-Q/A (Amendment No. 1) filed with the SEC on October 22, 2021.

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.

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Monitoring Activities

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, ~~each of~~ 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:

•

We are actively recruiting additional personnel, in addition to engaging and utilizing third party consultants and specialists to supplement our internal resources and segregate key functions within our business processes, where appropriate.

•

We also continue to take actions to improve our IT general controls, segregation of duties controls, period-end financial reporting controls, and journal entry controls.

•

We are in the process of formally documenting accounting policies and procedures complying with applicable financial reporting standards.

•

We are implementing comprehensive controls over the preparation and review of journal entries, establishing additional controls to verify transactions are properly classified in the financial statements and program change management controls to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately.

•

While we have processes to identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we are in the process of enhancing these processes to better evaluate, research and understand the nuances of the accounting standards for complex transactions and instruments. We plan to provide internal resources with enhanced access to accounting literature and research materials while increasing communication with third-party professionals with whom we consult regarding the application of accounting standards over complex transactions and instruments.

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 three months ended ~~September~~June 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal ~~Proceedings.~~Proceedings

~~There are no material litigation, arbitration or governmental proceedings currently pending or to Astra’s knowledge, threatened against us or any members~~Discussion of ~~Astra’s management team in their capacity as such. See~~legal matters is incorporated by reference from Part I, Item 1, ~~“Financial Statements (Unaudited) —~~ Note 11 —- Commitments and ~~Contingencies.~~Contingencies, of this Quarterly Report on Form 10-Q, and should be considered an integral part of Part II, Item 1, “Legal Proceedings.”

Item 1A. Risk ~~Factors.~~Factors

~~There~~Except for the risk factors set forth below, there have been no material changes from the risk factors previously disclosed in ~~the Company's Quarterly~~our Annual Report ~~(Amendment No. 1)~~ on Form ~~10-Q/A~~10-K for the period ended ~~June 30,~~December 31, 2021, filed with the SEC on ~~October 22, 2021,~~March 31, 2022, and investors are encouraged to review these risk factors prior to making an investment in the ~~Company. As mentioned earlier~~Company and in conjunction with their review of this Quarterly Report on Form 10-Q.

Summary of Risk Factors

A summary of the material risks affecting our business, operations and financial results that have been included in this Quarterly Report on Form 10-Q ~~we now refer~~include the following:

•

We have only conducted one launch which deployed customer satellites into orbit and are currently only delivering to our ~~“Satellite Services”~~customers two versions of our Astra Space Engine propulsion system. Any setbacks occurring during our launches and subsequent upgrades to our launch systems or space products could have a material adverse effect on our business, ~~line~~financial condition, and operations, and could harm our reputation.

•

We have incurred significant losses since inception and we may not be able to achieve or maintain profitability.

•

The success of our business will be highly dependent on our ability to effectively market and sell our launch services for small LEO satellites and our space products and services and to convert contracted revenues and our pipeline of potential contracts into actual revenues.

•

We may not be able to convert our estimated contracted revenue or potential contracts into actual revenue.

•

We have limited data and history to test our launch vehicles for the successful deployment of a LEO satellite.

•

Regulatory, availability, and other challenges may delay our progress in establishing the number of launch sites we require for our targeted annual launch rate, which could have an adverse effect on our ability to grow our business.

•

We may face litigation and other risks as ~~“Space Services.” Thus, wherever~~a result of the material weaknesses in our internal control over financial reporting and the restatement of our financial statements.

•

We are subject to stringent U.S. export and import control laws and regulations.

•

Our prospects and operations may be adversely affected by changes in customer preferences and economic conditions that affect demand for our launch services and space products.

•

The majority of our customer contracts may be terminated by the customer at any time for convenience as well as other provisions permitting the customer to discontinue contract performance for cause (for example, if we do not achieve certain milestones on a timely basis) which if terminated could adversely impact our results of operation.

•

We may become involved in litigation that may materially adversely affect us.

We have only conducted one launch which deployed customer satellites into orbit and are currently only delivering to our customers two versions of our Astra Space Engine propulsion system. Any setbacks occurring during our launches and subsequent upgrades to our launch systems or space products could have a material adverse effect on our business, financial condition, and operations, and could harm our reputation.

The success of our launch and space services offerings will depend on our ability to successfully and regularly deliver customer satellites into orbit. In November 2021, we successfully launched launch vehicle LV0007 to an inclination of 86.0 degrees at an altitude of 500 km and demonstrated orbital placement of test payload. Our data from this launch suggest that we achieved sufficient orbital velocity to successfully inject a satellite into orbit and serve as an opportunity to learn from the experience and to make further refinements to the design and manufacturing processes used to construct our launch vehicles and rockets. On February 10, 2022, we launched 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. On March 15, 2022, we successfully launched launch vehicle LV0009 and confirmed our first delivery of customer

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payloads into Earth orbit. On June 12, 2022, we conducted our first launch for NASA’s TROPICS-1 mission on our launch vehicle LV0010. While we had a nominal first stage flight, our upper stage shut down early and we did not deliver the payloads into low Earth orbit. In July 2022, we decided to focus on the development and production of the next version of our launch system and discontinued the production of launch vehicles supported by our current launch system. Given this, we do not plan to conduct any further commercial launches in 2022 and may not be able to conduct any paid commercial launches in 2023. Whether we will be able to conduct paid commercial launches in 2023 will depend in part upon the success of test launches of our new launch system. The new launch system is intended to support more payload capacity and a more frequent launch cadence. If we are not successful in developing our new launch system and ensuring that it can deliver payloads into low-earth orbit, our launch services business, and ultimately our space services offerings will suffer. Any delay in our ability to successfully deploy payloads under our new launch system will have a material adverse affect on our revenues, results of operations and future prospects.

The success of our space products offerings will depend on our ability to successfully and timely deliver propulsion systems that can thrust a customer's satellite while in orbit. During the three months ended June 30, 2022, we delivered the first set of our propulsion system to the customer.

The success of our strategy depends on our ability to successfully upgrade our rockets, launch vehicles, propulsion system, spacecraft, and related technology which may require significant adjustments to the design, manufacturing process and performance to achieve intended technological and performance goals. There is no guarantee that our planned development and production of our new launch system will be successful or our propulsion system delivered can thrust a customer's satellite while in orbit. While we have built operational processes to ensure that the design, manufacture, performance and servicing of our launch vehicles and propulsion systems meet rigorous performance goals, there can be no assurance that we will not experience operational or process failures and other problems during our planned launches. Any failures or setbacks could harm our reputation and have a material adverse effect on our business, financial condition and results of operation.

We have incurred significant losses since inception and we may not be able to achieve or maintain profitability.

We have incurred significant losses since our inception. We incurred net losses of $257.8 million, $68.3 million and $53.2 million for the years ended December 31, 2021, 2020 and 2019, respectively. While we have generated limited income to date, it is difficult for us to predict our future operating results. As a result, our losses may be larger than anticipated, and we may not achieve profitability when expected, or at all, and even if we do, we may not be able to maintain or increase profitability.

We expect our operating expenses to increase over the next several years as we focus on the development of our new launch system, continue to refine and streamline our design and manufacturing processes for our launch vehicles, increase the payload of our rockets, make technical improvements, increase our flight cadence, hire additional employees and continue research and development efforts relating to new products and technologies, including our space services. These efforts may be more costly than we expect and may not result in increased revenue or growth in our business. Any failure to increase our revenue sufficiently to keep pace with our investments and other expenses could prevent us from achieving or maintaining profitability or positive cash flow. Furthermore, if our future growth and operating performance fail to meet investor or analyst expectations, or if we have future negative cash flow or losses resulting from our investment in acquiring customers or expanding our operations, this could have a material adverse effect on our business, financial condition and results of operations.

The success of our business will be highly dependent on our ability to effectively market and sell our launch services for small LEO satellites and our space products and services and to convert contracted revenues and our pipeline of potential contracts into actual revenues.

We expect that our success will be highly dependent, especially in the foreseeable future, on our ability to effectively forecast, market and sell our launch services for small LEO satellites and space products. We have limited experience in forecasting, marketing and selling these services and products, and if we are unable to use our current or future sales organization effectively in order to adequately target and engage our potential customers, our business may be adversely affected.

We also expect that our success will be highly dependent on our ability to convert contracted revenues and our pipeline of potential contracts into actual revenues. We have received interest from a wide range of customers across various satellite applications or use cases. Our contracted revenues and our estimated pipeline may not fully convert into actual revenues because certain of our customers have the right to terminate their contracts if we do not achieve certain milestones or unable to conduct launches on the contracted schedule. If our customers terminate these contracts, the value of our contracted revenues may be significantly lower than our current estimates. Additionally, if we are unable to keep up with the demand for our launch services from a production and delivery perspective, we may not be in a position to deliver on our contracted revenues or our pipeline of potential contracts.

We remain in active discussions with potential customers and anticipate an increase in contracted revenue as the small satellite and satellite constellation markets continue to develop. Our success depends, in part, on our ability to attract new customers in a cost-effective manner. Notwithstanding our estimated contracted revenue, we expect that we will need to make significant investments in

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order to attract new customers. Our sales growth is dependent upon our ability to implement strategic initiatives, and these initiatives may not be effective in generating sales growth. In addition, marketing campaigns, which we have not historically utilized, can be expensive and may not result in the acquisition of customers in a cost-effective manner, if at all. Further, as our brand becomes more widely known, future marketing campaigns or brand content may not attract new customers at the same rate as past campaigns or brand content. If we are unable to attract new customers, our business, financial condition and results of operations will be harmed.

We may not be able to convert our estimated contracted revenue or potential contracts into actual revenue.

We expect that our success will be highly dependent on our ability to convert contracted revenues and our pipeline of potential contracts into actual revenues. Our contracted revenues and our estimated pipeline may not fully convert into actual revenues because certain of our customers have the right to terminate their contracts if we do not achieve certain milestones, or other termination rights. We may not meet these milestones, in which case the value of our contracted revenues may be significantly lower than our current estimates.

Some of our existing customer contracts include provisions allowing the customers to terminate the contracts for convenience, some with a termination penalty for at least the amounts already paid, or to terminate the contracts for cause (for example, if we do not achieve certain milestones on a timely basis). If any of our significant customer contracts are terminated and not replaced, our results of operations may differ materially and adversely from those anticipated. In addition, our contracts with government customers often contain provisions with additional rights and remedies favorable to such customers that are not typically found in commercial contracts. As a result, we may not receive revenue from these orders, and any contracted revenue we report may not be indicative of our future actual revenue.

Our decision to focus on the development of our new launch system and stop the production of launch vehicles supported by our current launch system could require that launches we currently have under contract be moved to future time periods. This shift in flight schedule may cause us to fail milestones or otherwise be in default under these contracts and provide our customers with the right to terminate. We have begun discussions with customers for whom we agreed to launch payloads on our old system regarding shifting those flights to launch vehicles supported by our new system. Whether customers will agree to shift the flight schedule for their launches will depend on a number of factors, many of which are outside of our control. Customers who do not want to move their flights will likely terminate their contracts and there can be no assurance as to whether we will be able to enter into a future contract with those customers or receive any revenue in connection with those terminations. In some cases where the termination results from our material breach, we may have termination penalties to pay to those customers. At this time, any obligation to pay termination penalties are highly speculative and unknown, but such penalties, if incurred, could have a material adverse impact on our cash flow and liquidity.

In addition, many other events may cause a delay in our ability to fulfill our existing or future orders, or cause planned launches or deliveries to not be completed at all, some of which may be out of our control, including unexpected weather patterns, maintenance issues, natural disasters, changes in governmental regulations or in the status of our regulatory approvals or applications or other events that force us to cancel or reschedule launches, which could have an adverse impact on our business, financial condition and results of operations.

We have limited data and history to test our launch vehicles for the successful deployment of a LEO satellite.

In November 2021, we successfully launched launch vehicle LV0007 to an inclination of 86.0 degrees at an altitude of 500 km and demonstrated orbital placement of test payload. Our data from this launch suggest that we achieve sufficient orbital velocity to successfully inject a satellite into orbit and serve as an opportunity to learn from the experience and to make further refinements to the design and manufacturing processes used to construct our launch vehicles and rockets. Although our November 2021 launch was a success, we may not be successful in reaching space and achieving sufficient orbital velocity during our subsequent launches planned. For example, on February 10, 2022, we launched 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. On March 15, 2022, we successfully launched launch vehicle LV0009 and confirmed our first delivery of customer payloads into Earth orbit. On June 12, 2022, we conducted our first launch for NASA’s TROPICS-1 mission on our launch vehicle LV0010. While we had a nominal first stage flight, our upper stage shut down early and we did not deliver the payloads into low Earth orbit. If we fail to continue to successfully inject payloads into orbit, our business, financial condition and results of operations could be materially and adversely impacted.

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As part of our strategy, we plan to increase the maximum payload capacity of our launch vehicle to meet the customer needs and demands, which would make us a more compelling alternative for LEO constellation deployment and satellite replenishment. This payload capacity improvement will come from numerous improvements, enhancements and modifications to our rocket. We may not be successful in our efforts to make improvements to our rocket to achieve the full increase in payload capacity, and if we are unable to demonstrate our ability launch heavier satellites to LEO, our business, financial condition and results of operations could be materially and adversely impacted.

Regulatory, availability, and other challenges may delay our progress in establishing the number of launch sites we require for our targeted annual launch rate, which could have an adverse effect on our ability to grow our business.

Part of our strategy involves increasing our launch capability and approaching a more frequent than monthly launch capability, which will depend on our ability to add new launch sites. We currently operate launch sites at the Pacific Spaceport Complex in Kodiak, Alaska, and Cape Canaveral Space Force Station in Cape Canaveral, Florida, and we expect to enter into a variety of arrangements to secure additional launch sites, which may include ownership, leasing, licensing, and permitting in the United States and outside the United States. We have in the past and may in the future experience delays in our efforts to secure additional launch sites around the globe based upon our customers’ inclination needs. Challenges as a result of regulatory processes or in our ability to secure the necessary permissions to establish these launch sites could delay our ability to achieve our target cadence and could adversely affect our business.

We may face litigation and other risks as a result of the material weaknesses in our internal control over financial reporting and the restatement of our financial statements.

The Company, in consultation with the Audit Committee and Company’s management, determined that it was appropriate to restate our previously filed financial statements for the period ended June 30, 2021. As part of the restatement, we identified a material weakness in our internal control over financial reporting.

As a result of such material weakness and such restatement, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatement and material weaknesses in our internal control over financial reporting and the preparation of our financial statements. As of the date of this Quarterly Report, Astra is currently a defendant or nominal defendant in three actions alleging violations of federal securities laws. Please see “Legal Proceedings” for more information about these actions. We can provide no assurance that additional litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition.

We are subject to stringent U.S. export and import control laws and regulations.

Our business is subject to stringent U.S. import and export control laws and regulations as well as economic sanctions laws and regulations. We are required to import and export our products, software, technology and services, as well as run our operations in the United States, in full compliance with such laws and regulations, which include the EAR, the ITAR, and economic sanctions administered by the Treasury Department’s OFAC. Similar laws that impact our business exist in other jurisdictions. These foreign trade controls prohibit, restrict, or regulate our ability to, directly or indirectly, export, deemed export, re-export, deemed re-export or transfer certain hardware, technical data, technology, software, or services to certain countries and territories, entities, and individuals, and for end uses. We have had inadvertent disclosures of certain of our products or components which are subject to the requirements of these U.S. import and export control laws, including one which occurred recently (the “Recent Incident”). The Recent Incident relates to a disclosure of a photograph of one of our components. Our practice is to provide a voluntary disclosure to the appropriate regulatory authority when such an inadvertent disclosure occurs and, in the case of the Recent Incident, we did provide an initial voluntary disclosure notification to the appropriate regulatory agency. Subsequent to the occurrence of the Recent Incident and after filing our initial voluntary disclosure notification, we sought approval from the Department of Defense to release this photo publicly, which was granted on June 24, 2022. Given the approval of the Department of Defense to the public release of the photograph at issue in the Recent Incident, we requested and received approval to close our voluntary disclosure notification with the regulatory agency to whom it was submitted. While no such regulatory authority has yet determined that any such inadvertent disclosure has violated these U.S. import and export control laws, we could be found to be in violation of these laws and regulations. Such a violation, if determined, could result in civil and criminal, monetary and non-monetary penalties, the loss of export or import privileges, debarment and reputational harm. If we are unable to maintain adequate controls related to the disclosure of information subject to U.S. import and export control laws and regulations, we may have future incidents that could result in violations of these laws and regulations.

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Pursuant to these foreign trade control laws and regulations, we are required, among other things, to (i) maintain a registration under the ITAR, (ii) determine the proper licensing jurisdiction and export classification of products, software, and technology, and (iii) obtain licenses or other forms of U.S. government authorization to engage in the conduct of our spaceflight business. The authorization requirements include the need to get permission to release controlled technology to foreign person employees and other foreign persons. Changes in U.S. foreign trade control laws and regulations, or reclassifications of our products or technologies, may restrict our operations. The inability to secure and maintain necessary licenses and other authorizations could negatively impact our ability to compete successfully or to operate our spaceflight business as planned. Any changes in the export control regulations or U.S. government licensing policy, such as those necessary to implement U.S. government commitments to multilateral control regimes, may restrict our operations. Given the great discretion the government has in issuing or denying such authorizations to advance U.S. national security and foreign policy interests, there can be no assurance we will be successful in our future efforts to secure and maintain necessary licenses, registrations, or other U.S. government regulatory approvals.

Under the “Exon-Florio Amendment” to the U.S. Defense Production Act of 1950, as amended (the “DPA”), the U.S. President has the power to disrupt or block certain foreign investments in U.S. businesses if he determines that such a transaction threatens U.S. national security. The Committee on Foreign Investment in the United States (“CFIUS”) has been delegated the authority to conduct national security reviews of certain foreign investments. CFIUS may impose mitigation conditions to grant clearance of a transaction.

The Foreign Investment Risk ~~Factors~~Review Modernization Act (“FIRRMA”), enacted in 2018, amended the DPA to, among other things, expands CFIUS’s jurisdiction beyond acquisitions of control of U.S. businesses. Under FIRRMA, CFIUS also has jurisdiction over certain foreign non-controlling investments in U.S. businesses that have involvement with critical technology or critical infrastructure, or that collect and maintain sensitive personal data of U.S. citizens (“TID U.S. Businesses”), if the foreign investor receives specified triggering rights in connection with its investment. We are a TID U.S. Business because we ~~refer~~develop and design technologies that would be considered critical technologies. Certain foreign investments in TID U.S. Businesses are subject to ~~Satellite Services,~~mandatory filing with CFIUS. These restrictions on the ability of foreign persons to invest in us could limit our ability to engage in strategic transactions that could benefit our stockholders, including a change of control, and could also affect the price that an investor may be willing to pay for our common stock.

Our prospects and operations may be adversely affected by changes in customer preferences and economic conditions that affect demand for our launch services and space products.

Because our offerings are currently concentrated on launch services and space products, we ~~mean~~are vulnerable to changes in customer preferences or other market changes, such as general economic conditions, energy and fuel prices, recession and fears of recession, interest rates, tax rates and policies, inflation, war and fears of war, inclement weather, natural disasters, terrorism and outbreak of viruses or widespread illness. The global economy has in the past, and will in the future, experience recessionary periods and periods of economic instability. During such periods, our ~~Space Services~~potential customers may choose not to expend the amounts that we anticipate based on our expectations with respect to the addressable market for launch and satellite services. There could be a number of other effects from adverse general business ~~line.~~and economic conditions on our business, including insolvency of any of our third-party suppliers or contractors, inflationary and supply chain pressures, decreased customer confidence, decreased discretionary spending and reduced customer or governmental demand for launch services and space products, which could have a material adverse effect on our business, financial condition and results of operations.

The majority of our customer contracts may be terminated by the customer at any time for convenience as well as other provisions permitting the customer to discontinue contract performance for cause (for example, if we do not achieve certain milestones on a timely basis) which if terminated could adversely impact our results of operation.

We are subject to a variety of contract-related risks. Some of our existing customer contracts, including those with the government, include provisions allowing the customers to terminate their contracts for convenience, with a termination penalty for at least the amounts already paid, or to terminate the contracts for cause (for example, if we do not achieve certain milestones on a timely basis). Customers that terminate such contracts may also be entitled to a pro rata refund of the amount of the customer’s deposit. In addition, some of our customers are pre-revenue startups or otherwise not fully established companies, which exposes us to a degree of counterparty credit risk. Please see “We may not be able to convert our estimated contracted revenue or potential contracts into actual revenue” above for information regarding how our decision to focus on the development of our new launch system could impact contracts where customers have the right to terminate for convenience or in the case of a default.

Part of our strategy is to market our launch services to key government customers. We expect we may derive limited revenue from contracts with NASA and the U.S. government and may enter into further contracts with the U.S. or foreign governments in the future, and this subjects us to statutes and regulations applicable to companies doing business with the U.S. government, including the Federal Acquisition Regulation (“FAR”). These U.S. government contracts customarily contain provisions that give the government substantial rights and remedies, many of which are not typically found in commercial contracts and which are unfavorable to contractors. For instance, most U.S. government agencies include provisions that allow the government to unilaterally terminate or

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modify contracts for convenience, in which case the counterparty to the contract may generally recover only its incurred or committed costs and settlement expenses and profit on work completed prior to the termination. If the government terminates a contract for default, the defaulting party may be liable for any extra costs incurred by the government in procuring undelivered items from another source.

Our government contracts may be subject to the approval of appropriations being made by the U.S. Congress to fund the expenditures under these contracts. In addition, government contracts normally contain additional requirements that may increase our costs of doing business, reduce our profits, and expose us to liability for failure to comply with these terms and conditions. These requirements include, for example:

•

specialized disclosure and accounting requirements unique to government contracts;

•

financial and compliance audits that may result in potential liability for price adjustments, recoupment of government funds after such funds have been spent, civil and criminal penalties, or administrative sanctions such as suspension or debarment from doing business with the U.S. government;

•

public disclosures of certain contract and company information; and

•

mandatory socioeconomic compliance requirements, including labor requirements, non-discrimination and affirmative action programs and environmental compliance requirements.

Government contracts are also generally subject to greater scrutiny by the government, which can initiate reviews, audits and investigations regarding our compliance with government contract requirements. Further, audits or investigations by other governmental agencies related to the conduct of our business, including those agencies who oversee our compliance with import and export laws, may also impact our government contracts. In addition, if we fail to comply with government contract laws, regulations and contract requirements, our contracts may be subject to termination, and we may be subject to financial and/or other liability under our contracts, the Federal Civil False Claims Act (including treble damages and other penalties), or criminal law. In particular, the False Claims Act’s “whistleblower” provisions also allow private individuals, including present and former employees, to sue on behalf of the U.S. government. Any penalties, damages, fines, suspension, or damages could adversely affect our ability to operate our business and our financial results.

If any customer were to unexpectedly terminate, cancel, or decline to exercise an option to renew with respect to one or more of our significant contracts for any reason, including as a result of our failure to meet certain performance milestones, or if a government customer were to suspend or debar us from doing business with such government, our business, financial condition, and results of operations would be materially harmed.

We may become involved in litigation that may materially adversely affect us.

From time to time, we may become involved in various legal proceedings relating to matters incidental to the ordinary course of our business, supplier, customer, or relationships with third-parties, including intellectual property, commercial, product liability, employment, class action, whistleblower and other litigation and claims, and governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources from the operation of our business, and cause us to incur significant expenses or liability or require us to change our business practices. Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes, even where we believe that we have meritorious claims or defenses. Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a material adverse effect on our business. We are currently a defendant or nominal defendant in three actions, alleging violations of federal securities laws. We also are obligated to indemnify certain other defendants in these actions. Please see “Legal Proceedings” for more information about these actions. We can provide no assurance that additional litigation or dispute will not arise in the future. While we believe these actions are not meritorious, these actions (and any future litigation or dispute), whether successful or not, could have a material adverse effect on our business, results of operations and financial condition. Further, while we have insurance to cover the defense of the existing actions (including our indemnification obligations), the amount of our retention is $20.0 million and we will need to incur costs in that amount before we will be eligible for assistance from our insurer.

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

~~None~~None.

Item 3. Defaults Upon Senior ~~Securities.~~Securities

~~None~~None.

Item 4. Mine Safety ~~Disclosures.~~Disclosures

~~None~~None.

Item 5. Other ~~Information.~~Information

~~None~~None.

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Item 6. ~~Exhibits.~~Exhibits

~~Exhibit~~

~~Number~~


				Incorporated by Reference
Exhibit Number		Description		Form		SEC File No.		Exhibit		Filing Date
10.1		Common Stock Purchase Agreement, dated August 2, 2022, between Astra Space, Inc. and B. Riley Principal Capital II, LLC.		8-K		001-39426		10.1		August 2, 2022
10.2		Registration Rights Agreement, dated August 2, 2022, between Astra Space, Inc. and B. Riley Principal Capital II, LLC.		8-K		001-39426		10.2		August 2, 2022
31.1*		Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		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.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

~~Description~~

~~10.1+~~

First Amendment to Employment Agreement of Chris Kemp dated September 1, 2021 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed with the SEC on September 7, 2021).

~~10.2+~~

First Amendment to Employment Agreement of Adam London dated September 1, 2021 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, filed with the SEC on September 7, 2021).

~~10.3+~~

First Amendment to Employment Agreement of Kelyn Brannon dated September 1, 2021 (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, filed with the SEC on September 7, 2021).

~~10.4+~~

First Amendment to Employment Agreement of Martin Attiq dated September 1, 2021 (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K, filed with the SEC on September 7, 2021).

~~10.5+~~

~~Employment Agreement of Benjamin Lyon dated September 1, 2021 (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K, filed with the SEC on September 7, 2021).~~

~~10.6+~~

~~Form of Performance Stock Option Award Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed with the SEC on September 22, 2021).~~

31.1*

~~Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

31.2*

~~Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

32.1**

~~Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

32.2**

~~Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~.

~~101.INS~~

~~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.~~

~~101.SCH~~

~~Inline XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~

~~Inline XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~

~~Inline XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~

~~Inline XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~

~~Inline XBRL Taxonomy Extension Presentation Linkbase Document~~

~~104~~

~~Cover Page Interactive Data File (embedded within the Inline XBRL document)~~

* Filed herewith.

** Furnished herewith.

~~+ Indicates a management contract or compensatory plan, contract or arrangement in which directors or executive officers participate.~~

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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.


		Astra Space, Inc.

Date: ~~November 15, 2021~~August 4, 2022		By:	/s/ Chris C. Kemp
			Chris C. Kemp
			Chief Executive Officer

~~Date: November 15, 2021~~Date August 4, 2022		By:	/s/ Kelyn J. Brannon
			Kelyn J. Brannon
			Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer

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