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    MNTS   US60879E1010

MOMENTUS INC.

(MNTS)
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08/11MOMENTUS INC. MOMENTUS' MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)
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08/11MOMENTUS : Announces Second Quarter 2022 Financial Results - Form 8-K
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MOMENTUS INC. MOMENTUS' MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

05/11/2022 | 06:08am EDT
The following discussion and analysis provides information which our management
believes is relevant to an assessment and understanding of our results of
operations and financial condition. This discussion and analysis should be read
together with our audited and unaudited financial statements and related notes
appearing elsewhere in this Quarterly Report on Form 10-Q (this "Form 10-Q").
This discussion and analysis should also be read together with our financial
information for the period ended and as of March 31, 2022. In addition to
historical financial information, this discussion and analysis contains
forward-looking statements that reflect our plans, estimates, and beliefs that
involve risks, uncertainties and assumptions. As a result of many factors, such
as those set forth under the "Risk Factors" in the Annual Report on Form 10-K
filed by the Company on March 9, 2022 and "Cautionary Statement Regarding
Forward-Looking Statements" elsewhere in this Form 10-Q, our actual results may
differ materially from those anticipated in these forward-looking statements.

Certain figures, such as interest rates and other percentages, included in this
section have been rounded for ease of presentation. Percentage figures included
in this section have not in all cases been calculated on the basis of such
rounded figures but on the basis of such amounts prior to rounding. For this
reason, percentage amounts in this section may vary slightly from those obtained
by performing the same calculations using the figures in our financial
statements or in the associated text. Certain other amounts that appear in this
section may similarly vary slightly due to rounding.

Overview


Momentus plans to offer transportation and infrastructure services to help
enable the commercialization of space. Satellite operators are our principal
customers and target customers. Services that we plan to provide include "last
mile" satellite transportation, payload-hosting, on-orbit satellite refueling,
on-orbit inspection, on-orbit satellite maintenance, de-orbiting, debris
removal, and other satellite-to-satellite service offerings. We believe our
planned service offerings will increase deployment options for satellite
operators and lower their operating costs relative to traditional approaches
while also minimizing environmental impact given our choice of water as a
propellant.

Our transportation service offering will focus on delivering our customers'
satellites to precision orbits of their choosing. To accomplish this, we plan to
create a hub-and-spoke transportation network in partnership with leading launch
service providers, such as SpaceX. Under this model, our customers' satellites
would "ride share" from Earth to space on a midsized or large rocket. Our
Orbital Transfer Vehicles ("OTVs") would then provide "last mile" transportation
services from the rocket's drop-off orbit to a custom orbit of the satellite
operator's choosing. We believe our hub-and-spoke model has the potential to
expand our customers' deployment options relative to what they would be able to
achieve with ride share launch alone, while reducing their costs relative to
what they could achieve with a dedicated small launch vehicle. Over time, we
plan to begin introducing additional services beyond "last mile" transportation.

Since our founding in 2017, we have been working to develop, test and enhance
our vehicles and supporting technologies, particularly our water plasma
propulsion technology, and have signed contracts for approximately $69 million
in backlog (potential revenue), as of April 30, 2022. These agreements contain
firm orders as well as options, allowing customers to opt-in to launches on
shorter notice without requiring a separate agreement. The breadth of these
signed contracts spans across 25 companies. In general, our customers have the
right to cancel their contracts with the understanding that they will forgo
their deposits. If a customer cancels a contract before it is required to pay
non-refundable deposits, we may not receive revenue from these orders, except
for an initial deposit which is paid at the time the contract is signed. Refer
to "Risk Factors - We may not be able to convert our orders in backlog into
revenue," in our Annual Report on Form 10-K filed by the Company on March 9,
2022.

Our first launch with customers is currently anticipated to occur as early as
May 2022, subject to receipt of licenses and government approvals, and
successful completion of our current efforts to get the system ready for flight.
Prior planned launches were cancelled due to not receiving required licenses and
other governmental approvals and other factors, and we can offer no assurances
that our first launch will occur in May 2022 or that we will ever receive the
required licenses and other governmental approvals.

On May 4, 2022, as a subsequent event, the Company received a favorable
determination from the Federal Aviation Administration (the "FAA") of its
application for payload review in support of the Company's inaugural flight of
the Vigoride orbital transfer vehicle on the launch targeted for May 2022.
Together with a license from the Federal Communications Commission (the "FCC")
received on April 28, 2022, and updates to existing licenses from the National
Oceanic and Atmospheric Administration (the "NOAA"), the Company has received
all required government approvals required for its inaugural flight. See Note
14.
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Our services are made possible by the space industry's rapid technological
developments over the past two decades, driven predominantly by significant
decreases in launch costs, as well as the advent of smaller, lower-cost
satellites. This convergence of these trends has resulted in substantial growth
in the commercial space market, rooted in higher accessibility for companies
entering the new space economy that aim to offer communication, earth
observation and data collection services, and other satellite services

We anticipate there could be considerable growth over the coming years in the
space transportation segment as companies continue to seek versatile and
low-cost ways to deliver single satellites to specific orbits or deploy their
satellite constellations. We anticipate that the need for small satellite
transportation to low-Earth orbit ("LEO") will continue to drive overall demand
growth for space transportation services in the short-term as technology
advancements continue to make space more accessible to new market entrants,
although new applications beyond LEO are also emerging. We also believe that
over the next decade, new space-based businesses may emerge, for example the
generation of solar energy in space, space manufacturing or space data
processing. The advent of these new business models could substantially increase
demand for space transportation and other space infrastructure services.

Beyond transportation, we anticipate that growth of the satellite constellations
market may drive demand for our Hosted Payload, on-orbit satellite refueling,
on-orbit inspection, on-orbit satellite maintenance, de-orbiting, debris
removal, and other satellite-to-satellite service offerings, if we are
successful in executing on our business plan, including fully developing and
validating our technology in space. Satellite constellations have relatively
short lifespans and, in our view, will require maintenance, de-orbiting, and
other general servicing with higher frequency.

We expect our expenses to increase substantially in connection with our ongoing
activities, particularly as we continue to advance the development of our
vehicles, build corporate infrastructure and enhance our sales and marketing
functions.

The technology underlying our anticipated service offerings is still in the
process of being developed, and has not been fully tested or validated in space.
Our ability to execute on our business plan is dependent on the successful
development and commercialization of the technologies described in this
Quarterly Report on Form 10-Q. Although we believe our water plasma propulsion
technology will be a key differentiator of our product offerings, we have to
date only conducted one test of this technology in space. Although we believe
our test unit generated plasma in space and validated the theoretical basis of
our technology, we have yet to experimentally confirm the unit's ability to
generate thrust in space, which is crucial to our ability to conduct actual
spacecraft maneuvers in orbit. Until we can accomplish this, the technology will
remain in the experimental stages. Moreover, even if the unit generates thrust,
there can be no assurance that it can be operated in a manner that is
sufficiently reliable and efficient to permit full commercialization of the
technology. Our statements and beliefs about the viability of our technology are
primarily based on theoretical analyses and experimentally observed results
during ground testing and our single test of this technology in space.
Development of space technologies is extremely complex, time consuming, and
expensive, and there can be no assurance that our predicted theoretical and
ground-based results will translate into operational space vehicles that operate
within the parameters we expect, or at all. This Quarterly Report on Form 10-Q
describes Momentus' current business plans for continuing to develop its
technology and marketing and commercializing its products, however there can be
no assurance that Momentus will be able to successfully develop its technologies
and implement them in commercially viable vehicles. Refer to "Risk Factors - A
key component of our business model is the delivery of satellites using our
vehicles from low earth orbit to other orbits. The technology for this maneuver
is still in the development stage..." in our Annual Report on Form 10-K filed by
the Company on March 9, 2022.

Services Overview

When our technology is fully developed and validated in the future, we currently plan to provide the following infrastructure services to the space economy:


Space Transportation. We are designing a space transportation service based on a
hub-and-spoke model, which combines ride share launch on a medium or large
rocket with last-mile delivery using one of our OTVs. Under this model, our
customers will deliver their payload to us a few months prior to launch for
integration onto our vehicle. Once we have integrated our customers' payloads,
we will then ship our vehicle, holding the customer payload fixture, to the
launch site, where it will be integrated onto the rocket. The rocket will then
transport our vehicle to the drop-off orbit. After separation from the rocket,
our vehicle will transport our customers' payloads to their chosen final orbit.

We are designing our water plasma thrusters to enable our vehicle to efficiently transport each customer payload to its respective orbit. We believe our hub-and-spoke model has the potential to expand our customers' deployment

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options relative to what they could achieve with ride share launch alone, while
reducing their costs relative to what they could achieve with a dedicated small
launch vehicle.

Initially, after delivering our customer payloads to their final orbits, our
vehicles will de-orbit. However, our plan is to develop the capability for our
vehicles to be reusable, such that, upon delivery of the payload, they will be
capable of remaining in space to conduct additional missions.

Hosted Payload. We are designing our transfer vehicles for modularity and ease
of integration with customer payloads, and with a full suite of capabilities
that our customers will need on orbit. Under our Hosted Payload model, our
vehicle, after transporting a customer payload to a specific orbit, would stay
connected to the payload for the duration of its mission to provide continuous
power, orbit maintenance, orientation, and communications to support telemetry,
commanding, and downlinking of payload data. Our objective is to offer a higher
degree of modularity which we believe has the potential to significantly
increase orbital accessibility and/or lower manufacturing costs for a wide range
of satellite operators.

In-Orbit Servicing. We view in-orbit servicing of satellites as a quickly
growing business opportunity. As the number of satellites in space increases, so
does their need to be serviced. We plan to design Momentus' future reusable
vehicles to be capable of performing in-orbit servicing and are pursuing
development activities that support this objective. Although we are still in
very preliminary stages for developing this technology, our aim is to equip
future vehicles with robotic arms and the ability to maneuver in close proximity
to other spacecraft and dock or berth with them. Once fully developed, we
believe these capabilities could allow us to offer a suite of different in-orbit
services, such as inspection, refueling, life extension, re-positioning, salvage
missions, maintenance and repair, and de-orbiting.

Factors Affecting Our Performance


We believe that our performance and future success depend to a substantial
extent on our ability to capitalize on the following opportunities, which in
turn is subject to significant risks and challenges, including those discussed
below and in the section titled "Risk Factors" in our Annual Report on Form 10-K
filed by the Company on March 9, 2022.

In-Space Transport and Service Vehicles and Related Technology Development


Our primary research and development objectives focus on the development of our
existing and future in-space transfer and service vehicles and related water
plasma propulsion technology.

Vigoride is the first vehicle that Momentus is developing. Once fully developed,
tested and validated in space, we expect Vigoride will be sufficient to meet our
initial operating plan of offering in-space transportation in LEO to small
satellites. Vigoride is intended to transport up to 750 kg of customer payload
in LEO, although our payload capacity will likely be lower in most common
configurations. We have set the delta-v and host power objectives for Vigoride
at 2 km/sec and 1 kW, respectively, which we believe we can achieve a few years
into our product roadmap. We have entered into a launch services agreement with
SpaceX that secures space for Vigoride on a launch vehicle that SpaceX currently
targets operating as early as May 2022. This would represent the inaugural
launch of a complete Momentus vehicle into space and would allow us to further
validate Vigoride's capabilities. While securing space on the manifest is an
important step, our plan to launch in May 2022 remains subject to the receipt of
licenses and other government approvals, and successful completion of our
current efforts to get the system ready for flight.

On May 4, 2022, as a subsequent event, the Company received a favorable
determination from the Federal Aviation Administration (the "FAA") of its
application for payload review in support of the Company's inaugural flight of
the Vigoride orbital transfer vehicle on the launch targeted for May 2022.
Together with a license from the Federal Communications Commission (the "FCC")
received on April 28, 2022, and updates to existing licenses from the National
Oceanic and Atmospheric Administration (the "NOAA"), the Company has received
all required government approvals required for its inaugural flight. See Note
14.

Beyond our planned May 2022 launch, we are planning to fly Vigoride again in the
second half of 2022, subject to receipt of licenses and government approvals,
and successful completion of our current efforts to get the system ready for
flight.

Early Vigoride vehicles will not be reusable, meaning that we will de-orbit them
following delivery of their customer payloads. However, around the middle of
this decade, we plan to make our vehicles capable of reuse such that, upon
delivery of their payloads, they will be able to remain in space to conduct
follow-on missions. Establishing reusable vehicles will require significant
additional research and technological developments. We

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believe our choice of water as a propellant will help with the creation of
reusable vehicles because water can be stored without special conditions, other
than ensuring lines and tanks do not freeze or become obstructed with ice, for
an indefinite amount of time and pumped easily. Additionally, water is safe and
non-hazardous relative to commonly used propellants such as cryogenic components
and hypergolic toxic fuels for chemical propulsion, or highly pressurized noble
gases (such as xenon or krypton) for electrical propulsion. We believe that if
we are able to achieve reusability, it will allow us to lower manufacturing and
launch costs on a per-ride basis and achieve higher margins and returns for our
investors while also reducing our environmental impact.

Beyond Vigoride, we envision bringing two progressively larger vehicles to
market, which we call Ardoride and Fervoride. These vehicles will be similar to
our Vigoride vehicle, but with larger structures, larger solar arrays, and more
powerful propulsion systems in order to carry progressively larger payloads
progressively further from Earth

The successful development of our vehicles with water plasma propulsion technology involves uncertainties, including:

•timing in finalizing systems design and specifications;

•successful completion of test programs and demonstration missions;


•whether we will receive and the timing of receipt of licenses and government
approvals that will allow us to fly our vehicles in space and gather valuable
data that will assist in further development of our vehicles;

•meeting stated technological objectives and goals for the design on time, on budget and within target cost objectives;

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

•our ability to secure slots on our launch providers' manifests;

•performance of our manufacturing facility despite risks that disrupt productions, such as natural disasters;

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

•performance of a limited number of suppliers for certain raw materials and supplied components and their willingness to do business with us;

•our ability to protect our intellectual property critical to the design and function of our orbital transfer vehicles;

•our ability to continue funding and maintaining our current research and development activities;

•the impact of the COVID-19 pandemic on us, our customers, suppliers and distributors, and the global economy; and

•our ability to comply with the terms of the NSA and any related compliance measures instituted by the Security Director.


A change in the outcome of any of these variables could delay the development of
our vehicles which in turn could impact our business and results of operations.
Refer to "Risk Factors," in our Annual Report on Form 10-K filed by the Company
on March 9, 2022.

Initial and Successive Launches


Our water plasma propulsion technology (that we are developing) is based on the
use of microwave electrothermal or "MET," thrusters, which we believe could
ultimately provide safe, affordable, reliable, and regular in-space services,
including Space Transportation, Hosted Payload, and In-Orbit Servicing. To
accomplish this, we currently intend to:

Launch our commercial program for in-space transportation. We currently plan to
fly our Vigoride vehicle on a SpaceX Transporter flight as early as May 2022,
subject to receipt of licenses and government approvals, and successful
completion of our current efforts to get the system ready for flight.

On May 4, 2022, as a subsequent event, the Company received a favorable
determination from the Federal Aviation Administration (the "FAA") of its
application for payload review in support of the Company's inaugural flight of
the Vigoride orbital transfer vehicle on the launch targeted for May 2022.
Together with a license from the Federal Communications Commission (the "FCC")
received on April 28, 2022, and updates to existing licenses from the National
Oceanic and Atmospheric Administration (the "NOAA"), the Company has received
all required government approvals required for its inaugural flight. See Note
14.
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Launch our commercial program for Hosted Payload. If in the future our vehicles
are operationalized for their intended in-space transport uses, we plan to
develop a modular approach to satellite systems through our hosted payload
model. For missions that require significant power for the payload and/or
specific orbits, our objective is for Momentus to be able to provide a unique
combination of a low-cost service model, in-orbit flexibility, and high
electrical power generation.

Launch our commercial program for In-Orbit Servicing. If we develop reusability
for our vehicles as currently contemplated, we believe we will be able to begin
offering a suite of different in-orbit services to our clients. Although we have
not yet developed these capabilities or the technology that would be required to
provide these services, such services may include inspection, refueling, life
extension, re-positioning, salvage missions, maintenance and repair, and
de-orbiting. As the quantity of satellites sent into space continues to
increase, we anticipate growing demand from such services.

The success of our in-space infrastructure services business will depend on our
ability to successfully and regularly deliver customer satellites into custom
orbits. Our planned inaugural launch is intended to be a demonstration mission.
While we plan to transport a few paying customer payloads, the primary goals of
our inaugural mission are to test Vigoride on orbit and learn from any issues
that we may encounter. The lessons learned from this initial flight will help
inform changes we can make to future missions as we seek to ultimately certify a
design for production. Depending on the nature of issues we encounter, our
schedule for future launches and other planned activities could be adversely
affected. There can be no assurance that we will not experience operational or
process failures and other problems during our inaugural mission or on any other
mission. Any failures or setbacks, particularly on our inaugural mission, could
harm our reputation and have a material adverse effect on our business,
financial condition and results of operation.

Customer Demand


Ahead of our first Vigoride launch, we have received significant interest from a
range of satellite operators, satellite manufacturers, satellite aggregators,
launch service providers, and others. While we have not recognized any revenue
from completed commercial launches through March 31, 2022, we had collected
approximately $1.7 million in customer deposits related to future launches.
While our standard contracts do not contain refunds or recourse provisions that
enable our customers to recover any non-refundable deposits that have been paid,
we issued refunds totaling $1.4 million to customers during the year ended
December 31, 2021 due to cancelled launches for 2021 in order to foster future
business relationships and customer goodwill.

Because our technologies have not yet been fully tested, our service offering to
our customers on our inaugural mission will be limited. To reflect this, we
expect to provide discounts to customers on this mission relative to the price
we intend to eventually charge for our transportation services. During our
inaugural mission, we plan to demonstrate Vigoride's ability to deploy
satellites. Once all customer payloads have been released, we plan to perform
certain maneuvers and technology demonstrations to validate our technology and
establish the potential commercial viability of our strategy. This approach
limits risk for us as well as for our customers.

We have signed contracts for approximately $69 million in backlog (potential
revenue), as of April 30, 2022. These agreements contain firm orders as well as
options, allowing customers to opt-in to launches on shorter notice without
requiring a separate agreement. The breadth of these signed contracts spans
across 25 companies in 15 countries. In general, our customers have the right to
cancel their contracts with the understanding that they will forgo their
deposits. If a customer cancels a contract before it is required to pay
non-refundable deposits, we may not receive revenue from these orders, except
for an initial deposit which is paid at the time the contract is signed. In the
three months ended March 31, 2022, we recognized no revenue related to customer
contracts.

Our backlog is subject to meaningful customer concentration risk. As of
April 30, 2022, approximately 70% of the total dollar value of our backlog
related to four launch services providers and aggregators of launch services
capacity, and their affiliates. The top 10 customers in our backlog represent
approximately 95% of the total dollar value of our backlog.

In addition, backlog is typically subject to large variations from quarter to
quarter and comparisons of backlog from period to period are not necessarily
indicative of future revenues. Furthermore, some contracts comprising the
backlog are for services scheduled many years in the future, and the economic
viability of customers with whom we have contracted is not guaranteed over time.
As a result, the contracts comprising our backlog may not result in actual
revenue in any particular period, or at all, and the actual revenue from such
contracts may differ from our backlog estimates. The timing of receipt of
revenues, if any, on projects included in the backlog could change because many
factors affect the scheduling of missions and adjustments to contracts may also
occur. The failure to realize some portion of our backlog could adversely affect
our revenues and gross margins.

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COVID-19 Impact


While the COVID-19 pandemic has affected our business and our timeline for our
formerly planned launch in April 2020, to date, it has not impacted us in a way
that we believe will materially affect our future growth outlook.

We are currently planning for our first commercial launch as early as May 2022,
subject to receipt of licenses and government approvals, and successful
completion of our current efforts to get the system ready for flight. We do not
foresee any delays due to COVID-19. The same applies to launches scheduled for
the remainder of 2022 and beyond.

On May 4, 2022, as a subsequent event, the Company received a favorable
determination from the Federal Aviation Administration (the "FAA") of its
application for payload review in support of the Company's inaugural flight of
the Vigoride orbital transfer vehicle on the launch targeted for May 2022.
Together with a license from the Federal Communications Commission (the "FCC")
received on April 28, 2022, and updates to existing licenses from the National
Oceanic and Atmospheric Administration (the "NOAA"), the Company has received
all required government approvals required for its inaugural flight. See Note
14.

We do not anticipate that the COVID-19 pandemic will materially affect our customer backlog and ability to secure new contracts going forward.


Our non-operations personnel began working from home in March 2020 as we reduced
our in-person operations to prioritize the safety of our employees. We have
begun to gradually bring essential personnel back to the office, while adhering
to Centers for Disease Control and Prevention, federal, state and local
protective standards. Subject to local regulations and the effectiveness of
vaccination initiatives, we intend to gradually bring all employees back to the
office; until then, we will continue to support our employees working from home.
While remote working arrangements have affected our manufacturing and
development timelines, the overall impact of this arrangement has not materially
adversely affected the timeline of future launches.

In May 2020, to strengthen our liquidity position, we received a Paycheck
Protection Program loan (the "PPP Loan") in the amount of $1.0 million under the
Coronavirus Aid, Relief, and Economic Security Act ("the CARES Act"); however,
in September 2020, we repaid the PPP Loan in full.

Notwithstanding the foregoing, the impact of the COVID-19 pandemic on the
Company's business, results of operations and overall financial performance will
ultimately depend on future developments, including the duration of the
pandemic, possible recurrent outbreaks, the appearance of variants and the
effectiveness of vaccines and other mitigation measures against variants, all of
which are highly uncertain and cannot be predicted. See "Risk Factors" in our
Annual Report on Form 10-K filed by the Company on March 9, 2022, for additional
discussion of the potential impact of the COVID-19 pandemic on our business.

Recent Developments

Consummation of Business Combination


On August 12, 2021, the Company consummated a merger pursuant to certain
Agreement and Plan of Merger, dated October 7, 2020, and as amended on March 5,
2021, April 6, 2021, and June 29, 2021 (the "Merger Agreement"), by and among
Stable Road Acquisition Corp ("SRAC"), Project Marvel First Merger Sub, Inc., a
Delaware corporation and a direct, wholly owned subsidiary of SRAC ("First
Merger Sub"), and Project Marvel Second Merger Sub, LLC, a Delaware limited
liability company and a direct, wholly owned subsidiary of SRAC ("Second Merger
Sub"), pursuant to which First Merger Sub merged with and into Momentus Inc., a
Delaware corporation ("Legacy Momentus") with Legacy Momentus as the surviving
corporation of the First Merger Sub, and immediately following which Legacy
Momentus merged with and into the Second Merger Sub, with the Second Merger Sub
as the surviving entity (the "Business Combination"). In connection with the
closing of the Business Combination (the "Closing"), the Company changed its
name from Stable Road Acquisition Corp. to Momentus Inc., and Legacy Momentus
changed its name to Momentus Space, LLC.

The Business Combination is accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, SRAC is treated as the "acquired" company for financial reporting purposes. We are deemed the accounting predecessor of the combined business, and Momentus Inc., as the parent company of the combined business, is the successor SEC registrant, meaning that our consolidated financial statements for previous periods are disclosed in the registrant's future periodic reports filed with the SEC.


The Business Combination will have a significant impact on our future reported
financial position and results as a consequence of the reverse recapitalization.
The most significant changes in Momentus's future reported financial

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position and results are an increase in cash of $247.3 million, offset by additional transaction costs for the Business Combination. See Note 3 "Reverse Recapitalization" for more information.


As a result of the Business Combination, we became the successor to an
SEC-registered and Nasdaq-listed company, which will require us to hire
additional personnel and implement procedures and processes to address public
company regulatory requirements and customary practices. We have begun to incur
additional recurring expenses as a public company for, among other things,
directors' and officers' liability insurance, director fees, and additional
internal and external accounting, legal and administrative resources.

Term Loan and Security Agreement


On February 22, 2021, the Company entered into a Term Loan and Security
Agreement (the "Term Loan") which provided the Company with up to $40.0 million
in borrowing capacity at an annual interest rate of 12%. $25.0 million of the
Term Loan was immediately available for borrowing by the Company at the
inception of the agreement, the Company borrowed this amount on March 1, 2021.
The remaining $15.0 million of borrowing capacity is no longer available as the
Company did not achieve certain milestones needed by the June 30, 2021 deadline.
Under the terms of the loan, if certain operating cash ratios are not met, the
lender is granted a lien on the Company's intellectual property while the loan
is outstanding. Prior to the Business Combination, the lien was granted but was
subsequently released as a result of the proceeds from the Business Combination.
The repayment terms of the Term Loan provide for interest-only payments
beginning March 1, 2021 through February 28, 2022.

Under the original terms of the loan, the principal amount was due and payable
on March 1, 2022, however, during January 2022, the Company exercised its option
to pay back the Term Loan over 24 months. The extended payment term resulted in
a recast schedule with a lower effective interest rate. See Note 10.

In conjunction with the Term Loan, warrants to purchase preferred stock up to 1%
of the fully diluted capitalization (including allowance for conversion of all
outstanding convertible notes, SAFE notes and such warrants) of the Company were
granted to the lender exercisable at the lender's option. 80% of the 1% of the
warrants were earned by the lender upon execution of the agreement. The
additional 20% of the warrants was forfeited as of June 30, 2021. On August 12,
2021 the lender exercised the warrant; see Note 11 for discussion on the
valuation and conversion of the warrants.

In addition, the lender will have certain rights to participate in future private equity offerings (including convertible notes or bridge financings) of Momentus.

SEC Settlement and CFIUS Review


We have incurred significant expenses in connection with the CFIUS review
described below and have incurred and expect to incur significant expenses in
connection with the implementation of the NSA described below. We have also
incurred significant expenses related to the SEC settlement discussed below. As
of March 31, 2022, the Company had incurred legal expenses of approximately
$8.3 million related to these matters.

SEC Settlement


On July 13, 2021, the Company agreed to a settlement with the SEC on a "neither
admit nor deny" basis, in anticipation of cease-and-desist proceedings relating
to certain violations of antifraud provisions of the federal securities laws
alleged by the SEC. As a result of the settlement, the Company agreed to a civil
penalty of $7.0 million, $2.0 million of which was paid immediately and
$5.0 million of which is payable within one year of the settlement order, and
outstanding as of March 31, 2022.

CFIUS Review and NSA


In February 2021, Momentus and its co-founder Mikhail Kokorich, with support
from SRAC, submitted a joint notice to CFIUS for review of the historical
acquisitions of interests in Momentus by Mr. Kokorich, his wife, and entities
that they control in response to concerns of the U.S. Department of Defense (the
"DoD") regarding Momentus' foreign ownership and control. On June 8, 2021, the
Company entered into a National Security Agreement with Mr. Kokorich, on behalf
of himself and Nortrone Finance S.A. (an entity controlled by Mr. Kokorich), Lev
Khasis and Olga Khasis, each in their respective individual capacities and on
behalf of Brainyspace LLC (an entity controlled by Olga Khasis), and the U.S.
government, represented by the DoD and the U.S Department of the Treasury (the
"NSA"). In accordance with the NSA, Mr. Kokorich, Nortrone Finance S.A., Lev
Khasis and his wife Olga Khasis, and Brainyspace LLC divested all the equity
interests in Momentus owned or beneficially owned by them by selling such equity
interests to the Company on June 8, 2021 (see below "Co-Founder Divestment").
The NSA also establishes various requirements and restrictions on the Company in
order to

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protect national security, certain of which may materially and adversely affect
our operating results due to uncertainty associated with and the cost of
compliance with security measures, and limitations on our control over certain
U.S. facilities, contracts, personnel, vendor selection and operations.

Co-Founder Divestment


In accordance with the NSA and pursuant to certain Repurchase Agreements entered
into with the Company, effective as of June 8, 2021, each of Mr. Kokorich,
Nortrone Finance S.A. and Brainyspace LLC (collectively " the Co-Founders") sold
100% of their respective equity interests in the Company on June 30, 2021. In
exchange for their equity interests, the Company initially paid each entity $1,
but will additionally pay up to an aggregate of $50,000,000, out of funds
legally available therefor, to the Co-Founders, on a pro rata basis, as follows:
(i) an aggregate of $40,000,000 to be paid out of funds legally available
therefor, within 10 business days after the earlier of (A) a business
combination or capital raising transaction or series of transactions (whether in
the form of debt or equity) resulting in cash proceeds of no less than
$100,000,000 and (B) the Business Combination (the "First Payment Date"); and
(ii) an aggregate of $10,000,000 to be paid out of funds legally available
therefor, within 10 business days after a business combination or capital
raising transaction or series of transactions (whether in the form of debt or
equity) resulting in cash proceeds of no less than $250,000,000 (determined
without any reduction for the $100,000,000 previously received in respect of the
First Payment Date).

As a result of the Business Combination, which generated $247.3 million of gross
proceeds (as described in Note 3), the Company paid the Co-Founders
$40.0 million in addition to the initial consideration paid of $3. The Company
recorded the consideration paid as a reduction of common stock and additional
paid in capital. Pursuant to the NSA, a portion of those divestment proceeds
were placed in escrow accounts, and may not be released to the divested
investors until after completion of audit by a third party auditor of the
investors compliance with the NSA and the lapse of a 15 day period without an
objection from the CFIUS Monitoring Agencies. Following the third party audit of
the investors' NSA compliance, all of the escrowed divestment proceeds were
released to the Co-Founders as of March 1, 2022 in accordance with the NSA.

If the Company were to undertake a business combination or capital raising
transaction or series of transactions (whether in the form of debt or equity)
resulting in cash proceeds of approximately $2.7 million or more, the Company
would need to pay an aggregate of $10.0 million to the Co-Founders (see Note
11).

The Company evaluated this potential consideration as a liability under ASC 480
utilizing a probability-weighted approach. Certain factors which would enable
successful fundraising were considered, including progress toward compliance
with the NSA, research and development progress, and agreements with launch
providers, resulting in an estimated liability of $6.0 million expected to be
paid to the Co-Founders with a corresponding offset to additional paid in
capital, as of March 31, 2022.

The payment came from proceeds of the Business Combination and PIPE Investment
and therefore reduce the proceeds available to Momentus to fund its operations
and capital expenditures going forward.

As part of the Repurchase Agreements, both Messrs. Kokorich and Khasis agreed to
a broad waiver and release of all claims (broadly defined) against the Company.
The Company has maintained that this release is effective as to various
advancement or indemnification claims either individual may have against the
Company. Both Messrs. Kokorich and Khasis have, through counsel, disagreed with
the Company's position. Absent a negotiated resolution, there is a chance that
the parties may litigate the matter. The total cumulative potential exposure for
the disputes with both Messrs. Kokorich and Khasis is presently unknown but
exceeds $1 million. We express no opinion on the probable outcome of these
matters.

See "Risk Factors - We may require substantial additional funding to finance our
operations, but adequate additional financing may not be available when we need
it, on acceptable terms or at all," in our Annual Report on Form 10-K filed by
the Company on March 9, 2022.

Components of Results of Operations

Service Revenue


We enter into contracts for 'last-mile' satellite and cargo delivery, payload
hosting and in-orbit servicing options with customers that are primarily in the
aerospace industry. From inception to March 31, 2022, we have not yet completed
a commercial launch of customer cargo. However, as of March 31, 2022 we have
signed contracts with customers and have collected approximately $1.7 million in
customer deposits, which are recorded as non-current contract liabilities in our
consolidated balance sheets. The Company's first launch with customers is
currently anticipated to occur as early as May 2022, subject to receipt of
licenses and government approvals, and successful

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completion of our current efforts to get the system ready for flight. While a
portion of the deposit balance relates to performance obligations that may be
satisfied over the next 12 months, the Company will classify customer deposits
as non-current until the inaugural launch date is reasonably assured.

On May 4, 2022, as a subsequent event, the Company received a favorable
determination from the Federal Aviation Administration (the "FAA") of its
application for payload review in support of the Company's inaugural flight of
the Vigoride orbital transfer vehicle on the launch targeted for May 2022.
Together with a license from the Federal Communications Commission (the "FCC")
received on April 28, 2022, and updates to existing licenses from the National
Oceanic and Atmospheric Administration (the "NOAA"), the Company has received
all required government approvals required for its inaugural flight. See Note
14.

The Company will recognize revenue (along with any other fees that have been
paid) upon the earlier of the satisfaction of our performance obligation or when
the customer cancels the contract. While the Company's standard contracts do not
contain refund or recourse provisions that enable its customers to recover any
non-refundable fees that have been paid, the Company may issue full or partial
refunds to customers on a case-by-case basis as necessary to preserve and foster
future business relationships and customer goodwill. As a result of the
Company's inability to complete any launches in 2021 (refer to Note 4 for
additional information), the Company issued customer refunds of $1.4 million to
customers during the year ended December 31, 2021.

Cost of Revenue


Cost of revenue consists primarily of expenses associated with the cost of the
orbital transfer vehicle and third-party launch costs. Until the orbital
transfer vehicle design is completed and released for production, the cost of
these orbital transfer vehicles is being expensed as research and development
costs as materials and services are received. The current design and technology
allow for a single use of the orbital transfer vehicle.

Research and Development


Research and development expenditures consist primarily of the cost for the
following activities for developing existing and future technologies for our
vehicles. Research and development activities include basic research, applied
research, design, development, and related test program activities. Costs
incurred for developing our vehicles primarily include equipment, material, and
labor hours (both internal and subcontractors).

As of March 31, 2022, we have expensed all research and development costs
associated with developing and building our vehicles. Once we have achieved
technological feasibility and released the design for volume production, we will
capitalize the costs to construct any additional components for the vehicles. We
expect to continue to see an increase in our research and development expenses
as we develop our next generation of vehicles.

Selling, General and Administrative


Selling, general and administrative expenses consist of human capital related
expenses for employees involved in general corporate functions, including
executive management and administration, accounting, finance, tax, legal,
information technology, security, sales, marketing, and human resources;
depreciation expense and rent relating to facilities, and equipment;
professional fees; and other general corporate costs. Headcount-related expenses
primarily include salaries, bonuses, equity compensation expense and benefits.
As we continue to grow as a company, we expect that our selling, general and
administrative costs will increase on an absolute dollar basis.

We also have begun to incur additional expenses as a result of operating as a
public company, including expenses necessary to comply with the rules and
regulations applicable to companies listed on a national securities exchange and
related to compliance and reporting obligations pursuant to the rules and
regulations of the SEC as well as to comply with the NSA.

Interest Income

Interest income consists of interest earned on investment holdings in interest bearing bank accounts.


Interest Expense

Interest expense includes interest incurred related to our loan payables as well as the amortization of warrant discount and debt issuance costs.

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Other Income/Expense


Other income/expense primarily relates to the change in the estimated fair value
of our SAFE notes and warrants, and non-recurring fees incurred in conjunction
with the SAFE and Term Loan financing, SEC settlement cost, and the Business
Combination.

Income Tax Provision

We are subject to income taxes in the United States. Our income tax provision
consists of an estimate of federal and state income taxes based on enacted
federal and state tax rates, as adjusted for allowable credits, deductions,
uncertain tax positions, changes in the valuation of our deferred tax assets and
liabilities, and changes in tax laws.

The effective tax rate may vary significantly from period to period and can be
influenced by many factors. These factors include, but are not limited to,
changes to the statutory rates in the jurisdictions where the Company has
operations and changes in the valuation of deferred tax assets and liabilities.
The difference between the effective tax rate and the federal statutory rate of
21% primarily relates to certain nondeductible items, state and local income
taxes and a full valuation allowance for deferred tax assets.

Results of Operations

The following tables set forth our results of operations for the periods presented. The period-to-period comparisons of financial results is not necessarily indicative of future results.


Comparison of Financial Results for the Three Months Ended March 31, 2022 and
2021

                                                                        Three Months Ended
                                                                             March 31,
(in thousands)                             2022                2021               $ Change                  % Change
Service revenue                        $        -          $      130          $      (130)                              N/A
Cost of revenue                                 -                  48                  (48)                              N/A
Gross margin                                    -                  82                  (82)                              N/A

Operating expenses:
Research and development expenses           9,971               9,906                   65                             1  %
Selling, general and administrative
expenses                                   14,853              14,005                  848                             6  %
Operating loss                            (24,824)            (23,829)                (995)                            4  %

Other income (expense):
Decrease (increase) in fair value of
SAFE notes                                      -              81,564              (81,564)                              N/A
Decrease (increase) in fair value of
warrants                                     (451)              8,083               (8,534)                   Not meaningful

Interest income                                 -                   1                   (1)                         (100  %)
Interest expense                           (1,492)               (968)                (524)                           54  %

Other income (expense)                          3                (179)                 182                          (102  %)

Net income (loss)                      $  (26,834)         $   64,671              (91,505)                         (141  %)


Service revenue

The revenue recognized during the three months ended March 31, 2021 was due to a
customer contract cancellation, resulting in the forfeiture of $0.1 million of
non-refundable customer deposits.

Cost of revenue

The cost of revenue recorded during the three months ended March 31, 2021 was due to costs incurred related to the cancelled contract.

Research and development expenses


Research and development expenses increased from $9.9 million to $10.0 million.
The increase was primarily due to additional payroll costs, despite an 11 person
decrease in headcount, of $1.1 million (including an increase of $0.3 million in
non-cash stock based compensation) due to higher compensation packages related
to the transition from start-up to a publicly traded company. Spending on
components, materials, and other costs also increased by $0.4 million. The
increase was offset by a $0.8 million reduction in subcontracted research and
development as well as an $0.8 million impairment of a prepaid launch deposit
specific to the three months ended March 31, 2021.
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Selling, general and administrative expenses


Selling, general and administrative expenses increased from $14.0 million to
$14.9 million. Non-stock based compensation payroll increased by $1.1 million,
while total headcount remained the same, due to higher compensation packages for
senior employees related to the transition from a start-up to a publicly traded
company. Additional insurance costs of $0.7 million and additional general
corporate costs of $0.8 million were incurred due to the extra requirements of
operating as a publicly traded company. Increased spending of $4.3 million on
non-legal professional fees was offset by a reduction of $2.2 million in legal
spending as the Company's activity related to the NSA and SEC topics discussed
in Note 12 shifted from legal proceedings to compliance. Stock based
compensation cost decreased by $3.9 million due to the non-recurring stock
modification in the prior period.

Decrease (increase) in fair value of SAFE notes


The decrease in the calculated fair value of SAFE notes during the three months
ended March 31, 2021 was primarily due to an decrease in the estimated fair
value of the Company's stock, which at that time was driven by its relation to
the market price of SRAC. All outstanding SAFE notes were converted to common
stock upon completion of the Business Combination (see Note 9). Prior to
conversion, our SAFE notes were classified as marked-to-market liabilities
pursuant to ASC 480 and gains or losses were recorded as other income or
expense.

Increase in fair value of warrants


For the three months ended March 31, 2021, the decrease in the calculated fair
value of the private loan-related warrants was due to the decrease in the
estimated fair value of the Company's stock. All outstanding warrants in the
prior period were exercised in connection with the Business Combination.

For the three months ended March 31, 2022, the increase in the calculated fair
value of the Company's currently outstanding warrants, which were assumed from
the Business Combination, was primarily driven by the observable market price of
the publicly listed warrants to purchase the Company's stock under comparable
terms. See Note 11.

Interest expense

Interest expense of $1.0 million for the three months ended March 31, 2021
relates to one month of cash and amortization interest under the original one
year term of the Term Loan. During the three months ended March 31, 2022, the
Company exercised its option to extend repayment of the loan, resulting in a
decrease of the effective interest rate and $1.5 million of cash and
amortization interest for the three month period. See Note 10.

Other income (expense)


Other expense in the three months ended March 31, 2021 was due to banking fees
related to SAFE financing raised during the period. Other expense for the three
months ended March 31, 2022 was immaterial.

Liquidity and Capital Resources


Since inception, we have financed our operations primarily by issuing equity and
debt, including the proceeds of the Business Combination and PIPE. As of
March 31, 2022, our principal sources of liquidity were our cash and cash
equivalents in the amount of $135.6 million, which are held in cash or invested
in money market funds.

Historical Cash Flows

                                                 Three Months Ended March 31,
(in thousands)                                       2022                   2021
Net cash provided by (used in)
Operating activities                      $       (23,062)               $ (21,199)
Investing activities                                 (521)                    (431)
Financing activities                                 (938)                  55,702
Net change in cash and cash equivalents   $       (24,521)               $  34,072


Operating Activities

Net cash used in operating activities for the three months ended March 31, 2022
was $23.1 million, driven primarily by headcount costs, research and development
activities, and professional fees related to the SEC and NSA compliance costs,
as well as net cash changes in operating assets and liabilities. Headcount
related payroll costs, excluding accrued bonus and stock-based compensation,
were $9.3 million. Research and development activity expenses, including
materials, components, and subcontractor costs were $3.9 million. Professional
fees for
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compliance related to the SEC and NSA topics discussed in Note 12, business
development, accounting and audit, and other services, were $5.8 million. Legal
fees, related to public company costs as well as the class action complaints
discussed in Note 12 were $2.5 million. Office overheads, other general
corporate expenses, and cash interest were $4.0 million. Additionally, cash used
in net working capital decreased by $2.4 million.

Net cash used in operating activities for the three months ended March 31, 2021
was $21.2 million, driven primarily by headcount costs, research and development
activities, and selling, general, and administrative costs. Headcount related
payroll costs, excluding accrued bonus and stock-based compensation, were $5.6
million. Research and development activity expenses, including materials,
components, and subcontractor costs were $4.4 million. Legal fees, related to
the SEC and CFIUS review topics, discussed in Note 12, were $4.6 million.
Professional fees for recruiting, accounting and audit, and other services were
$1.5 million. Office overheads, other general corporate expenses, and cash
interest were $1.9 million. Additionally, cash used in net working capital
increased by $3.1 million.

Investing Activities


Net cash used in investing activities was $0.5 million and $0.4 million for the
three months ended March 31, 2022, and 2021, respectively, which consisted
primarily of purchases of machinery and equipment, build-outs in our facility,
and capitalized implementation costs for cloud computing software.

Financing Activities


Net cash used in financing activities was $(0.9) million for the three months
ended March 31, 2022, due to the first month of principal repayment under the
Term Loam.

Net cash provided by financing activities was $55.7 million for the three months
ended March 31, 2021, consisting of proceeds from the issuance of SAFE notes and
the Term Loan.

Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing
activities, particularly as we continue to advance the development of our
vehicles, build corporate infrastructure and enhance our sales and marketing
functions.

Specifically, our operating expenses will increase as we:

•scale up our corporate infrastructure, people, processes and systems;

•enhance and scale our sales and marketing function;

•scale up our manufacturing capabilities increasing facility footprint, purchasing additional manufacturing equipment;

•pursue further research and development related to developing our next generation vehicles;

•seek regulatory approvals for changes or updates to our vehicles;

•hire additional personnel;

•implement measures required under the NSA and seek to comply with the NSA's requirements;

•maintain, expand and protect our intellectual property portfolio; and

•comply with public company reporting requirements.


We expect that our current cash and cash equivalents, our projected gross profit
(revenue less cost of revenue), and additional funding from equity or debt
financings will enable us to fund an anticipated operating expenses, research
and development expenses and capital expenditures beyond the next 12 months.
Additionally, we believe that the payments in the form of non-refundable
deposits we receive from our customers prior to launch will provide sufficient
funding and liquidity to support costs incurred related to that mission.

We have based these estimates on assumptions that may prove to be wrong, and we
could utilize our available capital resources sooner than we expect. For
example, the research and development, volume production, launch and in orbit
operation of our vehicles have unpredictable costs and are subject to
significant risks, uncertainties and contingencies, many of which are beyond our
control, that may affect the timing and magnitude of these anticipated
expenditures. Some of these risks and uncertainties are described in more detail
in our Annual Report on Form 10-K
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filed by the Company on March 9, 2022, under the heading "Risk Factors - Risks
Related to the Business and Industry of Momentus."

Although we believe that our current capital is adequate to sustain our
operations for a period of time, changing circumstances may cause us to expend
capital significantly faster than we currently anticipate, or we may need to
spend more money than currently expected because of circumstances beyond our
control. We may be required to seek additional equity or debt financing. In the
event that additional financing is required from outside sources, we may not be
able to raise it on terms acceptable to us, or at all. If we are unable to raise
additional capital when desired, our business, results of operations, and
financial condition would be adversely affected.

Commitments and Contingencies

We are a party to operating leases primarily for facilities (e.g., office buildings, warehouses and spaceport) under non-cancellable operating leases. These leases expire at various dates through 2028. Refer to Note 7.

We have principal of $24.1 million outstanding under the Term Loan. Refer to Note 10.


We enter into purchase obligations in the normal course of business. These
obligations include purchase orders and agreements to purchase goods or services
that are enforceable, legally binding, and have significant terms and minimum
purchases stipulated. Refer to Note 12.

Per the SEC settlement, $5.0 million of the civil penalty is due one year after the settlement. Refer to Note 12.


In addition, we enter into agreements in the normal course of business with
vendors for research and development services and outsourced services, which are
generally cancellable upon written notice. These payments are not included in
this table of contractual obligations.

Co-Founder Divestment and Share Repurchase


In accordance with the NSA and pursuant to certain Repurchase Agreements entered
into with the Company, effective as of June 8, 2021, each of Mr. Kokorich,
Nortrone Finance S.A. and Brainyspace LLC (collectively "the Co-Founders") sold
100% of their respective equity interests in the Company on June 30, 2021. In
exchange for their equity interests, the Company initially paid each entity $1,
but will additionally pay up to an aggregate of $50,000,000, out of funds
legally available therefor, to the Co-Founders, on a pro rata basis, as follows:
(i) an aggregate of $40,000,000 to be paid out of funds legally available
therefor, within 10 business days after the earlier of (A) a business
combination or capital raising transaction or series of transactions (whether in
the form of debt or equity) resulting in cash proceeds of no less than
$100,000,000 and (B) the Business Combination (the "First Payment Date"); and
(ii) an aggregate of $10,000,000 to be paid out of funds legally available
therefor, within 10 business days after a business combination or capital
raising transaction or series of transactions (whether in the form of debt or
equity) resulting in cash proceeds of no less than $250,000,000 (determined
without any reduction for the $100,000,000 previously received in respect of the
First Payment Date).

As a result of the Business Combination, which generated $247.3 million of gross
proceeds (as described in Note 3), the Company paid the Co-Founders
$40.0 million in addition to the initial consideration paid of $3. The Company
recorded the consideration paid as a reduction of common stock and additional
paid in capital. Pursuant to the NSA, a portion of those divestment proceeds
were placed in escrow accounts, and may not be released to the divested
investors until after completion of audit by a third party auditor of the
investors compliance with the NSA and the lapse of a 15 day period without an
objection from the CFIUS Monitoring Agencies. Following the third party audit of
the investors' NSA compliance, all of the escrowed divestment proceeds were
released to the Co-Founders as of March 1, 2022 in accordance with the NSA.

If the Company were to undertake a business combination or capital raising
transaction or series of transactions (whether in the form of debt or equity)
resulting in cash proceeds of approximately $2.7 million or more, the Company
would need to pay an aggregate of $10.0 million to the Co-Founders.

The Company evaluated this potential consideration as a liability under ASC 480
utilizing a probability-weighted approach. Certain factors which would enable
successful fundraising were considered, including progress toward compliance
with the NSA, research and development progress, and agreements with launch
providers, resulting in an estimated liability of $6.0 million expected to be
paid to the Co-Founders with a corresponding offset to additional paid in
capital, as of March 31, 2022. Refer to Note 11.

Off-Balance Sheet Arrangements

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We do not engage in any off-balance sheet activities or have any arrangements or
relationships with unconsolidated entities, such as variable interest, special
purpose, and structured finance entities.

Critical Accounting Policies and Estimates


Our discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with GAAP. The preparation of our financial statements and related disclosures
requires us to make estimates, assumptions and judgments as of the balance sheet
date that affect the reported amounts of assets, liabilities, revenues, costs
and expenses and related disclosures. Our actual results may differ from these
estimates under different assumptions and conditions.

Revenue Recognition


We enter into short-term contracts for 'last-mile' satellite and cargo delivery,
payload hosting and in-orbit servicing options with customers that are primarily
in the aerospace industry. From inception to March 31, 2022, we have not
completed a commercial launch of customer cargo and as a result, have not
recognized revenue related to performance obligations to date. However, as of
March 31, 2022 we have signed contracts with customers and have collected
approximately $1.7 million in customer deposits, which are recorded as
non-current contract liabilities in our consolidated balance sheet and will be
recognized as revenue (along with any other fess that have been paid) upon the
earlier of the satisfaction of our performance obligation or when the customer
cancels the contract.

We account for customer contracts in accordance with ASC Topic 606, Revenue from Contracts with Customers, which includes the following five-step model:

•Identification of the contract, or contracts, with a customer.

•Identification of the performance obligations in the contract.

•Determination of the transaction price.

•Allocation of the transaction price to the performance obligations in the contract.

•Recognition of revenue when, or as, the Company satisfies a performance obligation.


Our contracts are cancellable for convenience by the customer and typically do
not contain variable consideration. However, the full transaction price is
collected in advance of the scheduled launch and all fees that are paid are
non-refundable (and are not limited to deposits), regardless if the contract is
cancelled by the customer or in the event a performance obligation is not
satisfied by us. While the Company's standard contracts do not contain refund or
recourse provisions, the Company may issue full or partial refunds to customers
on a case-by-case basis as necessary to preserve and foster future business
relationships and customer goodwill. As a result of the Company's inability to
complete any launches in 2021 (refer to Note 4 for additional information), the
Company issued customer refunds of $1.4 million to customers during the year
ended December 31, 2021.

Our services are considered a single performance obligation, to transport the
customers' payload to a specified orbit in space. We recognize revenue at a
point in time when control is transferred, which is considered to be upon the
release of the customers' payload into its specified orbit. We will calculate
the weight distribution of each transfer vehicle at the customer level, and we
will estimate the delivery date for each customer's payload based on the
relative weight of payloads released to determine the point in time to recognize
revenue for each payload release.

In periods in which we recognize revenue, we will disclose the amounts of revenue recognized that was included as a contract liability balance at the beginning of the reporting period in accordance with ASC 606-10-50-8(b).

Loss Contingencies


We are subject to the possibility of various loss contingencies arising in the
ordinary course of business, including product-related and other litigation. We
consider the likelihood of loss or impairment of an asset or the incurrence of a
liability, as well as our ability to reasonably estimate the amount of loss in
determining loss contingencies. An estimated loss contingency is accrued when it
is probable that an asset has been impaired or a liability has been incurred and
the amount of loss can be reasonably estimated. We regularly evaluate current
information available to us to determine whether such accruals should be
adjusted and whether new accruals are required. Refer to Note 12.

Deferred Fulfillment and Prepaid Launch Costs


We prepay for certain launch costs to third party providers that will carry the
orbital transfer vehicle to orbit. Prepaid costs allocated to the delivery of a
customer's payload are classified as deferred fulfillment costs and recognized
as
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cost of revenue upon delivery of the customer's payload. Prepaid costs allocated
to our payload are classified as prepaid launch costs and are amortized to
research and development expense upon the release of our payload. The allocation
is determined based on the distribution between customer and our payload weight
on each launch.

On May 21, 2021, the Company received notification from one of its launch
service providers that it was terminating 2 launch service agreements for
flights scheduled during calendar year 2021 and that they considered the Company
to be in default of prior payments totaling $8.7 million. The Company believed
the prepayments would be non-recoverable as this was the third time the payload
was rescheduled. As a result of the notification from one of its launch service
providers, the Company recorded an impairment charge of $8.7 million of prepaid
launch costs during the three months ended June 30, 2021. There was an unrelated
impairment of $0.8 million the three months ended March 31, 2021.

On October 12, 2021, the Company began discussions with the same launch service
provider about reestablishing a future launch schedule. As a result of the
discussion, the Company signed a Launch Services Agreement on October 19, 2021
that reserves space on an upcoming launch, which is targeted for May 2022. While
securing space on the manifest is an important step, our plan to launch in May
2022 remains subject to the receipt of licenses and other government approvals,
and successful completion of our current efforts to get the system ready for
flight. The Company determined that $2.7 million of the impaired deposits were
potentially recoverable in connection with the reestablished schedule. The
Company did not record any adjustments as a result of the discussions. See Note
4.

On May 4, 2022, as a subsequent event, the Company received a favorable
determination from the Federal Aviation Administration (the "FAA") of its
application for payload review in support of the Company's inaugural flight of
the Vigoride orbital transfer vehicle on the launch targeted for May 2022.
Together with a license from the Federal Communications Commission (the "FCC")
received on April 28, 2022, and updates to existing licenses from the National
Oceanic and Atmospheric Administration (the "NOAA"), the Company has received
all required government approvals required for its inaugural flight. See Note
14.

Contract Liabilities

Customer deposits collected prior to the release of the customer's payload into
its specified orbit are recorded as current and non-current contract liabilities
in our condensed consolidated balance sheets as the amounts received represent a
prepayment for the satisfaction of a future performance obligation that has not
yet commenced. Each non-refundable deposit is determined to be a contract
liability upon cash collection. Prior to making this determination, we ensure
that a valid contract is in place that meets the definition of the existence of
a contract in accordance with ASC 606-10-25-1 and 2.

Stock-based Compensation


We have various stock incentive plans under which incentive and non-qualified
stock options and restricted stock awards are granted to employees, directors,
and consultants. All stock-based payments to employees, including grants of
employee stock options are recognized in the financial statements based on their
respective grant date fair values.

We recognize stock-based compensation expense using a fair value-based method
for costs related to all stock-based payments. We estimate the fair value of
stock-based payments on the date of grant using the Black-Scholes-Merton option
pricing model. The model requires management to make a number of assumptions,
including expected volatility of our stock, expected life of the option,
risk-free interest rate, and expected dividends. The fair value of the stock is
expensed over the related service period which is typically the vesting period.
The stock-based compensation expense that is reported in our financial
statements is based on awards that are expected to vest. We account for
forfeitures as they occur.

Estimating the fair value of equity awards as of the grant date using valuation
models, such as the Black-Scholes-Merton option pricing model, is affected by
assumptions regarding a number of variables as disclosed above, and any changes
in the assumptions can materially affect the fair value and ultimately how much
stock-based compensation expense is recognized. These inputs are subjective and
generally require significant analysis and judgment to develop. See Note 11 for
the specific assumptions we used in applying the Black-Scholes-Merton option
pricing model to determine the estimated fair value of our stock options and
awards granted during the three months ended March 31, 2022.

We expect our share-based compensation cost will increase to the extent that we
grant additional stock option awards to employees and non-employees. If there
are any modifications or cancellations of the underlying unvested securities, we
may be required to accelerate any remaining unearned share-based compensation
cost or incur
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incremental cost. Share-based compensation cost affects our research and development expenses and selling, general, and administrative expenses.

SAFE Notes


We issued SAFE notes to investors which were converted to shares of common stock
in connection with the Business Combination. Prior to conversion, we determined
that the SAFE notes were not a legal form of debt (i.e., no creditors' rights).
The SAFE notes included a provision allowing for cash redemption upon the
consummation of a change of control, the occurrence of which is outside the
control of the Company. Therefore, we classified SAFE notes as liabilities as
they were redeemable upon a change of control event which is not within the
control of the Company. SAFE notes were recorded at fair value, and were subject
to remeasurement through earnings at each balance sheet date until the date of
their respective settlement and classified as marked-to-market liabilities
pursuant to ASC 480.

We determined the estimated fair value of the SAFE notes by applying a Backsolve
method within the Black-Scholes-Merton Option Pricing model. This methodology
effectively allowed us to solve for the implied value of the business based on
the terms of the SAFE investments (i.e. the value of the company, such that when
allocated to the various securities, the value allocated to the SAFE investment
equals the price the investor paid for such SAFE instrument).

Income Taxes


We account for income taxes in accordance with authoritative guidance, which
requires the use of the asset and liability method. Under this method, deferred
income tax assets and liabilities are determined based upon the difference
between the financial statement carrying amounts and the tax basis of assets and
liabilities and are measured using the enacted tax rate expected to apply to
taxable income in the years in which the differences are expected to be
reversed.

Significant judgment is required in determining any valuation allowance recorded
against deferred tax assets. In assessing the need for a valuation allowance,
management considers all available evidence, including past operating results,
estimates of future taxable income, and the feasibility of tax planning
strategies.

In the event that management changes its determination as to the amount of
deferred tax assets that can be realized, we will adjust our valuation allowance
with a corresponding impact to the provision for income taxes in the period in
which such determination is made.

We are required to evaluate the tax positions taken in the course of preparing
its tax returns to determine whether tax positions are "more likely than not" of
being sustained by the applicable tax authority. Tax benefits of positions not
deemed to meet the "more likely than not" threshold would be recorded as a tax
expense in the current year. The amount recognized is subject to estimate and
management judgment with respect to the likely outcome of each uncertain tax
position. The amount that is ultimately sustained for an individual uncertain
tax position or for all uncertain tax positions in the aggregate could differ
from the amount that is initially recognized.

Recent Accounting Pronouncements


From time to time, new accounting pronouncements are issued by the FASB or other
standard setting bodies that are adopted by us as of the specified effective
date. Unless otherwise discussed, we believe that the impact of recently issued
standards that are not yet effective will not have a material impact on our
financial position or results of operations upon adoption.

Please refer to Note 2 in our financial statements included in Form 10-Q for a
description of recently adopted accounting pronouncements and recently issued
accounting pronouncements not yet adopted, the timing of their adoptions and our
assessment, to the extent we have made one, of their potential impact on our
financial condition and results of operations.

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