Tesseract has demonstrated hypergolic ignition but needs to work through design, manufacture, and test of our propulsion system. We have experience doing this work but engineering can take longer than expected. Our primary risk is burning through capital before completion of space qualification. Our estimate is January 2019. A green light schedule is Fall 2018 and yellow light Summer 2019. Our fundraise is to extend runway into 2019.
The Company may never receive a future equity financing or elect to convert the Securities upon such future financing. In addition, the Company may never undergo a liquidity event such as a sale of the Company or an IPO. If neither the conversion of the Securities nor a liquidity event occurs, the Purchasers could be left holding the Securities in perpetuity. The Securities have numerous transfer restrictions and will likely be highly illiquid, with no secondary market on which to sell them. The Securities are not equity interests, have no ownership rights, have no rights to the Company’s assets or profits and have no voting rights or ability to direct the Company or its actions.
Completing contracting takes longer than expected. We have a proposal we are competing for that is working toward a decision on 300 satellites with our propulsion system. It is expected that contracting will be in Q1 2019 at which point a payment of $5M would be received for non-recurring engineering out of the $50M contract award. Contracting can take time with large aerospace firms and we must have sufficient runway to reach initial payment.
If our competitors lower their prices below our break even for initial product build then this could be problematic. Competition from other more established companies in the industry may have more tools, capital and resources upon which to rely, which could be a threat to our growth.
Our future success depends on the efforts of key personnel and consultants, especially our founders, Erik, Jeff and Jacob. We heavily rely on our small management team. The loss of services of our founders or any key personnel may have an adverse effect on us. There can be no assurance that we will be successful in attracting and retaining other personnel we require to successfully grow our business.
It would be problematic if we don't win government grants such as NASA or DOD SBIR other solicitations. These are from $125k to $2M grants which are non-diluting. Grants would help pay for testing and qualification but funding should be available from investors or customer contracts. Despite the fact that we have previously won SBIR and Tipping Point contracts there is still no guarantee that we will win more.
Electric propulsion continues to take market share from chemical propulsion, including our product. Electric propulsion for huge satellites is high efficiency but for small satellites major technical challenges have been found shrinking high voltage electronics required. Electric also requires abundant solar energy to offer any performance and for the growing low Earth orbit market satellites are eclipsed 50% of the time by the Earth leading to poor performance. With the cost of launch being reduced by SpaceX, Rocket Lab, and Virgin Orbit the mass savings of electric propulsion are not worth the 1000x lower thrust available and 3-12 month transfer times, compared to hours for our system.