Annual report pursuant to Section 13 and 15(d)

Investments in Noncontrolled Entity

Investments in Noncontrolled Entity
12 Months Ended
Dec. 31, 2022
Equity Method Investments and Joint Ventures [Abstract]  
Investments in Noncontrolled Entity Investments in Noncontrolled Entity
Sky and Space Global Limited Investment
On October 23, 2020, the Company and Sky and Space Global Limited (“SAS”) entered into a settlement agreement to terminate and mutually release the parties from the launch service agreement dated September 16, 2016. The agreement took effect depending on the successful relisting and IPO of SAS on the Australian Stock Exchange (“ASX”) and any additional requirements from regulators.
The settlement agreement also includes a services and reseller agreement, under which the Company will receive a non-refundable fee of AUD 1.0 million per year for its promotion services for three years on a quarterly basis beginning on July 1, 2021 and ending on April 1, 2024, and the Company will pay SAS a fee of AUD 0.1 million for each launch that is resold or referred by SAS. Given the settlement was contingent on events which had not yet occurred as of December 31, 2022, the services and reseller agreement were not recognized in the consolidated financial statements for the year ended December 31, 2022.
On February 16, 2021, under the terms of the settlement agreement, the Company was issued 11,000,000 ordinary shares of SAS Parent at AUD 0.20 per share for a total of 2.2 million AUD, or $1.7 million, which represents 14.7% of ownership in SAS Parent. The Company is also entitled to one observer seat on the board of directors of the parent
company of SAS Parent so long as the Company maintains its ownership of 1,000,000 ordinary shares of SAS Parent. The Company does not have significant influence or the ability to exercise significant influence or control over SAS Parent. Therefore, the investment is accounted as a financial asset included in non-current asset in the consolidated balance sheets, with unrealized gain or loss and dividends recognized in the consolidated statement of operations and comprehensive loss. The Company has recognized upon issuance of the 11,000,000 ordinary shares of SAS Parent, an unrealized gain of 2.3 million from the initial investment, with an offset of $0.2 million unrealized loss based on SAS’ fair value as of December 31, 2021, which was recorded in other income, net for the year ended December 31, 2021. No significant changes to unrealized loss as of December 31, 2022.
On April 20, 2021, the Company was issued 7,000,000 fully vested call options with a strike price of AUD 0.40 per share, with settlement of the call options contingent upon the successful relisting and IPO of SAS Parent. As the relisting and IPO has not yet occurred as of December 31, 2022, the issuance of the options was not recognized in the consolidated financial statements. The Company also determined the estimated value of such options was not material.
On August 27, 2021, SAS Parent officially discontinued its efforts to be relisted on ASX. On September 8, 2021, the Company amended the services and reseller agreement to remove the condition of SAS Parent to be relisted on ASX resulting in the settlement agreement as well as the services and reseller agreement becoming effective. Accordingly, the $1.2 million deposit from SAS related to the terminated launch service agreement historically recorded in deferred revenue has been released from deferred revenue and recorded as other income, net in the consolidated statements of operations and comprehensive loss. The removal of this condition also relates to the outstanding call options, which as a result of the amendment, can be exercised into shares of SAS Parent regardless of the SAS Parent being relisted on ASX. However, the value of the options are not material for the periods presented. As of December 31, 2022, there were no material changes in the Company’s investment in SAS.
Arqit PIPE Investment
On May 12, 2021, the Company entered into a binding term sheet (the “Term Sheet”) and a subscription agreement to commit to contribute $5.0 million to Arqit Limited (“Arqit”) in a PIPE transaction (the “Arqit PIPE Investment”) in exchange for 500,000 ordinary shares at $10.00 per share, subject to and contingent upon the closing of a planned merger transaction (the “Arqit Transaction”) between Arqit and Centricus Acquisition Corp., a SPAC unaffiliated with the Company.
On September 3, 2021, the Arqit Transaction was consummated, and the Company made the Arqit PIPE Investment, which was recorded as a financial asset in investments in the consolidated balance sheets. During the quarter ended December 31, 2022, the Company disposed approximately 84% of its investment in Arqit. As of December 31, 2022, the fair value of the remaining Arqit PIPE Investment was $0.3 million that includes an unrealized loss of $2.3 million in the consolidated statements of operations and comprehensive loss.
On September 7, 2021, Arqit delivered $5.0 million to the Company as a non-refundable deposit towards an executed launch service agreement for up to five launches, with $1.0 million of such deposit to be applied towards the price of each remaining launch services commencing with the second launch, if Arqit requires fewer than five launch services, and the remainder to be applied towards the price of the first launch service. On September 30, 2022, the launch term dates were amended resulting in later launch payment milestone dates. As of December 31, 2022, the Company recorded $0.8 million in non-current deferred revenue on the consolidated balance sheets.
On December 21, 2022, the Company entered into a Stock Purchase Agreement with SatRev, S.A. (“SatRev”) to purchase 201,376 common shares (the “SatRev Shares”) for $5.0 million and a Launch Services Agreement to purchase launch services for a total of 500kg of spacecraft to low Earth orbit on various launch missions from the effective date until December 31, 2025, for $17.5 million which includes the payment of a $5.0 million deposit upon execution (the “SatRev Contracts”). The parties have decided to settle the outstanding and due payments to each other for the SatRev Contracts via payment netting. Subject to the terms and conditions of this Stock Purchase Agreement, SatRev will acquire, and the Company will transfer the SatRev Shares to SatRev in exchange for $5.0 million. SatRev shall receive the same class of equity securities, with the same rights, preferences and privileges
as provided to other investors in the Financing (such class of securities, the “Series U Stock”); SatRev’s purchase shall be on the same terms and conditions, including without limitation, the price of the Series U Stock, as those received by other investors in the Financing; and the aggregate amount raised by issuing equity securities in the Financing shall not be less than $10.0 million. As of December 31, 2022, the fair value of the SatRev Investment was $5.0 million.