UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14C INFORMATION

Information Statement Pursuant to Section 14(c) of the

Securities Exchange Act of 1934

 

 

Check the appropriate box:

 

☒	Preliminary information statement

 

☐	Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2))

 

☐	Definitive information statement

Astra Space, Inc.

(Name of Registrant as Specified in Its Charter)

Payment of Filing Fee (Check the appropriate box):

 

☐	No fee required.

 

☐	Fee paid previously with preliminary materials.

 

☒	Fee computed on table in exhibit required by Item 25(b) of Schedule 14A (17 CFR 240.14a-101) per Item 1 of this Schedule and Exchange Act Rules 14c-5(g) and 0-11.

 

 

 

PRELIMINARY INFORMATION STATEMENT - SUBJECT TO COMPLETION

 

Astra Space, Inc.

1900 Skyhawk Street

Alameda, California 94501

 

To our Stockholders:

This notice of stockholder action by consent in lieu of a meeting and appraisal rights and information statement is being furnished to the holders of Class A common stock, par value $0.0001 per share (the “Class A Shares”), and Class B common stock, par value $0.0001 per share (the “Class B Shares” and, together with the Class A Shares, the “Common Shares”), of Astra Space, Inc., a Delaware corporation (the “Company”), in connection with the Agreement and Plan of Merger (as amended or otherwise modified in accordance with its terms, the “Merger Agreement”), dated as of March 7, 2024, by and among Apogee Parent Inc., a Delaware corporation (“Parent”), Apogee Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and the Company, a copy of which is attached as Annex A to the accompanying information statement. Pursuant to the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger (the “Surviving Corporation”). Parent and Merger Sub were formed by the Company’s co-founders, Chris C. Kemp, the Company’s chief executive officer, chairman and a director, and Dr. Adam P. London, the Company’s chief technology officer and a director (collectively, including their immediate family members and certain trusts or other entities in which either Mr. Kemp or Dr. London or their immediate family members hold voting, proprietary, equity or other financial interests, the “Specified Stockholders”). Mr. Kemp and Dr. London are the sole holders of all outstanding Class B Shares. As of the effective time of the Merger (the “Effective Time”), Class A Shares held by Parent or its affiliates, including the Specified Stockholders and certain other holders of Class A Shares (the “Rollover Shares”), as a result of having been acquired by Parent or its affiliates pursuant to a rollover agreement or in connection with the funding of a capital commitment set forth in an equity commitment letter, will be canceled and cease to exist (the “Rollover”); provided that the Rollover will be permitted only if no Class B Shares are issued and outstanding. Upon consummation of the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, each Class A Share issued and outstanding immediately prior to the Effective Time (other than (i) the Rollover Shares, (ii) any Common Shares canceled pursuant to the Merger Agreement and (iii) each Common Share for which the holder thereof is entitled to and properly demands appraisal pursuant to the General Corporation Law of the State of Delaware (the “DGCL”), and does not withdraw or otherwise lose the right to appraisal pursuant to the DGCL (such Common Shares, the “Dissenting Shares”)) will be converted into the right to receive an amount in cash equal to $0.50 per Class A Share, without interest (the “Merger Consideration”).

A special committee (the “Special Committee”) of the board of directors (the “Board”) of the Company consisting only of independent and disinterested directors of the Company has unanimously determined that (i) the Merger Agreement and the transactions contemplated thereby (the “Transactions”), including the Merger, on the terms and subject to the conditions set forth therein, are advisable, fair to and in the best interests of the

Company and all of the holders of the issued and outstanding Common Shares, excluding the Specified Stockholders and their respective affiliates (excluding the Company and its subsidiaries) (the “Public Stockholders”) and (ii) recommended that the Board (a) approve the Merger Agreement, the other transaction documents and the Transactions, including the Merger, including for purposes of Section 203 of the DGCL, and (b) recommend adoption and approval of the Merger Agreement and the Transactions, including the Merger, to the Company’s stockholders.

The Board (with Mr. Kemp, Dr. London and Scott Stanford, a director of the Company and an affiliate of ACME, LLC, abstaining from voting on the approval of the Transactions, including the Merger), acting on the recommendation of the Special Committee (i) determined that the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth therein, are advisable, fair to and in the best interests of the Company and its stockholders, (ii) declared the Merger Agreement and the Transactions, including the Merger, advisable, (iii) approved the Merger Agreement, the execution and delivery by the Company of the Merger Agreement, the performance by the Company of its covenants and agreements contained therein and the consummation of the Transactions, including the Merger, on the terms and subject to the conditions contained in the Merger Agreement and (iv) resolved to recommend adoption and approval of the Merger Agreement and the Transactions, including the Merger, to the Company’s stockholders.

The adoption of the Merger Agreement and the approval of the Merger and the other Transactions required the affirmative vote or written consent, in accordance with Section 228 and Section 251 of the DGCL, the Company’s Second Amended and Restated Certificate of Incorporation, dated June 30, 2021 (as amended), and the Company’s Amended and Restated Bylaws, dated June 30, 2021 (as amended), by stockholders of the Company holding a majority of the aggregate voting power of the outstanding Common Shares entitled to vote thereon, voting together as a single class (the “Required Stockholder Approval”).

On March 7, 2024, following the execution of the Merger Agreement, Chris C. Kemp and Dr. Adam P. London, who on such date beneficially owned a majority of the voting power of the issued and outstanding Common Shares, executed and delivered to the Company a written consent adopting the Merger Agreement and approving the Merger (the “Written Consent”), thereby providing the Required Stockholder Approval for the Merger. A copy of the Written Consent is attached as Annex C to the accompanying information statement. Together, Mr. Kemp and Dr. London beneficially owned approximately 66.3% of the voting power of the outstanding Common Shares at the time of delivery of the Written Consent. As a result, no further action by any holder of Common Shares is required under applicable law or the Merger Agreement (or otherwise) to adopt the Merger Agreement and the Transactions contemplated thereby (including the Merger), and the Company will not be soliciting your vote for or consent to the adoption of the Merger Agreement and the approval of the Transactions, including the Merger, and will not call a stockholders’ meeting for purposes of voting on the adoption of the Merger Agreement and the approval of the Transactions. This notice and the accompanying information statement shall constitute notice to you from the Company of the Written Consent contemplated by Section 228(e) of the DGCL.

This notice of action by written consent and appraisal rights and the accompanying information statement constitute notice to you from the Company of the Written Consent to adopt and approve the Merger Agreement and the Transactions contemplated thereby, including the Merger, in lieu of a meeting.

Under Section 262 of the DGCL, if the Merger is completed, subject to compliance with the requirements of Section 262 of the DGCL, holders of Common Shares will have the right to seek an appraisal for, and be paid the “fair value” (exclusive of any element of value arising from the accomplishment or expectation of the Merger) in cash of, their Common Shares as determined by the Delaware Court of Chancery, together with interest, if any, on the amount determined to be fair value, instead of receiving the Merger Consideration. To exercise your appraisal rights, you must submit a written demand for an appraisal to the Company no later than twenty (20) days after the mailing of the accompanying information statement, which mailing date is    , 2024, and comply precisely with other procedures set forth in Section 262 of the DGCL, which are summarized in the accompanying information statement. A copy of Section 262 of the DGCL is attached as Annex D to the accompanying information statement.

This notice and the accompanying information statement shall constitute notice to you from the Company of the availability of appraisal rights under Section 262 of the DGCL in connection with the Merger. We urge you to read the entire information statement carefully. If the Merger is completed, you will receive instructions regarding payment for your Common Shares.

BY ORDER OF THE BOARD OF DIRECTORS,

/s/ Michael Lehman

Michael Lehman, Lead Independent Director

Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities regulatory agency has approved or disapproved the Merger, passed upon the merits or fairness of the Merger or passed upon the adequacy or accuracy of the disclosures in this notice or the accompanying information statement. Any representation to the contrary is a criminal offense.

The information statement is dated    , 2024 and is being mailed to stockholders on or about    , 2024.

TABLE OF CONTENTS

 

		Page
SUMMARY			1
Introduction			1
The Parties to the Merger Agreement (page 22)			2
The Merger (page 94)			2
The Merger Consideration (page 95)			3
The Segregated Account and the Segregated Funds (page 114)			3
Treatment of Outstanding Convertible Notes and Warrants (page 95)			4
Treatment of Company Equity Awards (page 86)			5
Recommendation of the Special Committee; Reasons for the Merger (page 66)			6
Recommendation of the Board; Reasons for the Merger (page 69)			6
Required Stockholder Approval for the Merger (page 70)			6
Opinion of Houlihan Lokey Capital, Inc. to the Special Committee (page 71 and Annex B)			7
Financing (page 80)			7
The Merger Agreement (page 94 and Annex A)			8
Interests of Our Directors and Executive Officers in the Merger (page 85)			12
Material United States Federal Income Tax Consequences of the Merger (page 90)			12
Regulatory Approvals (page 92)			12
Procedures for Receiving Merger Consideration (page 96)			12
Governing Law			13
Appraisal Rights (page 119 and Annex D)			13
Effect on the Company if the Merger is Not Completed			13
Transaction Litigation (page 90)			14
Market, Dividends and Certain Transactions in the Class  A Shares (page 117)			14
QUESTIONS AND ANSWERS ABOUT THE MERGER			15
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS			20
THE PARTIES TO THE MERGER AGREEMENT			22
The Company			22
Parent			22
Merger Sub			22
DIRECTORS, EXECUTIVE OFFICERS AND CONTROLLING PERSONS OF THE COMPANY			23
Directors			23
Non-Director Executive Officers			25
Controlling Persons			25
THE SPECIAL FACTORS			27
Background of the Merger			27
Recommendation of the Special Committee; Reasons for the Merger			66
Recommendation of the Board; Reasons for the Merger			69
Required Stockholder Approval for the Merger			70
Opinion of Houlihan Lokey Capital, Inc. to the Special Committee			71
Liquidation Analysis			76
Certain Company Financial Projections			77
Financing			80
Position of the Company on the Fairness of the Merger			81
Position of the Parent Entities in Connection with the Merger			81
Purposes and Reasons of the Company in Connection with the Merger			84
Purposes and Reasons of the Parent Entities in Connection with the Merger			85
Interests of Our Directors and Executive Officers in the Merger			85
Treatment of Company Equity Awards			86

 

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		Page
Severance Entitlements			87
Other Arrangements			87
Quantification of Payments and Benefits			88
Special Committee Compensation			89
Directors’ and Officers’ Indemnification and Insurance			89
Other Interests			89
Delisting and Deregistration of Class A Shares			89
Plans for the Company After the Merger			89
Transaction Litigation			90
Fees and Expenses			90
Material United States Federal Income Tax Consequences of the Merger			90
Regulatory Approvals			92
Alternatives to the Merger			93
THE MERGER AGREEMENT			94
Explanatory Note Regarding the Merger Agreement			94
Form of Merger			94
Consummation and Effectiveness of the Merger			94
Consideration to be Received in the Merger			95
Dissenting Shares			96
Procedures for Receiving Merger Consideration			96
Tax Withholding			98
Charter; Bylaws			98
Representations and Warranties			99
Conduct of Business by the Company Prior to Consummation of the Merger			101
Regulatory Filings; Efforts			105
Written Consent; Merger Sub Stockholder Consent			106
No Solicitation; Superior Proposal and Adverse Recommendation Change			106
Indemnification and Insurance			107
Financing of the Merger			108
Other Covenants and Agreements			109
Conditions to Consummation of the Merger			111
Termination of the Merger Agreement			112
Termination Fees and Expenses			114
Amendment and Waiver			114
Jurisdiction; Specific Performance			115
Governing Law			116
MARKET INFORMATION, DIVIDENDS AND CERTAIN TRANSACTIONS IN THE CLASS A SHARES			117
PROVISIONS FOR UNAFFILIATED STOCKHOLDERS			119
APPRAISAL RIGHTS			119
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			125
WHERE YOU CAN FIND MORE INFORMATION			128
DELIVERY OF INFORMATION STATEMENT			129
ANNEX A			A-1
ANNEX B			B-1
ANNEX C			C-1
ANNEX D			D-1

 

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SUMMARY

This summary highlights selected information from this information statement (this “Information Statement”) and may not contain all of the information that is important to you. To fully understand the Merger, as hereinafter defined and as described below, and for a more complete description of the legal terms of the Merger, you should carefully read this entire Information Statement, the annexes attached to this Information Statement and the documents referred to or incorporated by reference in this Information Statement. We have included page references in parentheses to direct you to the appropriate place in this Information Statement for a more complete description of the topics presented in this summary. In this Information Statement, the terms “Legacy Astra” refers to Astra Space Operations LLC, f/k/a Astra Space, Inc. on or before June 30, 2021; “Company,” “Astra,” “we,” “us” and “our” refer to Astra Space, Inc. and its subsidiaries (including Legacy Astra) after June 30, 2021; “Holicity” refers to Astra Space, Inc. on or before June 30, 2021. This Information Statement is dated     , 2024 and is being mailed to our stockholders on or about     , 2024.

Introduction

On March 7, 2024, the Company, Apogee Parent Inc., a Delaware corporation (“Parent”), and Apogee Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), entered into an Agreement and Plan of Merger (as amended or otherwise modified in accordance with its terms, the “Merger Agreement”), pursuant to which Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation (the “Surviving Corporation”) of the Merger and a wholly owned subsidiary of Parent. Parent and Merger Sub were formed by the Company’s founders, Chris C. Kemp, the Company’s chief executive officer, chairman and a director, and Dr. Adam P. London, the Company’s chief technology officer and a director (collectively, including their immediate family members and certain trusts or other entities in which either Mr. Kemp or Dr. London or their immediate family members hold voting, proprietary, equity or other financial interests, the “Specified Stockholders” and collectively with Parent and Merger Sub the “Parent Entities”). Mr. Kemp and Dr. London are the sole holders of all outstanding shares of Class B common stock, par value $0.0001 per share, of the Company (the “Class B Shares”) and beneficially own 63,192 shares of Class A common stock, par value $0.0001 per share, of the Company (each, a “Class A Share” and, together with the Class B Shares, the “Common Shares”), which together with the Class B Shares held by Mr. Kemp and Dr. London, represent approximately 66.3% of the total voting power of the Company.

The Company’s board of directors (the “Board”) formed a special committee of the Board comprised solely of independent and disinterested directors (the “Special Committee”) to (i) consider, evaluate, review and negotiate any potential acquisition of the Company and to take such other actions with respect to any acquisition of the Company that the Special Committee deemed necessary, appropriate or advisable, (ii) determine whether any acquisition of the Company is in the best interest of the Company and maximizes value for the Company’s stockholders, and (iii) if applicable, recommend to the Board what action, if any, should be taken by the Company with respect to any acquisition of the Company. As more fully described below, the Special Committee evaluated the Merger with the assistance of its financial and legal advisors and after taking into account the financial condition of the Company, including its ability to operate as a going concern if the Merger was not consummated. At the conclusion of its review, the Special Committee, among other things, unanimously resolved: (i) that the Merger Agreement and the transactions contemplated thereby (the “Transactions”), including the Merger, on the terms and subject to the conditions set forth therein, are advisable, fair to and in the best interests of the Company and all of the holders of the issued and outstanding Common Shares, excluding the Specified Stockholders and their respective affiliates (excluding the Company and its subsidiaries) (the “Public Stockholders”); and (ii) to recommend that the Board (a) approve the Merger Agreement, the other transaction documents and the Transactions, including the Merger, including for purposes of Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”); (b) recommend adoption and approval of the Merger Agreement and the Transactions, including the Merger, to the stockholders of the Company; and (c) authorize the execution and delivery of the agreements to which the Company is a party and the performance by the Company of all of its obligations under the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement.

 

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The Company entered into the Merger Agreement as the only actionable alternative to the filing of a petition for voluntary relief under Chapter 7 of the Bankruptcy Code, in which case all of the assets of the Company would have been liquidated and the stockholders would have received no value for their Class A Shares. Important information outlining the events leading up to the Special Committee’s decision to recommend the approval of this Merger Agreement and the consummation of the Transactions, including the Merger, as contemplated therein, are provided in “The Special Factors—Background of the Merger” beginning on page 27 of this Information Statement and “The Special Factors—Liquidation Analysis” beginning on page 76 of this Information Statement.

The Parties to the Merger Agreement (page 22)

The Company. Astra’s mission is to improve life on Earth from space^® by launching a new generation of space products and services. These products and services are enabled by new constellations of small satellites in low Earth orbit, which have rapidly become smaller, cheaper, and many times more numerous than traditional satellites. Astra believes that frequent, reliable, dedicated launches and space products enabled by scaled manufacturing are the keys to accelerating the growth of the space economy. Currently, Astra’s business consists of two segments, a mobile orbital launch system (“Launch Services”) and a space products business that produces the Astra Spacecraft Engine^® products (“Space Products”). To learn more about the Company, please visit https://astra.com. The Company’s website address is being provided as an inactive textual reference only. The Company’s principal executive offices are located at 1900 Skyhawk Street, Alameda, California 94501 and its telephone number is (866) 278-7217. Additional information about the Company is included in documents incorporated by reference into this Information Statement and its filings with the Securities and Exchange Commission (the “SEC”), copies of which may be obtained without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page 128 of this Information Statement. The information provided on, or accessible through, the Company’s website, other than the copies of the documents listed or referenced in the section entitled “Where You Can Find More Information” that have been or will be filed with the SEC, is not part of this Information Statement.

The Company’s Class A Shares are listed with, and trade on, the Nasdaq Capital Market (“Nasdaq”) under the symbol “ASTR.” The Company’s Class B Shares are not listed on any stock exchange nor traded on any public market. As of April 8, 2024, 19,004,806 Class A Shares were issued and outstanding and 3,702,613 Class B Shares were issued and outstanding.

Parent. Parent was formed in the State of Delaware on February 29, 2024, solely for the purpose of entering into the Merger Agreement and consummating the Merger with the Company. Parent is directly owned by Mr. Kemp and Dr. London and has not carried on any business, conducted any operations or incurred any liabilities or obligations, other than those incidental to its formation and pursuant to the Merger Agreement, the performance of its obligations thereunder and matters ancillary thereto. Parent’s principal executive offices are located at 1900 Skyhawk Street, Alameda, California 94501 and its telephone number is (866) 278-7217.

Merger Sub. Merger Sub was formed in the State of Delaware on February 29, 2024, solely for the purpose of entering into the Merger Agreement and consummating the Merger with the Company. Merger Sub is a wholly owned subsidiary of Parent and has not carried on any business, conducted any operations or incurred any liabilities or obligations, other than those incidental to its formation and pursuant to the Merger Agreement, the performance of its obligations thereunder and matters ancillary thereto. Upon consummation of the Merger, Merger Sub will cease to exist. Merger Sub’s principal executive offices are located at 1900 Skyhawk Street, Alameda, California 94501 and its telephone number is (866) 278-7217.

The Merger (page 94)

On March 7, 2024, the Company entered into the Merger Agreement with Parent and Merger Sub. Upon the terms and subject to the conditions provided in the Merger Agreement, and in accordance with the DGCL, at the

 

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effective time of the Merger (the “Effective Time”), Merger Sub will merge with and into the Company, with the Company continuing as the Surviving Corporation. As a result of the Merger, the Company will cease to be a publicly traded company. Unless otherwise set out in the Merger Agreement, because the Merger Consideration will be paid in cash, you will receive no equity interest in Parent in consideration for your Class A Shares, and after the Effective Time, you will not own any Class A Shares.

We encourage you to read the Merger Agreement, which is attached as Annex A to this Information Statement, as it is the legal document that governs the Merger and the other transactions contemplated thereby. The summary of the Merger Agreement below is qualified in its entirety by the full text of the Merger Agreement.

The Merger Consideration (page 95)

At the Effective Time, by virtue of the occurrence of the Merger, the following will occur:

 

•

each Common Share that is owned by the Company as treasury shares and each Common Share that is owned by any direct or indirect wholly owned subsidiary of the Company, or by Parent, Merger Sub, or any direct or indirect wholly owned subsidiary of Parent or Merger Sub, in each case, issued and outstanding immediately prior to the Effective Time, will automatically be canceled without payment of any consideration therefor and cease to exist (the “Canceled Common Shares”);

 

•

each Class A Share for which the holder thereof did not consent or vote in favor of the Merger Agreement and is entitled to and properly demands appraisal pursuant to the DGCL, and does not withdraw or otherwise lose the right to appraisal pursuant to the DGCL, will automatically be canceled (subject to the appraisal rights of such holders) (such Common Shares, the “Dissenting Shares”);

 

•

each (i) Class A Share and (ii) Class A Share subject to a Director RSU Award (as defined below) that has fully vested as of the Effective Time, that is issued and outstanding immediately prior to the Effective Time and held by Parent or its affiliates, including the Specified Stockholders and certain other holders of Class A Shares (the “Rollover Shares”), as of immediately prior to the Effective Time as a result of having been acquired by Parent or its affiliates pursuant to a rollover agreement in a form mutually acceptable to Parent and the Company (each, a “Rollover Agreement”) or in connection with the funding of a capital commitment set forth in an Equity Commitment Letter (as defined below), will be canceled and cease to exist (the “Rollover”); provided that the Rollover will be permitted only if no Class B Shares are issued and outstanding;

 

•

each Class A Share (other than (i) the Rollover Shares, (ii) any Canceled Common Shares and (iii) any applicable Dissenting Shares) issued and outstanding immediately prior to the Effective Time (such Class A Shares, the “Converted Shares”):

 

•

will automatically be canceled and converted into the right to receive $0.50 per share in cash, without interest (the “Merger Consideration”);

 

•

will no longer be outstanding and cease to exist;

 

•

each certificate formerly representing any such shares (each, a “Certificate”) or the applicable number of uncertificated shares represented by book-entry (each, a “Book-Entry Share”) will thereafter represent only the right to receive the Merger Consideration in accordance with the Merger Agreement; and

 

•

each share of common stock of Merger Sub (each, a “Merger Sub Share”) issued and outstanding immediately prior to the Effective Time will automatically be converted into and become one authorized, validly issued, fully paid and nonassessable share of common stock, par value $0.0001 per share, of the Surviving Corporation (each, a “Surviving Company Common Share”).

The Segregated Account and the Segregated Funds (page 114))

Following the execution of the Merger Agreement, and pursuant to the terms of the Merger Agreement, the Company (i) deposited into a segregated bank account of Astra Space Operations LLC (the “Segregated

 

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Account”) an amount in cash equal to $3.5 million (the “Segregated Funds”), and (ii) is working as promptly as reasonably practicable to (x) withdraw all funds held in the Segregated Account other than the Segregated Funds and (y) suspend any automatic withdrawal arrangements applicable to the Segregated Account. The Segregated Account is not permitted to contain any funds other than the Segregated Funds, and the Segregated Funds will be managed by the Company at the reasonable direction of the Special Committee acting in accordance with its fiduciary duties. The Segregated Funds will be held in the Segregated Account free and clear of any liens of the collateral agent of the holders of the Company Convertible Notes (as defined below). Pursuant to its agreement with the holders of the Company Convertible Notes, the Company may only use funds in the Segregated Account for certain enumerated purposes as the Special Committee may direct the Company, which include, among other things, payroll expenses, employee health and benefit expenses, rent and utilities, directors’ and officers’ liability insurance and bankruptcy work (such purposes, the “Permitted Purposes”). The Limited Waiver and Consent to Senior Secured Convertible Notes and Common Stock Purchase Warrant and Reaffirmation of Transaction Documents, dated as of March 7, 2024 (the “Limited Waiver and Consent”), among the Company, each of the subsidiaries of the Company, JMCM Holdings LLC (“JMCM”), SherpaVentures Fund II, LP (“ACME Fund II”), Chris C. Kemp, through the Chris Kemp Living Trust dated February 10, 2021 (the “Kemp Trust”), Dr. London, Astera Institute (“Astera”), MH Orbit, LLC (“MH Orbit”) and RBH Ventures Astra SPV, LLC (“RBH”), further limits when the Special Committee may use the Segregated Funds for bankruptcy work.

Treatment of Outstanding Convertible Notes and Warrants (page 95)

All outstanding 12.0% senior secured convertible notes due 2025 (the “Company Convertible Notes”), that are convertible into Class A Shares at an initial conversion price of $0.808 per share, subject to certain adjustments will, immediately after the Merger becomes effective, be converted into shares of Series A preferred stock, par value $0.0001 per share, of Parent (the “Parent Series A Preferred Stock”) in accordance with a noteholder conversion agreement, by and among Parent, Merger Sub, and each holder of Convertible Notes (the “Noteholder Conversion Agreement”). The Company Convertible Notes were issued by the Company pursuant to that certain Securities Purchase Agreement dated as of August 4, 2023 (as amended or otherwise modified by, inter alia, that certain Reaffirmation Agreement and Omnibus Amendment Agreement dated as of November 6, 2023, that certain Omnibus Amendment No. 3 Agreement dated as of November 21, 2023, that certain Amendment to Securities Purchase Agreement dated as of January 19, 2024, that certain Amendment to Senior Secured Convertible Notes dated as of January 31, 2024, that certain Second Amendment to Securities Purchase Agreement and Second Amendment to Senior Secured Convertible Notes dated as of February 26, 2024 and the Limited Waiver and Consent to Senior Secured Convertible Notes and Common Stock Purchase Warrant and Reaffirmation of Transaction Documents, dated as of March 7, 2024) (as so amended and modified, the “Purchase Agreement”).

All outstanding warrants to purchase Class A common stock, dated August 4, 2023, and common stock purchase warrants, dated November 6, 2023, November 13, 2023, November 21, 2023, January 19, 2024, March 6, 2024, March 7, 2024, and March 15, 2024, in each case, issued by the Company in favor of the respective holders thereof (collectively, the “Company Warrants”) pursuant to the Purchase Agreement, will, immediately after the Merger becomes effective, be exchanged for warrants to purchase Parent Series A Preferred Stock in accordance with a warrant exchange agreement, by and among Parent, Merger Sub, and each holder of Company Warrants (the “Warrant Exchange Agreement”).

The Company Convertible Notes are held by JMCM, ACME Fund II, the Kemp Trust, Dr. London, Astera, MH Orbit, RBH, Ulrich Gall and ERAS Capital, LLC (“ERAS” and collectively with JMCM, ACME Fund II, the Kemp Trust, Dr. London, Astera, MH Orbit, RBH, and Mr. Gall, the “Company Convertible Notes Holders”) and as of April 8, 2024, the aggregate principal amount of all outstanding Company Convertible Notes (including any paid-in-kind interest) was $31,750,001.26. The Company Warrants are held by certain of the Company Convertible Notes Holders (the “Company Warrant Holders”) and as of April 8, 2024, Company Warrants to purchase up to an aggregate of 14,823,917 Class A Shares at an exercise price of $0.808 per Class A Share, subject to certain adjustments, and that expire on dates ranging from August 4, 2028 to March 15, 2029, were outstanding.

 

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Pursuant to the Purchase Agreement, the Company Convertible Notes Holders and the Company Warrant Holders, as applicable, have, among other things, on the terms and subject to the conditions set forth therein, (i) consented to the execution of the Merger Agreement and the consummation of the Merger in accordance with the terms of the Merger Agreement; (ii) agreed that the filing with the SEC by one or more of the Company Convertible Notes Holders and the Company Warrant Holders, as applicable, together with one or more other persons indicating that a “group” (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) has been formed which is the direct or indirect “beneficial owner” of more than 50% of the Company’s then-outstanding Common Shares in connection with the Merger will not trigger a fundamental change or fundamental transaction under the Company Convertible Notes or the Company Warrants; and (iii) agreed that neither the Segregated Account nor the funds credited therein will constitute collateral that secures the Company Convertible Notes, and permitted the Company to fund and maintain the Segregated Funds in the Segregated Account and that funds in the Segregated Account could not, subject to a limited exception, exceed $3.5 million (such amount, as it may be reduced from time to time on a dollar for dollar basis by any amounts withdrawn from the Segregated Account at the direction of the Special Committee in accordance with the terms of the Merger Agreement, the “Minimum Cash Amount”) to be used exclusively for the Permitted Purposes. The Limited Waiver and Consent further limits when the Special Committee may use the Segregated Funds for bankruptcy work.

All outstanding warrants to purchase Class A Shares, dated February 3, 2023 (the “ShareIntel Warrants”), will automatically be canceled and converted into the right to receive an amount in cash equal to the product of (i) the number of Class A Shares issuable upon exercise of the ShareIntel Warrants immediately prior to the Effective Time by (ii) the amount, if any, by which the Merger Consideration exceeds the per share exercise price of the ShareIntel Warrants.

Treatment of Company Equity Awards (page 86)

Pursuant to the Merger Agreement, at the Effective Time, each outstanding option to purchase Class A Shares (each, a “Company Option”) other than a Company Option with an exercise price equal to or greater than the Merger Consideration (an “Underwater Option”), that is outstanding immediately prior to the Effective Time, whether vested or unvested, will be assumed by Parent and converted into an option (the “Converted Options”) to purchase shares of class A common stock, par value $0.0001 per share, of Parent (the “Parent Class A Shares”). The Converted Options will continue to be subject to substantially the same terms and conditions as were applicable to such Company Options immediately prior to the Effective Time, except that (i) each Converted Option will be exercisable for that number of Parent Class A Shares equal to the number of Class A Shares subject to such option immediately prior to the Effective Time and (ii) the per share exercise price for each Parent Class A Share issuable upon exercise of a Converted Option will be equal to the exercise price per share of Class A Shares of such option immediately before the Effective Time. Each Underwater Option will be canceled for no consideration at the Effective Time. As of April 8, 2024, all Company Options were Underwater Options.

In addition, at the Effective Time, each outstanding restricted stock unit with respect to Class A Shares (a “Company RSU Award” and collectively with the Company Options, the “Company Equity Awards”) held by any director of the Company who is not an employee of the Company (a “Director RSU Award”) will be accelerated in full. At the Effective Time, each Company RSU Award that has vested in accordance with its terms, or so accelerated in the case of Director RSU Awards (except for Rollover Shares that are issued upon acceleration of Director RSU Awards) will be canceled and will only entitle the holder of such Company RSU Award to receive (without interest) an amount in cash equal to (i) the number of Class A Shares subject to such Company RSU Award immediately prior to the Effective Time multiplied by (ii) the Merger Consideration. At the Effective Time, each Company RSU Award that has not vested in accordance with its terms or so accelerated will be canceled for no consideration.

 

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Recommendation of the Special Committee; Reasons for the Merger (page 66)

On March 5, 2024, after consideration of various factors as discussed in the section entitled “The Special Factors—Recommendation of the Special Committee; Reasons for the Merger” beginning on page 66 of this Information Statement, the Special Committee, acting with the advice and assistance of its own financial and legal advisors, considered and evaluated the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, and unanimously determined that the Merger Agreement and the Transactions, including the Merger, are advisable, fair to and in the best interests of the Company and the Public Stockholders.

The Special Committee also unanimously recommended to the Board that the Board:

 

•

approve the Merger Agreement and the consummation of the Transactions, including the Merger; and

 

•

recommend that the stockholders of the Company adopt and approve the Merger Agreement and the Transactions, including the Merger.

Recommendation of the Board; Reasons for the Merger (page 69)

After consideration of various factors as discussed in the section entitled “The Special Factors—Recommendation of the Board; Reasons for the Merger” beginning on page 69 of this Information Statement, the Board (with Mr. Kemp, Dr. London and Scott Stanford abstaining from voting on the approval of the Transactions, including the Merger), based on the unanimous recommendation of the Special Committee, resolved:

 

•

that the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, are advisable and in the best interests of the Company and the Company’s stockholders;

 

•

to declare the Merger Agreement and the Transaction, including the Merger, advisable;

 

•

to approve the execution and delivery by the Company of the Merger Agreement, the performance by the Company of its covenants and agreements contained therein and the consummation of the Transactions, including the Merger, on the terms and subject to the conditions contained in the Merger Agreement; and

 

•

to recommend adoption of the Merger Agreement and the Transactions, including the Merger, to the stockholders of the Company.

Required Stockholder Approval for the Merger (page 70)

The adoption of the Merger Agreement and the approval of the Merger and the other Transactions required the affirmative vote or written consent, in accordance with Section 228 and Section 251 of the DGCL, the Company’s Second Amended and Restated Certificate of Incorporation, dated June 30, 2021 (as amended, the “Company Charter”) and the Company’s Amended and Restated Bylaws, dated June 30, 2021 (as amended, the “Company Bylaws”), by stockholders of the Company holding a majority of the aggregate voting power of the outstanding Class A Shares and Class B Shares entitled to vote thereon, voting together as a single class (the “Required Stockholder Approval”). As of March 7, 2024, the record date for determining stockholders of the Company entitled to vote on the adoption of the Merger Agreement, there were 19,004,806 Class A Shares outstanding and 3,702,613 Class B Shares outstanding. Holders of Class A Shares are entitled to one vote for each Class A share held of record, and holders of Class B Shares are entitled to ten votes for each share held of record, on all matters on which stockholders are entitled to vote generally, including adoption of the Merger Agreement.

On March 7, 2024, following the execution of the Merger Agreement, Mr. Kemp and Dr. London, who on such date beneficially owned Common Shares representing approximately 66.3% of the total voting power of the

 

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outstanding Common Shares, executed and delivered to the Company a written consent adopting the Merger Agreement and approving the Merger (the “Written Consent”). No further action by any other Company stockholder is required under applicable law or the Merger Agreement (or otherwise) in connection with the adoption of the Merger Agreement. As a result, the Company is not soliciting your vote for the adoption of the Merger Agreement and will not call a stockholders’ meeting for purposes of voting on the adoption of the Merger Agreement. No further action by the stockholders of the Company is required to complete the Merger and all requisite corporate action by and on behalf of Parent and Merger Sub required to complete the Merger has been taken.

When actions are taken by the written consent of less than all of the stockholders entitled to vote on a matter, Delaware law requires notice of the action be given to those stockholders who did not consent in writing to the action and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that consents signed by a sufficient number of holders to take the action were delivered to the corporation in accordance with Section 228 of the DGCL, which, in this case, would be March 7, 2024. This Information Statement and the notice attached to this Information Statement constitute notice to you from the Company of the Written Consent as required by Delaware law.

Opinion of Houlihan Lokey Capital, Inc. to the Special Committee (page 71 and Annex B)

The Special Committee retained Houlihan Lokey Capital, Inc. (“Houlihan Lokey”), as financial advisor to the Special Committee in connection with the Transactions, including the Merger. On March 5, 2024, Houlihan Lokey orally rendered its opinion to the Special Committee (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the Special Committee dated March 5, 2024) as to, as of such date, the fairness, from a financial point of view, to the Public Stockholders of the Merger Consideration to be received by the Public Stockholders in the Merger pursuant to the Agreement.

Houlihan Lokey’s opinion was directed to the Special Committee (in its capacity as such), and only addressed the fairness, from a financial point of view, to the Public Stockholders of the Merger Consideration to be received by the Public Stockholders in the Merger pursuant to the Merger Agreement and did not address any other aspect or implication of the Merger or any other agreement, arrangement or understanding. The summary of Houlihan Lokey’s opinion in this Information Statement is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex B to this Information Statement and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in connection with the preparation of its opinion. However, neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this Information Statement are intended to be, and do not constitute, advice or a recommendation to the Special Committee, the Board, the Company, any stockholder or any other person as to how to act or vote with respect to any matter relating to the Merger or otherwise. For more information, see the section entitled “The Special Factors—Opinion of Houlihan Lokey Capital, Inc. to the Special Committee” beginning on page 71 of this Information Statement.

Financing (page 80)

The Merger is not subject to a financing condition. Parent estimates that the total funds necessary to complete the Merger will be approximately $[●], including estimated transaction fees and expenses and assuming no exercise of dissenters’ rights by stockholders of the Company.

Pursuant to equity commitment letters with Parent and Merger Sub, each dated March 7, 2024 (collectively, the “Equity Commitment Letters”), Mr. Kemp, Dr. London, ACME Fund II, Astera, Eagle Creek Capital, LLC (“Eagle Creek”), JW 16 LLC (“JW 16”), and RBH (collectively, the “Equity Commitment Parties,” and each, an “Equity Commitment Party”) have severally agreed to provide equity financing to Parent in the amounts specified in their respective Equity Commitment Letters, for a total aggregate value of approximately $28.8 million, on the

 

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terms and subject to the conditions contained in the Equity Commitment Letters. The Equity Commitment Parties’ commitments may be satisfied, in each of their sole discretion, by (i) a cash contribution to Parent, (ii) a contribution to Parent of Class A Shares held by such Equity Commitment Party, or (iii) a combination of the foregoing. For purposes of determining the value of an Equity Commitment Party’s contribution pursuant to the foregoing clauses (ii) and (iii), each Class A Share contributed by an Equity Commitment Party will be ascribed a value equal to the Merger Consideration.

In addition, RBH has also agreed in its Equity Commitment Letter to provide interim debt financing to the Company in the amount of $1.5 million, and MH Orbit may, in its sole and absolute discretion, pursuant to a debt commitment letter, dated March 7, 2024, provide debt financing to the Company in the amount of $1.0 million, in each case, on or before April 15, 2024, for the purposes of financing cash shortfalls at the Company during the period between the signing of the Merger Agreement and the consummation of the Merger. Any interim debt financing is expected to be effected by the Company’s issuance of (i) additional Company Convertible Notes and (ii) (if elected by RBH or MH Orbit, as the case may be) additional Company Warrants; provided, however that any offer and sale of any Company Convertible Notes and Company Warrants pursuant to the Purchase Agreement after March 7, 2024, requires the consent of holders of a majority in interest of the then-outstanding Company Convertible Notes or Company Warrants, as applicable. The amount of any interim debt financing provided to the Company by RBH or MH Orbit will reduce the value of the equity commitments provided for in the Equity Commitment Letters of RBH and JW 16, respectively. Further, in addition to RBH and MH Orbit, any other Equity Commitment Party may provide interim financing to the Company to finance cash shortfalls at the Company during the period between the signing of the Merger Agreement and the consummation of the Merger. Any such interim financing provided by an Equity Commitment Party will also reduce the value of the equity commitments provided for in such party’s Equity Commitment Letter. There is no guarantee that the interim financing will be sufficient to fund the Company’s operations through the consummation of the Merger.

On March 15, 2024, RBH purchased additional Company Convertible Notes and Company Warrants. As a result of these purchases, such interim debt financing commitment and equity commitment of RBH under its Equity Commitment Letter were reduced by $991,000 and $1,044,658.75, respectively.

In addition to the Equity Commitment Letters, pursuant to a debt commitment letter with Parent, dated March 6, 2024 (the “AST Debt Commitment Letter”), AST & Science, LLC (“AST”) has agreed to purchase from Parent one or more notes in an aggregate principal amount of up to $2.5 million for a purchase price of 100% of the principal amount thereof, on the terms and subject to the conditions contained in the AST Debt Commitment Letter (including that the Merger shall have closed substantially concurrent with such purchase).

For more information on Parent’s financing arrangements for the Merger, see the sections entitled “The Special Factors—Financing” beginning on page  80 of this Information Statement.

The Merger Agreement (page 94 and Annex A)

Conditions to Consummation of the Merger

The respective obligations of the Company, Parent and Merger Sub to effect the Merger are subject to the satisfaction (or written waiver by the Company and Parent, if permissible under applicable law) at or prior to the closing, of the following conditions:

 

•

the Required Stockholder Approval having been obtained in accordance with applicable law and the Company Charter and the Company Bylaws;

 

•

no judgment or law enacted, promulgated, issued, entered, amended or enforced by any governmental authority of competent jurisdiction that is in effect enjoining, restraining or otherwise making illegal, preventing or prohibiting the consummation of the Merger; and

 

•

at least 20 calendar days have elapsed since the Company mailed to the stockholders of the Company this Information Statement as contemplated by Regulation 14C of the Exchange Act (including Rule 14c-2 promulgated thereunder).

 

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The Written Consent was delivered to the Company within 24 hours following the execution of the Merger Agreement, and as a result, the first closing condition listed above has been satisfied.

The obligations of Parent and Merger Sub to effect the Merger are also subject to the satisfaction or written waiver by Parent, if permissible under applicable law, at or prior to the closing of the following conditions:

 

•

the representations and warranties of the Company must be true and correct as of the closing as though made on and as of such time in the manner described in the section entitled “The Merger Agreement—Conditions to Consummation of the Merger” beginning on page 111 of this Information Statement;

 

•

the Company having performed or complied with, in all material respects, the obligations and agreements required to be performed or complied with by it under the Merger Agreement at or prior to the Effective Time;

 

•

there having been no Material Adverse Effect (as such term is defined in the Merger Agreement) that is continuing; and

 

•

the receipt by Parent of a certificate signed by an executive officer of the Company certifying that each of the conditions specified above have been satisfied.

The obligation of the Company to effect the Merger is also subject to satisfaction or waiver by the Company at or prior to the closing of the following conditions:

 

•

the representations and warranties of Parent and Merger Sub must be true and correct as of the closing as though made on and as of such time in the manner described in the section entitled “The Merger Agreement—Conditions to Consummation of the Merger” beginning on page 111 of this Information Statement;

 

•

each of Parent and Merger Sub having performed or complied with, in all material respects, the obligations and agreements required to be performed or complied with by it under the Merger Agreement at or prior to the Effective Date; and

 

•

the receipt by the Company of a certificate signed by an executive officer of Parent certifying that each of the conditions specified above have been satisfied.

No Solicitation; Superior Proposal and Change of Recommendation

From the date of the Merger Agreement until the Effective Time (or, if earlier, the valid termination of the Merger Agreement), the Company has agreed that it will and will cause each of its subsidiaries and its and their officers, employees and directors to, and will instruct and direct its other representatives to:

 

•

immediately cease any discussions or negotiations with any persons that may be ongoing with respect to an acquisition proposal;

 

•

not, directly or indirectly,

 

•

solicit, initiate or knowingly encourage or knowingly facilitate the making of an acquisition proposal;

 

•

engage in or otherwise participate in any discussions or negotiations regarding, or furnish to any other person any non-public information or access to its properties or assets for the purpose of encouraging or facilitating, an acquisition proposal; or

 

•

enter into any definitive agreement with respect to any acquisition proposal.

By virtue of the delivery of the Written Consent following the execution of the Merger Agreement, the provisions of the Merger Agreement with respect to the Board or the Special Committee’s ability to (i) withhold, withdraw or modify in a manner adverse to Parent its recommendation, (ii) recommend, approve or adopt any

 

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alternative acquisition proposal or (iii) terminate the Merger Agreement in connection with a material event, change or circumstance with respect to the Company are no longer applicable, except if such actions are required by the directors’ fiduciary duties or applicable law.

Termination of the Merger Agreement

The Merger Agreement may be terminated and the Merger and the Transactions may be abandoned at any time prior to the Effective Time by the mutual written consent of Parent and the Company (upon the approval of the Special Committee).

In addition, the Merger Agreement may be terminated and the Merger and the Transactions may be abandoned at any time prior to the Effective Time by either Parent or the Company (upon approval by the Special Committee) if:

 

•

the Merger is not consummated on or prior to September 6, 2024 (the “Initial Outside Date”); provided, that Parent will have the right, in its sole discretion, to extend the Initial Outside Date by one week for each $1.5 million of cash that Parent or Merger Sub provide, or cause to be provided, to the Company (on such terms and conditions as the parties to the Merger Agreement may agree upon in good faith) prior to the termination of the Merger Agreement (and if extended by this provision, such date will be, together with the “Initial Outside Date” the “Outside Date”), except that this right will not be available to any party if the failure of such party to perform in all material respects any of its obligations under the Merger Agreement, including to use its reasonable best efforts to consummate the Transactions as required by and subject to the terms of the Merger Agreement, was the primary cause of or primarily resulted in the failure of the Merger to be consummated on or prior to such date, unless such obligations have been waived; or

 

•

any judgment or law enacted, promulgated, issued, entered, amended or enforced by any governmental authority of competent jurisdiction enjoining, restraining or otherwise making illegal, preventing or prohibiting consummation of the Merger is in effect and has become final and nonappealable, provided that the party seeking to terminate the Merger Agreement has performed in all material respects its obligations under the Merger Agreement and used its reasonable best efforts to prevent the entry of and to remove such judgment or law in accordance with its obligations under the Merger Agreement.

The Merger Agreement also provides that Parent may terminate the Merger Agreement if the Company breaches any of its representations or warranties or failed to perform any of its obligations or agreements set forth in the Merger Agreement, which breach or failure to perform would give rise to the failure of a condition precedent to closing and is not reasonably capable of being cured prior to the Outside Date or, if reasonably capable of being cured prior to the Outside Date, has not been cured within the earlier of (i) 30 calendar days following receipt by the Company of written notice of such breach or failure to perform from Parent stating Parent’s intention to terminate the Merger Agreement and the basis for such termination and (ii) one business day prior to the Outside Date, except that Parent will not have the right to terminate the Merger Agreement if Parent or Merger Sub is then in breach of any of its representations, warranties, obligations or agreements under the Merger Agreement, which breach would give rise to a failure of a condition to the consummation of the Merger.

The Merger Agreement also provides that the Company (upon approval of the Special Committee) may terminate the Merger Agreement if:

 

•

Parent or Merger Sub breaches any of its representations or warranties or failed to perform any of its obligations or agreements set forth in the Merger Agreement, which breach or failure to perform would give rise to the failure of a condition to consummation of the Merger and is not reasonably capable of being cured prior to the Outside Date or, if reasonably capable of being cured prior to the Outside Date, has not been cured within the earlier of (i) 30 calendar days following receipt by Parent or Merger Sub of written notice of such breach or failure to perform from the Company stating the Company’s

 

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intention to terminate the Merger Agreement and the basis for such termination and (ii) one business day prior to the Outside Date, except that the Company will not have the right to terminate the Merger Agreement if the Company is then in breach of any of its representations, warranties, obligations or agreements under the Merger Agreement, which breach would give rise to a failure of a condition to consummation of the Merger;

 

•

(i) the conditions to Parent’s and Merger Sub’s obligations to effect the Merger have been satisfied or waived (other than those conditions that by their nature are to be satisfied by actions taken at the closing so long as such conditions would be satisfied if the closing date were the date of termination of the Merger Agreement), (ii) the Company has confirmed by written irrevocable notice to Parent that all conditions to the Company’s obligations to effect the Merger have been satisfied (other than those conditions that by their nature are to be satisfied by actions taken at the closing so long as such conditions would be satisfied if the closing date were the date of such notice) or that it is willing to waive any unsatisfied conditions, (iii) the Merger is required to be consummated pursuant to the Merger Agreement and (iv) Parent and Merger Sub fail to consummate the Merger within three business days after the later of (a) receipt by Parent of the notice referred to in the foregoing clause (ii) and (b) the date the Merger was required to be consummated pursuant to the Merger Agreement; except that no party will be permitted to terminate the Merger Agreement during such three-business-day period contemplated by the foregoing clause (iv); or

 

•

at any time, the Company’s cash, cash equivalents and marketable securities, in each case determined in accordance with U.S. generally accepted accounting principles (“GAAP”) in the United States and expressed in U.S. dollars (collectively, “Cash on Hand”), (including any amounts held pursuant to escrow arrangements or in the Segregated Account) is less than $3.5 million (a “Cash Shortfall”); provided that the Company will not be able to terminate the Merger Agreement in accordance with this clause unless (i) the Company delivers to Parent a written notice advising Parent that the Board (acting on the recommendation of the Special Committee) or the Special Committee has determined in good faith, after consultation with, and taking into account the advice of, its financial advisor and outside legal counsel, that (a) a Cash Shortfall is expected to occur within three business days and (b) absent a cure of such Cash Shortfall, the failure to initiate proceedings for seeking relief under the United States Bankruptcy Code would be inconsistent with the directors’ fiduciary duties under applicable laws, (ii) such Cash Shortfall will not have been cured within three business days of receipt of such notice (it being understood that (1) curing such Cash Shortfall will require the replenishment of any Segregated Funds drawn upon during such three business day period for ordinary course business expenses incurred during such period (which, for the avoidance of doubt, will not include amounts incurred for any preparatory work required for seeking relief under the United States Bankruptcy Code, solely to the extent the Special Committee has determined in good faith, after consultation with, and taking into account the advice of, its financial advisor and outside legal counsel, that the failure to conduct such preparatory work would be inconsistent with the directors’ fiduciary duties under applicable laws, and which preparatory work will take into account any such previously prepared preparatory work in order to minimize cost (“Bankruptcy Preparatory Work”)) with funds that are free and clear of any liens to the same extent as contemplated with respect to the original Segregated Funds and (2) for purposes of calculating such three business day period, the first business day will be the first business day after the date of delivery of such notice (the “Cure Period”)) or Parent will have advised the Company in writing that it will not seek to cure such Cash Shortfall and (iii) upon such termination, the Company authorizes the initiation of proceedings for seeking relief under the United States Bankruptcy Code.

The Merger Agreement also provides a termination right for (i) Parent if, prior to the delivery of the Written Consent, an adverse recommendation change occurred, and (ii) the Company (A) if the duly executed Written Consent was not received by the Company within 24 hours of signing the Merger Agreement or (B) prior to the delivery of the Written Consent, in connection with entering into an agreement relating to any alternative acquisition proposal, if prior to or concurrently with such termination, the Company paid or caused to be paid a

 

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termination fee. These termination rights are no longer exercisable because the Written Consent was delivered to the Company following the execution of the Merger Agreement.

Interests of Our Directors and Executive Officers in the Merger (page 85)

You should be aware that the Company’s executive officers and directors have interests in the Merger that may be different from, or in addition to, the interests of the Company’s stockholders generally. The Board and the Special Committee were aware of these interests and considered them, among other matters, in approving the Merger Agreement. These interests are described in the section entitled “The Special Factors—Interests of Our Directors and Executive Officers in the Merger” beginning on page 85 of this Information Statement.

Material United States Federal Income Tax Consequences of the Merger (page 90)

The exchange of Class A Shares for cash pursuant to the Merger will be a taxable transaction for United States federal income tax purposes. Therefore, a United States Holder (as defined in the section entitled “The Special Factors—Material United States Federal Income Tax Consequences of the Merger” beginning on page 90 of this Information Statement) receiving cash in the Merger generally will recognize capital gain or loss for United States federal income tax purposes in an amount equal to the difference between (i) the amount of cash the United States Holder received (determined before deduction of any applicable withholding taxes) and (ii) the adjusted tax basis of the surrendered Class A Shares.

A Non-United States Holder (as defined in “The Special Factors—Material United States Federal Income Tax Consequences of the Merger”) will generally not be subject to United States federal income tax on any gain resulting from the exchange of Class A Shares pursuant to the Merger, unless such holder has certain connections to the United States, but the Merger could be a taxable transaction to such holder under non-United States tax laws applicable to such holder.

Holders of Class A Shares should read the section entitled “The Special Factors—Material United States Federal Income Tax Consequences of the Merger” beginning on page 90 of this Information Statement for a more detailed description of the United States federal income tax consequences of the Merger. Tax matters can be complicated, and the tax consequences of the Merger to you will depend on your particular situation. Holders are urged to consult their own tax advisors about the U.S. federal, state, local and non-U.S. tax consequences of the Merger.

Regulatory Approvals (page 92)

Pursuant to the Merger Agreement and subject to the terms thereof, each of the parties to the Merger Agreement has agreed to cooperate with the other parties and use (and to cause its respective subsidiaries to use) its reasonable best efforts (unless, with respect to any action, another standard of performance is expressly provided for in the Merger Agreement) to, among other things, promptly take, or cause to be taken, all actions, and do, or cause to be done, and assist and cooperate with the other parties in doing, all things necessary, proper or advisable to cause the conditions to closing set forth in the Merger Agreement applicable to such party to be satisfied as promptly as reasonably practicable and to consummate and make effective, in the most expeditious manner reasonably practicable, the Transactions.

The Company, Parent and Merger Sub have determined that no regulatory filings are required in connection with the Transactions.

Procedures for Receiving Merger Consideration (page 96)

As soon as practicable after the Effective Time (but in no event later than three business days thereafter), the Surviving Corporation or Parent will cause the paying agent to mail to each holder of record of a Certificate (i) a

 

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form of letter of transmittal specifying that delivery of a Certificate will be effected, and risk of loss and title to such Certificate will pass, only upon delivery of such Certificate to the paying agent (which will be in such form and have such other customary provisions as the Surviving Corporation may specify, subject to Parent’s consent (which will not be unreasonably withheld, conditioned or delayed)) and (ii) instructions setting forth the procedures for holders of Certificates to receive the applicable Merger Consideration to which they are entitled pursuant to the Merger Agreement.

Upon the completion of such applicable procedures by a holder and surrender of such holder’s Certificate, and without any action by any holder of record of Book-Entry Shares, the paying agent will deliver to such holder (other than to any holder in respect of Dissenting Shares) (i) in the case of Book-Entry Shares, a notice of the effectiveness of the Merger and (ii) cash in an amount (after giving effect to any required tax withholdings) equal to (x) the number of Converted Shares represented by such Certificate or Book-Entry Shares immediately prior to the Effective Time multiplied by (y) the Merger Consideration to which such holder is entitled, and such Certificates or Book-Entry Shares will be canceled.

Governing Law

The Merger Agreement and any claim, cause of action or other action (whether in contract, tort or otherwise) that may directly or indirectly be based upon, relate to or arise out of the Merger Agreement or the Transactions, or the negotiation, execution or performance of the Merger Agreement, will be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

Appraisal Rights (page 119 and Annex D)

Pursuant to Section 262 of the DGCL, if the Merger is consummated, stockholders (including beneficial owners) of the Company have the right to demand an appraisal of, and be paid the “fair value” (exclusive of any element of value arising from the accomplishment or expectation of the Merger) of, their Common Shares as determined by the Delaware Court of Chancery, together with interest, if any, on the amount determined to be the fair value, instead of receiving the per share Merger Consideration, but only if they strictly comply with the procedures and requirements set forth in Section 262 of the DGCL. The judicially determined fair value under Section 262 could be greater than, equal to or less than the $0.50 per share that holders of Class A Shares are entitled to receive in the Merger. In order to exercise your appraisal rights, you must submit a written demand for an appraisal of your shares no later than 20 days after the date of mailing of this Information Statement, which mailing date is   , 2024, and precisely comply with other procedures set forth under Section 262 of the DGCL. In addition, even if you comply with such procedures in seeking to exercise your appraisal rights in connection with the Merger, the Delaware Court of Chancery will dismiss any such appraisal proceedings as to any holder of Class A Shares who is otherwise entitled to appraisal rights unless (i) the total number of Common Shares entitled to appraisal exceeds 1% of the outstanding Common Shares eligible for appraisal, or (ii) the value of the consideration provided in the Merger for such total number of Common Shares entitled to appraisal exceeds $1.0 million.

For a more complete discussion of appraisal rights, see the section entitled “Appraisal Rights” beginning on page 119 of this Information Statement. A copy of Section 262 of the DGCL is attached as Annex D to this Information Statement. We urge you to read these provisions carefully and in their entirety. Moreover, due to the complexity of the procedures for exercising appraisal rights, stockholders (including beneficial owners) who are considering exercising such rights are encouraged to seek the advice of legal counsel. Failure to comply strictly with all of the requirements of Section  262 will result in loss or waiver of the right of appraisal.

Effect on the Company if the Merger is Not Completed

If the Merger is not completed for any reason, our stockholders will not receive any payment for their Class A Shares in connection with the Merger. Instead: (i) the Company will remain a public company and the Special

 

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Committee will continue to evaluate a range of potential strategic alternatives, including, without limitation, additional sources of financing and a potential dissolution or winding up of the Company and liquidation of our assets; (ii) our Class A Shares will continue to be listed and traded on Nasdaq; and (iii) we will continue to file periodic reports with the SEC.

If the Merger is not completed, the Company has substantial doubt about its ability to raise financing sufficient to continue operating as a going concern. Furthermore, if the Merger is not completed, and depending on the circumstances that cause the Merger not to be completed, there can be no assurance as to the price at which our Class A Shares may trade, and the price of our Class A Shares may decline significantly. If the Merger is not completed and the Special Committee decides that it is in the best interests of the Company and its stockholders to file a voluntary petition for relief under Chapter 7 of the U.S. Bankruptcy Code, it is expected that such filing will result in a liquidation of all of the Company’s assets, and not a reorganization.

Transaction Litigation (page 90)

As of the filing of this Information Statement, the Company is not aware of any complaints filed or litigation pending related to the Merger.

Market, Dividends and Certain Transactions in the Class A Shares (page 117)

The Class A Shares are listed with, and trade on, Nasdaq under the symbol “ASTR”. The Class B Shares are not listed on any stock exchange nor traded on any public market. As of April 8, 2024, 19,004,806 Class A Shares were issued and outstanding and 3,702,613 Class B Shares were issued and outstanding.

The closing sale price of the Class A Shares on March 6, 2024, the last trading day prior to the execution of the Merger Agreement, was $0.86 per share. The closing sale price of the Class A Shares on April 5, 2024, the most recent practicable date before the date of this Information Statement, was $0.68 per share. You are encouraged to obtain current market quotations for the Class A Shares.

The Company has never declared or paid any dividends on the Common Shares. The terms of the Merger Agreement do not allow the Company to declare or pay any dividends between March 7, 2024 and the earlier of the consummation of the Merger or the termination of the Merger Agreement.

Following the Merger, there will be no further market for the Class A Shares and the Class A Shares will be delisted from Nasdaq and de-registered under the Exchange Act. As a result, following completion of the Merger and such de-registration, we will no longer file periodic or other reports with the SEC.

Neither the SEC nor any state securities regulatory agency has approved or disapproved the Merger, passed upon the merits or fairness of the Merger or passed upon the adequacy or accuracy of the disclosures in this Information Statement. Any representation to the contrary is a criminal offense.

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER

The following questions and answers are intended to briefly address commonly asked questions as they pertain to the Merger Agreement and the Merger. These questions and answers may not address all questions that may be important to you as a Company stockholder. Please refer to the section entitled “Summary” beginning on page 1 of this Information Statement and the more detailed information contained elsewhere in this Information Statement, the annexes to this Information Statement and the documents referred to or incorporated by reference in this Information Statement, each of which you should read carefully. You may obtain additional information, which is incorporated by reference in this Information Statement, without charge, by following the instructions in the section entitled “Where You Can Find More Information” beginning on page 128 of this Information Statement.

 

Q:	What is the proposed transaction and what effects will it have on the Company?

 

A:

The proposed transaction is the acquisition by Parent of all of the Class A Shares (other than (i) the Rollover Shares, (ii) any Canceled Common Shares and (iii) any applicable Dissenting Shares) issued and outstanding immediately prior to the Effective Time through the merger of Merger Sub and the Company on the terms and subject to the conditions set forth in the Merger Agreement. Once the closing conditions under the Merger Agreement have been satisfied or waived (to the extent waivable) and subject to the other terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company. The Company will be the Surviving Corporation of the Merger and will cease to be a publicly traded company.

 

Q:	If the Merger is completed, what will I receive for my Class A Shares?

 

A:

Upon consummation of the Merger and subject to the terms and conditions set forth in the Merger Agreement, and subject to your compliance with the letter of transmittal delivered to you by the paying agent after the closing of the Merger as further described in the section entitled “The Merger Agreement—Procedures for Receiving Merger Consideration” beginning on page 96 of this Information Statement, you will receive the Merger Consideration equal to $0.50 in cash, without interest and less any required withholding taxes, for each Class A Share that you own, unless you are entitled to demand and properly demand appraisal pursuant to, and in a manner that complies with, Section 262 of the DGCL, and do not withdraw or otherwise lose the right to appraisal pursuant to the DGCL. For example, if you own 100 Class A Shares, you will receive $50.00 in cash for your Class A Shares without interest and less any required withholding taxes. Upon completion of the Merger, you will not own any equity in the Surviving Corporation.

 

Q:	What happens to Company Equity Awards if the Merger is completed?

 

A:

At the Effective Time, each outstanding Company Option, other than an Underwater Option, that is outstanding immediately prior to the Effective Time, whether vested or unvested, will be assumed by Parent and converted into an option to purchase Parent Class A Shares. Underwater Options will be canceled at the Effective Time for no consideration. As of April 8, 2024, all Company Options were Underwater Options.

At the Effective Time, each Company RSU Award that has vested in accordance with its terms, or is accelerated in connection with the Merger in the case of Director RSU Awards (except for Rollover Shares that are issued upon acceleration of Director RSU Awards) will be canceled and will only entitle the holder of such Company RSU Award to receive (without interest) an amount in cash equal to (i) the number of Class A Shares subject to such Company RSU Award immediately prior to the Effective Time multiplied by (ii) the Merger Consideration. Each Company RSU Award that has not vested in accordance with its terms or so accelerated will be canceled for no consideration.

 

Q:	When do you expect the Merger to be completed?

 

A:	We are working to complete the Merger as quickly as possible. We currently expect to complete the Merger promptly after all of the conditions to the Merger have been satisfied or waived and subject to the other

 

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terms and conditions set forth in the Merger Agreement. Completion of the Merger is currently expected to occur in the second quarter of 2024, although the Company cannot assure completion by any particular date, if at all. In addition, the Company cannot provide any assurance that it will be able to obtain interim financing sufficient to fund the Company’s operations through the consummation of the Merger.

 

Q:	What happens if the Merger is not completed?

 

A:

If the Merger is not completed for any reason, our stockholders will not receive any payment for their Class A Shares in connection with the Merger. Instead: (i) the Company will remain an public company and the Special Committee will continue to evaluate a range of potential strategic alternatives, including, without limitation, additional sources of financing and a potential dissolution or winding up of the Company and liquidation of our assets through the filing of a petition for voluntary relief under Chapter 7 of the US Bankruptcy Code; (ii) our Class A Shares will continue to be listed and traded on Nasdaq; and (iii) we will continue to file periodic reports with the SEC.

If the Merger is not completed, the Company has substantial doubt about its ability to raise financing sufficient to continue operating as a going concern. Furthermore, if the Merger is not completed, and depending on the circumstances that cause the Merger not to be completed, there can be no assurance as to the price at which our Class A Shares may trade, and the price of our Class A Shares may decline significantly. If the Merger is not completed and the Special Committee decides that it is in the best interests of the Company and its stockholders to file a voluntary petition for relief under Chapter 7 of the U.S. Bankruptcy Code, it is expected that such filing will result in a liquidation of all of the Company’s assets, and not a reorganization.

 

Q:	Why am I not being asked to vote on the Merger?

 

A:

To effect the Merger, Section 228 and Section 251 of the DGCL, the Company Charter and the Company Bylaws require the adoption of the Merger Agreement by stockholders of the Company holding a majority of the aggregate voting power of the outstanding Class A Shares and Class B Shares entitled to vote thereon, voting together as a single class. The Company Charter permits stockholders to act by written consent in certain circumstances, including in connection with the approval of transactions such as the Merger. On March 7, 2024, following the execution of the Merger Agreement, Mr. Kemp and Dr. London, who on such date beneficially owned a majority of the Common Shares outstanding, executed and delivered to the Company the Written Consent, thereby providing the required stockholder approval for the Merger. Therefore, your vote is not required and is not being sought. We are not asking you for a proxy, and you are not being requested to send us a proxy.

 

Q:	Why did I receive this Information Statement?

 

A:

Applicable laws and securities regulations require us to provide you with notice of the Written Consent that was delivered by Mr. Kemp and Dr. London, as well as other information regarding the Merger, even though your vote or consent is neither required nor requested to adopt or authorize the Merger Agreement or complete the Merger. This Information Statement also constitutes notice to you of the availability of appraisal rights in connection with the Merger under Section 262 of the DGCL, a copy of which is attached to this Information Statement as Annex D.

 

Q:	What did the Special Committee determine and recommend to the Board?

 

A:	After consideration of various factors as discussed in the section entitled “The Special Factors—Recommendation of the Special Committee; Reasons for the Merger” beginning on page 66 of this Information Statement, the Special Committee unanimously resolved:

 

•

that the Merger Agreement, the other transaction documents and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, are advisable, fair to and in the best interests of the Company and the Public Stockholders; and

 

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•

to recommend that the Board: (i) approve the Merger Agreement, the other transaction documents and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement; (ii) recommend adoption and approval of the Merger Agreement and the Transactions, including the Merger, to the stockholders of the Company; and (iii) authorize the execution and delivery of the agreements to which the Company is a party and the performance by the Company of all of its obligations under the Merger Agreement and the Transactions, including the Merger.

 

Q:	Did the Board approve and recommend the Merger Agreement?

A:

Yes. After consideration of various factors as discussed in the section entitled “The Special Factors—Recommendation of the Board; Reasons for the Merger” beginning on page 69 of this Information Statement, among other things, the Board (based on the unanimous recommendation of the Special Committee and with Mr. Kemp, Dr. London and Mr. Stanford abstaining) resolved:

 

•

that the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, are advisable and in the best interests of the Company and the Company’s stockholders;

 

•

to approve the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement;

 

•

to recommend adoption and approval of the Merger Agreement and the Transactions, including the Merger, to the stockholders of the Company; and

 

•

to authorize the execution and delivery of the agreements to which the Company is a party and the performance by the Company of all of its obligations under the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement.

 

Q:	Have a majority of directors who are not employees of the Company retained an unaffiliated representative to act solely on behalf of the Public Stockholders for purposes of negotiating the terms of the Merger and/or preparing a report concerning the fairness of the Merger?

 

A:

As described more fully in the section entitled “The Special Factors—Background of the Merger,” the Special Committee, which consists entirely of independent and disinterested directors, was formed for the purpose of exploring potential strategic alternatives including, without limitation, one or more potential financing transactions or a potential dissolution or winding up of the Company and liquidation of our assets. The Special Committee retained (i) Freshfields Bruckhaus Deringer LLP as its legal advisor and (ii) Houlihan Lokey as its financial advisor, and Houlihan Lokey rendered an opinion to the Special Committee to the effect that the Merger Consideration to be received by the Public Stockholders in the Merger, pursuant to the Merger Agreement, is fair to such stockholders, from a financial point of view, as more fully described in the section entitled “The Special Factors—Opinion of Houlihan Lokey Capital, Inc. to the Special Committee” beginning on page 71 of this Information Statement.

 

Q:	What happens if I sell my shares before the completion of the Merger?

 

A:

If you transfer your Class A Shares before consummation of the Merger, you will have transferred the right to receive the Merger Consideration and lose your appraisal rights. In order to receive the Merger Consideration or exercise appraisal rights, you must hold your Common Shares, as applicable, through the Effective Time.

 

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Q:	How do I surrender my Book-Entry Shares held by the Company’s transfer agent, Continental Stock Transfer & Trust Company?

 

A:

Promptly after the Effective Time, without any action by any holder of record of Book-Entry Shares, the Surviving Corporation will direct the paying agent to mail to each holder of record of Book-Entry Shares (i) a notice of effectiveness of the Merger and (ii) a check for an amount, less any required withholding taxes, equal to (x) the number of Book-Entry Shares held by such holder immediately prior to the Effective Time multiplied by (y) the Merger Consideration and such Book-Entry Shares shall forthwith be canceled.

 

Q:	Should I send in my Certificates or other evidence of ownership now?

 

A:

No. Do not send in your Certificates now. After the Merger is completed, you will be sent a letter of transmittal with detailed written instructions for exchanging your Class A Shares for the Merger Consideration. If your Class A Shares are held in “street name” by your broker, bank or other nominee, you may receive instructions from your broker, bank or other nominee as to what action, if any, you need to take to effect the surrender of your “street name” shares in exchange for the Merger Consideration.

 

Q:	What happens to my Class A Shares held by my broker?

A:	Your broker generally will handle cashing out all Class A Shares that you hold in your brokerage account after the closing of the Merger has occurred. You should direct any specific questions on this to your broker.

 

Q:	Is the Merger subject to any conditions?

 

A:

Yes. Before the Merger can be completed, the Company, Parent and Merger Sub must satisfy or, if permissible, waive several closing conditions. If these conditions are not satisfied or waived, the Merger will not be completed. See the section entitled “The Merger Agreement—Conditions to Consummation of the Merger” beginning on page 111 of this Information Statement.

 

Q:	Am I entitled to exercise appraisal rights instead of receiving the Merger Consideration for my Common Shares?

 

A:

Yes. Company stockholders are entitled to demand and properly demand appraisal pursuant to, and in a manner that complies with, Section 262 of the DGCL, and do not withdraw or otherwise lose the right to appraisal pursuant to the DGCL are entitled to appraisal rights in connection with the Merger with respect to their Common Shares. See the section entitled “Appraisal Rights” beginning on page 119 of this Information Statement.

 

Q:	What happens if a third party makes an offer to acquire the Company before the Merger is completed?

 

A:	The Company’s rights to provide non-public information and engage in negotiations or discussions with third parties and to make an adverse recommendation change ceased upon the delivery of the Written Consent following the execution of the Merger Agreement.

Prior to the delivery of the Written Consent, the Company and its representatives were allowed, under certain circumstances and in compliance with certain obligations set forth in the Merger Agreement, to provide non-public information and engage in discussions and negotiations with respect to an unsolicited acquisition proposal that would reasonably be expected to lead to a superior proposal.

Additionally, prior to the delivery of the Written Consent, the Board, Special Committee or other committee of the Board were allowed to make an adverse recommendation change in response to an intervening event or an acquisition proposal, in each case, under certain specified circumstances and after complying with certain specified procedural requirements.

 

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Q:	Will I owe taxes as a result of the Merger?

 

A:

The exchange of Class A Shares for the Merger Consideration pursuant to the Merger will be a taxable transaction for United States federal income tax purposes. Therefore, a United States Holder receiving the Merger Consideration generally will recognize capital gain or loss for United States federal income tax purposes in an amount equal to the difference between (i) the amount of the Merger Consideration that such United States Holder received (determined before deduction of any applicable withholding taxes) and (ii) the adjusted tax basis of the surrendered Class A Shares.

A Non-United States Holder will generally not be subject to United States federal income tax on any gain resulting from the exchange of the Class A Shares pursuant to the Merger, unless such holder has certain connections to the United States, but the Merger could be a taxable transaction to such holder under non-United States tax laws applicable to such holder.

Holders of Class A Shares should read the section entitled “The Special Factors—Material United States Federal Income Tax Consequences of the Merger” beginning on page 90 of this Information Statement for a more detailed description of the United States federal income tax consequences of the Merger. Tax matters can be complicated, and the tax consequences of the Merger to you will depend on your particular situation. Holders are urged to consult their own tax advisors about the U.S. federal, state, local and non-U.S. tax consequences of the Merger.

 

Q:	Where can I find more information about the Company?

 

A:

We file annual, quarterly and current reports, proxy statements, and other documents with the SEC. This information is available on the website maintained by the SEC at www.sec.gov. For a more detailed description of the available information, please refer to the section entitled “Where You Can Find More Information” beginning on page 128 of this Information Statement.

 

Q:	Who can help answer my other questions?

 

A:	If you have more questions about the Merger, please contact our investor relations department at ir@astra.com. If your broker holds your Common Shares, you should call your broker for additional information.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Information Statement, and the documents to which we refer you in this Information Statement, contain forward-looking statements within the meaning of federal securities laws. The forward-looking statements include our current expectations, assumptions and estimates about the Merger and the Transaction. We have used the words “approximate,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” and similar terms and phrases to identify forward-looking statements.

These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict, that may cause actual results to differ materially from those that we are expecting, including whether the Transactions, including the Merger, can, in fact, be consummated in the manner described in Merger Agreement or this Information Statement or at all. Such risks include:

 

•

risks associated with Merger and the Transactions generally, such as the inability to obtain, or delays in obtaining, any required approvals or consents;

 

•

the failure to consummate or delay in consummating the Merger for other reasons;

 

•

the risk that a condition to closing of the Transactions, including the Merger, may not be satisfied;

 

•

the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement;

 

•

the possibility that if the Merger Agreement were terminated the Special Committee would decide to liquidate, wind up or dissolve the Company, which process would be subject to uncertainties and the possibility that there may never be a liquidating distribution made to stockholders;

 

•

the failure of the Company to raise sufficient interim capital to continue its business operations through the consummation of the Merger;

 

•

the failure of Parent to obtain the financing required to consummate the Transactions (including the Merger), including the breach by any of the Equity Commitment Parties of their obligations under the Equity Commitment Letters;

 

•

the outcome of any legal proceedings that may be instituted following announcement of the Merger;

 

•

failure to retain key management and employees of the Company;

 

•

the fact that under the terms of the Merger Agreement, the Company is restrained from soliciting other acquisition proposals during the pendency of the Merger;

 

•

unfavorable reaction to the Merger by customers, competitors, suppliers and employees;

 

•

the amount of the costs, fees, expenses and charges related to the Merger Agreement or the Merger;

 

•

unpredictability and severity of catastrophic events, including but not limited to acts of terrorism, war or hostilities, as well as management’s response to any of the aforementioned factors;

 

•

the risk that trading price of our Class A Shares may fluctuate during the pendency of the Merger and may decline significantly if the Merger is not completed; and

 

•

additional factors discussed in the Company’s filings with the SEC, including in our Annual Report on Form 10-K (which is incorporated by reference herein), and the Rule 13e-3 Transaction Statement on Schedule 13E-3 to be filed by the Company, Parent and certain other persons with respect to the Transactions (including all exhibits and any amendments or supplements thereto, the “Schedule 13E-3”).

 

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We believe that the assumptions on which our forward-looking statements are based are reasonable. All forward-looking statements concerning the Merger and the Transactions, or other matters addressed in this Information Statement are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Forward-looking statements speak only as of the date of this Information Statement or the date of any document incorporated by reference in this document. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

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THE PARTIES TO THE MERGER AGREEMENT

The Company

Astra Space, Inc.

1900 Skyhawk Street

Alameda, California 94501

Phone: (866) 278-7217

Astra’s mission is to improve life on Earth from space^® by launching a new generation of space products and services. These products and services are enabled by new constellations of small satellites in low Earth orbit, which have rapidly become smaller, cheaper, and many times more numerous than traditional satellites. We believe that frequent, reliable, dedicated launches and space products enabled by scaled manufacturing are the keys to accelerating the growth of the space economy. Currently, our business consists of two segments, Launch Services and Space Products. To learn more about the Company, please visit https://astra.com. Our website address is being provided as an inactive textual reference only. Additional information regarding the Company is contained in our filings with the SEC, copies of which may be obtained without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page 128 of this Information Statement. The information provided on, or accessible through, our website, other than the copies of the documents listed or referenced in the section entitled “Where You Can Find More Information” that have been or will be filed with the SEC, is not part of this Information Statement.

The Class A Shares are listed with, and trade on, Nasdaq under the symbol “ASTR”.

Parent

Apogee Parent Inc.

1900 Skyhawk Street

Alameda, California 94501

Phone: (866) 278-7217

Parent was formed in the State of Delaware on February 29, 2024 solely for the purpose of entering into the Merger Agreement and consummating the Merger with the Company, and has not carried on any business, conducted any operations or incurred any liabilities or obligations, other than those incidental to its formation and pursuant to the Merger Agreement, the performance of its obligations thereunder, and matters ancillary thereto.

Merger Sub

Apogee Merger Sub Inc.

1900 Skyhawk Street

Alameda, California 94501

Phone: (866) 278-7217

Merger Sub was formed in the State of Delaware on February 29, 2024 solely for the purpose of entering into the Merger Agreement and consummating the Merger with the Company. Merger Sub is a wholly owned subsidiary of Parent and has not carried on any business, conducted any operations or incurred any liabilities or obligations, other than those incidental to its formation and pursuant to the Merger Agreement, the performance of its obligations thereunder and matters ancillary thereto. Upon consummation of the Merger, Merger Sub will cease to exist.

 

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DIRECTORS, EXECUTIVE OFFICERS AND CONTROLLING PERSONS OF THE COMPANY

Neither the Company nor, to the knowledge of the Company, any of the Company’s directors or executive officers listed below has been convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors). In addition, neither the Company nor, to the knowledge of the Company, any of the Company’s directors or executive officers listed below has during the past five years, been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, U.S. federal or state securities laws, or a finding of any violation of U.S. federal or state securities laws.

The business address of each of the directors and executive officers of the Company listed below is 1900 Skyhawk Street, Alameda, California 94501.

Directors

Chris C. Kemp is our co-founder, Chairman and Chief Executive Officer. Mr. Kemp leads the overall company strategy and direction. Mr. Kemp founded Astra in October 2016. Mr. Kemp previously served as the Chief Technology Officer of NASA IT. During his time at NASA from November 2007 until March 2011, Mr. Kemp developed cloud computing strategy for the United States Federal Government with the White House and founded OpenStack, an open infrastructure software platform, which is the largest and fastest growing open-source project in history, in 2010. Mr. Kemp currently serves on the Board of Directors at Scalr, an information technology and services company, and has served in that role since April 2015. Mr. Kemp has also served as an advisor to Planet Labs, an aviation and aerospace company, since January 2013, and Ripcord, a computer software company, since October 2015. Mr. Kemp previously founded and served as the CEO of three venture-backed start-ups, all of which are now owned by public companies. Mr. Kemp studied Computer Engineering at the University of Alabama in Huntsville and currently teaches at Stanford University.

Adam P. London is our co-founder, Chief Technology Officer and serves as one of our directors. Dr. London helped found Astra in October 2016 and has served as the Chief Technology Officer and director since then. Dr. London leads our technology strategy and long-term product roadmap. Dr. London co-founded and served as a managing partner for Ventions, LLC, which was our predecessor company, from January 2005 until September 2016. While at Ventions, LLC, Dr. London spent over 10 years leading initiatives to miniaturize high-performance rocket technologies, supported by funding from the Defense Advanced Research Projects Agency, NASA, and other government agencies. Prior to founding Ventions, LLC and Astra, Dr. London served as an engagement manager at McKinsey & Company, where he focused on the automotive and manufacturing sectors. Dr. London holds a B.S., M.S. and Ph.D. in Aerospace Engineering from Massachusetts Institute of Technology, where his research culminated in the creation of a liquid-cooled chemical rocket engine smaller than a postage stamp.

Julie Cullivan has served as one of our directors since February 2023. Ms. Cullivan currently serves a special advisor to Brighton Park Capital, an investment firm specializing in the technology and healthcare sectors, joining there in 2020. From 2017 through 2021, she was the Chief Technology and People Officer at Forescout Technologies, Inc., a leading provider of compliance and cybersecurity for all connected devices, reporting to the CEO, where she was responsible for leading the company’s business model transformation, information technology strategy, security risk and compliance program, customer production operations, and human resources. Prior to Forescout, Ms. Cullivan was the EVP, Business Operations and CIO at FireEye, Inc. Ms. Cullivan was a member of the executive team that set the company’s strategy and helped scale FireEye from a private company with $80 million in revenue, through its successful IPO, to a global publicly traded company with revenues of over $700 million and a $2.7 billion valuation. Since 2017, Ms. Cullivan has served as a director for Axon Enterprise Inc. (Nasdaq: AXON), a leader in global public safety technology, where she is a member of the Audit Committee and chairs its Enterprise Risk and Information Security Committee. She also serves on the board of directors of for Axon Enterprise, Inc. and HeartFlow, Inc. Ms. Cullivan has a B.S. degree in Finance from Santa Clara University.

 

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Michèle Flournoy has served as one of our directors since August 2021. Ms. Flournoy’s career has spanned many roles in the defense and national security industry, ranging from research to advisory. She is the co-founder and managing partner of WestExec Advisors, a strategic advisory firm formed in early 2018. She previously served as the Under Secretary of Defense for Policy from February 2009 to February 2012, acting as principal advisor to the Secretary of Defense in the formulation of national security and defense policy, oversight of military plans and operations, and in National Security Council deliberations. She led the development of the Department of Defense’s 2012 Strategic Guidance and represented the Department in dozens of foreign engagements, in the media and before Congress. Ms. Flournoy co-founded the Center for a New American Security (“CNAS”), a bipartisan think tank, in 2007 and served as President until 2009. She returned to serve as the CEO of CNAS from July 2014 through December 2017. Ms. Flournoy is also the recipient of numerous honors and awards, and has edited and authored various works on a broad range of defense and national security issues. In addition, Ms. Flournoy has also served on numerous business and advisory boards, including her current service as a director for Rivada Networks, CNAs, Booz Allen Hamilton, Amida Technology Solutions, and Spirit of America (a nonprofit corporation), CARE and the Honorary Advisory Committee of The Leadership Council for Women in National Security. Ms. Flournoy is also a former member of the President’s Intelligence Advisory Board, the CIA Director’s External Advisory Board, and the Defense Policy Board, and is currently a member of the Council on Foreign Relations and the Aspen Strategy Group, and is a Senior Fellow at Harvard’s Belfer Center for Science and International Affairs. Ms. Flournoy earned a bachelor’s degree in social studies from Harvard University and a master’s degree in international relations from Balliol College, Oxford University, where she was a Newton-Tatum scholar.

Michael Lehman has served as one of our directors since June 30, 2021 and is our lead independent director. Mr. Lehman served the University of Wisconsin in various capacities from March 2016 until October 2021, most recently as Interim Chief Operating Officer of the Wisconsin School of Business, and previously as Special Advisor to the Chancellor, Interim Vice Provost for Information Technology, Chief Information Officer and Interim Vice Chancellor for Finance and Administration. He is currently on the Boards of MGIC Investment Corp. (serving in that role since 2001) and Immunicom, Inc. (serving in that role since April 2022). He had previously been a consultant (2014-2016); Interim Chief Financial Officer at Ciber Inc., a global information technology company (2013-2014); Chief Financial Officer of Arista Networks, a cloud networking firm (2012-2013); and Chief Financial Officer of Palo Alto Networks, a network security firm (2010-2012). Earlier in his career, he was the Executive Vice President and Chief Financial Officer of Sun Microsystems, Inc., a provider of computer systems and professional support services.

Lisa Nelson has served as one of our directors since August 2021. Ms. Nelson has served in different management positions at several Global 500 companies around the world. Ms. Nelson was most recently at Microsoft from August 2005 to October 2019 where she held executive roles across corporate accounting, investor relations, finance and business development. While at Microsoft, Ms. Nelson co-founded Microsoft’s first venture fund, M12, and served as Managing Director for three years before retiring from Microsoft. Following her retirement from Microsoft, she has served as an advisor and director to a number of global businesses and charitable organizations. Currently, she is a member of the board of directors of the following organizations: Seattle Bank (since October 2021), Transforming Age (since July 2020), DNA Seattle (since June 2021) and Kuelap Inc. (since June 2021). She also serves on the advisory boards of Flying Fish Partners (since July 2020), Movac, a venture capital fund in New Zealand (since July 2020), Brooks Running (since January 2021), amongst others. She is also an Edmund Hillary Fellow.

Scott Stanford has served as one of our directors since June 30, 2021, and served on the board of Legacy Astra since December 2017. Mr. Stanford has served as the co-founder of several companies, including ACME, LLC and its affiliates, a venture capital firm, since February 2013; and Silicon Foundry, a membership-based corporate advisory platform, since February 2013. Prior to these roles, Mr. Stanford served as a managing director at Goldman Sachs from June 2004 until February 2013. Mr. Stanford served as a member of the board of directors of Cue Health Inc., a publicly held health technology company, from December 2017 to July 2022, and currently serves as a director of several private companies, including Boombox Labs, Inc., a remote culture

 

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experience company, since February 2022; Time by Ping, Inc., an artificial intelligence company providing time automation services, since July 2021; Curology, Inc., a direct to consumer prescription skincare company, since September 2015; and BFA Industries (formerly known as IPSY), a personalized beauty commerce company, since September 2015. Mr. Stanford holds an M.B.A. from Harvard Business School.

Non-Director Executive Officers

Axel Martinez has served as our Chief Financial Officer since October 2022. Prior to joining us, Mr. Martinez served as Chief Financial Officer at Virgin Hyperloop One and Veev Group Inc. Mr. Martinez started his technology career at Google where he spent 10 years in finance roles, including Head of Capital Markets where he managed more than $40 billion. Mr. Martinez also served as Vice President and Treasurer of Uber where he helped the company scale into more than 60 countries. Prior to that, Mr. Martinez worked at Merrill Lynch and the Chase Manhattan Bank as an investment banker. Mr. Martinez holds a B.A. in Economics and Political Science from Columbia University and an M.B.A. from Harvard Business School.

Martin Attiq has served as our Chief Business Officer since January 2020 and leads our sales, partnerships, customer success, real estate services, spaceport services, communications and corporate development. Mr. Attiq previously spent 10 years at BlackRock where he co-founded the Financial Markets Advisory group and led many of the group’s landmark assignments. Mr. Attiq holds a B.S.E. in Industrial Engineering from the University of Michigan and an M.S. in Management from the Stanford Graduate School of Business, where he was a Sloan Fellow.

Controlling Persons

The holders of the Class B Shares, Chris C. Kemp and Adam P. London, beneficially own a majority of the voting power of all outstanding Common Shares. The address of the Controlling Persons is 1900 Skyhawk Street, Alameda, California, 94501.

Set forth below for each director and/or officer of Parent is such director and/or officer’s respective principal occupation or employment, the name of the organization in which such occupation or employment is conducted and the five-year employment history of each such person and country of citizenship, each of whom has the business address set forth above.

 

Individual		Description
Chris C. Kemp (U.S. Citizen)		Chris C. Kemp is the Company’s co-founder, Chairman and Chief Executive Officer. Mr. Kemp leads the overall company strategy and direction. Mr. Kemp founded Astra in October 2016. Mr. Kemp previously served as the Chief Technology Officer of NASA IT. During his time at NASA from November 2007 until March 2011, Mr. Kemp developed cloud computing strategy for the United States Federal Government with the White House and founded OpenStack, an open infrastructure software platform, which is the largest and fastest growing open-source project in history, in 2010. Mr. Kemp currently serves on the Board of Directors at Scalr, an information technology and services company, and has served in that role since April 2015. Mr. Kemp has also served as an advisor to Planet Labs, an aviation and aerospace company, since January 2013, and Ripcord, a computer software company, since October 2015. Mr. Kemp previously founded and served as the CEO of three venture-backed start-ups, all of which are now owned by public companies. Mr. Kemp studied Computer Engineering at the University of Alabama in Huntsville and currently teaches at Stanford University.

 

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Individual		Description
Adam P. London (U.S. Citizen)		Adam P. London is Company’s co-founder, Chief Technology Officer and serves as one of its directors. Dr. London helped found Astra in October 2016 and has served as the Chief Technology Officer and director since then. Dr. London leads our technology strategy and long-term product roadmap. Dr. London co-founded and served as a managing partner for Ventions, LLC, which was our predecessor company, from January 2005 until September 2016. While at Ventions, LLC, Dr. London spent over ten years leading initiatives to miniaturize high-performance rocket technologies, supported by funding from the Defense Advanced Research Projects Agency, NASA, and other government agencies. Prior to founding Ventions, LLC and Astra, Dr. London served as an engagement manager at McKinsey & Company, where he focused on the automotive and manufacturing sectors. Dr. London holds a B.S., M.S. and Ph.D. in Aerospace Engineering from Massachusetts Institute of Technology, where his research culminated in the creation of a liquid-cooled chemical rocket engine smaller than a postage stamp.

 

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THE SPECIAL FACTORS

The following, together with the summary of the Merger Agreement set forth under the section entitled “The Merger Agreement,” is a description of the material aspects of the Merger. While we believe that the following description covers the material aspects of the Merger, the description may not contain all of the information that is important to you. We encourage you to carefully read this entire Information Statement, including the Merger Agreement attached to this Information Statement as Annex A, for a more complete understanding of the Merger. The following description is subject to and qualified in its entirely by reference to, the Merger Agreement. You may obtain additional information without charge as described in the section entitled “Where You Can Find More Information.”

Background of the Merger

The following chronology summarizes the key meetings and events that led to the signing of the Merger Agreement. This chronology does not purport to catalog every conversation of or among the Board, the Special Committee, the Parent Entities, their respective representatives, or other parties that may be relevant to the signing of the Merger Agreement.

Legacy Astra was initially formed in September 2016, by Chris Kemp, the Company’s chairman and chief executive officer, and Dr. Adam London, the Company’s chief technology officer. Mr. Kemp and Dr. London were the controlling stockholders of Legacy Astra. Mr. Kemp and Dr. London are sometimes referred to in this Information Statement as the “co-founders”. On June 30, 2021, Legacy Astra consummated a business combination with Holicity and Holicity Merger Sub, Inc. (“SPAC Merger Sub”), a wholly owned subsidiary of Holicity (the “Business Combination”). Holicity was incorporated in June 2020, as a special purpose acquisition company. Holicity completed its initial public offering in August 2020 and begin trading on Nasdaq shortly thereafter at a price per share of $9.88 (or $148.19 when adjusted for the Reverse Stock Split (as defined below)). In connection with the Business Combination, Legacy Astra merged with and into SPAC Merger Sub, becoming a wholly owned subsidiary of Holicity, and changed its name to Astra Space Operations, Inc. (n/k/a Astra Space Operations, LLC). At the same time, Holicity amended and restated its certificate of incorporation to, among other things, change its name to Astra Space, Inc. Additionally, in connection with and as a condition to the Business Combination, the certificate of incorporation was amended to provide for a dual-class structure in which Mr. Kemp and Dr. London would receive Class B Shares (which provide for 10 votes per Class B Share on all matters before the stockholders as opposed to one vote per Class A Share to be cast on such matters). Mr. Kemp and Dr. London, together, hold all of the Class B Shares, and the Class B Shares represent 66.1% of the voting power of the Company.

At the time of the Business Combination and all relevant times thereafter, the Company was an early stage operating company and thus relied heavily on the net cash proceeds generated in both the Business Combination and the sale of shares through a contemporaneous PIPE transaction, which net cash proceeds received as of the consummation of the Business Combination were approximately $464 million, in the aggregate. The Company used approximately $70.8 million of these cash reserves, net of cash acquired, to acquire Apollo Fusion, Inc. (“Apollo Fusion”) and start the Company’s Space Products business (which is sometimes referred to in this Information Statement as the “ASE business”) on July 1, 2021.

Between July 1, 2021, and June 30, 2022, the Company’s business operations produced a number of successes, including the following milestones:

 

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the first Astra Spacecraft Engine® achieved a successful orbital ignition on board the Spaceflight Sherpa-LTE1 orbital transfer vehicle on August 20, 2021;

 

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the Company’s first commercial orbital launch of Rocket 3.3 was achieved in connection with a test flight for the United States Space Force on November 20, 2021 (for which the Company received a milestone payment); and

 

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•

the Company’s first delivery of customer payloads into Lower Earth Orbit (“LEO”) occurred on March 15, 2022, in connection with a paid launch for Spaceflight, Inc.

As an early stage company, the Company sought to invest in scaling manufacturing to support commercial operations of its launch system while developing a higher capacity rocket, the Company also had some failed launch attempts, culminating with an anomaly occurring during the Company’s first launch for the NASA Tropics-1 mission on June 12, 2022 (the “NASA Mission”), wherein the upper stage of the Company’s launch vehicle shut down early, causing the inability of the Company to deliver the payloads into LEO.

As of June 30, 2022, the Company had just over $200 million in cash and cash equivalents and marketable securities. In July 2022, following the NASA Mission, the Company decided to focus on the development and production of its next launch system – Launch System 2.0 – and stopped commercial launches for the remainder of 2022 and through the date of this Information Statement. Also, in July 2022, the Company conducted its first set of cost-reduction initiatives, including a reduction-in-force to streamline its business operations in line with its decision to focus on the development of its next launch system and its planned growth of its Space Products business through the sale of its Astra Spacecraft Engines^®.

On October 6, 2022, and as reported in the Company’s filings with the SEC, the Company received a deficiency notice from Nasdaq that it was not in compliance with Rule 5450(a)(1) of the listing requirements because its per share closing bid price had been below $1.00 for thirty consecutive business days.

From August 2022 through August 2023, the Company explored a number of working capital and general corporate financing options, which resulted in (i) the entering of a $100 million Class A Common Purchase Agreement with B. Riley Principal Capital LLC (the “B. Riley Facility”) on August 2, 2022 (which was terminated July 5, 2023, in connection with the entering of the Roth ATM (as defined later in this sentence)), (ii) a Sales Agent Agreement with Roth Capital Partners LLC (“Roth Capital”) to sell up to $65 million in Class A Shares in at-the-market transactions on July 10, 2023 (the “Roth ATM”); and (iii) the sale of $12.5 million aggregate principal amount of senior secured notes (the “Original Notes”) and warrants to purchase up to 22.5 million Class A Shares (or 1.5 million Class A Shares as adjusted for the Reverse Stock Split) (the “Original Warrants”) to an institutional investor (the “Original Secured Lender”) on August 4, 2023 (as amended, the “Original Secured Facility”).

As of June 30, 2023, the Company had $26.3 million in cash and cash equivalents and marketable securities. Given the depressed stock price, which was $0.43 per Class A Share on December 30, 2022 (or $6.51 as adjusted for the Reverse Stock Split), $0.42 per Class A Share on March 31, 2023 (or $6.37 as adjusted for the Reverse Stock Split), $0.37 per Class A Share on June 30, 2023 (or $5.53 as adjusted for the Reverse Stock Split), and continued to be less than $1.00 per Class A Share until the Reverse Stock Split was effective on September 13, 2023, the Company found it difficult to leverage the B. Riley Facility (which had a $1.00 per Class A Share threshold price) or the Roth ATM to infuse the Company with significant capital without incurring excessive dilution and putting significant pressure on the stock price. The Company also found it difficult to find asset-backed, equipment based or other alternative lending sources willing to provide acceptable financing to the business.

The Original Secured Facility provided a very limited injection of new capital to support the Company’s business operations. The Original Notes bore interest at 9.0% per annum, had a maturity date of November 1, 2024, and were secured by a first priority security interest in all of the assets of the Company and its subsidiaries. The Original Warrants were immediately exercisable upon issuance at an exercise price of $0.45 per Class A Share, subject to certain adjustments and had an expiration date of August 4, 2028. Among other things, the Original Secured Facility required the Company to (i) maintain $5.0 million of cash and cash equivalents in a restricted account, making such funds unavailable to the Company for its working capital or general corporate purposes, and (ii) have at least $15.0 million of cash and cash equivalents in one or more deposit accounts subject to one or more control agreements entered into in favor of Original Secured Lender. The Original Secured Facility also

 

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required the Company to maintain an approved at-the-market equity program and/or equity line that, at all times, had available and unused capacity to generate at least $20.0 million of gross proceeds to the Company, which restriction limited the Company’s ability to use the full capacity of the Roth ATM.

In conjunction with its capital raising activities and search for debt financing from August 2022 through August 2023, the Company also engaged in a number of cost-reduction initiatives to preserve cash and streamline its business operations. In November 2022, the Company implemented a reduction of the Company’s then-existing headcount by approximately 16% from 430 and allocated resources to support the growth of the Launch Services and Space Products businesses. On August 4, 2023, the Company announced a strategic restructuring which resulted in (x) the reallocation of approximately 50 engineering and manufacturing personnel from the Launch Services business to the Space Products business, and (y) the layoff of approximately 70 employees, reducing its overall workforce by approximately 25% from July 1, 2023 through August 4, 2023.

Beginning in the second quarter of 2023 and given the Company’s challenges in raising capital and its forecasted cash needs, the Board began to meet more frequently with the Company’s management to evaluate and discuss the Company’s financial position, as well as potential financing transactions and other strategic transactions. The first such meeting occurred on April 19, 2023 (the “April 19 Meeting”) and focused on four potential go-forward scenarios for the Company, including forecasts of the Company’s projected cash balances through the end of 2024. The Board met again on April 21, 2023, to continue discussions from the April 19 Meeting around the various scenarios discussed at the April 19 Meeting, and to also discuss a potential financing transaction involving an equity investment (with respect to which the Board suggested to the Company’s management that PJT Partners LP (a financial advisor with whom the Company had worked in the past and who had significant experience advising companies with respect to potential strategic alternatives the Company may be exploring) (“PJT Partners”) be engaged to review the terms of any potential financing transaction). The Board met with Company management again on April 25, 2023 and April 28, 2023 (PJT Partners was also in attendance), in each case, to receive an update on commercial and strategic opportunities and the Company’s financing efforts, including, at the April 28, 2023 meeting, a discussion of alternative forms of financing such as equipment and intellectual property based financings.

The Board met on May 9, 2023, during which meeting the Company’s management summarized and discussed with the Board a number of near-term financing options the Company was exploring, including (i) a potential equity transaction, which management believed was too dilutive and not in the best interests of stockholders, (ii) an indicative term sheet for senior secured notes with warrant coverage, which Company management believed, based on a comparison of terms presented to the Board, was more favorable to existing stockholders than the potential equity transaction described in clause (i), (iii) a potential financial investment by a third party, with whom exploratory discussions were being held, and (iv) an initial proposal for an at-the-market financing facility. The Company’s management also presented to the Board three financial scenarios, evaluating the Launch Services Business on a standalone basis, the Space Products Business on a standalone basis and the combined company, respectively, providing forecasts of revenue, expenses and capital requirements for each such scenario. PJT Partners also attended this meeting to discuss preliminary views on the potential financing options and various strategic alternatives that the Company and Board might explore.

On May 25, 2023, the Board held its regular quarterly meeting for the first quarter of 2023, which included extensive business updates on both the Launch Services and Space Products businesses. During this meeting, the Board engaged in a discussion with the Company’s management regarding both a proposed senior secured note offering and an at-the-market equity financing. This discussion included a presentation by Axel Martinez, the Company’s chief financial officer, regarding the Company’s cash needs, including a liquidity analysis. The Board also received an update on potential strategic investments and government financing options to address the Company’s cash needs. The Board also approved a restructuring of the Company’s business operations to position the Company to more easily sell or finance the Space Products business, if that should become a viable strategic alternative, and the Company began to implement this restructuring in June 2023.

 

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On June 27, 2023, the Board met, primarily for the purpose of reviewing the Company’s progress on certain key performance indicators. During this meeting, the Board received an update from the Company’s management on the status of the potential Roth ATM (which was subsequently entered into on July 10, 2023) and the potential Original Secured Facility (which was subsequently entered into on August 4, 2023). The Board engaged in a discussion regarding the Company’s financing strategy following the closing of the Roth ATM and the Original Secured Facility, as well as other potential financing and strategic opportunities and timing.

The Board met with Company management on June 30, 2023, for an update on the status of the negotiations regarding the potential Original Secured Facility. The Board was presented with the current proposed terms of the Original Secured Facility and Company management presented its plan to reduce expenses in order to facilitate compliance with certain likely debt covenants under the Original Secured Facility. The Board also discussed additional financing activities that the Company was exploring, including an update on the potential Roth ATM. Management also presented its current financial plan and assumptions, and there was a discussion of the impact of the potential financing alternatives on the current financial plan.

Effective as of July 1, 2023, the Company, at the direction of the Board, formally engaged PJT Partners as its exclusive financial advisor to assess various strategic alternatives, with Company management initially directing PJT Partners to focus on assisting the Company in connection with a potential sale of a minority interest in the Company’s Space Products business. Such other strategic alternatives the Company considered at the time included one or more acquisitions by the Company of a third party, the sale of the Company (or one of its other business units) to a third party (including a potential joint venture transaction), or a debt or equity financing transaction (collectively, the “Potential Strategic Options”).

The Board met with Company management on July 6, 2023, July 13, 2023 and July 18, 2023, in each case to receive updates on the progress of the various financing transactions being negotiated, including changes to deal terms, and any other strategic financing or other alternatives that the Company was exploring with third parties, including the potential Original Secured Facility, the potential Roth ATM and a potential PIPE investment from existing stockholders or other long-time investors (the “Potential PIPE”). At the meeting on July 6, 2023, the Board primarily reviewed two expense reduction scenarios and discussed three financing possibilities as well as the Company’s contingent earnout obligation (the “Apollo Earnout”) related to its Apollo Fusion acquisition , wherein the Company was obligated under the Agreement and Plan of Merger, dated June 5, 2021, to make payments to the former shareholders of Apollo Fusion, Inc. (together with their representatives, the “Apollo Parties”) in a combination of cash and Class A Shares upon the achievement of certain customer milestones with respect to the Astra Spacecraft Engine^® prior to December 31, 2023. Disputes had arisen between the Apollo Parties and the Company as to the timing and amount of any such earnout payments due.

At the Board meeting on July 13, 2023, Company management updated the Board on discussions it had been having with the Apollo Parties regarding the Apollo Earnout and provided a forecast of potential earnout obligations based on its current projected shipments of Astra Spacecraft Engines^®. The Board discussed proposals for resolving the dispute with the Apollo Parties and authorized Company management to explore possible resolutions. The Board also discussed an additional financing proposal that was under consideration by an intellectual property investment, advisory and asset management firm and existing stockholder of the Company (“Party A”) that evolved out of the Potential PIPE discussions with third parties. The July 13, 2023 meeting also included an updated proposal by Company management for expense reductions and a liquidity analysis. At the meeting on July 18, 2023, Mr. Kemp and Scott Stanford, a director of the Company and affiliate of ACME (defined below), along with Matthew Sant, the Company’s general counsel, described conversations that they had each had with representatives of Party A, which was interested in potentially providing financing to the Company through the purchase of secured notes and warrants. At the July 18, 2023 meeting, the Board also discussed expense reductions and the Apollo Earnout, among other topics.

At a meeting on July 21, 2023, Mr. Kemp led a Board discussion about a term sheet from Party A regarding a potential financing (the “Initial Term Sheet”) and PJT Partners presented a detailed analysis of the Initial Term

 

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Sheet and the timing of a potential closing of this financing in comparison to what it understood to be the general terms of the Original Secured Facility and other financing alternatives the Company was exploring, including the Potential PIPE. The Board discussed the Initial Term Sheet and the various financing options, including the Original Secured Facility, along with the costs and timing of each, the likelihood of a closing and the impact on the Company’s stockholders. The Board also discussed several obligations in the Initial Term Sheet that the Company’s management believed would be difficult to satisfy.

The Board met again on July 25, 2023, with the Company’s management to discuss a revised version of the Initial Term Sheet (the “Revised Term Sheet”). The Company’s general counsel indicated that he understood that Mr. Stanford had expressed the possibility that one or more funds affiliated with ACME, LLC (“ACME”), a venture capital firm co-founded by Mr. Stanford and an existing investor in the Company, may be interested in participating in a financing based on the Revised Term Sheet, and if that was a possibility, Mr. Stanford would need to recuse himself from all discussions and negotiations involving the Revised Term Sheet, that a special committee of the Board would need to be created to negotiate and approve the transaction and that the Audit Committee would need to approve any transaction that constituted a related party transaction. Mr. Stanford confirmed to the Board that ACME might be interested in participating in some form in the transaction described in the Revised Term Sheet through one of its funds and recused himself from the meeting given his potential conflict of interest. The Board received a detailed update of the Company’s on-going negotiations with the Original Secured Lender regarding the terms of the Original Secured Facility and with Party A regarding the terms of the Revised Term Sheet. PJT Partners discussed with the Board the material terms of the Revised Term Sheet, and the Board directed PJT Partners to further negotiate the Revised Term Sheet.

The Board met on July 26, 2023, with Company management and PJT Partners to receive a further update on continuing negotiations with Party A regarding the Revised Term Sheet. Mr. Stanford again recused himself from these discussions. The Board engaged in discussion around the need to close the transaction under the Revised Term Sheet quickly given the Company’s financial position and cash needs and the stated requirements of more than one potential customer that future business opportunities were contingent upon the Company announcing a financing transaction. The Board further discussed the likelihood it would be able to complete the transaction outlined in the Revised Term Sheet quickly and also considered the terms of the proposed Original Secured Facility in comparison to the Revised Term Sheet, the costs of capital, risk around the timing to close each proposed transaction, and the Company’s covenants and obligations in each potential transaction, among other factors. The July 26, 2023, meeting also included a discussion of the Company’s current cash condition and the potential availability of equity financing through a third-party intermediary.

The Board met on July 28, 2023 (the “July 28 Board Meeting”), initially to receive an update on the Company’s financial condition and the status of management’s discussions with the Apollo Parties about a resolution of the Apollo Earnout dispute. Given Mr. Stanford’s affiliation with ACME, which was potentially interested in investing in the transaction outlined in the Revised Term Sheet with Party A (such potential investment by Party A and potentially ACME, the “Potential Party A Financing”), Mr. Stanford recused himself as the conversation turned to financing matters. The remaining Board members held a discussion around the relative merits of each of the Original Secured Facility and the Potential Party A Financing. PJT Partners discussed with the Board the key financial terms of both proposed financings. Specifically, with respect to the Original Secured Facility, the Board considered the restrictions on cash, the minimum cash covenant (both described above), cash burn covenants, the short maturity date on the Original Notes (maturing on November 1, 2024) and the dilutive effect to the Company’s stockholders given the warrant coverage. With respect to the Potential Party A Financing, the Board considered the Company’s ability to meet required deliverables for future financing or to comply with certain proposed terms in the Potential Party A Financing, along with the likelihood that the Potential Party A Financing could be closed quickly enough given the process of negotiating the Revised Term Sheet. The Board also took into account the fact that the definitive documents related to the Original Secured Facility were near completion and that, after months of sourcing Potential Strategic Options, including financing transactions, the only potentially near-term viable financing alternatives for the Company were the Original Secured Facility and the Potential Party A Financing. After evaluating these factors, including the Company’s financial condition and

 

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cash needs, the Board determined that closing the Original Secured Facility was (i) superior to signing the non-binding Revised Term Sheet and attempting to negotiate definitive documents with Party A (and potentially ACME) to close the Potential Party A Financing; and (ii) despite its concerns with some of the terms of the Original Secured Facility, superior to both the Potential Party A Financing and any decision to take no action on the Original Secured Facility. The Board also noted that the terms of the Original Secured Facility allowed it to be refinanced at a later date. Accordingly, the Board (with Mr. Stanford abstaining from the vote) adopted resolutions authorizing management to proceed with the negotiation of final documentation with respect to the Original Secured Facility, and to continue negotiating with Party A on a non-exclusive basis, provided, however, that PJT Partners be instructed to solicit additional indications of interest in a competitive process. Following this meeting, Company management directed PJT Partners to solicit additional indications of interest from other parties in connection with a potential transaction involving a minority stake in the Company’s Space Products business.

Given Mr. Stanford’s potential conflict of interest by virtue of ACME’s potential interest in participating in the Potential Party A Financing, the Board created the Special Committee effective on July 28, 2023, which, at that time, consisted of all directors other than Mr. Stanford. The purpose of the Special Committee, at that time, was solely to consider, approve and recommend to the Board whether the Potential Party A Financing was in the best interests of the Company and all of its stockholders, on both a stand-alone basis and in comparison with other potential financing transactions the Company was considering. Mr. Kemp and Dr. London were initially members of the Special Committee because, at that time, neither had expressed interest in participating in a Potential Strategic Option as an investor or lender and the purpose of the Special Committee was limited to the evaluation of the Potential Party A Financing.

The Board met with Company management for an update on the Original Secured Facility, the Roth ATM, other financing alternatives and the cost reduction initiatives and restructuring (discussed above and announced on August 4, 2023) on August 1, 2023, and August 2, 2023 (solely regarding the status of the closing of the Original Secured Facility).

On August 3, 2023, the Original Secured Facility was again approved unanimously by written consent of the Board (including Mr. Stanford) in connection with the closing of the Original Secured Facility on August 4, 2023. Following the Company’s announcement of the Original Secured Facility, discussions with Party A regarding any potential transaction ceased until later in the month.

On August 9, 2023, the Board held its regular meeting for the second quarter of 2023. The meeting included business updates for the Space Products and Launch Services businesses, and a discussion around the Company’s current financial condition. Specifically, the Board discussed the Company’s cash burn, the weekly cash forecast, outstanding receivables and appropriate levels of resources for the Launch Services business. The Board also discussed the debt covenants in the Original Secured Facility and the Company’s ability to remain in compliance with such covenants. At the August 9, 2023 meeting, the Board also approved a settlement with the Apollo Parties to resolve disputes related to certain matters in connection with the Apollo Earnout.

On August 14, 2023, the Company entered into a settlement agreement and general release (the “Apollo Settlement Agreement”) with the Apollo Parties pursuant to which the Company agreed to pay the former stockholders of Apollo Fusion either a cash payment in the amount of $2.0 million plus $8.0 million in Class A Shares, or a cash payment of $7.0 million. The Apollo Settlement Agreement resolved disputes between the parties and, once paid, would satisfy all of the Company’s outstanding obligations under the Apollo Earnout. On August 16, 2023, the Company announced the Apollo Settlement Agreement.

On August 23, 2023, PJT Partners met with the Board to discuss the process they had undertaken to identify Potential Strategic Options and prospective buyers of the Company or its business lines, as well as prospective investors, lenders or other financing partners as previously directed by the Board at the July 28 Board Meeting. This meeting included a discussion of parties contacted and the status and feedback provided from each such

 

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party, including discussions explored with certain potential strategic counterparties who were not interested in pursuing a transaction. PJT Partners then presented the Board with three potential structures for the Board to consider, including a sale of the Space Products business, a sale of all or substantially all of the Company’s assets or equity, or a take private transaction with a third-party acquirer. The Board asked PJT Partners to explore potential purchasers for all structures to provide the Board and the Company with optionality. In a conversation from which Mr. Stanford recused himself, PJT Partners also informed the Board that, after conducting outreach directed by the Company on July 28, 2023, Party A had indicated that it was willing to provide bridge financing in connection with a potential transaction and the Board directed PJT Partners to continue exploring bridge financing with Party A, as well as other parties.

On September 7, 2023, the Board met again with PJT Partners and Company management present to discuss a new term sheet that Party A had provided to PJT Partners, which was a proposal to acquire control of the Company’s Space Products business (the “New Term Sheet”) and which PJT Partners had shared with the Company upon receipt. Mr. Stanford was not recused from this meeting since the New Term Sheet did not contemplate any participation by other investors. PJT Partners discussed with the Board the material terms of the New Term Sheet and provided the Board its analysis of the New Term Sheet in light of other alternatives available to the Company. The New Term Sheet contained several proposed terms not acceptable to the Board, including a requirement to provide a payment to Party A upon the signing of the New Term Sheet as a reimbursement for future diligence costs and a number of conditions that the Company would likely be unable to satisfy moving forward. The Board discussed and agreed that the New Term Sheet was not an acceptable alternative for the Company and was not in the Company’s or its stockholders’ best interest.

At the September 7, 2023 meeting, PJT Partners and the Board further discussed the potential need for bridge financing to allow the Company to seek, secure and close a potential transaction, including a Potential Strategic Option if one was actionable. The Board discussed how much bridge financing might be necessary to facilitate the Company’s closing of a Potential Strategic Option. PJT Partners also explored with the Board reaching out to five parties (excluding Party A) who had expressed some interest in exploring a potential transaction with the Company and requesting an indication of interest from such parties, as well as from Party A, by a certain date. In materials provided by the Company’s management prior to the Board meeting, management forecasted a potential for the Company to breach the $15.0 million minimum cash covenant by early November (with such forecast assuming $5.0 million of new funding by early October). As a result, the Board’s discussion during the meeting was focused on maximizing stockholder value and attempting to ensure that the Company did not default under the debt covenants in the Original Secured Facility. The Board discussed seeking additional financing for the purpose of redeeming the Original Secured Facility.

At the conclusion of the September 7, 2023 meeting, the Board directed PJT Partners to inform Party A that its proposal in the New Term Sheet was not acceptable for the reasons stated above but to invite Party A to make an alternative proposal to buy all of the Company or the ASE business, or to provide bridge financing to close a potential transaction with a third party, including a Potential Strategic Option. The Board also directed PJT Partners to contact the remaining parties in the process to invite them to submit a proposal by a date certain (approximately two weeks thereafter), where such proposal could be to acquire the ASE business or the entire Company (a “Sale Transaction”). The Board encouraged the Company’s management to continue to reduce expenses. Promptly following this meeting, PJT Partners contacted Party A, rejecting its proposal and also contacted the remaining five (5) interested parties to solicit a proposal for a potential transaction in the form of control of the ASE business, the sale of all of the ASE business or the sale of all of the Company and its assets.

On September 13, 2023, and in order to satisfy the deficiency in Nasdaq’s listing requirements, the Board approved an amendment to the Company Charter to effect a 1-for-15 reverse stock split of the Common Shares on September 13, 2023 (the “Reverse Stock Split”). The stockholders of the Company, at the 2023 annual meeting held on June 8, 2023, had previously approved the Reverse Stock Split at a ratio in the range of 1-for-5 to 1-for-15, with the final decision of whether to proceed with the reverse stock split and the exact ratio and timing of the reverse stock split to be determined by the Board, in its discretion, no later than June 8, 2024.

 

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As a cost-reduction measure, a show of support for the Company and its employees, and in an effort to help the Company manage its cash, effective on September 16, 2023, Mr. Kemp and Dr. London voluntarily agreed to reduce their salaries to the California minimum wage through December 31, 2023. At the time Mr. Kemp and Dr. London were earning annual base salaries of $600,000 and $500,000, respectively.

On September 21, 2023, the Board met again with Company management and PJT Partners present, where the Board received an update on the status of PJT Partners’ discussions with potential interested parties in connection with a Sale Transaction, including those who were newly entering the process and those who had previously participated in the process, but were not currently active. PJT Partners also updated the Board on three parties that were actively engaged in the process and were currently in discussions with PJT Partners. The Board, PJT Partners and Company management discussed the process that PJT Partners had undertaken to identify potential interested parties to a Sale Transaction (the “Sale Process”), particularly focusing on the Company’s financing concerns, including with respect to the Original Secured Facility, debt covenants and availability of bridge financing. During this meeting, the Board also received information from Company management regarding the Company’s financial condition and liquidity. Also, on this call, the Board approved a potential confidentially marketed offering led by Roth Capital (the “Roth Offering”), which it hoped would raise up to $10.0 million of gross cash proceeds.

On September 26, 2023, the Special Committee delivered to Freshfields Bruckhaus Deringer US LLP (“Freshfields”) an executed engagement letter formalizing the engagement of Freshfields as the Special Committee’s outside legal counsel. The Special Committee engaged Freshfields based on, among other things, Freshfields’ independence, reputation and experience with respect to special committee assignments, merger and acquisition engagements, financings and insolvencies.

On September 27, 2023, the Board met with Company management, who informed it that, due to lack of demand and the near-term issuance of Class A shares to the former stockholders of Apollo Fusion pursuant to the Apollo Settlement Agreement, the Company and Roth were unable to pursue the Roth Offering. With reference to Delaware case law, the Company’s general counsel gave a presentation to the Board describing the directors’ fiduciary duties in a scenario where the Company was in the “zone of insolvency” as well as if and when the Company were to be determined to be insolvent. The Board then had a discussion regarding the Company’s current financial condition, its liquidity and potential options, including potential reductions in headcount. The Board also discussed the Company’s compliance with the debt covenants in the Original Secured Facility.

Also on September 27, 2023 (the “September 27 SC Meeting”), the Special Committee met with Company management present to discuss potential financing transactions with certain existing investors, including ACME and JMCM, and in which both Mr. Kemp and Dr. London indicated a potential interest in participating (the “October Potential Financing Transaction”). Mr. Kemp and Dr. London recused themselves from the September 27 SC Meeting.

At a September 29, 2023 meeting (the “September 29 SC Meeting”), the Special Committee (now consisting solely of disinterested directors Julie A. Cullivan, Michèle Flournoy, Michael Lehman and Lisa Nelson) met, with Mr. Martinez and Mr. Sant present (Mr. Martinez, Mr. Sant, Mr. Attiq and other members of the Company’s management (other than the co-founders) are sometimes referred to as “Independent Company Management” in this Information Statement). Neither the co-founders nor Mr. Stanford attended the September 29 SC Meeting. In light of the co-founders’ potential participation in a strategic or financing transaction involving the Company, they resigned from serving on the Special Committee and the Special Committee officially accepted their resignations as members of the Special Committee on September 29, 2023. At the September 29 SC Meeting, Mr. Sant reviewed with the members of the Special Committee their fiduciary duties generally, as well as in the context of evaluating any Potential Strategic Option, indicating that the Special Committee would likely need to make a recommendation to the full Board with respect to the favorability or fairness of transactions involving related parties, but the specifics of that approval would likely depend on the nature of the proposed transactions and the parties involved. At the request of the Special Committee, Independent Company Management

 

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confirmed that none of them had any relationships with JMCM. The Special Committee discussed the October Potential Financing Transaction, including its material terms, the likelihood of the transaction closing and the extent to which it would influence the likelihood of receiving offers for or the closing of a future potential acquisition of the Company. In the context of such discussion, Mr. Sant noted that, he had a discussion with Mr. Stanford about the October Potential Financing Transaction prior to the September 29 SC Meeting during which Mr. Stanford (i) again acknowledged to him his potentially conflicting interests resulting from ACME’s potential participation in the October Potential Financing Transaction, as well as his fiduciary duty, as a director, to the Company; (ii) committed that another partner at ACME would lead any negotiations on ACME’s behalf, involving a potential financing transaction involving funds affiliated with ACME, and (iii) further committed not to leverage his role or knowledge as a director of the Company in connection therewith. The Special Committee also discussed retaining specialized restructuring counsel if the October Potential Financing Transaction did not close.

As of September 30, 2023, the Company had $18.9 million of cash and cash equivalents, $5.0 million of which was restricted and unavailable to the Company under the terms of the Original Secured Facility. As discussed above, the Original Secured Facility required that the Company meet a minimum threshold of $15.0 million in cash and cash equivalents (the “Minimum Cash Threshold”).

At a Board meeting on October 3, 2023 (the “October 3 Board Meeting”), the Board concluded that, given their interest in a potential sale or financing transaction as disclosed most recently at the September 29 SC Meeting, Mr. Kemp, Dr. London and Mr. Stanford should be excluded from any discussion around any third party interest in acquiring the Company or either of its businesses, including updates from PJT Partners regarding the Sale Process. Accordingly, the Board expanded the scope of the mandate of the Special Committee to give it the power and authority to, among other things, (i) consider and advise the Board as to whether any one or more potential strategic or financing transactions were in the best interests of the Company, both on a standalone basis and as compared to other potential transactions being considered by the Company, including consulting with and receiving updates from PJT Partners, (ii) approve the potential transaction, and (iii) obtain any and all financing necessary to effectuate the potential transaction. In addition, the Special Committee was granted the authority, at such time as it chose to do so, to interview, select and retain, at the Company’s expense and on behalf of the Board and/or the Special Committee, such additional investment bankers, financial advisors, attorneys, accountants and other advisors as it may deem appropriate. At the October 3 Board Meeting, PJT Partners advised the Board (with Mr. Kemp, Dr. London and Mr. Stanford recusing themselves from the discussion) that (i) out of 30 parties contacted at the start of the process by PJT Partners, there were currently six parties (excluding Party A) conducting diligence (the “Interested Parties”), (ii) PJT Partners expected two of the Interested Parties would likely not submit bids given their concerns about the Company’s cash flows, (iii) PJT Partners was waiting for decisions from two of the other Interested Parties; and (iv) PJT Partners believed it might receive bids from the other two Interested Parties soon. The Board (with Mr. Kemp, Dr. London and Mr. Stanford recusing themselves) instructed PJT Partners to reengage with Party A to determine if such party would be interested in pursuing a transaction that was actionable by the Company. The Board also received an update on discussions between Company management and the lender in the Original Secured Facility, including the potential waiver of the minimum cash balance, should it become necessary.

Following the October 3 Board Meeting, the Special Committee had a separate meeting on October 3, 2023 with representatives of Freshfields present, to discuss, among other things, updates regarding the Sale Process and other Potential Strategic Options, the possibility of and risks associated with a potential default on the Original Notes issued to the Original Secured Lender, and the Company’s estimated cash runway and available options, including bankruptcy proceedings. At the meeting, representatives of Freshfields reviewed with the Special Committee the directors’ fiduciary duties in light of the Company’s financial distress, and discussed with the Special Committee the implications of reaching insolvency.

On October 10, 2023, the Board met to receive a weekly accounts receivable and cash balance update. The Board also received an update and held a discussion around the Company’s anticipated non-compliance with the

 

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$15.0 million minimum cash covenant in the Original Secured Facility. In anticipation of obtaining a waiver, the Board authorized Company management to negotiate and enter into a waiver and forbearance agreement with the Original Secured Lender providing a waiver of the default of the minimum cash covenant from the date of the default through October 31, 2023 and to make a prepayment of principal to the lender at the 105% redemption rate with accrued interest in connection with a proportionate reduction in the interim minimum cash covenant.

On October 10, 2023, following the Board meeting on the same day, the Special Committee met with members of Independent Company Management, and at the request of Independent Company Management, representatives of PJT Partners, in order for such representatives to give the Special Committee an update on the Sale Process taking place. Members of Independent Company Management provided an update on the October Potential Financing Transaction, including the potential participants in the financing, as well as the status of discussions with Party A, who was conducting due diligence but was believed by members of Independent Company Management to be unlikely to participate in the October Potential Financing Transaction. Representatives of PJT Partners discussed the Sale Process and noted that, based on the lack of indications of interest received to date, it did not appear likely that actionable indications of interest for a Sale Transaction would be received moving forward. Given ACME’s, Mr. Kemp’s and Dr. London’s potential involvement in the October Potential Financing Transaction, it was discussed that going forward the Special Committee (instead of the full Board) should be receiving updates on the Sale Process, as the details of that process could put the investor group (potentially including ACME, Mr. Kemp and Dr. London) in an advantaged situation vis a vis other potential financing sources and transaction parties.

On October 11, 2023, the Company failed to maintain the Minimum Cash Threshold as required under the Original Secured Facility and, effective October 11, 2023, the Original Secured Lender waived this event of default through October 31, 2023, provided that the Company maintained $10.5 million in cash and cash equivalents (the “Revised Minimum Cash Threshold”) and the Company also made a payment to the Original Secured Lender in the amount of approximately $2.1 million, approximately $2.0 million of which was applied as a principal reduction on the Original Notes that were part of the Original Secured Facility.

On October 14, 2023, the Special Committee met with members of Independent Company Management present (the “October 14 SC Meeting”). The Special Committee discussed with members of Independent Company Management, among other matters, the buyer outreach process, the term sheet with respect to a potential bridge financing received from Party A on October 14, 2023 (the “October 14 Term Sheet”) and the advisability of the Special Committee engaging its own financial advisor in order to be prepared to respond quickly to a potential transaction. It was noted that the October 14 Term Sheet contained a number of problematic terms, including that the bridge financing contemplated by it was dependent upon the negotiation of a subsequent sale of a controlling interest in the ASE business to Party A. The Special Committee determined that the October 14 Term Sheet was not actionable in its current form and that negotiating a short-term financing with Party A was not a good use of the Company’s limited resources. The Special Committee further instructed Independent Company Management to continue negotiations with Party A regarding the potential sale of the ASE business to Party A and to prepare a draft term sheet therefor, which could be shared with Party A, without specifying a price for the ASE business.

On October 16, 2023, the Special Committee met with members of Independent Company Management present. Martin Attiq, the Company’s chief business officer, provided the Special Committee with an update on the October Potential Financing Transaction, and the Special Committee instructed Independent Company Management to provide a “best and final” term sheet to JMCM to participate in the October Potential Financing Transaction which incorporated the Special Committee’s feedback on terms. Mr. Attiq then reviewed with the Special Committee a proposed term sheet for the acquisition of the ASE business by Party A, as requested by the Special Committee at the October 14 SC Meeting, and the Special Committee authorized Independent Company Management to deliver such term sheet to Party A, leaving the price blank, which term sheet was delivered to Party A on October 16, 2023 (the “October 16 Term Sheet”). Party A never formally responded to the October 16 Term Sheet and discussions with Party A did not resume until November 1, 2023 (as described below).

 

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In contemplation of the Company’s liquidity needs and taking into account the interests of the Company and its stakeholders, the co-founders began considering whether they would be able to assist with an alternative strategic transaction. In furtherance of the foregoing, the co-founders engaged Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”) on October 15, 2023, and Moelis & Company (“Moelis”) on November 1, 2023. On October 16, 2023, the Company received a request from Pillsbury, legal counsel to the co-founders, for a form non-disclosure agreement for use with potential participants in a strategic process on behalf of the co-founders.

On October 17, 2023, PJT Partners notified the Company of its resignation as the Company’s financial advisor, citing concerns that it may be conflicted moving forward, given that its prior involvement with Party A and certain members of Company management in connection with prior transactions and the increasing likelihood that Party A and certain members of Company management would be participating in a potential transaction at that time. During its engagement, at the direction of the Company, PJT Partners reached out to 30 parties, which included a combination of financial buyers and strategic parties, who were ultimately most interested in the Space Products business. Of those parties, 14 parties executed a confidentiality agreement with the Company and only seven parties actively engaged in due diligence (including Party A). PJT Partners’ process resulted in only the October 14 Term Sheet from Party A.

On October 17, 2023, the Board met with Company management in order to receive an update on the Company’s default under the Original Secured Facility and the current waiver of such default by the Original Secured Lender. There was a discussion around the limited time to pursue additional financing before the waiver of the default expired on October 31, 2023. In addition to receiving a business and financial update, the Board considered another potential equity offering underwritten by Roth Capital and delegated to the Special Committee the authority to review and approve a potential equity offering and to establish a pricing committee in connection with such an offering. The Board discussed PJT Partners’ resignation and determined that it was appropriate for the Special Committee, rather than the Board, to retain its own independent financial advisor.

Also on October 17, 2023, the Special Committee met with Independent Company Management present. The Special Committee discussed the selection of an independent financial advisor, who would be engaged by and would report directly to the Special Committee for independence purposes. The Special Committee discussed the Company’s cash position and status and terms of the October Potential Financing Transaction, noting the urgency of closing the financing as soon as possible, and considered whether there was a need for a financial analysis to be provided by the financial advisor to the Special Committee in connection with the October Potential Financing Transaction. The Special Committee also considered an opportunity, initiated and presented by Roth Capital, to potentially raise up to $5.0 million to $10.0 million in a confidentially marketed public offering (“Second Potential Roth Offering”), and authorized the Company’s management to pursue the Second Potential Roth Offering. The Special Committee established a pricing committee consisting of Ms. Nelson and Ms. Cullivan for the purpose of reviewing and approving the pricing of the Second Potential Roth Offering. The Special Committee also received an update on the Company’s efforts to retain restructuring counsel and determined that the Company, not the Special Committee, should retain restructuring counsel and do so as soon as possible.

The Second Potential Roth Offering was abandoned by Company management on October 19, 2023, due to market and stock performance and lack of demand by investors.

As described above, the Special Committee (and previously the Board) considered the October 14 Term Sheet and the results of PJT Partners’ process, taking into account the Company’s financial condition and the best interests of the Company and its stockholders, and on October 19, 2023, at the Special Committee’s direction, the Company also received non-binding term sheets from JMCM and ACME for the potential issuance of senior secured convertible notes in a potential principal amount of up to $25.0 million (the “October Potential Financing Transaction”), in which JMCM and ACME each committed to fund up to $5.0 million (the “J/A Term Sheets”).

 

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On October 24, 2023, the Special Committee approved the engagement of Houlihan Lokey Capital, Inc. (“Houlihan Lokey”) as its exclusive financial advisor to provide financial advisory and investment banking services in connection with the Special Committee’s consideration of the October Potential Financing Transaction or other Potential Strategic Options.

On October 24, 2023, the Special Committee met with members of Independent Company Management present. The Special Committee received updates on (i) the restructuring of the Original Notes under the Original Secured Facility and the related negotiations with the Original Secured Lender, (ii) the October Potential Financing Transaction, including the fact that the Company had received signed, non-binding term sheets for an aggregate of $13 million in commitments (including the J/A Term Sheets) and that Mr. Kemp and Dr. London were expected to participate in the financing but had not yet provided signed, non-binding commitments to do so and (iii) other Potential Strategic Options, including timing of further engagement with Party A and contacting other potentially interested parties, including an investment firm specializing in alternative investing who had been introduced to the Company during the second quarter of 2023 and was one of the Interested Parties in the PJT Partners process (“Party B”). Representatives of Houlihan Lokey also joined the meeting and discussed a proposed transition plan to assume its role as the Special Committee’s financial advisor, as well as provided perspectives on the October Potential Financing Transaction. Representatives of Houlihan Lokey also noted the lack of any financing alternatives (other than an emergency bankruptcy filing without debtor-in-possession (“DIP”) financing) available at such time to the Company.

On October 25, 2023, the Company engaged KTBS Law LLP (“KTBS”) as its restructuring counsel to advise the Company in connection with its financial condition and contingency planning, and any matters arising therefrom. On October 26, 2023, in connection with its engagement, upon the request of the Special Committee, representatives of Houlihan Lokey confirmed that, since October 25, 2021, based on a review of its information management systems, Houlihan Lokey had not been engaged pursuant to a written engagement letter to provide advisory services to any party listed in Houlihan Lokey’s disclosure letter (including the co-founders, Party A, Party B, JMCM and ACME), for which such parties paid fees to Houlihan Lokey, other than Party B, from whom Houlihan Lokey had received over $20 million in respect of such advisory services. On October 27, 2023, the Special Committee and the Company delivered to Houlihan Lokey an executed engagement letter formalizing the engagement of Houlihan Lokey in such capacity.

On October 29, 2023, the Special Committee met with members of Independent Company Management present, as well as representatives of Houlihan Lokey, Freshfields, KTBS and Cozen O’Connor, P.C. (“Cozen”), legal counsel to the Company. The Special Committee received an update on the status of the Company’s default under the Original Secured Facility and the pending expiration of the lender’s waiver of those defaults. A representative of Houlihan Lokey indicated that Houlihan Lokey had held discussions with Moelis regarding the potential structure and terms of a transaction under consideration by the co-founders in which they would seek to take the Company private. Members of Independent Company Management provided an update on the October Potential Financing Transaction, including the risks and obstacles to the purchase of the Original Secured Facility notes directly from the Original Secured Lender and the status of those negotiations. The Special Committee also discussed the Company’s financial condition, including a discussion around the Company’s solvency, the possibility of bankruptcy and preserving stockholder value. The Special Committee considered the risks and merits of a preemptive bankruptcy filing and considered that in order for the Company to emerge successfully from bankruptcy, it would require a DIP lender to finance the process. The Special Committee also discussed that, if it were to file for bankruptcy, the Company would likely not be able to secure DIP financing and this might result in the liquidation of the Company.

On October 30, 2023, the Company failed to meet the Revised Minimum Cash Threshold of $10.5 million and was in default under the Original Secured Facility, and, on November 3, 2023, the Company announced this and other events of default under the Original Notes as well as that the Company was engaged in continued discussions with a number of other investors regarding potential additional debt and equity financings and other strategic transactions.

 

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The Board met on October 31, 2023, with Company management and KTBS present. Houlihan Lokey was in attendance solely in order to receive an update on certain financial matters discussed so that Company management did not have to repeat the update a second time. The Board received an update on the Company’s default under the Revised Minimum Cash Threshold of the Original Secured Facility and was reminded that the initial waiver would expire at the end of the day. Company management indicated that the Original Secured Lender had not provided a draft extension or new waiver, but that discussions were ongoing. Company management also informed the Board that JMCM and ACME were discussing a note purchase directly with the Original Secured Lender. The Board received a financial update, taking into account the default under the Original Secured Facility and the anticipated net proceeds from the expected new financing. Company management also discussed the Company’s current accounts payable balance, indicating that the Company intended to pay approximately $3.0 million of accounts payable following a financing but that this would not be sufficient to release vendor pressure. As further expense reduction measures, Company management also proposed the terms of a potential salary reduction for certain senior employees and a possible furlough of employees.

On November 2, 2023, after being introduced by Independent Company Management to Party A, representatives of Houlihan Lokey met with Party A to identify Houlihan Lokey to Party A as the Special Committee’s financial advisor and Party A asked Houlihan Lokey to provide, at Party A’s request, a business update in connection with Party A’s prior interest in purchasing the ASE business.

Although the co-founders had communicated through Moelis an intention to potentially submit to the Company a take-private proposal, Independent Company Management discussed that the Company was not in a position to consider any Potential Strategic Options until after it had consummated a financing and addressed the default under the Original Secured Facility and that the public announcement of any such offer could potentially affect the proposed note purchase transaction between the Original Secured Lender and JMCM and ACME. As a result, on behalf of the co-founders, Moelis agreed that they would not deliver a proposal to the Company until Moelis received further direction from Houlihan Lokey.

On November 2, 2023 (the “November 2 SC Meeting”), the Special Committee met with representatives of Freshfields and Houlihan Lokey, with members of Independent Company Management and representatives of KTBS and Cozen present, to receive an update on the agreements being negotiated in connection with the October Potential Financing Transaction (which were expected to take the form of a reaffirmation and omnibus amendment of the securities purchase agreement with the Original Secured Lender) and review its material terms, including requirements that the Company would need to appoint a chief restructuring officer, implement a cost reduction plan and provide transparency to the investor group regarding the ongoing buyer outreach process. The Special Committee discussed that if the Company did not obtain a waiver of the defaults under the Original Notes, as well as additional financing, it would likely need to immediately furlough employees and consider pursuing bankruptcy protection. A representative of KTBS reiterated that, unless the Company was able to secure DIP financing, it was unlikely that the Company would emerge from bankruptcy successfully. A representative of Houlihan Lokey also expressed the view that the Company’s continued operation was a prerequisite to pursuing other Potential Strategic Options and noted that the Special Committee had not identified any alternatives to the October Potential Financing Transaction. In light of the foregoing, the Special Committee approved moving forward with the reaffirmation agreement, subject to the Special Committees’ review and approval of the final agreement.

On November 3, 2023 (the “November 3 SC Meeting”), the Special Committee met with representatives of Freshfields and Houlihan Lokey, with members of Independent Company Management and representatives of KTBS and Cozen present, to receive an update on the Company’s default under the Original Secured Facility and the status of the financing transaction and potential note purchase. The Special Committee considered whether it should recommend immediately furloughing all employees and prepare for an emergency bankruptcy filing and instructed Company management to continue working towards a financing transaction while simultaneously preparing for potential furloughs and a possible bankruptcy filing. The Special Committee acknowledged that such a filing would likely be without financing and could result in a liquidation of the Company.

 

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Immediately following the November 3 SC Meeting, the Company began working with KTBS to actively prepare for a bankruptcy filing.

On November 5, 2023, the Special Committee met with representatives of Freshfields and Houlihan Lokey, with members of Independent Company Management and representatives of KTBS and Cozen present, to approve and authorize the Company to undertake an initial financing with JMCM and ACME (the “Initial Investors”), for a total investment amount of approximately $13.4 million (the “Initial Financing”). The Initial Financing was agreed to pursuant to a reaffirmation agreement and omnibus amendment agreement dated November 6, 2023 (the “Initial Financing Agreement”) and was in furtherance of the October Potential Financing Transaction. The Initial Financing included (i) a purchase by the Initial Investors of the remaining $8.0 million aggregate principal amount of Original Notes and Original Warrants to purchase up to 1.5 million post-Reverse Stock Split Class A Shares from the Original Secured Lender, under which the Company was in default as of October 30, 2023, (ii) a loan by the Initial Investors to the Company and its subsidiaries in the aggregate amount of approximately $3.05 million evidenced by senior secured bridge notes (the “Bridge Notes”) that matured on November 17, 2023, and (iii) a sale to the Initial Investors of warrants (the “Bridge Warrants”) to purchase up to 5,314,201 Class A Shares at a purchase price of $0.125 per Bridge Warrant for an aggregate purchase price of approximately $664,275 that were immediately exercisable at an exercise price of $0.808 per Class A Share, subject to certain adjustments and with an expiration date of November 6, 2028. In connection with the Initial Financing, the Initial Investors also agreed to waive all existing events of defaults under the Original Secured Facility through November 17, 2023.

On November 7, 2023, the Special Committee met with representatives of Freshfields and Houlihan Lokey, with members of Independent Company Management present, to discuss the closing of the Initial Financing and the solicitation of non-binding indications of interest from third parties. Representatives of Houlihan Lokey shared their perspectives with the Special Committee as to which parties may be interested in a strategic transaction involving the Company. The Special Committee discussed, among other matters, the importance of contacting third parties and not relying solely on the investor group potentially being assembled by Mr. Kemp and Dr. London and that it would be valuable to set ground rules around what type of offer would be viewed favorably by the Special Committee, including that it was important that any offer be actionable and backed by firm financing. After discussion, the Special Committee authorized Houlihan Lokey to solicit non-binding indications of interest from third parties, including Mr. Kemp and Dr. London, and to convey to all parties that proposals should be actionable and backed by firm financing. Given the closing of the Initial Financing, the Special Committee also instructed the Company to pause active bankruptcy planning, which had been commenced by the Company and KTBS following the November 3 SC Meeting.

Later in the day on November 7, 2023, consistent with the Special Committee authorization, representatives of Houlihan Lokey sent an email to Moelis advising them that the Special Committee would be open to receiving an offer to take the Company private consistent with the following terms:

 

1.

Price (can be a range or an estimated premium) being offered for the shares;

 

2.

Target closing date, which should be as soon as practicable;

 

3.

Firm financing at the time of signing;

 

4.

Very high degree of certainty and timing of closing once definitive documents are signed;

 

5.

An estimate of the amount of financing (debt and equity) needed to close and a summary description of the parties providing such financing;

 

6.

Bridge financing to ensure the Company has adequate liquidity to operate from date of signing definitive documents through closing; and

 

7.

A summary timeline of the actions necessary to sign definitive documents, including any diligence required by the financing sources.

 

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The representatives of Houlihan Lokey further conveyed to Moelis that the Special Committee had a strong preference not to trigger a disclosure requirement with respect to any offer until the Special Committee and its advisors could reasonably conclude that financing sources have substantially completed any required diligence.

The Board held its quarterly meeting on November 8, 2023, attended by management and, for a portion of the meeting, KTBS and Cozen. In addition to the business and financial updates, the Board received an update and overview of the Initial Financing and near-term milestones. In connection with this discussion and given the fact that an affiliate of Mr. Stanford had participated in the Initial Financing, Mr. Stanford offered to resign from the remainder of his committee assignments and as the Company’s lead independent director. Mr. Stanford’s resignation was accepted and Mr. Lehman was appointed lead independent director. There was also a discussion around the Company’s accounts payable plan and ongoing expense reductions. With respect to potential salary reductions, the Board was not supportive of granting equity in exchange for salary reductions but authorized management to implement such temporary salary reductions as it deemed appropriate after consultation with the Initial Investors. KTBS joined the meeting and provided a presentation on bankruptcy matters.

On November 8, 2023, the Company announced that Mr. Stanford had resigned as the lead independent director of the Board in connection with the participation of ACME in the Initial Financing and that the Board had appointed Michael Lehman to serve as the Lead Independent Director.

Also on November 8, 2023, based upon initial indications of support from potential investors and subject to customary conditions, Mr. Kemp and Dr. London delivered to the Special Committee a non-binding proposal (the “Take Private Proposal”), offering to acquire all of the outstanding Common Shares not currently owned by Mr. Kemp and Dr. London for an indicative purchase price of $1.50 per share in cash. The text of Mr. Kemp’s and Dr. London’s proposal was as follows (with terms defined therein used solely for the purposes set forth therein):

As requested by the Special Committee, we are pleased to submit this preliminary and non-binding indication of interest concerning the potential acquisition (the “Proposal”) of 100% of the outstanding share capital of Astra Space, Inc. (“Astra” or the “Company”) led by Chris Kemp (“Kemp”) and Dr. Adam London (“London”) (together, “we”) not already owned directly or indirectly by Kemp and London.

We have assembled a team of external advisors and we are ready to initiate customary confirmatory due diligence with the aim to finalize the transaction documents as rapidly as possible following acceptance of this Proposal by a fully empowered special committee (“Special Committee”) comprised of independent and disinterested directors appointed by Astra’s Board of Directors.

We believe that Astra’s strategic objectives and business prospects will be best served as a private company. Taking the company private while delivering a meaningful premium to current shareholders allows for the best interests of shareholders as well as the Company, its employees and its customers to be met.

This proposal is made pursuant to and in accordance with the instructions that Houlihan Lokey, on the behalf of the Special Committee, provided to Moelis & Company LLC on November 7, 2023.

1. Purchase Price. Based on publicly available information and the information provided to date, and subject to the terms and conditions of this letter, our non-binding indicative offer for the Company is $1.50 per share. Our offer represents a premium of 103% to today’s closing share price of $0.74 and a premium of 83% to the Company’s 20-day volume weighted average price (“VWAP”) of $0.82 as of today’s close.

2. Key Assumptions. Our Proposal is predicated on assumptions regarding the cash and debt positions of the Company at present and expected at closing, transaction expenses as well as the expected fully diluted share capitalization of the Company at the time of closing. Notably, we anticipate that the Company will close its previously announced financing (or a similar financing arrangement thereof) of at least $15 million, and up to $25 million, on terms generally consistent with the proposed financing term sheet executed on October 19, 2023. These assumptions have been informed by the Company’s recent public filings and information made available to us and our advisors but remains subject to confirmatory due diligence. Given

 

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the relative magnitude of these factors to the funds intended to acquire shares, deviation from these assumptions could lead to material changes in our proposed purchase price per share.

3. Financing. Based on our proposed purchase price per share and cash consideration to shareholders as well as the anticipated transaction expenses and capital required for the outstanding bridge financing, we anticipate raising $60 - 65 million of capital. As part of this proposed transaction, we will also raise sufficient incremental capital to allow Astra to meet its strategic and financial objectives as a privately-held company. We are additionally open to certain accredited investor stockholders of the Company rolling their equity into the transaction. We anticipate our financing sources will be able to work expeditiously to complete confirmatory due diligence. We are highly confident of our ability to obtain commitments for both the rollover and the capital required on a contemporaneous basis and we expect that definitive documentation would not contain any financing contingencies.

4. Timing. Given our deep knowledge of the Company and industry as co-founders of Astra, we believe we can progress rapidly and efficiently through our required due diligence for the potential transaction. We and our representatives are prepared to proceed expeditiously and dedicate the resources necessary towards completing our due diligence in an expeditious manner. We will concurrently negotiate definitive transaction agreements as we conduct our remaining due diligence.

5. Other Terms. We will work with the Special Committee to agree on a transaction structure that takes into account applicable Delaware law, as well as provides certainty of closing to support the Company’s liquidity needs.

6. Material Conditions. The definitive terms of the Proposal and the transaction would be set forth in a definitive transaction agreement between our acquisition vehicle and the Company that will contain customary terms found in agreements providing for the acquisition of a US public company.

Our Proposal does not outline all such terms, but we do want to highlight a few key conditions upon which our Proposal is predicated:

(a) Receiving the approval of Astra’s Board of Directors for the Proposal upon the recommendation of the Special Committee;

(b) Satisfactory conclusion of our due diligence;

(c) Entering into a mutually acceptable definitive transaction agreement; and

(d) Receiving a DGCL 203 waiver.

7. Advisors. We have engaged Pillsbury Winthrop Shaw Pittman LLP as legal counsel and Moelis & Company LLC as financial advisor.

8. Additional Information. Please note that this Proposal is an expression of interest only, and we reserve the right to withdraw or modify our Proposal in any manner at any time. We reserve the right, at our absolute discretion, to cease our evaluation of and withdraw from pursuing the Proposal at any time without liability to any person or otherwise vary its terms and conditions, as a result of the diligence review, prevailing market conditions or otherwise. This Proposal does not constitute an offer to sell or the solicitation of an offer to buy any securities. This Proposal is not intended to, and will not, impose any legal obligations upon the parties, which obligations can only be created upon execution and delivery of binding agreements and then only to the extent provided for therein. We are obligated to disclose this Proposal promptly in an amended 13D filing, which we expect to do promptly upon delivery of this letter.

This Proposal shall be governed by and construed in accordance with the laws of the State of Delaware.

If you have any questions regarding this Proposal, please feel free to reach out to Matthew Hughes, Email: ********, Phone: ********. We look forward to hearing from you regarding our Proposal as soon as possible. Both we and our advisors are prepared to work expeditiously and commit all necessary resources to complete our due diligence and execute a definitive agreement as quickly as possible.

 

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Thank you for your consideration and cooperation.

On November 9, 2023, the Company filed a current report on Form 8-K with the SEC acknowledging the receipt of the Take Private Proposal and stating that the Special Committee, in consultation with its financial and legal advisors, would carefully review and consider it.

Following receipt of the Take Private Proposal, representatives of Houlihan Lokey reached out to Moelis for clarification on (i) financing sources, (ii) status of financing/diligence required and (iii) timeline to signing, noting that it would be important to obtain clarity on these points so that the Special Committee could determine whether the proposal was actionable.

On November 9, 2023, the Company received a proposal from an aerospace and space technologies company (“Party D”) to acquire certain pieces of the Company’s equipment for $1.6 million. The Company’s management was of the view that the pieces of equipment subject to the Party D proposal represented core machines used for daily production, with replacement value considerably in excess of the price offered by Party D. Given the nature of the proposal and the core nature of the equipment and based on discussions with Houlihan Lokey and Independent Company Management, the Special Committee did not engage on this proposal.

Representatives of Houlihan Lokey and Independent Company Management also engaged with Party A to gauge their continued interest in purchasing the ASE business, and provided them with a business update on November 9, 2023.

On November 13, 2023, the Special Committee approved the draw down of the uncommitted delayed draw term loan pursuant to the Bridge Note issued to JMCM in the Initial Financing in an aggregate principal amount of $2.5 million (the “Additional Advance”). In connection with the issuance of the Additional Advance, JMCM also purchased Bridge Warrants to purchase up to 869,781 Class A Shares at a purchase price of $0.125 per warrant for an aggregate purchase price of approximately $108,723, that were immediately exercisable at an exercise price of $1.006 per Class A Share, subject to certain adjustments and with an expiration of November 13, 2028 (the “JMCM Warrants”).

The Board met with Independent Company Management on November 16, 2023, to receive an update on the Company’s financials, including the cash and accounts payable situations. The Board also received an update on certain milestones under the Initial Financing, including the engagement of a chief business optimization officer as required under the Initial Financing Agreement.

On November 16, 2023, the Special Committee met with representatives of Freshfields and Houlihan Lokey, with members of Independent Company Management present (the “November 16 SC Meeting”). The Special Committee discussed the Subsequent Financing (defined below). Given the Company’s liquidity needs, Mr. Kemp and Dr. London indicated a willingness to participate in the Subsequent Financing to support on-going operations. The Special Committee considered whether to permit Mr. Kemp and Dr. London to participate in the Subsequent Financing as investors. Independent Company Management confirmed that they believed the additional cash to be provided by the co-founders was imperative to funding the Company’s operations. Given that neither Mr. Kemp nor Dr. London was involved in, or had any influence over, the negotiation of the terms of the Subsequent Financing, the Special Committee authorized their participation in the Subsequent Financing.

At the November 16 SC Meeting, the Special Committee also discussed with representatives of Freshfields and Houlihan Lokey the status of discussions with Moelis and the status of discussions with Mr. Kemp and Dr. London’s financing sources. Representatives of Houlihan Lokey provided an update on potential buyer outreach, noting that five parties were currently actively engaged, consisting of Party A, a non-U.S. aerospace company (“Party C”), a non-U.S. rocket manufacturer (“Party E”), a U.S. aerospace manufacturer (“Party F”) and an investment firm focused on opportunities in the aerospace and defense industries (“Party G”). With respect to Party A, the representatives of Houlihan Lokey noted that Party A had previously suggested that its

 

43

valuation of the ASE business had declined significantly. The representatives of Houlihan Lokey also described the time and regulatory challenges a foreign buyer would face in pursuing an acquisition of the Company, including in connection with seeking CFIUS approval, and observed it was unlikely that Party C, Party E or any other foreign entity would be able to deliver an offer that is timely and actionable, but they noted that Houlihan Lokey would continue to support diligence requests and solicit indications of interest.

On November 16, 2023, as a further cost reduction measure, all employees having a title of vice president and senior vice president received a 20% temporary pay reduction and the Company’s chief financial officer, chief business officer, general counsel and chief people officer all received a 25% temporary pay reduction. These pay reductions were initially intended to last until the end of the first quarter of 2024, although the Compensation Committee reserved the right to further extend them. No change was made to the prior salary reductions implemented for Mr. Kemp and Dr. London on September 16, 2023 (as described earlier).

A representative of Freshfields then conveyed that Pillsbury had requested that the Special Committee inform the co-founders as to whether, given the Company’s ongoing liquidity concerns and the importance of conveying deal certainty and speed of closing to potential investors, employees and customers of the Company, the Special Committee would require that a potential take-private offer include a “majority of the minority” (i.e., approval of a take-private transaction by a majority of the stockholders other than Mr. Kemp and Dr. London, the controlling stockholders of the Company) approval condition. The representative of Freshfields reviewed with the directors their fiduciary duties and the standards used to assess compliance with those duties, including in the context of a take-private transaction. The Special Committee discussed the procedural advantages of a “majority of the minority” approval condition, as well as the risks associated with the imposition of such a condition, including with respect to deal certainty and speed of execution. Representatives of Houlihan Lokey also reviewed with the Special Committee precedent take-private transactions, noting the rate at which “majority of the minority” approval conditions are used and observing that such conditions have been less frequently used in transactions involving companies that had recently completed an initial public offering or recently completed a de-SPAC business combination and faced financial challenges. Following discussion, the Special Committee decided to revisit the topic at a subsequent meeting after the co-founders had made more progress structuring the potential transaction and advancing conversations with their financing sources.

On November 17, 2023, the Company was in default under the terms of the Original Notes and the Bridge Notes.

On November 20, 2023, representatives of Houlihan Lokey distributed process letters soliciting indications of interest to Party A (with respect to an acquisition of the ASE business), Party C (with respect to an acquisition of the Company), Party E (with respect to an acquisition of the Company), Party F (with respect to an acquisition of the ASE business) and Party G (with respect to an acquisition of the ASE business). Each such process letter included a deadline of November 29, 2023, for submission of indications of interest.

The Special Committee met with representatives of Freshfields and Houlihan Lokey, with members of Independent Company Management and a representative of Cozen present, on November 21, 2023, regarding the Subsequent Financing, as well as discussions between the financial and legal advisors for the Special Committee and the co-founders regarding the Take Private Proposal, including the financing needed to consummate the proposal, as well as to support the Company’s continued business operations between the signing and closing of a transaction, and the structure and timing of a potential transaction.

A representative of Freshfields informed the Special Committee that representatives of Moelis and Pillsbury had followed up to understand the Special Committee’s perspective regarding a “majority of the minority” condition to the consummation of the Take Private Proposal. Representatives of Houlihan Lokey noted that, given the liquidity position of the Company, any potential investors in the Take Private Proposal would likely need to contribute money to the Company during the pendency of the transaction and any risk of the transaction not closing once it is signed could be fatal to their ability to secure financing. A representative of Freshfields reviewed again with the members of the Special Committee their fiduciary duties generally and in the specific

 

44

context of evaluating and making determinations with respect to the Take Private Proposal or other strategic alternatives and the standards used to assess compliance with those duties. The Special Committee weighed the procedural advantages of subjecting the transaction to a “majority of the minority” approval requirement against the additional delay and consummation risk that such a condition would introduce. The Special Committee determined that, balancing all factors, including the Company’s precarious financial condition, it would not be advisable to include a “majority of the minority” approval requirement. The Special Committee directed Houlihan Lokey to communicate that determination to representatives of Moelis and Pillsbury.

A representative of Cozen reviewed with the members of the Special Committee the status, structure and terms of the Subsequent Financing. Representatives of Houlihan Lokey expressed the view that, based on their understanding of prior outreach conducted by the Company and PJT Partners and other considerations, they did not believe there to be viable options available to the Company at that time other than the Subsequent Financing.

On November 21, 2023, the Special Committee, in an action by unanimous written consent, approved, and the Company closed, a subsequent financing (the “Subsequent Financing”) with the Initial Investors, Mr. Kemp, through the Kemp Trust, and Dr. London (together with the Kemp Trust, the “Additional Investors” and collectively with the Initial Investors, the “Investors”), pursuant to the Securities Purchase Agreement dated as of August 4, 2023 (as amended by the Reaffirmation Agreement and Omnibus Amendment Agreement dated as of November 6, 2023, the Limited Waiver and Consent and Omnibus Amendment No. 2 Agreement dated as of November 17, 2023 and the Omnibus Amendment No. 3 Agreement dated as of November 21, 2023) (the “Subsequent Financing Agreement”). The Subsequent Financing Agreement was also related to and in furtherance of the October Potential Financing Transaction and amended the Initial Financing Agreement to conform the economic terms of the Original Notes (which JMCM and ACME had purchased from the Original Lender), as well as the Initial Notes and Initial Warrants with the terms that were negotiated under the term sheets delivered in connection with the October Potential Financing Transaction (including the J/A Term Sheets). Pursuant to the Subsequent Financing Agreement, (i) the Company, the Company’s subsidiaries and the Initial Investors agreed to amend and modify the terms of the Existing Notes in their entirety in accordance with the form of the Company Convertible Notes in exchange for the Company’s reimbursement of a premium (including accrued interest thereon from November 6, 2023), of approximately $1.2 million paid by the Initial Investors in connection with their purchase of the Original Notes and Original Warrants from the Original Secured Lender, which amount was capitalized and added to the outstanding principal amount of the Company Convertible Notes; (ii) the Additional Investors agreed to purchase (x) $3.0 million aggregate principal amount of Company Convertible Notes at 100% of the aggregate principal amount of such Company Convertible Notes and (y) Company Warrants to purchase up to 1,299,505 Class A Shares at a purchase price of $0.125 per Company Warrant for an aggregate purchase price of approximately $162,438 that were immediately exercisable at an exercise price of $0.808 per Class A Share, subject to certain adjustments, and with an expiration of November 21, 2028; (iii) the JMCM Warrants were exchanged for Company Warrants to purchase up to 1,082,921 Class A Shares in exchange for the payment by JMCM to the Company of $26,642.50 as additional consideration for the Company Warrants that were immediately exercisable at an exercise price of $0.808 per Class A Share, subject to certain adjustments, and with an expiration of November 13, 2028; and (iv) the Bridge Warrants were exchanged for Company Warrants for no additional consideration that were immediately exercisable at an exercise price of $0.808 per Class A Share, subject to certain adjustments, and with an expiration of November 6, 2028. Upon closing of the Subsequent Financing, the Company had outstanding $17,819,219.48 aggregate principal amount of the Company Convertible Notes and Company Warrants to purchase up to 7,696,627 Class A Shares, at an exercise price of $0.808, subject to certain adjustments. The Original Warrant for the purchase of up to 1,500,000 Class A Shares was not affected by the Subsequent Financing Agreement.

Since November 21, 2023, the Company has closed on subsequent financings under the Subsequent Financing Agreement (as further amended or modified on January 19, 2024, January 31, 2024, February 26, 2024 and March 7, 2024) on January 19, 2024, February 26, 2024, March 5, 2024, March 7, 2024, March 8, 2024, and March 15, 2024. As of April 8, 2024, the aggregate principal amount of all outstanding Company Convertible

 

45

Notes (including any paid-in-kind interest) was $31,750,001.26 and there were Company Warrants outstanding to purchase 14,823,917 Class A Shares at an exercise price of $0.808, subject to certain adjustments, and that expire on dates ranging from August 4, 2028 to March 15, 2029.

Between November 22, 2023 and December 31, 2023, Mr. Kemp and Dr. London, through communications between Houlihan Lokey and Moelis, continued to update the Special Committee on the status of the financing for their Take Private Proposal and the Special Committee continued to require that such financing include adequate interim financing to fund the Company’s continued business operations through closing. During that period, Houlihan Lokey and Moelis met frequently by telephone, and the Special Committee held five meetings.

On November 28, 2023, the Board met with members of Independent Company Management present. Representatives from Houlihan Lokey were also present solely for the purpose of receiving the business, financing and cash forecast update. The Board received an update on the Subsequent Financing, and an update on the business and financial condition of the Company. Management provided an update on its selection process for engaging a firm to provide “chief business optimization officer” services and indicated that after interviewing several candidates, management was recommending Riveron Management Services, LLC (“Riveron”) due to its industry background, business optimization expertise, cultural fit and fees. The Board discussed a number of potential cost reduction and efficiency opportunities for Riveron and authorized management to finalize the Riveron engagement.

On November 28, 2023, the Company engaged Riveron to provide advisory services related to liquidity and cash management and analysis of business operations and financial performance, and potential for customer accommodations, as well as to help evaluate strategic alternatives available to the Company and advise the Board on restructuring matters as needed (the “November Engagement Letter”). The November Engagement Letter also provided for the potential appointment of two Riveron representatives to the temporary staff officer positions of Chief Business Optimization Officer and Business Optimization Manager, each reporting to the Company’s Chief Executive Officer, subject to certain conditions precedent being met. On December 22, 2023, after confirming that the conditions precedent had been met, the two Riveron employees began acting in an officer capacity under the November Engagement Letter. The two Riveron representatives subsequently resigned from these two temporary staff officer positions effective as of January 9, 2024, and such resignations were accepted by the Company. On January 10, 2024, the Company and Riveron entered into a new engagement letter (the “January Engagement Letter”) to (i) alter Riveron’s reporting line from the Company’s CEO to the Special Committee, (ii) expand the scope of Riveron’s responsibilities to include preparatory work in connection with a potential bankruptcy filing, and (iii) provide for Riveron’s potential appointment to the temporary staff officer positions of Chief Restructuring Officer and Senior Restructuring Manager, again subject to certain conditions precedent being met. The conditions precedent to the officer appointments under the January Engagement Letter were never met. Accordingly, Riveron has continued to act in an advisory capacity only, advising the Special Committee on liquidity-related matters and other matters.

On November 30, 2023, in response to the process letters sent by Houlihan Lokey to the remaining parties potentially interested in the Company, the Company received a non-binding indication of interest from Party C for the acquisition of the whole Company, including both the Space Products and Launch Services businesses, at a valuation of up to $30 million, subject to satisfactory release or conversion of all financial obligations (the “Party C Proposal”).

At the December 4, 2023 meeting of the Special Committee, at which representatives of Freshfields, Houlihan Lokey, Riveron, Cozen and KTBS, as well as members of Independent Company Management, were present, the Special Committee considered the Party C Proposal, as supplemented by a follow-up conversation between Houlihan Lokey and Party C on December 1, 2023. Representatives of Houlihan Lokey explained that the proposed valuation was for up to $30 million (which represented aggregate consideration to cover payments in respect of the convertible debt, the warrants and the common shares) and was subject to completion of business and financial diligence. The representatives of Houlihan Lokey noted that the preferential returns of the

 

46

Company Convertible Notes Holders would result in negligible consideration or, depending on when a transaction would actually close, no consideration for stockholders. Representatives of Houlihan Lokey also highlighted the extended timeline of closing a transaction with a foreign buyer like Party C, who would likely require CFIUS clearance as a condition to closing, and noted that while the proposal contemplated bridge financing during the pendency of the transaction and seemed to be backed by financial sources, the bridge financing was subject to further diligence and it was questionable whether any meaningful work had been done by Party C’s proposed financing sources in respect of either (i) the cash needs of the Company during the interim period between the signing and closing of a transaction or (ii) the funds necessary to consummate a transaction. Following discussion with its advisors, the consensus of the Special Committee was that the Party C proposal did not present a viable option and was unacceptable in its current form. Party C withdrew its proposal on December 8, 2023, citing the Company’s lack of engagement with Party C.

Representatives of Riveron then provided the Special Committee with an overview of the Company’s current cash availability, including the $5.0 million of cash and cash equivalents required to be maintained by the Company in a restricted account, making such funds unavailable to the Company for its working capital or general corporate purposes. Riveron noted that absent any additional revenues or other sources of liquidity, and without the Company making any further vendor payments, the Company had sufficient cash to operate until December 12, 2023, after which time the Company would need to furlough employees to avoid incurring wage liability for which it lacked funds to pay. Mr. Martinez then updated the Special Committee on discussions with the Initial Investors as to access to the $5.0 million maintained in a restricted account and agreed to request access to such amount.

The Special Committee, taking into account matters relating to the financing of the Take Private Proposal and the goal of ensuring the Take Private Proposal continued as an available alternative, adopted resolutions authorizing, for purposes of Section 203 of the DGCL, Mr. Kemp, Dr. London, ACME and JMCM, to enter into agreements, arrangements and understandings in furtherance of the Take Private Proposal, provided that any binding definitive agreements in respect of the Take Private Proposal shall be subject to the approval of the Special Committee, which resolutions were subsequently expanded to cover other potential investors pursuant to a unanimous written consent of the Special Committee.

On December 5, 2023, the Special Committee met with representatives of Freshfields and Houlihan Lokey, with members of Independent Company Management, Mr. Kemp and Dr. London, representatives of ACME and representatives of Moelis present. At the meeting, Mr. Kemp provided an update with respect to the potential financing sources for the Take Private Proposal and discussed certain assumptions underlying the Company’s cash needs going forward as well as timing for closing a potential transaction. A representative of Houlihan Lokey stated that the Company would require additional funding under any reasonable timeline to a transaction closing and emphasized the importance of the co-founders identifying a funding plan to ensure that the Company would be able to operate through a closing.

Later in the day on December 5, 2023, the Special Committee again met with representatives of Freshfields and Houlihan Lokey, with members of Independent Company Management and representatives from ACME present, and discussed the amount of financing the co-founders had indicated the Company would need in order to consummate the Take Private Proposal and the likelihood that the co-founders would successfully secure the needed capital, as well as the timeline for the potential transaction and the extent to which it would be executable given the cash position and cash needs of the Company. The Special Committee also discussed the importance of considering alternative plans to the Take Private Proposal, including preparation for a potential bankruptcy filing, and considered the relative merits of the Take Private Proposal, a potential Section 363 sale under the Bankruptcy Code and a liquidation under Chapter 7 of the Bankruptcy Code (a “Chapter 7 Liquidation”). The Special Committee also decided to refer the co-founders to the parties that had expressed an interest in acquiring the Company (including Party C), which the Special Committee had previously determined were not actionable on a stand-alone basis, in order to improve the chances of the co-founders securing the requisite financing for the Take Private Proposal. Party B declined to be referred to the co-founders, citing that it was focused on another

 

47

acquisition at the time. On December 12, 2023, representatives of Houlihan Lokey provided representatives of Moelis with contact information for Party C. On December 13, 2023, representatives of Houlihan Lokey provided representatives of Moelis with contact information for Party G as well as for a venture capital firm with investments in technology-based sectors, which had previously expressed an interest in partnering with a group to acquire all or a portion of the Company or its assets.

On December 9, 2023, the Special Committee met with representatives of Freshfields and Houlihan Lokey, with representatives of Riveron present, and discussed with representatives of Houlihan Lokey the specific process and logistics for referring potentially interested parties to Moelis for potential participation in the Take Private Proposal, in order to support the ability of Mr. Kemp and Dr. London to secure the financing required to execute the Take Private Proposal. Following discussion, the Special Committee directed Houlihan Lokey to refer the parties from both the Sale Process and who had been speaking with Houlihan Lokey to Moelis, with the exception of Party A given that Party A had expressed interest in only the ASE business and had the financial ability to finance a transaction on a standalone basis, and not referring Party A to Moelis at this juncture could be beneficial to the Company. A representative of Riveron also updated the Special Committee on the Company’s liquidity position and cost reduction efforts, and further discussed with the Special Committee that the Initial Investors had agreed to provide the Company with unconditional access to $2.5 million of the $5.0 million in the restricted account.

On December 12, 2023, the Board met with management and representatives from Riveron present. Representatives from Houlihan Lokey were in attendance, solely for the purpose of receiving the business and cash forecast update. Representatives from Riveron presented the current cash report and indicated that based on its current analysis and assuming access to half of the restricted account, the Company had sufficient funds to cover employer liabilities through approximately January 9, 2024.

On December 15, 2023, representatives of Houlihan Lokey connected with representatives of Moelis to ascertain the status of the Take Private Proposal. Representatives of Moelis informed the representatives of Houlihan Lokey that Mr. Kemp and Dr. London had not yet been able to secure sufficient third-party financing commitments to support the Take Private Proposal and discussions were still ongoing with potential investors.

Between December 15, 2023 and January 15, 2024, the Company, the Special Committee, and JMCM and its affiliates explored the possibility of the Company restructuring in bankruptcy (the “Chapter 11 Reorganization”). Such persons and their advisors engaged in extensive discussions relating thereto, including due diligence sessions and the exchange of drafts of transaction agreements to be executed and filings to be made in connection with a potential Chapter 11 Reorganization.

On December 19, 2023, the Board met with management and representatives from Riveron, KTBS and Cozen present. Representatives from Houlihan Lokey were in attendance solely for the purpose of receiving the business and cash forecast update. The Board received a financial update and representatives from Riveron noted that based on its current analysis, the Company had sufficient funds to cover employer liabilities through approximately January 10, 2024. The Board considered the potential impact of bankruptcy preparations and filing on the cash forecast. The Company’s general counsel previewed with the Board the contents of a written consent expanding the scope of the Special Committee’s mandate to include bankruptcy proceedings.

Following the meeting, acting by unanimous written consent and effective as of December 19, 2023, the Board expanded the scope of the Special Committee’s mandate to include the authority to approve the commencement of a bankruptcy case, retain assistance by legal counsel, accountants, financials advisors, and other professionals in connection with the bankruptcy case, negotiate, execute and deliver a cash collateral, debtor-in-possession financing or other financing arrangement, and develop and implement a plan of reorganization.

On December 19, 2023, the Special Committee met with representatives of Freshfields and Houlihan Lokey, with representatives of Riveron Cozen and KTBS, as well as members of Independent Company Management,

 

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present. Mr. Kemp and Dr. London, as well as representatives from Moelis and Pillsbury, were present for a portion of the meeting to present an update on the Take Private Proposal process. Mr. Kemp and Dr. London updated the Special Committee on, among other things, the financing for the Take Private Proposal. The representatives of Houlihan Lokey again encouraged the co-founders to secure additional financing commitments in order for the Take Private Proposal to be executable. The Special Committee then discussed a potential Chapter 11 Reorganization and directed Independent Company Management to pause efforts to close an additional tranche of convertible note financing until there was greater clarity as to whether the Company would undertake the Take Private Proposal or a Chapter 11 Reorganization (or another alternative). The Special Committee determined that the Company would actively pursue each of the Take Private Proposal and the Chapter 11 Reorganization on a “dual track” to maximize optionality and the likelihood of a successful outcome for the Company and/or its stockholders.

On January 1, 2024, Mr. Kemp and Dr. London’s pay reductions were adjusted to the new California minimum wage and voluntarily extended through January 31, 2024.

On January 2, 2024, the Board met with Company management, with representatives of Riveron and KTBS present. Representatives from Houlihan Lokey were in attendance, solely for the purpose of receiving the business and cash forecast update. Riveron and management presented an updated cash forecast that included potential professional fees and expenses in connection with preparations for a potential bankruptcy filing, as well as a $4.0 million convertible note financing and $2.0 million in employee retention payments. Riveron identified January 19, 2024 as the date that the Company would need to make a decision about a bankruptcy filing, although factors may allow that date to be delayed for up to one week. Riveron also clarified that the full 13-week forecast did not contemplate the pendency of the bankruptcy proceeding with regard to professional fees.

Also on January 2, 2024, the Special Committee met with representatives of Freshfields and Houlihan Lokey, with representatives of Riveron and KTBS present, and discussed, among other things, the Company’s stock price, broader market factors that had led to elevated stock prices in the space sector, as well as the fact that the co-founders had not yet been able to secure sufficient financing to execute the Take Private Proposal. At the meeting, the Special Committee resolved that, in light of the financial situation of the Company and the uncertainty around the timing and likelihood of the Company successfully closing a Potential Strategic Option, the Company should continue preparatory work in connection with a potential Chapter 11 Reorganization.

At a meeting of the Special Committee on January 15, 2024, the Special Committee met with representatives of Freshfields and Houlihan Lokey, with representatives of Cozen, KTBS, JMCM, ACME, Pillsbury, Moelis and Sidley Austin LLP, counsel to JMCM, as well as members of Independent Company Management and Mr. Kemp and Dr. London, present (the “January 15 SC Meeting”). At the January 15 SC Meeting, JMCM stated that it continued to be willing to consider supporting a strategic transaction, potentially including the Take Private Proposal, but that it was not interested in further discussions for possible financing for the Chapter 11 Reorganization. JMCM further stated that it could provide up to $16.0 million in financing for the Take Private Proposal as well as an additional $4.0 million in immediate bridge financing if progress was made towards the Take Private Proposal or another transaction, subject to executing customary investment documents. The members of the Special Committee then requested that the co-founders and their advisors provide the Special Committee on the next day with a written, specific and actionable plan with respect to the Take Private Proposal, including specific details with respect to equity commitments that had been secured, which commitments should be sufficient to fully finance the Take Private Proposal.

Following the departure of the co-founders and the representatives of JMCM, ACME and their respective advisors from the January 15 SC Meeting, the members of the Special Committee discussed the Company’s cash burn and liquidity position as well as the steps to be taken to ensure that JMCM would provide the $4.0 million in bridge financing on an expedited basis and on appropriate terms. The Special Committee also discussed with its advisors that, in light of the Company’s cash burn and that there was not a debtor-in-possession lender to

 

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support a potential Chapter 11 Reorganization, the only viable alternative to the Take Private Proposal at such time was a Chapter 7 Liquidation. The Special Committee directed its advisors to communicate to the co-founders and JMCM that, while the Special Committee remained open to receiving an updated Take Private Proposal, it would simultaneously proceed with planning for a filing in connection with a Chapter 7 Liquidation.

At this point, the Company had not received any incremental financing since November 21, 2023, and was in dire need of cash.

On January 16, 2024, Mr. Kemp and Dr. London provided a letter to the Special Committee and its representatives (the “January 16 Letter”), in which they, among other things, (i) reaffirmed their Take Private Proposal (including the indicative purchase price of $1.50 per share), (ii) updated the Special Committee on the status of the financing commitments in support of their Take Private Proposal and (iii) requested the Special Committee enter an exclusivity agreement that would allow the Company and Mr. Kemp and Dr. London to focus on negotiating an agreement and plan of merger to effectuate the Take Private Proposal and to reduce the professional fees that the Company was incurring in connection with simultaneous preparations for a bankruptcy filing. That same day, the Special Committee met with representatives of Freshfields, Houlihan Lokey and Riveron to discuss the request for exclusivity and the merits of entering an exclusivity agreement to negotiate an agreement and plan of merger given the absence of committed financing to ensure the Company could continue its business operations through closing and to fund the Take Private Proposal. The Special Committee determined it would be advisable to enter the exclusivity agreement, temporarily pause bankruptcy preparation activities and work toward negotiating a merger agreement if there was assurance of interim funding of at least $7.6 million and a segregated account to support needs of the Company should it be required to file for bankruptcy protection. The Special Committee’s determination with respect to the exclusivity agreement took into account the fact that, absent additional funding, the Company only had sufficient cash on hand to continue operations through January 23, 2024, at which point its only option would be a Chapter 7 Liquidation.

Accordingly, the Company, Mr. Kemp and Dr. London entered into an exclusivity agreement, dated as of January 19, 2024 (the “Exclusivity Agreement”), concurrently with the investment by MH Orbit, an affiliate of JMCM, and RBH of a total of $6.0 million in aggregate principal amount of Company Convertible Notes and the purchase of Company Warrants exercisable to purchase up to 2,599,010 Class A Shares. The Exclusivity Agreement established an exclusivity period beginning on January 19, 2024, and ending at 11:59 pm Eastern time on January 26, 2024 (the “Initial Exclusivity Period”), which period was automatically extended by the terms of the Exclusivity Agreement to 11:59 pm Eastern time on February 2, 2024 (the “Extended Exclusivity Period” and together with the Initial Exclusivity Period, the “Exclusivity Period”) upon receipt by the Company of the aforementioned $6.0 million. The Extended Exclusivity Period was to be further extended under the Exclusivity Agreement to 11:59 pm Eastern time on February 9, 2024, should the Company obtain aggregate financing of $7.6 million (in other words, an additional $1.6 million beyond the $6.0 million provided on January 19, 2024) during the Extended Exclusivity Period. The Exclusivity Agreement also provided that, among other things, the Special Committee would direct the Company to stop any bankruptcy preparatory activity during the exclusivity period, and that the Company would set aside $3.0 million for the following purposes: (a) securing payroll, payroll tax and related employee payroll obligations (including vacation pay, sick leave and similar items), (b) the payment of the premium owed under the Company’s existing directors and officers insurance policy through April 30, 2024, as and when such premium obligations are due (provided that any premiums that become due during the Exclusivity Period must be paid from the segregated account), and (c) a limited contingency not to exceed $500,000 to allow the Company to prepare for and make a Chapter 7 Liquidation filing.

On January 22, 2024, Pillsbury delivered a first draft of the Merger Agreement to Cozen and Freshfields and subsequently provided drafts of certain transaction documents, including a form of equity commitment letter. Cozen and Freshfields worked on proposed revisions to the Merger Agreement and other transaction documents and circulated them to Pillsbury, with the goal on the part of both the Company and the Special Committee to negotiate a Merger Agreement with an indicative price of $1.50 per share, as reaffirmed by Mr. Kemp and

 

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Dr. London in the January 16 Letter. Between January 22, 2024 and through the execution of the definitive Merger Agreement, Cozen and Freshfields negotiated with Pillsbury on, among other things, (i) the conditionality to the Parent’s obligations to close the transaction and the investors’ obligations to fund their commitments, (ii) the amount of the termination fee that would be payable by the Company in certain circumstances, including in connection with the exercise of a “fiduciary out”, which fee was ultimately agreed to be $250,000, (iii) the Company’s termination rights if the Company’s cash on hand fell below a specified minimum level (which was ultimately agreed to be $3.5 million), (iv) the Company’s rights and remedies in the event of a breach by Parent or any of the investors; and (v) whether limited guarantees, in addition to equity commitment letters, from financing sources would be required (which limited guarantees were ultimately not provided).

The Board met on January 30, 2024 with Company management and representatives of Riveron present. Representatives from Houlihan Lokey were in attendance, solely for the purpose of receiving the business and cash forecast update. Mr. Kemp described preliminary conversations with one customer about potential opportunities to assist the ASE business with its resource constraints. Riveron presented an updated 13-week cash forecast and confirmed that additional funding was still required to fund the business through any potential transaction.

The Special Committee also met with representatives of Freshfields, Houlihan Lokey and Riveron on January 30, 2024, for an update on the status of the interim financing to be provided under the Exclusivity Agreement, Mr. Kemp and Dr. London’s efforts to obtain the financial commitments needed to support the Take-Private Proposal, and the ongoing negotiation of the draft of the Merger Agreement and other certain transaction documents providing for the Take-Private Proposal. Specifically, Houlihan Lokey informed the Special Committee that further information was still required to (i) ensure the Company remained operational through a closing of the Take Private Proposal, (ii) confirm the funding of the merger consideration (including at the indicative purchase price of $1.50 per Class A Share) or (iii) confirm the funding of the Company’s post-closing operations. The Special Committee also discussed the terms of the current draft of the Merger Agreement with representatives of Freshfields and asked Houlihan Lokey to contact Party A to ascertain whether it would be interested in providing financial support for the Take Private Proposal (given its prior interest in acquiring the ASE business and the lack of any progress on a standalone transaction with Party A).

Effective as of February 1, 2024, Mr. Kemp and Dr. London’s salaries were reinstated and adjusted to reflect the 25% pay reduction applicable to other senior management that had been implemented as a cost reduction measure on November 16, 2023. These temporary pay reductions were expected to expire at the end of the first quarter 2024, but were extended at the discretion of the Compensation Committee of the Board to expire on the earlier of the closing of the Take Private Proposal or June 30, 2024.

The Extended Exclusivity Period under the Exclusivity Agreement expired on February 2, 2024, as Mr. Kemp and Dr. London were unable to secure the full amount of the interim financing required under the Exclusivity Agreement to support a further extension of the Extended Exclusivity Period to February 9, 2024.

On February 2, 2024, Mr. Kemp sent the Special Committee an email providing an update on financing in support of the Take Private Proposal (the “February 2 Financing Update”). Mr. Kemp stated that investors had been provided term sheets and equity commitment letters on January 29, 2024, and were instructed to provide confirmation of their comfort with the documentation by no later than February 5, 2024, and be in a position to sign such documentation by February 9, 2024. Mr. Kemp noted that one of the Company’s Space Products customers (“Customer A”) had entered the Take Private Proposal process and may be interested in participating as an equity investor in the Take Private Proposal. Because the Extended Exclusivity Period would be expiring later that day, Mr. Kemp requested that the Special Committee agree to extend exclusivity through February 9, 2024, in recognition of Dr. London’s and his continued effort toward a transaction and the positive impact of the arrangement with Customer A (described below).

 

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On February 2, 2024, at a meeting with representatives of Freshfields and Houlihan Lokey and members of Independent Company Management present, the Special Committee discussed with Mr. Sant a commercial agreement that the Company had reached with Customer A, which would result in an additional $2.0 million of advance contractual payments being provided to the Company. Mr. Sant informed the Special Committee that Customer A was aware of the possibility that the Company may be insolvent.

Representatives of Houlihan Lokey then provided an update on the Company’s liquidity position, and informed the Special Committee that Party A had not expressed any interest in participating in the Take Private Proposal.

The Special Committee then discussed with representatives of Freshfields and Houlihan Lokey further strategies to protect the interests of the disinterested public stockholders in the Take Private Proposal. The Special Committee discussed with representatives of Freshfields and Houlihan Lokey that the co-founders did not have any room to increase the cash consideration they would be willing to pay, given the difficulties they were facing securing financing for the Take Private Proposal, as well as interim bridge financing to sustain the Company during the pendency of the transaction. The Special Committee then discussed, as an alternative to seeking additional cash consideration, the potential of seeking to secure contingent value rights (or “CVR”) as a means of enabling the public stockholders to participate in the proceeds of a sale of one or both of the Space Products and Launch Services businesses (if such sale occurred after the execution of the Take Private Proposal), considering that Party A had previously expressed an interest in the Space Products business and the fact that Customer A appeared to be focused on the viability of the Space Products business. The Special Committee considered the potential difficulties (including transaction complexities and the costs to administer) and benefits with respect to securing a CVR, as well as the likelihood that the co-founders would agree to a CVR, and determined that that the Company should request a CVR (the “CVR Request”) or other similar mechanism by which the public stockholders would be entitled to participate in proceeds related to such transactions, and instructed its advisors to communicate such request to the co-founders.

On February 3, 2024, and in response to the February 2 Financing Update, the Special Committee directly, and via representatives of Houlihan Lokey, communicated to the co-founders and representatives of Moelis, respectively, that (i) the Extended Exclusivity Period would not be further extended in light of the failure of the co-founders to secure the entire $7.6 million in financing required for such an extension under the terms of the Exclusivity Agreement, (ii) the Special Committee was willing to engage constructively with Mr. Kemp and Dr. London in furtherance of the Take Private Proposal so long as, among other factors, Mr. Kemp and Dr. London would provide the Special Committee with a detailed accounting of their financing sources for the Take Private Proposal and (iii) the Special Committee would like to discuss a mechanism, including the use of a CVR, by which the public stockholders would be entitled to participate in proceeds related to a sale of the Space Products and/or Launch Services businesses if such a sale were agreed upon pursuant to definitive documentation within a 24-month period following the closing of the Take-Private Proposal.

On February 6, 2024, the Board met with Company management and representatives of Riveron. Representatives from Houlihan Lokey were in attendance, solely for the purpose of receiving the business and cash forecast update. Mr. Kemp provided an update on the engagement with Customer A, including negotiations to replace the initial commercial agreement with a more formal agreement that will facilitate additional advances of revenue and incremental cash optimization payments. Riveron and management presented a financing update and the 13-week cash forecast, noting that it did not assume any additional funding from Customer A. A representative from Riveron indicated that absent any additional funding or expense reductions, the Company would face another liquidity shortfall at the end of the week of February 12, 2024.

On February 9, 2024, the Special Committee met with representatives of Freshfields, Houlihan Lokey, Richards, Layton & Finger, P.A., Delaware legal counsel to the Special Committee (“RLF”) and Riveron, with members of Independent Company Management, Mr. Kemp, Dr. London and representatives of Pillsbury and Moelis present (the “February 9 SC Meeting”). Mr. Kemp provided an update on (i) the status of the financing for the Take Private Proposal, noting that while he and Dr. London were continuing to vigorously work to assemble a

 

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financing syndicate to execute the transaction, they were not at completion, as well as (ii) the status of discussions with Customer A regarding a potential commercial arrangement or broader strategic transaction involving the Company. The Special Committee inquired as to the co-founders’ target financing amount for successful completion of the Take Private Proposal, and Mr. Kemp indicated that the co-founders required approximately $51.0 million in financing in order to pay the public stockholders $1.50 per share, but that the co-founders believed they could execute on the Take Private Proposal with just over $40.0 million in total financing if the amount paid to the public stockholders was reduced to $1.00 per share, and all other transaction expenses of the Company were reduced as much as possible.

Members of Independent Company Management provided an update on arrangements with Customer A for advance payments under its customer agreement, in addition to the $2.0 million previously received by the Company from Customer A, as well as a potential separate optimization payment (representing the possibility of total additional funding of $4.0 million to $6.5 million), and confirmed Customer A was fully aware of the magnitude and urgency of the Company’s financing needs. Members of Independent Company Management further discussed with the Special Committee Customer A’s potential interest in a separate strategic transaction with the Company, and explained that Customer A was considering a wide array of potential transaction options. Mr. Kemp confirmed on behalf of himself and Dr. London that the co-founders were willing to support any strategic transaction with Customer A that would be in the best interests of the Company and its stockholders.

The Special Committee met with representatives of Freshfields and RLF on February 10, 2024, to evaluate the status of the Take Private Proposal in light of Mr. Kemp’s presentation at the February 9 SC Meeting, financing for the Take Private Proposal and a potential strategic transaction with Customer A. Representatives of Freshfields and RLF reviewed with the Special Committee their fiduciary duties under Delaware law, including in connection with their consideration of the Take Private Proposal. The Special Committee discussed matters relating to the consummation of the Take Private Proposal, including whether there would be sufficient committed financing to ensure a successful closing. After discussion, members of the Special Committee determined that they would not be willing to support a proposal from the co-founders unless there was a clear path to a successful closing and adequate committed financing in the interim period. The Special Committee further discussed the remarks made by Mr. Kemp during the February 9 SC Meeting that, if the offer price was reduced from $1.50 to $1.00, the co-founders would need only just over $40 million to execute on the Take Private Proposal, and agreed that Mr. Lehman should communicate to the co-founders that the Special Committee would not be receptive to revisions to the Take Private Proposal that would erode value for the public stockholders. Given the current status of the Take Private Proposal, the Special Committee determined that, in light of the Company’s financial position and cash burn rate, a potential transaction with Customer A was currently the Company’s only potential actionable alternative to a Chapter 7 Liquidation. The Special Committee also discussed with representatives of Freshfields and RLF the fact that the co-founders faced potential conflicts of interest in discussions with Customer A and determined that it was imperative that members of the Special Committee and its advisors be involved in any direct discussions with Customer A in order to maintain visibility over the process. Later that day, Mr. Lehman advised the co-founders by email of the Special Committee’s positions.

On February 11, 2024, members of the Special Committee and Independent Company Management, together with representatives of RLF, Houlihan Lokey and Cozen, met with Customer A to discuss a potential strategic transaction between Customer A and the Company. Following this discussion, the Special Committee instructed Independent Company Management to work to negotiate a strategic transaction with Customer A.

Also on February 11, 2024, Mr. Lehman sent an email on behalf of the Special Committee to Mr. Kemp and Dr. London indicating that the Special Committee had concluded that Mr. Kemp and Dr. London were in a conflicted position relative to a transaction with Customer A. In light of such conflicted position, Mr. Lehman conveyed to Mr. Kemp and Dr. London the Special Committee’s direction that (i) neither Mr. Kemp nor Dr. London participate in any negotiations with Customer A without the Special Committee’s prior consent, and (ii) a representative of the Special Committee be given the opportunity to attend all meetings or other

 

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conferences or dialogue with representatives of Customer A (including with respect to anything ranging from commercial transactions, the Take Private Proposal or any other strategic transaction with Customer A (whether stand-alone or in conjunction with any other party)). The co-founders were amenable to the involvement of the Special Committee and its advisors in discussions with Customer A, but cautioned that there should be reasonable parameters in place so as not to make the negotiation with Customer A impracticable.

Meetings were held at the Company’s headquarters with representatives of Customer A, members of the Company’s management, a representative of Houlihan Lokey and Cozen from February 12, 2024 through February 14, 2024. Over the course of such meetings, the Company and Customer A explored a number of potential transaction alternatives (alone or in conjunction with other parties), but as noted more fully below, a transaction failed to materialize in light of, among other factors, the risks, costs and complexities of executing on a strategic transaction with the Company in a short amount of time.

At the same time and continuing through February 23, 2024, at the request of the Special Committee, members of Independent Company Management, Houlihan Lokey and Cozen simultaneously worked with other parties (including government customers and their primes and subcontractors, all of which were made aware of the Company’s dire and ongoing liquidity needs) to negotiate (i) a strategic transaction for the acquisition of the ASE business; (ii) the securing of a DIP lender or sponsor to support a Chapter 11 Reorganization; or (iii) short-term interim financings, through accelerated payments due under certain customer contracts or through intellectual property licensing arrangements.

The Special Committee met with representatives of Freshfields, Houlihan Lokey and Riveron, with members of Independent Company Management and a representative of Cozen present, daily on February 13, 2024 (the “February 13 SC Meeting”), February 14, 2024 (the “February 14 SC Meeting”), February 15, 2024 (the “February 15 SC Meeting”), February 16, 2024 (the “February 16 SC Meeting”) and February 20, 2024 (the “February 20 SC Meeting”) (with RLF present at each such meeting other than the February 13 SC Meeting), primarily for the Special Committee to receive, among other things, updates on the status of negotiations with Customer A and to provide oversight and direction to the Company and Houlihan Lokey with respect to such negotiations and discussions.

At the February 13 SC Meeting, a representative of Houlihan Lokey noted that conversations with Customer A involved an exploration of several potential transaction alternatives, three of which were under active consideration: (i) a Chapter 7 Liquidation, (ii) a Chapter 11 Reorganization or (iii) a commercial arrangement between the Company and Customer A outside of the bankruptcy context. The representative of Houlihan Lokey conveyed that Customer A had expressed the following requirements as pillars to any potential transaction with the Company: (a) that Customer A was unwilling to own the Company’s Launch Services business, (b) that Customer A wanted to be in business only with a trusted partner and (c) that Customer A wanted to minimize potential litigation exposure. The Special Committee discussed with representatives of Freshfields, Houlihan Lokey and Riveron, among other factors, (1) that a Chapter 11 Reorganization was likely the only actionable transaction structure given Customer A’s stated transaction objectives, (2) the significant cost to Customer A of undertaking any of the transactions under consideration and the likelihood that Customer A would be willing to spend the required amount of money and (3) the commercial importance to Customer A of the spacecraft engines under development by the Company.

At the February 14 SC Meeting, the Special Committee discussed the status of discussions with Customer A for a potential acquisition of the Company’s Space Products business in connection with a Chapter 11 Reorganization. A representative of Houlihan Lokey noted that earlier that day representatives of Customer A had contacted Houlihan Lokey and representatives of Independent Company Management to notify them that Customer A would be unable to participate in the potential Chapter 11 Reorganization on a standalone basis, citing, among other things, the cost of such transaction as being too high. The representative of Houlihan Lokey further reported that Customer A indicated that it was instead reaching out to other direct and indirect customers of the Company, regarding the possibility of partnering with them for purposes of participating in the potential Chapter

 

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11 Reorganization. The Special Committee then discussed with representatives of Freshfields, RLF, Houlihan Lokey and Riveron the difficulties Customer A would likely face in securing additional partners for a potential Chapter 11 Reorganization, in light of the Company’s limited cash runway, the lack of interim financing and the difficulty of bringing large, multinational companies through a process on such an accelerated timeframe.

Also at the February 14 SC Meeting, the representatives of Riveron reviewed with the Special Committee a Chapter 7 Liquidation analysis (the “Liquidation Analysis”) prepared by Riveron Consulting, LLC (“Riveron Consulting”), which had been prepared relying on Riveron Consulting’s expertise in similar transactions and had specifically taken into account (i) a December 2022 appraisal of the Company’s capital equipment performed by a third party valuation service (which the representatives of Riveron Consulting noted was likely to be conservative given Riveron’s experience with such provider) and (ii) the proceeds generated in the April 2023 liquidation of Virgin Orbit, which Riveron Consulting considered to be a comparable transaction. The Liquidation Analysis is further described in the section entitled “The Special Factors—Liquidation Analysis,” and the Special Committee subsequently authorized and directed Houlihan Lokey to rely on the Liquidation Analysis for purposes of its fairness opinion. The representatives of Riveron Consulting noted that the Liquidation Analysis had estimated that a liquidation of all the Company’s assets could produce between approximately $12.5 million and $21.6 million of proceeds, of which (a) approximately $6.4 million to $8.4 million would be necessary to satisfy liquidation expenses, (b) approximately $2.0 million could be necessary to pay certain tax liabilities and (c) the remainder would be available for distribution to Original Secured Lenders (and the estimated recovery to such lenders would be approximately 15% to 55% of the principal amount of the obligations owed to them).

The members of the Special Committee discussed with representatives of Freshfields, Houlihan Lokey and Riveron the relative merits of a Chapter 11 Reorganization compared to a Chapter 7 Liquidation, including the potential to preserve the enterprise through a Chapter 11 Reorganization as opposed to in a Chapter 7 Liquidation and the superior recovery that Original Secured Lenders and other creditors would be expected to obtain in a Chapter 11 Reorganization relative to a Chapter 7 Liquidation.

At the February 15 SC Meeting, a representative of Houlihan Lokey provided an update on the Company’s discussions with Customer A and other potential investors. The representative of Houlihan Lokey explained that Customer A, having determined that the cost to participate in a potential Chapter 11 Reorganization on a standalone basis was too high, had been considering entering into a transaction alongside the Take Private Proposal, in which Customer A would provide debt financing in an indicative amount of $25.0 million, the proceeds of which would be used specifically in the Space Products business, which would be separated from the Company’s Launch Services business and reorganized into a standalone entity. After consideration, Customer A ultimately determined that it was not willing to provide such debt financing.

The representative of Houlihan Lokey then informed the Special Committee that a federal government agency (the “Government Agency”), which had been a long-term partner of the Company was interested in helping the Company attempt to broker a transaction whereby Customer A and two other aerospace and satellite company customers of the Company (“Customer B” and “Customer C”, respectively) would collectively provide $25.0 million in capital to the Company, with such financing to occur side-by-side with the Take Private Proposal (the “Customer Financing Proposal”). The representative of Houlihan Lokey further noted that it was his understanding that Customer A would be willing to participate in the Customer Financing Proposal if Customers B and C also participated. The Special Committee discussed that any transaction involving Customer A, Customer B and Customer C would be extremely complicated, as it would entail a separation of the Space Products business from the Launch Services business, as well as the negotiation of the capitalization structure and governance architecture of the resulting companies, which would be very challenging to achieve given the short time permitted by the Company’s liquidity situation.

The Special Committee then discussed with representatives of Houlihan Lokey and Cozen whether the restrictions on the ability of Mr. Kemp and Dr. London to engage with Customer A without the Special

 

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Committee’s prior consent, given that Customer A was no longer a potential competitor to the Take Private Proposal, should be lifted. Following discussion, in light of the fact that (i) the situation had changed such that the co-founders were no longer competing with Customer A and (ii) a standalone transaction with Customer A was no longer a viable alternative to the Take Private Proposal, the Special Committee determined to remove such restrictions on Mr. Kemp and Dr. London, so long as a representative of Houlihan Lokey, a representative of Cozen, or a member of Independent Company Management would also be present during any substantive discussions with Customer A.

A representative of Riveron then provided an overview of the latest cash forecast prepared by Riveron with respect to the Company’s operations, which indicated that, if the Company were to delay making payment of its accounts payable, it should be able to retain liquidity through February 22, 2024. The Special Committee then discussed whether there was any merit to Riveron reaching out to additional third parties with which it was acquainted to determine whether such third parties might be willing to participate in the Take Private Proposal. The Special Committee discussed, with the assistance of Houlihan Lokey, whether such outreach would currently be helpful, given (i) the potential for added complexity to the many parallel conversations being held by Mr. Kemp and members of Independent Company Management with previously identified investors, (ii) the risk it would detract from Mr. Kemp’s and Independent Company Management’s bandwidth for conversations with such investors, and (iii) the breadth of the Company’s prior outreach to investors. Following further discussion, the Special Committee determined not to direct Riveron to reach out to additional third parties in connection with the Take Private Proposal at this time.

At the February 16 SC Meeting, Mr. Sant provided the Special Committee with an update on the Company’s discussions with another customer (“Customer D”), regarding Customer D’s potential injection of $1.3 million in cash, in the form of an acceleration of future committed contract payments, into the Company in exchange for a springing perpetual intellectual property license to manufacture Customer D’s Astra Spacecraft Engines^® in the event of a windup of the Company or delay by the Company in delivering Company D its units. Mr. Sant opined that the combination of the scope of the license, the broad triggers for the license and the lack of new money to be paid for the license did not present a basis on which the Company could move forward with Customer D at this time and he reported that he had conveyed the same to Customer D. Mr. Sant indicated his opinion that either the license needed to be narrowed or Customer D needed to agree to pay incremental new money as a license fee. Mr. Martinez then presented to the Special Committee financial projections for the years ended 2024 and 2025 that had been prepared by Company management for use in connection with the Company’s financing and strategic discussions (the “Projections”). The Projections are further described in the section entitled “—Certain Company Financial Projections.” The Special Committee had not previously reviewed any long-term financial models and was reviewing the Projections for the first time. In discussing the Projections with the Special Committee, Mr. Martinez noted that significant funding would be required in order to fund applicable operating costs and capital expenditure requirements of the Space Products business and the Launch Services business, such that, in the aggregate (and taking into account additional cash requirements for the Company’s shared services arrangements), the Company would require approximately $130.0 million in new funding through 2025, approximately $82.0 million of which was required for 2024. In light of the aggregate funding required by the Company, the Special Committee then discussed with the members of Independent Company Management and the representatives of Houlihan Lokey, Riveron and Freshfields, among other things, the fact that the Take Private Proposal was currently contemplated to result in only $10.0 million on the balance sheet of the Company as of its closing, which would result in a large funding gap relative to the Company’s cash needs as set forth in the Projections. Mr. Martinez, in response to questions from a representative of Freshfields, stated that the Projections represented management’s best estimates for the performance of the Company, which were conservative and achievable assuming (i) the Company was appropriately funded (as contemplated by the Projections) and (ii) the Company’s spacecraft engine systems were qualified and delivered to customers as scheduled. Mr. Martinez told the Special Committee that he was comfortable transmitting the Projections in connection with the Take Private Proposal and the related potential financing transaction with Customer A, Customer B and Customer C.

 

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Following the presentation of the Projections, the Special Committee discussed whether Houlihan Lokey should use the Projections for its evaluation work, or for a fairness opinion if one were to be issued in connection with the Take Private Proposal, given the significant funding assumptions embedded in the Projections and the Company’s liquidity position. Having discussed with representatives of Freshfields, Houlihan Lokey and Riveron, the Special Committee determined that Mr. Martinez could proceed with sharing the Projections with certain customers with whom the Company was having discussions about potential financing transactions or contractual arrangements and certain investors in the Take Private Proposal. The Special Committee also directed Riveron to request that Mr. Martinez provide recipients of the Projections a list of the key underlying assumptions alongside the Projections.

On the morning of February 20, 2024, Mr. Kemp and a representative of Houlihan Lokey met with the Government Agency, Customer A, Customer B, Customer C and the prime contractor for Customer A (the “February 20 Customer Meeting”) to discuss a possible strategic transaction with the Company regarding the ASE business and the Company’s immediate liquidity needs and other possible short-term funding options Following the February 20 Customer Meeting, Customer C requested a follow-up meeting with the Special Committee, the Government Agency and the prime contractor for Customer C (the “Customer C Partner”). This meeting was held later in the day on February 20, 2024 (the “February 20 Customer Follow-up Meeting”). Representatives of Houlihan Lokey, Cozen, Freshfields, Customer C, the Government Agency and the Customer C Partner attended the meeting, wherein those in attendance discussed current options available to the Company, its ability to remain solvent and the effect on Customer C’s Astra Spacecraft Engine^® orders.

Later in the day, at the February 20 SC Meeting, a representative of Houlihan Lokey informed the Special Committee about both the February 20 Customer Meeting and the February 20 Customer Follow-up Meeting.

Representatives of Riveron then confirmed to the Special Committee that the Company had until February 23, 2024 to receive additional cash, without which the Company would be imminently required to file for Chapter 7 Liquidation. Following discussion, the Special Committee determined that a representative of Cozen should again reach out to KTBS, to make the appropriate arrangements for a Chapter 7 Liquidation in the event it became necessary. A representative of Cozen then reported to the Special Committee that the Company had been negotiating potential arrangements with other Company customers, including continuing to negotiate with Customer D and a satellite manufacturer customer (“Customer E”), seeking to (i) secure contractual prepayments, and/or (ii) receive additional cash payments in exchange for (a) title to fully assembled flight systems constructed for such customers but that had not yet finished testing and/or (b) springing licenses to certain intellectual property in the event of business disruptions. The representative of Cozen then requested the Special Committee’s guidance as to whether the Company should continue to pursue such arrangements in light of the fact that the Company might be required to pursue Chapter 7 Liquidation soon after receipt of such funds from customers. Following discussion, the Special Committee determined that the Company should not further pursue such arrangements at such time given that the Company would either be in Chapter 7 Liquidation, or otherwise saved from bankruptcy through a Government Agency-brokered transaction, which no longer appeared to be linked to or dependent on the Take Private Proposal, but rather appeared more likely to materialize in connection with a Chapter 11 Reorganization, within the coming week.

On February 22, 2024, the Company remained in dire need of interim cash financing and the Special Committee met with representatives of Freshfields, Houlihan Lokey, RLF and Riveron (the “February 22 SC Meeting”), with a member of Independent Company Management and representatives of KTBS and Cozen present, to discuss the Company’s options. During the February 22 SC Meeting, a representative of Houlihan Lokey provided the Special Committee an update on ongoing discussions with the Government Agency, as well as Customer A, Customer B and Customer C, in connection with a potential strategic transaction brokered by the Government Agency. The representative of Houlihan Lokey informed the Special Committee that, after numerous discussions with the Government Agency and Customer A, Customer B and Customer C during the preceding days, it appeared that none of such Customers were willing to provide the funding necessary to enable short-term operations of the Company to continue, or otherwise enter into a strategic transaction with the

 

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Company, including a Chapter 11 Reorganization, at this time, and save the Company from a Chapter 7 Liquidation. The representative of Houlihan Lokey further reported that the representative of the Government Agency had suggested that Houlihan Lokey reach out directly to a founder of Customer B who might be positioned to broker a strategic transaction for the Company with a financial investor. The representative of Houlihan Lokey noted that, upon discussion with the founder of Customer B, it became clear that the founder of Customer B had not understood that the Company had secured debt obligations outstanding. The representative of Houlihan Lokey also reported that the founder of Customer B had suggested that Houlihan Lokey contact Party B regarding the possibility of Party B providing a DIP loan to fund the Company through a Chapter 11 Reorganization, in which Party B would acquire the Space Products business, but reminded the Special Committee that Houlihan Lokey had previously discussed a strategic transaction with Party B, and Party B had expressed definitively that it was not interested (after which time the financial situation of the Company had deteriorated even further). Independent Company Management then advised the Special Committee of the Company’s remaining cash available and the payroll liabilities the Company continued to accrue and, in light thereof, recommended that the Company consider a furlough of the majority of its employees, other than those required to assist with bankruptcy planning, on February 23, 2024, or by February 26, 2024 at the very latest, and the Special Committee and others present at the meeting discussed the logistics of a furlough of the employees and preparing to file for Chapter 7 Liquidation. Following this meeting, the Company began to prepare to furlough of employees and also began preparatory work for a Chapter 7 Liquidation, which included a meeting between Independent Company Management, Riveron, Cozen and KTBS with Young Conaway Stargatt & Taylor, LLP, a Delaware law firm with expertise in bankruptcy and restructuring (“YCST”). The Company engaged YCST on January 9, 2024, to assist it with bankruptcy planning in connection with the Chapter 11 Reorganization, but did not start working with YCST until February 23, 2024, at which time it requested YCST’s assistance with preparing for a Chapter 7 Liquidation.

On February 23, 2024, the Board met with Independent Company Management and Cozen present. Representatives of Freshfields and Houlihan Lokey were also present at the request of the Special Committee. During this meeting, the Board discussed the Company’s current liquidity position, including its immediate cash needs. The Special Committee informed the Board of its discussion regarding a furlough of substantially all employees, except those who were needed to assist with bankruptcy planning. Mr. Kemp informed the Board of various near-term interim financing options with three customers as well as the status of financing to be committed for the Take Private Proposal. Following the Board meeting, at the direction of the Special Committee, Houlihan Lokey sent a message to Mr. Kemp and Dr. London, requesting that Mr. Kemp and Dr. London provide the Special Committee with (i) a revised written proposal setting forth the Take Private Proposal, (ii) a detailed schedule outlining the sources and uses of the financing for the Take Private Proposal, (iii) a list of parties providing financing in support of the Take Private Proposal, including for each party, the amount, form and timing of funding as well as any conditions to funding, (iv) a timeline for signing of the definitive documents providing for the Take-Private Proposal, and (v) a schedule for calls for the next day to be held with Houlihan Lokey, the parties and their legal (and if appropriate, financial) advisors to confirm their readiness to provide financing based on the terms and conditions proposed.

On February 24, 2024, Mr. Kemp and Dr. London submitted a revised proposal to the Special Committee to acquire 100% of the outstanding share capital of the Company not already owned directly or indirectly by Mr. Kemp or Dr. London for a price of $0.50 per share (the “Revised Take Private Proposal”). The Revised Take Private Proposal was accompanied by a separate schedule detailing Mr. Kemp and Dr. London’s proposed financing sources for the Revised Take Private Proposal, which contemplated $44.0 million in equity commitments. The text of the Revised Take Private Proposal was as follows (with terms defined therein used solely for the purposes set forth therein):

As requested by the Special Committee, we are pleased to submit this revised proposal concerning the potential acquisition (the “Revised Proposal”) of 100% of the outstanding share capital of Astra Space, Inc. (“Astra” or the “Company”) led by Chris Kemp (“Kemp”) and Dr. Adam London (“London”) (together, “we”) not already owned directly or indirectly by Kemp and London.

 

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We, together with our team of external advisors, have dedicated substantial time and resources evaluating the Company’s liquidity position and its business and growth prospects as a private company since our initial proposal dated November 8, 2023. Due to our investment of resources, we have completed our due diligence and solidified the financing required to close a transaction notwithstanding the difficult financial markets and the Company’s performance during the interim period. We have substantially advanced drafts of the definitive transaction agreement and related documents and believe we would be in a position to promptly execute definitive documentation on the terms below and as discussed with your advisors.

We have revised our offer price to $0.50 per share for the Company for several reasons, including but not limited to (i) the continued cash burn resulting from delay in reaching an agreement; (ii) higher non-operating expenses related to the Company’s use of multiple third party advisors to address the Company’s liquidity needs and assess options outside of this proposed transaction; (iii) Special Committee, customer and investor requirements for sufficient cash to be on the Company’s balance sheet at closing of a transaction to support go forward operations; and (iv) the urgent need for the Company to identify a sustainable solution satisfactory to the Special Committee as an alternative to imminent bankruptcy, transposed with the amount of investor capital that we have identified to date in support of this transaction.

We, as current shareholders, will also be diluted by this lower price and our ownership and control of the Company will be significantly diminished. That said, we believe that taking the Company private and delivering some equity value to shareholders is a superior alternative to taking the Company through a liquidation or reorganization process that would likely impair the Company commercially and result in zero proceeds to shareholders. In addition, we believe the holders of the convertible notes are supportive of the proposed transaction and being long-term investors in Astra.

As you know, we have been tirelessly working to identify both investor capital and customer support to fund this transaction and bridge the Company’s cash flow needs from signing to closing. Since our initial offer, the convertible notes have received an incremental $10.4 million in funding and we have identified several customers who view Astra as an essential supplier and have agreed to fund an additional $8.6 million of cash into the Company promptly to support future orders. This cash contribution has been put on hold by the Special Committee subject to identification of a long-term solution. We believe that this Revised Proposal outlines a long-term solution and encourage the Special Committee to immediately authorize these commercial arrangements. In addition, our Revised Proposal would increase the authorized amount of the convertible notes by approximately $6 million, allowing for future funding by investors should it be necessary to reach transaction closing.

Our investors have all signaled support for this Revised Proposal and are standing by for agreement on definitive documentation. We believe we could sign the merger agreement early this week with your full engagement.

The following summarizes our Revised Proposal:

1. Purchase Price. A newly formed entity (“Newco”) will purchase 100% of the outstanding share capital of Astra not already owned directly or indirectly by Kemp and London or other investors into Newco for $0.50 per share. Newco will pay 100% of the purchase price in cash at the completion of the transaction (the “Closing Date”). Based on approximately 15 million current shares outstanding (assuming conversion and rollover of the convertible notes), we estimate that the purchase of the Company’s outstanding stock would require approximately $45 million in cash funding, including transaction fees and an expectation of $20 million to the Company’s balance sheet at closing (Appendix A).

2. Key Assumptions. Our Revised Proposal is based on the cash and debt positions of the Company at present and expected at closing, transaction expenses as well as the expected funding required for the Company to continue to operate through the Closing Date. This includes the incremental cash burn and professional fees incurred by the Company over the last several weeks versus what was previously understood at the time of our initial proposal as the Special Committee engaged restructuring focused consultants and advisors. Our Revised Proposal also contemplates a minimum of $20 million of cash on the

 

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balance sheet at closing to satisfy investors and customers and allow Astra to meet its strategic and financial objectives as a privately-held company.

3. Financing. We have arranged equity and rollover commitments for the amounts necessary to consummate the transaction. We are willing to provide a schedule detailing funding and access to these investors so that you may verify this. We expect the support of key customers upon agreement with this transaction and have identified approximately $8.6 million ready to fund into the Company via commercial arrangements.

4. Transaction Documents. We are ready to finalize the definitive documents for the transaction, including the merger agreement, equity commitment letter, and rollover commitment letter and anticipate that we will be in a position to promptly execute. We are confident we can resolve any potential issues to the mutual satisfaction of the parties to meet our timeline.

5. Additional Information. Please note that this Revised Proposal is an expression of interest only, and we reserve the right to withdraw or modify our Revised Proposal in any manner at any time. We reserve the right, at our absolute discretion, to cease our evaluation of and withdraw from pursuing the Revised Proposal at any time without liability to any person or otherwise vary its terms and conditions, as a result of the diligence review, prevailing market conditions or otherwise. This Revised Proposal does not constitute an offer to sell or the solicitation of an offer to buy any securities. This Revised Proposal is not intended to, and will not, impose any legal obligations upon the parties, which obligations can only be created upon execution and delivery of binding agreements and then only to the extent provided for therein.

This Revised Proposal shall be governed by and construed in accordance with the laws of the State of Delaware.

We are highly focused on signing and subsequently closing a transaction with the utmost speed and certainty, and are prepared to commit all of the resources necessary. Please do not hesitate to reach out to us or our advisors with any questions. Time is of the essence and we expect your prompt reply.

Following receipt of the Revised Take Private Proposal on February 24, 2024, representatives of Houlihan Lokey, at the direction of the Special Committee, sent an email to Mr. Kemp, Dr. London and their representatives to request additional clarification on which sources and amounts of financing for the Revised Take Private Proposal were intended to be provided in connection with the signing of the transaction as opposed to at or prior to the closing of the transaction and to request direct discussions with such sources of financing. Later that day, representatives of Houlihan Lokey held discussions, attended by Mr. Kemp, with each of the six financing sources identified by the Revised Take Private Proposal. During such discussions, representatives of Houlihan Lokey requested that each such financing source confirm, (i) that it was supportive of the Revised Take Private Proposal, (ii) the amount of funding that it was prepared to commit to the Revised Take Private Proposal, (iii) that it had been furnished with all information necessary in order to finalize its equity commitment, (iv) that it had reviewed a sources and uses schedule, (v) that it was aware of how the Company was intended to be funded between signing and closing of the Revised Take Private Proposal, (vi) that it was familiar with the financial condition of the Company and (vii) that it had reviewed drafts of definitive documents for the Revised Take Private Proposal. The representatives of Houlihan Lokey further inquired of each such financing source (a) when it would be in position to deliver an equity commitment letter in support of the Revised Take Private Proposal and (b) whether it had any conditions to the delivery of a commitment letter or its funding of the Revised Take Private Proposal.

On the morning of February 25, 2024, a representative of the Government Agency sent an email to a representative of Houlihan Lokey, noting his understanding that a DIP financing arrangement involving Party B would not materialize. The representative of the Government Agency further noted that the Government Agency was not in position to provide funds to the Company directly, and that he was unaware at that time of any other alternative funding transactions available to the Company, particularly in light of doubts expressed by Customer A, Customer B and Customer C that the Company would be in position to continue its operations.

 

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On February 25, 2024 (the “February 25 SC Meeting”), the Special Committee met with representatives of Freshfields, Houlihan Lokey, RLF and Riveron, with members of Independent Company Management and representatives of Cozen and KTBS present, to, among other things, review a presentation prepared by Houlihan Lokey summarizing certain key terms of the Revised Take Private Proposal and the financing secured in support thereof. The Special Committee discussed with its advisors the fact that there was a funding gap of $13.0 million in the financing necessary to consummate the transaction and there was still no clarity around the bridge financing required to ensure the continuing operations of the Company between signing and closing (which, in the view of the Special Committee, was expected to be between $15.0 million to $20.0 million). The Special Committee also discussed, with the assistance of Houlihan Lokey, the Revised Take Private Proposal with the indicative price of $0.50 per share relative to a Chapter 7 Liquidation, where, based on the Liquidation Analysis, the senior creditors were impaired and there would be no recovery for the Company’s unsecured creditors or stockholders. In addition, the Special Committee also discussed with representatives of Freshfields and RLF fiduciary considerations relevant in making a choice between the Revised Take Private Proposal with the indicative price of $0.50 per share or a Chapter 7 Liquidation. The Special Committee further discussed the need to potentially furlough the Company’s employees (with a Chapter 7 Liquidation filing to follow in short order) if sufficient financing with respect to the Revised Take Private Proposal could not be obtained.

During the February 25 SC Meeting, Mr. Kemp and Dr. London sent an email to the Special Committee offering to purchase an aggregate principal amount of $300,000 in Company Convertible Notes (the “Founders Interim Financing Proposal”) in order to avert an immediate furlough of the Company’s employees, contingent on the Special Committee confirming, among other matters, that (i) it was agreed in principle on the Revised Take Private Proposal and would instruct Freshfields, Cozen and Houlihan Lokey to work with Mr. Kemp, Dr. London, Pillsbury and Moelis to execute definitive documents for the Revised Take Private Proposal by no later than the end of that week, and (ii) it would instruct members of Company management to work towards execution on designated customer contracts for short term funding, or other alternative sources of liquidity. The Special Committee discussed the Founders Interim Financing Proposal, and the fact that the offered $300,000 of interim funds appeared to be contingent upon acceptance of the Revised Take Private Proposal, and the appropriate response thereto. Upon such discussion, the Special Committee formulated a consensus view that it would, barring any further developments in the following hours, proceed with recommending to the Board that the Company instruct KTSB and YCST to proceed with preparations to make an imminent Chapter 7 filing, and reject the Founders Interim Financing Proposal if the provision of the relevant funds remained contingent upon acceptance of the Revised Take Private Proposal. The Special Committee further instructed a representative of Houlihan Lokey to contact Moelis to (i) understand whether, if the interim funds offered by the co-founders were to be accepted, there was a viable path to entering into the Revised Take Private Proposal and (ii) request additional information as to the sources of the bridge financing required to ensure the continuing operations of the Company between signing and closing.

Following the February 25 SC Meeting, at the direction of the Special Committee, a representative of Houlihan Lokey sent an email to representatives of Moelis requesting the following additional information: (i) a target date for signing definitive documentation for the Revised Take Private Proposal, (ii) an updated sources and uses table summarizing equity commitments to be available as of such target date and (iii) a summary of co-founders’ views on the amount of bridge financing required for the Company’s operations between signing and closing, as well as detail on the portion of such bridge financing that was expected to be committed at the target signing date. In the same email, the representative of Houlihan Lokey further indicated that Houlihan Lokey would at a later time need to contact the contemplated sources of bridge financing to confirm their commitments.

Also on February 25, 2024, the Board met, with representatives of Cozen, RLF, KTBS, Houlihan Lokey and Freshfields present, to consider and determine whether to approve an immediate furlough of substantially all of the employees of the Company (to occur on February 26, 2024 or February 27, 2024) and whether to continue with bankruptcy planning. Shortly after the Board meeting commenced, the Company’s general counsel adjourned the meeting, and advised the co-founders to add Pillsbury and Moelis to the meeting, (with Mr. Stanford departing) so the members of the Special Committee, Freshfields and Houlihan Lokey could discuss

 

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(the “February 25 Interim Financing Discussion”) with Mr. Kemp and Dr. London and their representatives the Founders Interim Financing Proposal as well as the likely amount of time needed for Mr. Kemp and Dr. London to secure any interim financing (through commercial arrangements with customers and via bridge financing commitments from investors) and additional financing to close the Revised Take Private Proposal. During the February 25 Interim Financing Discussion, Mr. Kemp and Dr. London agreed to revise the conditions for the Founders Interim Financing Proposal to be limited to the Special Committee permitting the Company to enter into contracts with Customer D and Customer E to (i) secure contractual prepayments and/or (ii) receive additional cash payments in exchange for (a) title to fully assembled flight systems constructed for such customers but that had not yet finished testing and/or (b) springing licenses to certain intellectual property in the event of business disruption.

Immediately following the February 25 Interim Financing Discussion on February 25, 2024, members of the Special Committee met with representatives of Houlihan Lokey, Freshfields, KTBS and Riveron to discuss the revised conditions of the Founders Interim Financing Proposal. Following discussion, the Special Committee agreed to accept the revised conditions of the Founders Interim Financing Proposal, so long as reasonable commercial terms were negotiated by the Company with each of Customer D and Customer E, in consultation with Cozen and KTBS. The Special Committee directed Houlihan Lokey to convey its decision to Moelis and, following discussion with representatives of Houlihan Lokey and Freshfields regarding strategies to protect the interests of the public stockholders in connection with the Revised Take Private Proposal, further directed Houlihan Lokey to reiterate the CVR Request to Moelis. Mr. Kemp, through the Kemp Trust, and Dr. London subsequently paid the $300,000 to the Company on February 26, 2024, purchasing Company Convertible Notes in the aggregate amount of $300,000. The Company also continued to negotiate reasonable commercial terms with Customer D and Customer E, in consultation with Cozen and KTBS.

On February 26, 2024, representatives of Houlihan Lokey conveyed the Special Committee’s determination with respect to the Founders Interim Financing Proposal as well as the CVR Request to representatives of Moelis. In response, representatives of Moelis noted that they anticipated the co-founders would not be receptive to the CVR Request, but nonetheless agreed to covey it to Mr. Kemp and Dr. London.

The Special Committee met with representatives of Freshfields, Houlihan Lokey, RLF and Riveron, with representatives of KTBS present, and with members of Independent Company Management later joining the meeting, on February 27, 2024 (the “February 27 SC Meeting”), to receive updates on and discuss (i) the status of the financing for the Revised Take Private Proposal and related bridge financing, as well as the extent to which the co-founders had made progress to close the funding gaps previously identified, (ii) the current drafts of the Merger Agreement and other transaction documents in connection with the Revised Take Private Proposal under negotiation, and (iii) Chapter 7 Liquidation preparations being made by Riveron and the Company.

A representative of Freshfields then provided an update to the Special Committee on the drafts of definitive transaction documents Freshfields and Cozen had received from representatives of Pillsbury.

The Special Committee then discussed with representatives of Freshfields and Houlihan Lokey the circumstances in which signing a transaction for the Revised Take Private Proposal (which had the potential to deliver a greater consideration to the public stockholders but which also carried substantial consummation risk) was superior to an immediate Chapter 7 Liquidation, and the importance that the Company be left no worse off than it was currently if the signed transaction fails to close, and the Company is eventually forced into Chapter 7 Liquidation. The Special Committee discussed with representatives of Freshfields and Houlihan Lokey that executing the Revised Take Private Proposal – even if it ultimately did not close – was preferrable to filing for Chapter 7 Liquidation imminently (regardless of the risk that the Revised Take Private Proposal may not close and the Company may ultimately be forced to file for Chapter 7 Liquidation), so long as the Company is permitted to keep a sufficient amount of cash in a segregated account to pay payroll liabilities, Chapter 7 Liquidation filing fees, and directors’ and officers’ insurance premiums.

 

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In light of the foregoing discussions, the Special Committee determined that, as a condition to signing a transaction for the Revised Take Private Proposal, the Company should ensure that (i) it was permitted to set aside in a segregated account, which was not subject to a control agreement in favor of the Company’s secured lenders, cash in a sufficient amount in order to pay, among other things, the Company’s payroll liabilities, Chapter 7 Liquidation fees and expenses and extended coverage under the directors’ and officers’ insurance policy, and (ii) the Company had the right to terminate the Merger Agreement if its cash on hand was to fall below a specified balance so that it can implement an orderly Chapter 7 Liquidation proceeding. The Special Committee then instructed its advisors to collectively propose such a specific package of requests, which the advisors would recommend the Special Committee require the co-founders achieve in order for the Revised Take Private Proposal to be agreed in principle. The Special Committee also instructed the Independent Company Management to continue to progress Chapter 7 Liquidation filing preparations, in parallel with any work to be done in respect of the Revised Take Private Proposal, and be ready to make such a Chapter 7 Liquidation filing by March 4, 2024 in case the Revised Take Private Proposal was not a viable option for the Company.

Following the February 27 SC Meeting, Mr. Lehman, based on the recommendation of the Special Committee’s advisors, on behalf of the Special Committee, sent an e-mail to the co-founders and representatives of Pillsbury and Moelis. In such e-mail, he stated that the Special Committee would be willing to proceed with the Revised Take Private Proposal if, among other conditions: (i) the co-founders or other investors would provide at least $10.0 million of new funding to the Company at the signing of the Revised Take Private Proposal, which amount was not to include any previously-made payments by customers or revenue pull-forwards, (ii) the Company would be entitled to maintain a $4 million segregated escrow account (the “Segregated Account”), not subject to any security interests of any Company lenders, during the interim period between signing and closing, and (iii) the Company would be entitled to terminate the Merger Agreement and facilitate a Chapter 7 Liquidation if the Company’s available cash fell below $500,000 (excluding the Segregated Account) prior to the closing of the Revised Take Private Proposal (the “February 27 Correspondence”).

In response to the February 27 Correspondence, Mr. Kemp sent the Special Committee and its advisors, on behalf of himself and Dr. London, a message on February 29, 2024 (the “February 29 Response”) indicating, among other matters, that: (i) the co-founders (a) expected $7.5 million in new interim funding to be provided at the signing of the Revised Take Private Proposal, (b) expected an incremental $2.5 million to be committed at signing and to fund on April 12, 2024, (c) had an additional $1.0 million nearing commitment and expected to be funded at signing, and (d) had identified an additional $2.5 million of potential incremental revenue from a commercial agreement to be provided at signing; (ii) the Company would be permitted to retain $3.0 million in the Segregated Account (which, in the co-founders’ view, was sufficient to cover, among other things, the Company’s payroll liabilities, Chapter 7 Liquidation fees, and expenses and extended coverage under the directors’ and officers’ insurance policy); and (iii) the Company would be entitled to terminate the Merger Agreement to facilitate a Chapter 7 Liquidation filing if the Company’s available cash on hand fell below $500,000, excluding the $3 million in the Segregated Account, and subject to certain limitations on professional fees paid by the Company and notice and cure rights being afforded to Parent before the Company terminated the Merger Agreement for insufficient cash on hand.

Between February 27, 2024 and the execution of the definitive Merger Agreement, the parties negotiated extensively, among other matters, the required amount to be held in the Segregated Account, and the amount of cash on hand that would trigger the Company’s right to terminate the Merger Agreement in order to make a bankruptcy filing (which amounts were both ultimately agreed to be $3.5 million).

On March 1, 2024, the Company publicly announced the Revised Take Private Proposal, noting in its disclosure that the Company, under the direction of the Special Committee, had explored a variety of alternative funding options and transactions, none of which led to an actionable proposal. The Company also informed its investors that, without additional financing, the Company had very limited cash resources to fund its business operations until the closing of a definitive agreement on the Revised Take Private Proposal should one be reached. The Company further disclosed that the Special Committee believed that the only alternative to the Revised Take Private Proposal was the filing of a voluntary petition for relief under Chapter 7 of the Bankruptcy Code.

 

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The Special Committee met with representatives of Freshfields, Houlihan Lokey, RLF and Riveron, with members of Independent Company Management and a representative of Cozen present, on March 2, 2024 (the “March 2 SC Meeting”) and, without Cozen present, on March 4, 2024 (the “March 4 SC Meeting”) to receive an update on and discuss, among other things, (i) the status of negotiations with respect to material terms of the Merger Agreement and related transaction agreements (including those addressed in the February 27 Correspondence and February 29 Response), (ii) the cash forecast and cash runway of the Company, and (iii) the status of discussion with customers in connection with their making certain payments, or providing certain financing, to the Company.

At the March 2 SC Meeting, the Special Committee directed Houlihan Lokey to rely on the Liquidation Analysis, which is described in the section entitled “The Special Factors—Liquidation Analysis”, for purposes of rendering its opinion as to the fairness, from a financial point of view, of the consideration to be provided in the Revised Take Private Proposal to the Company’s public stockholders, given the Special Committee’s determination that the Projections prepared by management of the Company, which are described in the section entitled “—Certain Company Financial Projections,” and presented February 16, 2024, did not constitute an appropriate basis on which Houlihan Lokey’s opinion should be based, which determination was based on, among other factors, the Special Committee’s view that the funding assumptions underlying such Projections were not realistically attainable under current circumstances.

At the March 4 SC Meeting, a representative of Houlihan Lokey presented to the Special Committee Houlihan Lokey’s materials relating to the fairness, from a financial point of view, of the consideration to be provided in the Revised Take Private Proposal to the public stockholders.

Also at the March 4 SC Meeting, a representative of Freshfields reviewed with the members of the Special Committee their fiduciary duties, and the standards for assessing compliance with their duties, both generally and in the context of the Revised Take Private Proposal. Each Special Committee member present at the meeting confirmed that he or she had no relationships with the co-founders or the investors providing financing in support of the Revised Take Private Proposal, or any amount of bridge financing, and no unique interest in the Revised Take Private Proposal that might implicate his or her duty of loyalty to the Company.

The Special Committee met with representatives of Freshfields, Houlihan Lokey, RLF and Riveron, on both the morning and the evening (the “March 5 SC Evening Meeting”) of March 5, 2024. During the March 5 SC Evening Meeting, the Special Committee, having been presented the Merger Agreement, the disclosure letters thereto, the Certificate of Incorporation of the Surviving Company, and various other transaction agreements, for review and consideration, met with representatives of Freshfields and Houlihan Lokey, to further consider the Revised Take Private Proposal. Riveron provided an update to the Special Committee as to the Company’s current liquidity situation and explained that if, within the next day, (i) the Revised Take Private Proposal was not signed, and (ii) the interim financing to be paid to the Company at the signing thereof was not provided, all of the Company’s remaining cash on hand would be required to meet outstanding payroll and health care-related liabilities, to pay for directors’ and officers’ insurance, and to make Chapter 7 Liquidation filing preparations. A representative of Freshfields then reviewed certain material terms of the Merger Agreement with the Special Committee, including, among other things, with respect to the amount to be reserved in the Segregated Account. The Special Committee then discussed in detail with representatives of Freshfields and Houlihan Lokey whether $3.5 million in the Segregated Account, in conjunction with the other protections afforded to the Company and the Special Committee under the Merger Agreement and the Limited Waiver and Consent, was sufficient to ensure the Company could pay for, among other things, Chapter 7 Liquidation preparation and filings, payroll and healthcare liabilities and directors’ and officers’ insurance, should the Revised Take Private Proposal not close.

Houlihan Lokey then discussed with the Special Committee Houlihan Lokey’s review of the Liquidation Analysis with respect to the Company and the proposed Merger, among other considerations related to its opinion. Thereafter, as requested by the Special Committee, Houlihan Lokey orally rendered its opinion to the

 

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Special Committee (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the Special Committee dated March 5, 2024), as to the fairness, from a financial point of view, to the Company’s public stockholders of the Merger Consideration to be received by the public stockholders in the Merger pursuant to the Merger Agreement. Houlihan Lokey also updated and confirmed its prior disclosure to the Special Committee that, since March 3, 2022, based on a review of its information management systems, Houlihan Lokey had not been engaged pursuant to a written engagement letter to provide advisory services to any party listed in Houlihan Lokey’s disclosure letter (including the co-founders and certain investors in the Revised Take Private Proposal, among others), for which such parties paid fees to Houlihan Lokey.

Following discussion and based upon, among other things, the advice of its professional advisors and such other information that it had received with respect to the Merger and the viability of the Company as a going concern if a Merger is not consummated, the Special Committee unanimously determined it was advisable, fair and in the best interests of the Company and the public stockholders that the Company enter into the Merger Agreement and the other Transaction Documents and recommended that the Board (i) approve the Merger Agreement, the other Transaction Documents and the transactions contemplated thereby, including the Merger, including for purposes of Section 203 of the DGCL, and (ii) recommend that the stockholders of the Company adopt the Merger Agreement. See “Recommendation of Special Committee; Reasons for Merger” below for more information about the Special Committee’s decision. The Special Committee also determined that it would instruct the Company, given the need for the Special Committee and its advisors to monitor the Company’s cash flows and cash on hand until the closing of the Revised Take Private Proposal in order to determine whether the Special Committee should instruct the Company to commence a Chapter 7 Liquidation, to retain Riveron as an advisor for such purposes, or otherwise note that the Special Committee would retain Riveron for such purposes.

Following this March 5 SC Evening Meeting, the Board met with representatives of Freshfields and Houlihan Lokey, as well as Independent Company Management and a representative of Cozen, among others, for the purpose of considering the Merger Agreement, and other Transaction Documents. The Special Committee reported its recommendation to the Board and outlined the reasons for its decision. Mr. Kemp, Dr. London and Mr. Stanford abstained from the voting and discussions regarding the Special Committee’s recommendation, and the Board (with Mr. Kemp, Dr. London and Mr. Stanford abstaining), (i) approved the Merger Agreement, the other Transaction Documents and the transactions contemplated thereby, including the Merger, including for purposes of Section 203 of the DGCL, and (ii) recommended that the stockholders of the Company adopt the Merger Agreement. See “Recommendation of the Board; Reasons for Merger” below for more information about the Special Committee’s decision.

In addition, at the March 5, 2024 Board meeting, the Board discussed and approved a royalty-bearing license agreement with Customer E. The Company’s general counsel reported that this license agreement was not a business continuity license, but rather a license that enabled the customer to manufacture up to 300 Astra Spacecraft Engines^® in parallel with the Company. The Board considered the royalty and payment terms and potential liabilities for the Company under the license agreement, and the Company’s general counsel noted that Customer E was involved on the investor side of the Revised Take Private Proposal, but that the members of Independent Company Management who negotiated the license were not familiar with or involved with those discussions or any related agreements.

Following the March 5 SC Evening Meeting and the subsequent meeting of the Board, the Company, Cozen and Freshfields worked with the co-founders and Pillsbury to finalize Transaction Documents, incorporating technical modifications that were intended to clarify and confirm a limited number of provisions. Those modifications, which were deemed immaterial in the aggregate, were nevertheless reviewed with and approved by each member of the Special Committee, who also constitute all of the disinterested directors of the Board (representing a majority of the Board) and all of the members of the Audit Committee. The Merger Agreement was executed and delivered on March 7, 2024.

 

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Following the execution of the Merger Agreement and also on March 7, 2024, Mr. Kemp and Dr.  London executed and delivered to the Company the Written Consent, constituting the Required Stockholder Approval for the Merger.

Recommendation of the Special Committee; Reasons for the Merger

Recommendation of the Special Committee

On March 5, 2024, the Special Committee, acting with the advice and assistance of Houlihan Lokey and Freshfields, considered and evaluated the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, and unanimously determined that the Merger Agreement and the Transactions, including the Merger, are advisable, fair to and in the best interests of the Company and the Public Stockholders.

The Special Committee also unanimously recommended to the Board that the Board:

 

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approve the Merger Agreement and the consummation of the Transactions, including the Merger; and

 

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recommend that the stockholders of the Company adopt and approve the Merger Agreement and the Transactions, including the Merger.

Reasons for the Merger

In the course of reaching the recommendations described above, the Special Committee considered, in consultation with Houlihan Lokey and Freshfields, and having discussed certain matters with Independent Company Management, the following material factors that weighed in favor of the Merger, which are not intended to be exhaustive and are not presented in any relative order of importance:

 

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the belief that the Merger Consideration of $0.50 per Class A Share in cash represents fair value for the Class A Shares, taking into account the Company’s current and historical financial condition, results of operations, business, competitive position and prospects (including the risks involved in achieving such prospects), and the best price reasonably obtainable for the Class A Shares;

 

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the fact that the Special Committee, with the assistance of Houlihan Lokey conducted an extensive and open process, over the course of several months, to solicit proposals for a strategic transaction involving the Company or one or both of its lines of business, which resulted in no actionable proposals other than the Revised Take Private Proposal;

 

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the fact that (i) during its engagement, PJT Partners reached out to approximately 30 parties, which included a combination of financial buyers and strategic parties largely interested in the Space Products business and of those parties, 14 executed a confidentiality agreement with the Company and only seven actively engaged in due diligence (including Party A) (on October 17, 2023, PJT Partners resigned from its engagement with the Company as its financial advisor, primarily due to concerns that it could not provide independent financial advice given the likelihood that Party A and Company insiders may participate in a potential transaction), and (ii) PJT Partners’ process only resulted in the October 14 Term Sheet from Party A;

 

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the fact that the co-founders’ Take Private Proposal was publicly disclosed as of November 9, 2023 and anyone else willing to submit a better offer had ample time to do so;

 

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the fact that no party was willing to sponsor a Chapter 11 Reorganization of the Company;

 

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the fact that the only alternative to the Revised Take Private Proposal was a Chapter 7 Liquidation, which would result in only partial recovery to the senior secured creditors and no recovery to the Company’s stockholders and other creditors;

 

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the fact that, absent the Revised Take Private Proposal, the furloughing of employees and a Chapter 7 Liquidation were imminent;

 

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the Special Committee’s discussions with its financial and legal advisors that executing the Revised Take Private Proposal, even if it ultimately did not close, was preferrable to filing for Chapter 7 Liquidation, so long as the Company is permitted to keep a sufficient amount of cash in a segregated account to pay payroll liabilities, Chapter 7 Liquidation filing fees, and directors’ and officers’ insurance premiums;

 

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the lack of funding available to the Company and the belief of the Special Committee that the Company may be able to secure funding more easily as a privately held company and thus potentially maintain the viability of the Company;

 

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the financial analysis reviewed by Houlihan Lokey with the Special Committee as well as the oral opinion of Houlihan Lokey rendered to the Special Committee on March 5, 2024 (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the Special Committee dated March 5, 2024), as to, as of such date, the fairness, from a financial point of view, to the Public Stockholders of the Merger Consideration to be received by the Public Stockholders in the Merger pursuant to the Merger Agreement, as more fully described in the section entitled “—Opinion of Houlihan Lokey Capital, Inc. to the Special Committee” beginning on page 71 of this Information Statement;

 

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the Special Committee’s understanding of the Company’s industry, business, operations, financial condition, earnings, strategy and prospects (including the prospects of the Company as a publicly traded entity and the risks involved in achieving such prospects), as well as the Company’s historical and projected financial performance;

 

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the Special Committee’s view that the Merger Consideration was the result of extensive negotiation and a belief that the Merger Consideration was the highest price that could reasonably be obtained from Parent, that the terms set forth in the Merger Agreement were the most favorable terms Parent would be willing to agree to and that further negotiations would create a risk of causing Parent to abandon the transaction altogether or materially delay the entry into a definitive agreement for the transaction;

 

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the fact that (i) the Company was entitled to maintain $3.5 million in the Segregated Account, not subject to any security interests of any Company lenders, during the interim period between the signing and closing of the Transactions, and (ii) subject to certain conditions, the Company had the right to terminate the Merger Agreement and file for bankruptcy if cash on hand fell below such amount;

 

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the anticipated timing of the consummation of the Merger, which allows for a potential closing of the Merger in a relatively short timeframe; and

 

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the terms and conditions of the Merger Agreement, as discussed in more detail in the section entitled “The Merger Agreement” beginning on page 94 of this Information Statement.

The Special Committee also considered the factors discussed below, relating to the procedural safeguards that it believes were and are present to ensure the fairness of the Merger to the Public Stockholders. The Special Committee believes such factors support its determinations and recommendations and provide assurance of the procedural fairness of the Merger:

 

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the authority granted to the Special Committee by the Board to negotiate the terms and conditions of the definitive agreement with respect to the Merger and the Transactions, or to determine not to pursue any transaction;

 

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that, as authorized and empowered by the Board, in addition to evaluating the Merger, the Special Committee concurrently pursued alternative financing solutions and strategic transactions, including exploring options in bankruptcy or foreclosure;

 

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that prior to the Effective Time of the Merger, the Merger Agreement prohibits, without the prior written consent of the Special Committee, (i) the Board from dissolving or otherwise dismantling the Special Committee, or revoking or diminishing the authority of the Special Committee, and (ii) Parent,

 

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Merger Sub and their affiliates from removing any director of the Board that is a member of the Special Committee either as a member of the Board or the Special Committee (other than for cause);

 

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that the Special Committee consists solely of independent directors, who are not officers or employees of the Company and are not expected to have an economic interest in the Company following the completion of the Merger, and who are best positioned and able to evaluate and negotiate a potential transaction between the Company and the Specified Stockholders on behalf of the Public Stockholders;

 

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that the members of the Special Committee will not personally benefit from the consummation of the Transactions, including the Merger, contemplated by the Merger Agreement in a manner different from the Public Stockholders, except for indemnification and continuing directors and officers liability insurance coverage and the receipt of customary compensation provided to the members of the Special Committee in respect of their services;

 

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that the Special Committee held more than 15 formal meetings to discuss and evaluate a potential transaction with the Specified Stockholders and that each member of the Special Committee was actively engaged in the process;

 

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that the Special Committee retained and received the advice of (i) Houlihan Lokey as its own independent financial advisor and (ii) Freshfields and RLF as its own independent legal advisors;

 

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that the financial and other terms and conditions of the proposed transaction were the product of extensive negotiations that took place over the course of several months between the Special Committee, with the assistance of its financial and legal advisors, on the one hand, and Parent and its representatives, on the other hand;

 

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that, under the DGCL, stockholders have the right to demand appraisal of their Class A Shares, as discussed in the section entitled “Appraisal Rights” beginning on page 119 of this Information Statement;

 

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the fact that the Special Committee made its evaluation of the Merger Agreement and the Merger based upon the factors discussed in this Information Statement; and

 

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that the compensation provided to the members of the Special Committee in respect of their services was not contingent on the Special Committee approving the Merger Agreement or taking the other actions described in this Information Statement.

In the course of reaching the determination described above, the Special Committee also considered and balanced, in consultation with its own financial and legal advisors, the factors that weighed in favor of the Merger against a variety of potentially negative factors, uncertainties and risks in its deliberations concerning the Merger Agreement and the Merger, which are not intended to be exhaustive and are not presented in any relative order of importance:

 

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that the closing of the Merger is not conditioned upon the receipt of the affirmative vote of a majority of the Public Stockholders to adopt the Merger Agreement;

 

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the fact that the Merger was expected to be approved via the Written Consent shortly following the execution of the Merger Agreement and, as such, there was a very limited window of time during which a competing bid could be submitted by another potentially interested party;

 

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that the Public Stockholders will have no ongoing equity participation in the Company following the Merger and that those stockholders will cease to participate in the Company’s future earnings or growth, if any, and will not benefit from increases, if any, in the value of the Class A Shares;

 

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the possibility that, at some future time, Parent could sell some or all of the Company or its securities, businesses or assets to one or more purchasers at a valuation higher than the valuation implied by the Merger Consideration, and that the Public Stockholders would not be able to participate in or benefit from such a sale;

 

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•

the fact that the co-founders did not have committed bridge financing to guarantee the continued operations of the Company during the interim period between signing and closing and, as a result, if the co-founders were not able to procure additional funds, the Merger may not be consummated;

 

•

the risk that the co-founders’ equity financing sources would not fund their equity commitments and, given the Company’s financial condition, the fact that the Company would then have limited remedies available to it;

 

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the risk that the conditions to the parties’ obligations to complete the Merger may not be satisfied, and as a result, the possibility that the Merger may not be consummated;

 

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that the proposed Merger Consideration was reduced from the initial $1.50 per Class A Share to the current $0.50 per Class A Share;

 

•

the risks and costs to the Company of the pendency of the Merger or if the Merger does not close, including the potential effect of the diversion of management and employee attention from the Company’s business, the substantial expenses which the Company will have incurred, the potential adverse effect on the relationship of the Company and its subsidiaries with their respective employees, agents, customers and other business contacts;

 

•

the risk of litigation arising from stockholders in respect of the Merger Agreement or the Transactions, including the Merger;

 

•

that the receipt by stockholders of the Company of the Merger Consideration will be a taxable transaction for United States federal income tax purposes as discussed in the section entitled “The Special Factors—Material United States Federal Income Tax Consequences of the Merger” beginning on page 90 of this Information Statement; and

 

•

the risks of the type and nature described in the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”

The above discussion of the information and factors considered by the Special Committee is not intended to be exhaustive but indicates the material matters considered. In reaching its determination and recommendation, the Special Committee did not quantify, rank or assign any relative or specific weight to any of the foregoing factors, and individual members of the Special Committee may have considered various factors differently. The Special Committee did not undertake to make any specific determination as to whether any specific factor, or any particular aspect of any factor, supported or did not support its ultimate recommendation. The Special Committee based its unanimous recommendation on the totality of the information presented to, and factors considered by, it. In addition, individual members of the Special Committee may have given differing weights to different factors. The Special Committee and the Board are not aware of any firm offer by any other person during the prior two years for a merger or consolidation of the Company with another company, the sale or transfer of all or substantially all of the Company’s assets or a purchase of the Company’s securities that would enable such person to exercise control of the Company.

Recommendation of the Board; Reasons for the Merger

After careful consideration, the Board (with Mr. Kemp, Dr. London and Mr. Stanford abstaining from voting on the approval of the Transactions, including the Merger), acting on the unanimous recommendation of the Special Committee, resolved:

 

•

that the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth therein, are advisable, fair to and in the best interests of the Company and its stockholders;

 

•

to declare the Merger Agreement and the Transactions, including the Merger, advisable;

 

•

to approve the execution and delivery by the Company of the Merger Agreement, the performance by the Company of its covenants and agreements contained therein and the consummation of the

 

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Transactions, including the Merger, on the terms and subject to the conditions contained in the Merger Agreement; and

 

•

to recommend adoption of the Merger Agreement and the Transactions, including the Merger, to the Company’s stockholders.

In reaching its determination, the Board considered a number of factors, including the following material factors:

 

•

the belief that the Merger Consideration of $0.50 per Class A Share in cash represents fair value for the Class A Shares, taking into account the Company’s current and historical financial condition, results of operations, business, competitive position and prospects (including the risks involved in achieving such prospects), and the best price reasonably obtainable for the Class A Shares;

 

•

the Special Committee’s unanimous determination that the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, are advisable, fair to and in the best interests of the Company and the Public Stockholders and the Special Committee’s unanimous recommendation to the Board that the Board (i) approve the Merger Agreement and the consummation of the Transactions, including the Merger; and (ii) recommend that the stockholders of the Company adopt and approve the Merger Agreement, along with the reasons provided by the Special Committee for their recommendation to the Board (See “Recommendation of Special Committee; Reasons for Merger” above); and

 

•

the procedural fairness of the Transactions, including that the Transactions were negotiated over a period of several months by the Special Committee comprised solely of independent directors who are best positioned and able to evaluate and negotiate a potential transaction between the Company and the Specified Stockholders on behalf of the Public Stockholders, and that the Special Committee was advised by its own independent financial and legal advisors.

The above discussion of the information and factors considered by the Board is not intended to be exhaustive but indicates the material matters considered. In reaching its determinations and recommendations, the Board did not quantify, rank or assign any relative or specific weight to any of the foregoing factors, and individual members of the Board may have considered various factors differently. The Board did not undertake to make any specific determination as to whether any specific factor, or any particular aspect of any factor, supported or did not support its ultimate recommendation. The Board based its recommendation on the totality of the information presented to, and considered by, it.

Required Stockholder Approval for the Merger

The adoption of the Merger Agreement and the approval of the Merger and the other Transactions required the affirmative vote or written consent, in accordance with Section 228 and Section 251 of the DGCL, the Company Charter and the Company Bylaws, by stockholders of the Company holding a majority of the aggregate voting power of the outstanding Class A Shares and Class B Shares entitled to vote thereon, voting together as a single class. As of March 7, 2024, the record date for determining stockholders of the Company entitled to vote on the adoption of the Merger Agreement, there were 19,004,806 Class A Shares outstanding and 3,702,613 Class B Shares outstanding. Each Class B Share is entitled to 10 votes per share held of record on all matters on which stockholders are entitled to vote generally, including adoption of the Merger Agreement, and each Class A Share is entitled to one vote per share held of record on all matters on which stockholders are entitled to vote generally, including adoption of the Merger Agreement.

On March 7, 2024, following the execution of the Merger Agreement, Mr. Kemp and Dr. London, who on such date beneficially owned Common Shares representing approximately 66.3% of the total voting power of the outstanding Common Shares, delivered the Written Consent. No further action by any other Company stockholder is required under applicable law or the Merger Agreement (or otherwise) in connection with the adoption of the Merger Agreement. As a result, the Company is not soliciting your vote for the adoption of the

 

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Merger Agreement and will not call a stockholders’ meeting for purposes of voting on the adoption of the Merger Agreement. No action by the stockholders of the Company is required to complete the Merger, and all requisite corporate action by and on behalf of Merger Sub required to complete the Merger has been taken.

When actions are taken by the written consent of less than all of the stockholders entitled to vote on a matter, Delaware law requires notice of the action be given to those stockholders who did not consent in writing to the action and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that consents signed by a sufficient number of holders to take the action were delivered to the corporation in accordance with Section 228 of the DGCL. This Information Statement and the notice attached hereto constitute notice to you from the Company of the Written Consent as required by Delaware law.

Opinion of Houlihan Lokey Capital, Inc. to the Special Committee

On March 5, 2024, Houlihan Lokey orally rendered its opinion to the Special Committee (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the Special Committee dated March 5, 2024) as to, as of such date, the fairness, from a financial point of view, to the Public Stockholders of the Merger Consideration to be received by the Public Stockholders in the Merger pursuant to the Merger Agreement.

Houlihan Lokey’s opinion was furnished for the use of the Special Committee (in its capacity as such), and only addressed the fairness, from a financial point of view, to the Public Stockholders of the Merger Consideration to be received by the Public Stockholders in the Merger pursuant to the Merger Agreement and did not address any other aspect or implication of the Merger or any other agreement, arrangement or understanding. The summary of Houlihan Lokey’s opinion in this Information Statement is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex B to this Information Statement and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in connection with the preparation of its opinion. However, neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this Information Statement are intended to be, and do not constitute, advice or a recommendation to the Special Committee, the Board, the Company, any security holder or any other person as to how to act or vote with respect to any matter relating to the Merger or otherwise.

In connection with its opinion, Houlihan Lokey made such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances. Among other things, Houlihan Lokey:

 

•

reviewed copy of the Merger Agreement, in substantially the form of the execution version of the Merger Agreement, received by it on March 5, 2024;

 

•

reviewed certain publicly available business and financial information relating to the Company that Houlihan Lokey deemed to be relevant;

 

•

reviewed certain information relating to the historical, current and future operations, financial condition and prospects of the Company made available to Houlihan Lokey by the Company, including the Liquidation Analysis of the Company prepared by Riveron Consulting, reviewed by Company management and reviewed and approved for Houlihan Lokey’s use by the Special Committee;

 

•

spoke with certain members of Company management and certain of the Company’s and the Special Committee’s representatives and advisors regarding the business, operations, financial condition and prospects of the Company, the Merger and related matters, including, without limitation, such management’s views of the operational and financial risks and uncertainties attendant with not pursuing the Merger;

 

•

considered the results of the solicitation processes conducted by the Company and the Special Committee with respect to a possible sale of the Company or other strategic transactions, which the

 

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Special Committee advised Houlihan Lokey did not result in the Company receiving any alternative proposals with respect to a sale of the Company or other strategic transaction that the Special Committee considered superior to or competitive with the Merger and the Merger Consideration;

 

•

for informational purposes reviewed the current and historical market prices and trading volume for certain of the Company’s publicly traded securities, and the current and historical market prices of the publicly traded securities of certain other companies that Houlihan Lokey deemed to be relevant;

 

•

reviewed a confirmation letter addressed to Houlihan Lokey from senior Company management which contained, among other things, representations regarding the accuracy of the information, data and other materials (financial or otherwise) provided to, or discussed with, Houlihan Lokey by or on behalf of the Company; and

 

•

conducted such other financial studies, analyses and inquiries and considered such other information and factors as Houlihan Lokey deemed appropriate.

Houlihan Lokey relied upon and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished, or otherwise made available, to it, discussed with or reviewed by it, or publicly available, and did not assume any responsibility with respect to such data, material and other information. Company management advised Houlihan Lokey, and at the Special Committee’s direction Houlihan Lokey relied upon and assumed, that the Liquidation Analysis was reasonably prepared by Riveron Consulting in good faith on bases reflecting the best currently available estimates and judgments of Company management as to the expected realizable value for the Company’s assets in a liquidation of such assets and the amounts, if any, estimated to be available for distribution to the holders of Common Shares. At the Special Committee’s direction, Houlihan Lokey relied, without independent verification, solely upon the judgment of Company management (with the advice of Riveron Consulting) regarding all aspects of the Liquidation Analysis. Houlihan Lokey expressed no view or opinion with respect to the Liquidation Analysis or the assumptions on which it was based. If the assumptions, estimates or conclusions set forth in the Liquidation Analysis are not accurate, the conclusions set forth in Houlihan Lokey’s opinion could be materially affected.

The Special Committee and Company management advised Houlihan Lokey, and at the Special Committee’s direction Houlihan Lokey relied upon and assumed, that (i) there was substantial doubt about the Company’s ability to continue as a going concern, (ii) since inception, the Company had experienced significant recurring losses from operations and expected continuing operating losses for the foreseeable future, (iii) the Company’s existing sources of liquidity were not sufficient to fund commercial scale production and sale of its services and products, (iv) to continue the Company’s business operations, the Company needed to raise substantial additional funds, (v) the Company, under the supervision of the Special Committee, had explored a variety of funding options and transactions, none of which came to fruition, (vi) the Company had been unable to obtain sufficient financial resources, (vii) the Company’s business, financial condition and results of operations had been materially and adversely affected, (viii) in the absence of the funds to be secured in connection with the execution of the Merger Agreement (including payments related to a commercial contract), the Company would likely exhaust its remaining available cash resources within the next several days, (ix) given the Company’s current liquidity situation, the Company’s only alternative to the Merger was filing a voluntary petition for relief under Chapter 7 of the U.S. Bankruptcy Code, which would result in a liquidation of the Company, and (x) as a result of such liquidation, the holders of Common Shares would receive no recovery.

Houlihan Lokey relied upon and assumed, without independent verification, that there had been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of the Company since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to it that would be material to its analyses or opinion, and that there was no information or any facts that would make any of the information reviewed by it incomplete or misleading. In reaching its conclusions in its opinion, (i) Houlihan Lokey did not rely upon a discounted cash flow analysis of the Company, due to the Company’s going concern issues and, as the Special Committee advised Houlihan Lokey and directed it to

 

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assume, the fact that no current, reliable projections with respect to the future financial performance of the Company were available, and (ii) Houlihan Lokey did not rely upon a review of the publicly available financial terms of other transactions or a review of other companies with publicly traded equity securities, due to the Company’s going concern issues.

With the Special Committee’s approval, Houlihan Lokey relied upon and assumed, without independent verification, that (i) the representations and warranties of all parties to the Merger Agreement and all other related documents and instruments referred to therein were true and correct, (ii) each party to the Merger Agreement and such other related documents and instruments would fully and timely perform all of the covenants and agreements required to be performed by such party, (iii) Parent would be successful in its efforts to secure and provide funding sufficient for (a) the operation of the Company during the period from the execution of the Merger Agreement until the consummation of the Merger and (b) payment of the Merger Consideration, in each case, as contemplated by the Merger Agreement, (iv) all conditions to the consummation of the Merger (including, without limitation, any conditions related to the financing of the Merger) would be satisfied without waiver thereof, (v) there would be no litigation or other actions or proceedings concerning the Company, the Merger or otherwise that would delay the consummation of, or otherwise have any effect on, the Merger, and (vi) the Merger would be consummated in a timely manner in accordance with the terms described in the Merger Agreement and such other related documents and instruments, without any amendments or modifications thereto. Houlihan Lokey relied upon and assumed, without independent verification, that (i) the Merger would be consummated in a manner that complies in all respects with all applicable foreign, federal, state and local statutes, rules and regulations, and (ii) all governmental, regulatory, and other consents and approvals necessary for the consummation of the Merger would be obtained and that no delay, limitations, restrictions or conditions would be imposed or amendments, modifications or waivers made that would have an effect on the Company or the Merger that would be material to its analyses or opinion. In addition, Houlihan Lokey relied upon and assumed, without independent verification, that the final form of the Merger Agreement would not differ in any respect from the execution copy of the Merger Agreement received by it on March 5, 2024.

Furthermore, in connection with its opinion, Houlihan Lokey was not requested to, and did not, make any physical inspection or independent appraisal or evaluation of any of the assets, properties or liabilities (fixed, contingent, derivative, off-balance-sheet or otherwise) of the Company or any other party. Houlihan Lokey did not undertake any independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which the Company was or may have been a party or was or may have been subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which the Company was or may have been a party or was or may have been subject.

Houlihan Lokey’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Houlihan Lokey as of, the date of its opinion. Houlihan Lokey did not undertake, and is under no obligation, to update, revise, reaffirm or withdraw its opinion, or otherwise comment on or consider events occurring or coming to its attention after the date of its opinion. Houlihan Lokey did not express any opinion as to the price or range of prices at which Common Shares may be purchased or sold, or otherwise be transferable, at any time.

Houlihan Lokey’s opinion was furnished for the use of the Special Committee (in its capacity as such) in connection with its evaluation of the Merger and may not be used for any other purpose without Houlihan Lokey’s prior written consent. Houlihan Lokey’s opinion was not intended to be, and did not constitute, a recommendation to the Special Committee, the Board, the Company, any security holder or any other party as to how to act or vote with respect to any matter relating to the Merger or otherwise.

Houlihan Lokey was not requested to opine as to, and its opinion did not express an opinion as to or otherwise address, among other things: (i) the underlying business decision of the Special Committee, the Board, the Company, its security holders or any other party to proceed with or effect the Merger, (ii) the terms of any arrangements, understandings, agreements or documents related to, or the form, structure or any other portion or

 

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aspect of, the Merger or otherwise (other than the Merger Consideration to the extent expressly specified in its opinion), including, without limitation, any terms, aspects or implications of (a) the financing to be secured in connection with the execution of the Merger Agreement, (b) any Rollover Agreement to be entered into by Parent and certain holders of Common Shares (if any), (c) the Noteholder Conversion Agreement to be entered into by Parent, Merger Sub and the holders of the Company Convertible Notes and (d) the Warrant Exchange Agreement to be entered into by Parent, Merger Sub and each holder of Company Warrants , (iii) the fairness of any portion or aspect of the Merger to the holders of any class of securities, creditors or other constituencies of the Company, or to any other party, except if and only to the extent expressly set forth in the last sentence of its opinion, (iv) the relative merits of the Merger as compared to any alternative business strategies or transactions that might have been available for the Company or any other party, (v) the fairness of any portion or aspect of the Merger to any one class or group of the Company’s or any other party’s security holders or other constituents vis-à-vis any other class or group of the Company’s or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration amongst or within such classes or groups of security holders or other constituents), (vi) whether or not the Company, Parent, their respective security holders or any other party is receiving or paying reasonably equivalent value in the Merger, (vii) the solvency, creditworthiness or fair value of the Company, Parent or any other participant in the Merger, or any of their respective assets, under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters, or (viii) the fairness, financial or otherwise, of the amount, nature or any other aspect of any compensation to or consideration payable to or received by any officers, directors or employees of any party to the Merger, any class of such persons or any other party, relative to the Merger Consideration or otherwise.

Houlihan Lokey did not express any opinion, counsel or interpretation regarding matters that require legal, regulatory, environmental, accounting, insurance, tax or other similar professional advice. Houlihan Lokey assumed that such opinions, counsel or interpretations had been or would be obtained from the appropriate professional sources. Furthermore, Houlihan Lokey relied, with the consent of the Special Committee, on the assessments by the Special Committee, the Board, the Company, Parent and their respective advisors as to all legal, regulatory, environmental, accounting, insurance, tax and other similar matters with respect to the Company, the Merger or otherwise.

Houlihan Lokey’s opinion was only one of many factors considered by the Special Committee in evaluating the Merger. Neither Houlihan Lokey’s opinion nor its analyses were determinative of the Merger Consideration or of the views of the Special Committee, the Board or Company management with respect to the Merger or the Merger Consideration. The type and amount of consideration payable in the Merger were determined through negotiation between the Special Committee and Parent, and the decision to enter into the Merger Agreement was solely that of the Special Committee and the Board.

Financial Analyses

The following is a summary of the material financial analyses considered by Houlihan Lokey in connection with the preparation of its opinion and reviewed with the Special Committee on March 4, 2024 and March 5, 2024. The summary of these analyses is not a complete description of the analyses underlying Houlihan Lokey’s opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytical methods employed and the adaptation and application of these methods to the unique facts and circumstances presented. As a consequence, neither Houlihan Lokey’s opinion nor the underlying analyses are readily susceptible to summary description. Houlihan Lokey arrived at its opinion based on the results of all reviews undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, methodology or factor.

In reaching its conclusions in its opinion, (i) Houlihan Lokey did not rely upon a discounted cash flow analysis of the Company, due to the Company’s going concern issues and, as the Special Committee advised Houlihan Lokey and directed it to assume, the fact that no current, reliable projections with respect to the future financial

 

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performance of the Company were available, and (ii) Houlihan Lokey did not rely upon a review of the publicly available financial terms of other transactions or a review of other companies with publicly traded equity securities, due to the Company’s going concern issues.

Review of Liquidation Analysis. Houlihan Lokey reviewed and considered the Liquidation Analysis of the Company, which was prepared by Riveron Consulting, reviewed by Company management and reviewed and approved for Houlihan Lokey’s use by the Special Committee. The Liquidation Analysis estimated the potential realizable values for the Company’s assets in a liquidation under Chapter 7 of the U.S. Bankruptcy Code and the remaining amounts, if any, available upon completion of such liquidation for distribution to holders of the Common Shares. Houlihan Lokey noted that the Liquidation Analysis estimated a range of potential realizable values for the Company’s assets in a liquidation under Chapter 7 of the U.S. Bankruptcy Code of $12.5 million to $21.6 million and a range of liquidation costs, as described in the section entitled “—Liquidation Analysis” beginning on page 76 of this Information Statement, of $6.4 million to $8.4 million, which resulted in a range of net cash available to the Company’s creditors and equity holders of $6.2 million to $13.2 million. Houlihan Lokey also noted the Liquidation Analysis identified a total of $80.2 million of claims with priority to the holders of the Common Shares (including, without limitation, secured claims related primary to the Company Convertible Notes, and unsecured claims relating to vendors, operating leases and customers), which resulted in $0.00 in estimated recovery to the holders of the Common Shares, as compared to the Merger Consideration to be received by the Public Stockholders in the Merger pursuant to the Agreement of $0.50 per Common Share.

Other Matters

Houlihan Lokey was engaged by the Special Committee to act as its financial advisor in connection with the Merger and provide financial advisory services, including an opinion to the Special Committee as to the fairness, from a financial point of view, to the Public Stockholders of the Merger Consideration to be received by the Public Stockholders in the Merger pursuant to the Agreement. The Special Committee engaged Houlihan Lokey based on Houlihan Lokey’s experience and reputation. Houlihan Lokey is regularly engaged to provide financial advisory services in connection with mergers and acquisitions, financings and financial restructurings. Pursuant to its engagement by the Special Committee, Houlihan Lokey became entitled to a fee of $375,000 (the “Initial Fee”) upon its retention by the Special Committee, $250,000 upon the 30-day anniversary of the receipt by the Company of an acquisition proposal from the Specified Stockholders, and $500,000 (the “Opinion Fee”) upon the rendering of its opinion to the Special Committee. Houlihan Lokey is also entitled to a fee of $3.0 million upon the closing of the Merger, against which the Initial Fee and the Opinion Fee are creditable. The Company has also agreed to reimburse Houlihan Lokey for certain expenses and to indemnify Houlihan Lokey, its affiliates and certain related parties against certain liabilities and expenses, including certain liabilities under the federal securities laws, arising out of or related to Houlihan Lokey’s engagement.

In the ordinary course of business, certain of Houlihan Lokey’s employees and affiliates, as well as investment funds in which they may have financial interests or with which they may co-invest, may acquire, hold or sell, long or short positions, or trade, in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or investments in, the Company, Parent or any other party that may be involved in the Merger and their respective affiliates or security holders or any currency or commodity that may be involved in the Merger.

Houlihan Lokey and certain of its affiliates may provide investment banking, financial advisory and/or other financial or consulting services to the Company, Parent, other participants in the Merger or certain of their respective affiliates or security holders in the future, for which Houlihan Lokey and its affiliates may receive compensation. Furthermore, in connection with bankruptcies, restructurings, distressed situations and similar matters, Houlihan Lokey and certain of its affiliates may have in the past acted, may currently be acting and may in the future act as financial advisor to debtors, creditors, equity holders, trustees, agents and other interested parties (including, without limitation, formal and informal committees or groups of creditors) that may have included or represented and may include or represent, directly or indirectly, or may be or have been adverse to,

 

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the Company, Parent, other participants in the Merger or certain of their respective affiliates or security holders, for which advice and services Houlihan Lokey and its affiliates have received and may receive compensation.

Other Presentations by Houlihan Lokey

In addition to the presentation reviewed with the Special Committee on March 4, 2024 and March 5, 2024 described above, Houlihan Lokey provided supplemental materials to the Special Committee on March 5, 2024 and made a presentation to the Special Committee related to the proposed Merger on February 25, 2024. Summaries of these materials and the presentation are provided below. The following summaries, however, do not purport to be a complete description of the supplemental materials or the presentation.

The supplemental materials provided to the Special Committee by Houlihan Lokey on March 5, 2024 included (i) an illustrative review of the sources and uses of funds for the proposed Merger assuming various timelines for closing the Merger, (ii) an illustrative 12-week cash flow forecast developed by Company management and Riveron assuming the execution of the Merger Agreement and the receipt of applicable funds upon the execution of the Merger Agreement, and (iii) a review of committed and additional expected financing sources for the Merger identified by Mr. Kemp and Dr. London.

The presentation made by Houlihan Lokey to the Special Committee on February 25, 2024 included (i) a review of the sources and uses of funds as shown in the revised proposal submitted to the Special Committee on February 24, 2024 by Mr. Kemp and Dr. London, (ii) a summary of the discussions by Mr. Kemp and Dr. London with potential financing sources, and (iii) observations regarding the financing for the Merger contemplated by the revised proposal submitted to the Special Committee on February 24, 2024 by Mr. Kemp and Dr. London.

Liquidation Analysis

In connection with the evaluation of the Merger by the Special Committee and Board, Riveron Consulting prepared the Liquidation Analysis, which was reviewed by Company management, with respect to the estimated value to stockholders of the liquidation or dissolution of the Company as a potential alternative to the Merger. The Company engaged Riveron and Riveron Consulting to advise the Special Committee as it evaluated the Company’s strategic alternatives, including dissolution.

The Liquidation Analysis was also provided to Houlihan Lokey, who was authorized and directed by the Special Committee to use and rely upon the Liquidation Analysis for purposes of its opinion. The Liquidation Analysis estimated potential realizable values for the Company’s assets in an orderly liquidation and remaining amounts available upon completion of such liquidation for distribution to holders of Common Shares.

The inclusion of the Liquidation Analysis should not be deemed an admission or representation by the Company or any of its officers, directors, affiliates, advisors, or other representatives with respect to the Liquidation Analysis. The Liquidation Analysis is not included to influence your views on the Merger or the Merger Agreement and the Transactions contemplated thereby, and is summarized in this Information Statement solely to provide our stockholders access to certain information considered by the Special Committee and the Board in connection with their evaluation of the Merger, the Merger Agreement and the Transactions contemplated thereby, and the Company’s potential alternatives. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which could have been significantly more or less favorable. In addition, analyses relating to the liquidation value of the Company do not purport to be appraisals or reflect the prices at which Common Shares may actually be valued or traded. The assumptions and estimates used in, and the results derived from, the Liquidation Analysis are hypothetical, and are thus, inherently subject to substantial uncertainty.

The Liquidation Analysis was not prepared with a view toward public disclosure, nor was it prepared with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information or GAAP.

 

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The Liquidation Analysis includes estimates of cash and of certain expenditures, which for the purpose of the Liquidation Analysis were not calculated in accordance with GAAP. “Non-GAAP financial measures,” which is a financial performance measure that is not calculated in accordance with GAAP, should not be viewed as a substitute for GAAP financial measures. Furthermore, there are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, non-GAAP financial measures should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP. The SEC rules, which otherwise would require a reconciliation of a non-GAAP financial measure to a GAAP financial measure, do not apply to non-GAAP financial measures provided to a board of directors or financial advisors in connection with a proposed business combination transaction such as the Merger if the disclosure is included in a document such as this Information Statement to comply with requirements under state laws, including case law. In light of the foregoing factors and the uncertainties inherent in estimated cash balances, stockholders are cautioned not to place undue reliance, if any, on the Liquidation Analysis.

The below summary of the Liquidation Analysis is subject to the statements above. The Liquidation Analysis does not account for potential liabilities of the Company that cannot be reasonably estimated or quantified, including potential risks and uncertainties associated with pursuing a winding down and liquidation of the Company. Such liabilities could materially affect the cash amounts that, in the event of a liquidation or dissolution of the Company, may be distributed to stockholders as permitted under applicable law.

The Liquidation Analysis estimated the potential realizable values for the Company’s assets in liquidation and the remaining amounts, if any, available upon completion of such liquidation for distribution to holders of the Common Shares. The Liquidation Analysis assumes all non-monetary assets are sold through an auction process over a 90-day period with a range of total liquidation costs of $6.4 million to $8.4 million. The Liquidation Analysis estimated a range of potential realizable values for the Company’s assets in liquidation of $12.5 million to $21.6 million based on low, medium and high recovery estimates. The recovery estimate on current assets (excluding cash) was assumed to be between 10% (in the low scenario) and 30% (in the high scenario). The recovery estimate on property, plant and equipment, given the highly specialized nature of such assets was assumed to be between 25% (in the low scenario) and 40% (in the high scenario). Based on such assumptions and costs, the Liquidation Analysis resulted in a range of net cash available to the Company’s creditors and equity holders of $6.2 million to $13.2 million. The Liquidation Analysis identified a total of $80.2 million of claims with priority to the Common Shares (including, without limitation, secured claims related primary to the Company Convertible Notes, and unsecured claims relating to vendors, operating leases and customers) which resulted in $0.00 in estimated recovery to the Common Shares, as compared to the Merger Consideration to be received by the Public Stockholders in the Merger pursuant to the Agreement of $0.50 per Common Share.

Certain Company Financial Projections

The Company’s management does not currently as a matter of course make public projections as to future performance, revenues, earnings or other results due to, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates. The Company is especially reluctant to disclose projections for extended periods due to the increasing uncertainty, unpredictability and subjectivity of such assumptions and estimates when applied to time periods further in the future. As a result, the Company does not endorse projections or other unaudited prospective financial information as a reliable indication of future results. However, in connection with the buyer outreach process conducted by PJT Partners and Houlihan Lokey, as well as in connection with the co-founders’ discussions with various prospective investors in the Take Private Proposal, the Company’s management prepared several iterations of financial projections that were shared with potential investors between October 10, 2023 and February 15, 2024 (collectively, the “Prior Projections”). There were only modest revisions among the different iterations of the Prior Projections. The Prior Projections were not presented to or approved by the Special Committee or the Board.

On February 16, 2024, in connection with the Company’s financing and strategic discussions, the Company’s management developed additional, more conservative, projections for 2024 and 2025 (the “February

 

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Projections”, and together with the Prior Projections, the “Projections”). The Company’s management presented an overview of the February Projections to the Special Committee on February 16, 2024 and, with the authorization of the Special Committee (as described in more detail in the section entitled “—Background of the Merger” beginning on page 27 of this Information Statement) shared the February Projections with the applicable customers and certain potential investors in the Take Private Proposal on such date.

In developing the February Projections, the Company’s management made certain key assumptions, including the following:

 

•

assumed that the Company would secure equity capital in the amount of $90.0 million in the first quarter of 2024 and an additional $40.0 million in the first quarter of 2025;

 

•

assumed decreases and/or timing changes to ASE and Launch Services new bookings, ASE deliveries and Launch Services missions;

 

•

modeled the Company as a private company and excluded public company expenses after the second quarter of 2024;

 

•

projected a significant reduction in the selling, general and administrative workforce in second quarter of 2024;

 

•

did not forecast one-time expenses related to legal and advisory fees in connection with the Transactions, including the Merger, beyond the second quarter of 2024; and

 

•

assumed a minimum consolidated cash balance of $15.0 million per quarter

Space Products business (or ASE business)

 

($ in thousands)		Q4 2023E				Q1 2024E				Q2 2024E				Q3 2024E				Q4 2024E				Q1 2025E				Q2 2025E				Q3 2025E				Q4 2025E
# Deliveries			9				14				20				32				37				35				59				14				22
Revenue		$	3,182			$	4,954			$	5,519			$	8,805			$	10,302			$	10,046			$	20,903			$	3,287			$	5,745
Adjusted EBITDA(1)		($	6,635	)		($	4,285	)		($	3,108	)		($	892	)		$	270			$	3,462			$	8,690			($	3,415	)		($	2,129	)

Launch Services business

 

($ in thousands)		Q4 2023E				Q1 2024E				Q2 2024E				Q3 2024E				Q4 2024E				Q1 2025E				Q2 2025E				Q3 2025E				Q4 2025E
# Deliveries			0				0				0				0				0				1				1				1				1
Revenue		$	0			$	0			$	0			$	0			$	0			$	1,500			$	1,500			$	11,450			$	5,000
Adjusted EBITDA(1)		($	6,765	)		($	8,616	)		($	7,791	)		($	7,640	)		($	7,814	)		($	6,917	)		($	6,454	)		$	281			($	5,435	)

Consolidated

 

($ in thousands)		Q4 2023E				Q1 2024E				Q2 2024E				Q3 2024E				Q4 2024E				Q1 2025E				Q2 2025E				Q3 2025E				Q4 2025E
Revenue		$	3,182			$	4,954			$	5,519			$	8,805			$	10,302			$	11,546			$	22,403			$	14,737			$	10,745
Adjusted EBITDA(1)(2)		($	17,495	)		($	19,117	)		($	15,069	)		($	11,876	)		($	10,730	)		($	6,566	)		($	866	)		($	6,226	)		($	10,647	)
Bookings		$	0			$	1,500			$	1,500			$	0			$	0			$	10,300			$	18,250			$	37,000			$	59,150
Net Cash used in Operating Activities		($	23,545	)		($	20,814	)		($	20,369	)		($	21,913	)		($	19,344	)		($	13,962	)		($	14,734	)		($	3,608	)		($	8,130	)

 

(1)	“Adjusted EBITDA” is defined as total gross profit, minus total operating expenses, minus other expense / (income).

(2)	Includes applicable amounts attributable to shared services arrangements between the Space Products and Launch Services businesses.

Despite these revisions to the Prior Projections, Riveron, when presented with the February Projections, characterized the February Projections as optimistic and not likely to be achieved, considering, among other

 

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things, the Company’s historical performance, nascent product portfolio, liquidity constraints and employee attrition. The Special Committee also did not view the February Projections as an appropriate basis on which a valuation of the Company should be performed given, among other factors, the funding constraints experienced by the Company and the fact that the February Projections assume that the Company would be able to secure equity capital in the amount of $90.0 million in the first quarter of 2024 and an additional $40.0 million in the first quarter of 2025. As described in more detail in the section entitled “—Background of the Merger” beginning on page 27 of this Information Statement, the Special Committee determined not to authorize the use of the February Projections by Houlihan Lokey in connection with its financial analysis and opinion.

Additional Information About the Projections

The inclusion of the Projections in this Information Statement should not be regarded as an indication that any of the Company or any of its affiliates, advisors or representatives have considered the Projections to be predictive of actual future events, and the Projections should not be relied upon as such. The Company advises the recipients of the Projections that its internal financial forecasts upon which the Projections were based are subjective in many respects.

Although presented with numerical specificity, the Projections were based on numerous variables, assumptions and estimates as to future events made by the Company’s management that the Company’s management believed were reasonable at the time the Projections were prepared, taking into account the relevant information available to management at the time. These variables, assumptions and estimates are inherently uncertain and many are beyond the control of the Company. Important factors that may affect actual results and cause these internal financial Projections to not be achieved include, but are not limited to, risks and uncertainties relating to the business of the Company (including its ability to achieve strategic goals, objectives and targets over applicable periods), industry performance, the regulatory and competitive environment, changes in technology, general business and economic conditions and other risk factors referenced in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 20 of this Information Statement. Various assumptions underlying the Projections may not prove to have been, or may no longer be, accurate. The Projections may not be realized, and actual results may be significantly higher or lower than projected in the Projections. The Projections also reflect assumptions as to certain business strategies or plans that are subject to change. The Projections do not take into account any circumstances or events occurring after the date they were prepared. The Projections cover multiple years, and such information by its nature becomes less predictive with each successive year. As a result, the inclusion of the Projections in this information statement should not be relied on as necessarily predictive of actual future events and actual results may differ materially (and will differ materially if the Transactions are completed) from the Projections. For all of these reasons, the internal financial Projections, and the assumptions upon which they are based, (i) are not guarantees of future results; (ii) are inherently speculative; and (iii) are subject to a number of risks and uncertainties. As a result, actual results may differ materially from those contained in these internal financial Projections. Accordingly, there can be no assurance that the Projections will be realized.

The Projections were prepared solely for internal use and to assist with potential investors in the Take Private Proposal, and although they were prepared on an accounting basis consistent with the Company’s financial statements, they were not prepared with a view toward public disclosure or toward compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The Projections included in this Information Statement have been prepared by, and are the responsibility of, the Company’s management. PricewaterhouseCoopers LLP has not audited, reviewed, compiled, examined nor applied agreed-upon procedures with respect to the Projections and accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report incorporated by reference in this Information Statement relates to the Company’s previously issued financial statements. It does not extend to the Projections and should not be read to do so.

 

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Adjusted EBITDA contained in the Projections is a non-GAAP financial measure. The SEC rules which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure do not apply to non-GAAP financial measures included in disclosures relating to a proposed business combination such as the Merger if the disclosure is included in a document such as this Information Statement. Accordingly, the Company has not provided a reconciliation of the financial measure included in the Projections to the relevant GAAP financial measure. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by the Company may not be comparable to similarly titled amounts used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, the non-GAAP financial measure should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP.

For these reasons, as well as the basis and assumptions on which the Projections were compiled, the inclusion of specific portions of the Projections in this Information Statement should not be regarded as an indication that such Projections will be an accurate prediction of future events, and they should not be relied on as such. None of the Company or any of its affiliates, advisors, officers, directors, partners or representatives can give you any assurance that actual results will not differ from these Projections. Except as required by applicable law, none of the Company or any of its affiliates, advisors, officers, directors, partners or representatives undertake any obligation to update or otherwise revise or reconcile the Projections or the specific portions presented to reflect circumstances existing after the date the Projections were generated or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error. Therefore, readers of this Information Statement are cautioned not to place undue, if any, reliance on the specific portions of the Projections set forth above. None of the Company or any of its affiliates, advisors, officers, directors, partners or representatives intend to make publicly available any update or other revision to these Projections. In addition, none of the Company or any of its affiliates, advisors, officers, directors, partners or representatives have made, make, or are authorized in the future to make, any representation to any stockholder or other person regarding the Company’s ultimate performance compared to the information contained in the Projections or that projected results will be achieved, and any statements to the contrary should be disregarded. The Company has made no representation to the Parent Entities, in the Merger Agreement or otherwise, concerning the Projections.

Financing

The Merger is not subject to a financing condition. Parent estimates that the total funds necessary to complete the Merger will be approximately $[●], including estimated transaction fees and expenses and assuming no exercise of dissenters’ rights by stockholders of the Company.

Pursuant to the Equity Commitment Letters, the Equity Commitment Parties have severally agreed to provide equity financing to Parent in the amounts specified in their respective Equity Commitment Letters, for a total aggregate value of approximately $28.8 million, on the terms and subject to the conditions contained in the Equity Commitment Letters. The Equity Commitment Parties’ commitments may be satisfied, in each of their sole discretion, by (i) a cash contribution to Parent, (ii) a contribution to Parent of Class A Shares held by such Equity Commitment Party, or (iii) a combination of the foregoing. For purposes of determining the value of an Equity Commitment Party’s contribution pursuant to the foregoing clauses (ii) and (iii), each Class A Share contributed by an Equity Commitment Party will be ascribed a value equal to the Merger Consideration.

In addition, RBH has also agreed in its Equity Commitment Letter to provide interim debt financing to the Company in the amount of $1.5 million, and MH Orbit may, in its sole and absolute discretion, pursuant to a debt commitment letter, dated March 7, 2024, provide debt financing to the Company in the amount of $1.0 million, in each case, on or before April 15, 2024, for the purposes of financing cash shortfalls at the Company during the period between the signing of the Merger Agreement and the consummation of the Merger. Any interim debt financing is expected to be effected by the Company’s issuance of (i) additional Company Convertible Notes and (ii) (if elected by RBH or MH Orbit, as the case may be) additional Company Warrants;

 

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provided, however that any offer and sale of any Company Convertible Notes and Company Warrants pursuant to the Purchase Agreement after March 7, 2024, requires the consent of holders of a majority in interest of the then-outstanding Company Convertible Notes or Company Warrants, as applicable. The amount of any interim debt financing provided to the Company by RBH or MH Orbit will reduce the value of the equity commitments provided for in the Equity Commitment Letters of RBH and JW 16, respectively. Further, in addition to RBH and MH Orbit, any other Equity Commitment Party may provide interim financing to the Company to finance cash shortfalls at the Company during the period between the signing of the Merger Agreement and the consummation of the Merger. Any such interim financing provided by an Equity Commitment Party will also reduce the value of the equity commitments provided for in such party’s Equity Commitment Letter. There is no guarantee that the interim financing will be sufficient to fund the Company’s operations through the consummation of the Merger.

On March 15, 2024, RBH purchased additional Company Convertible Notes and Company Warrants. As a result of these purchases, such interim debt financing commitment and equity commitment of RBH under its Equity Commitment Letter were reduced by $991,000 and $1,044,658.75, respectively.

In addition to the Equity Commitment Letters, pursuant to the AST Debt Commitment Letter, AST has agreed to purchase from Parent one or more notes in an aggregate principal amount of up to $2.5 million for a purchase price of 100% of the principal amount thereof, on the terms and subject to the conditions contained in the AST Debt Commitment Letter (including that the Merger shall have closed substantially concurrent with such purchase).

For more information on Parent’s financing arrangements for the Merger, see the sections entitled “The Merger Agreement—Financing of the Merger” beginning on page 108 of this Information Statement.

Position of the Company on the Fairness of the Merger

On March 5, 2024, the Board (with Mr. Kemp, Dr. London and Mr. Stanford abstaining from voting on the approval of the Transactions, including the Merger), acting upon the unanimous recommendation of the Special Committee, (i) determined that the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, are advisable and in the best interests of the Company and its stockholders; (ii) approved the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, (iii) authorized the execution and delivery of the agreements to which the Company is a party and the performance by the Company of all of its obligations under the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, and (iv) resolved to recommend adoption and approval of the Merger Agreement and the Transactions, including the Merger, to the Company’s stockholders in accordance with the DGCL. In making the determination described above, the Board has expressly adopted the analysis of the Special Committee, which adopted as its own the opinion and financial analyses of Houlihan Lokey, among other factors considered in the course of making its recommendation that the Board approve the Merger Agreement and the Transactions, including the Merger.

Position of the Parent Entities in Connection with the Merger

Under the SEC rules governing “going-private” transactions, the Parent Entities may be deemed to be affiliates of the Company and engaged in the going-private transaction and, therefore, be required to express their beliefs as to the fairness of the Transactions, including the Merger, to the Public Stockholders of the Company. The Parent Entities are making the statements included in this section solely for purposes of complying with the requirements of Rule 13e-3 and related rules and regulations under the Exchange Act. The Parent Entities have interests in the Merger that are different from, and in addition to, the Public Stockholders.

The Parent Entities believe that the Merger (which is the Rule 13e-3 transaction for which the Schedule 13E-3 will be filed with the SEC) is fair to the Public Stockholders, on the basis of the factors (which the Parent Entities

 

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agree with and adopt) described in the sections entitled “—Recommendation of the Special Committee; Reasons for the Merger,” “—Recommendation of the Board; Reasons for the Merger” and “—Position of the Company on the Fairness of the Merger” beginning on pages 66, 69 and 81 of this Information Statement, respectively, the factors described in the section entitled “—Position of the Parent Entities in Connection with the Merger” beginning on page 81 of this Information Statement and the additional factors described below with respect to the Parent Entities.

The Parent Entities also believe that the interests of the Public Stockholders were properly represented by the Special Committee, which negotiated the terms and conditions of the Merger Agreement on behalf of the stockholders of the Company (excluding the Specified Stockholders and their respective affiliates (excluding the Company and its subsidiaries)) with the assistance of its independent legal and financial advisors. The Parent Entities neither participated in the deliberations of the Special Committee regarding, nor received advice from the Special Committee’s independent legal or financial advisors as to the substantive or procedural fairness of the Merger. The Parent Entities have not performed, or engaged a financial advisor to perform, any valuation or other analysis for the purpose of assessing the fairness of the Merger to the Public Stockholders. The Parent Entities have not received any report, opinion or appraisal from any outside party materially related to the Merger, including any report, opinion or appraisal relating to the fairness of the Merger to the Public Stockholders or the Parent Entities.

Based on the factors considered by, and findings of, the Board and the Special Committee (which findings the Parent Entities agree with and adopt) described in the sections entitled “—Recommendation of the Special Committee; Reasons for the Merger,” “—Recommendation of the Board; Reasons for the Merger,” and “—Position of the Company on the Fairness of the Merger” beginning on pages 66, 69 and 81 of this Information Statement, respectively, the Parent Entities believe that the Merger is substantively and procedurally fair to the Public Stockholders. The Parent Entities believe the factors considered by, and findings of, the Board and the Special Committee provide a reasonable basis upon which to form their belief that the Merger is fair to the Public Stockholders. This belief should not, however, be construed as a recommendation to any Public Stockholders as to whether they should, and the Parent Entities do not make any recommendation as to whether any Public Stockholders should, exercise their appraisal rights under the DGCL.

Based on the Parent Entities’ knowledge and analysis of information regarding the Company, including such information obtained in their roles as senior management of the Company, as well as discussions with other members of the Company’s senior management regarding the Company and its business, and the factors considered by, and findings of, the Board and the Special Committee (which findings the Parent Entities agree with and adopt) described in the sections entitled “—Recommendation of the Special Committee; Reasons for the Merger,” “—Recommendation of the Board; Reasons for the Merger,” and “—Position of the Company on the Fairness of the Merger” beginning on pages 66, 69 and 81 of this Information Statement, respectively, the Parent Entities believe that the Merger is substantively and procedurally fair to the Public Stockholders. In particular, the Parent Entities considered the following substantive factors:

 

•

the Merger Consideration, which is all cash, (i) provides the Public Stockholders with certainty of value and liquidity for their Class A Shares, (ii) eliminates the risks to the Public Stockholders in the current market and operating environment that the Company’s current leverage position is unsustainable and that the Company may be unable to effect a recapitalization as a public reporting company and (iii) eliminates the risks and uncertainties relating to the prospects of the Company;

 

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the likelihood that the Merger would be completed, based on, among other things, the limited number and nature of the conditions to the completion of the Merger, including the fact that there is no financing condition;

 

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the substantial doubt that in the absence of the Merger, the Company could raise sufficient funds to continue operating as a going concern and avoid dissolution or liquidation; and

 

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the potential risks to the Company of continuing to have publicly traded common stock, including the risks of market volatility and global economic uncertainty.

 

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The Parent Entities also considered a variety of procedural factors related to the fairness of the Merger, including the following:

 

•

the Merger Consideration resulted from active and extensive negotiations between the Special Committee and the Parent Entities;

 

•

the Merger Agreement and the Transactions were unanimously approved by the Special Committee composed of four directors, who are not representatives of the Parent Entities and are not employees of the Company or any of its subsidiaries, that could objectively and independently assess the potential transaction, and that the Special Committee retained its own nationally recognized independent legal and financial advisors and which was fully informed about the extent to which the interests of the Parent Entities in the Merger differed from those of the Public Stockholders;

 

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the fact that appraisal rights are available to Public Stockholders who comply with all of the required procedures under the DGCL for exercising appraisal rights, which allows such stockholders to seek appraisal of the “fair value” of their Class A Shares in lieu of receiving the Merger Consideration;

 

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the fact that since the outset of discussions of the Parent Entities Acquisition Proposal with the Special Committee, the Parent Entities have conditioned the Parent Entities Acquisition Proposal on approval by the Special Committee;

 

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the fact that the Special Committee had no obligation to recommend any transaction, including a transaction with the Parent Entities, and that the Special Committee had the authority to reject any proposals made by the Parent Entities or any other person;

 

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the fact that the financial advisors to the Company (until their resignation) and the Special Committee had solicited indications of interest from a substantial number of potential counterparties and were unable to receive any alternative proposals that were actionable;

 

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the Special Committee, acting with the advice and assistance of its own independent legal and financial advisors, considered and evaluated the Merger Agreement and the Transactions and unanimously determined that the Merger Agreement and the Transactions are advisable, fair to, and in the best interests of, the Company and the Public Stockholders. The Special Committee also unanimously recommended to the Board that the Board (i) determine that the Merger Agreement and the Transactions on the terms and subject to the conditions set forth therein, are advisable, fair to and in the best interests of the Company and the Public Stockholders and (ii) recommended that the Board (a) approve the Merger Agreement and the Transactions and (b) recommend adoption and approval of the Merger Agreement and the Transactions to the Company’s stockholders; and

 

•

the Board (acting on the recommendation of the Special Committee, and with Mr. Kemp, Dr. London and Mr. Stanford abstaining) after consultation with its legal counsel, (i) determined that the Merger Agreement and the Transactions on the terms and subject to the conditions set forth therein, are advisable, fair to and in the best interests of the Company and its stockholders, (ii) approved the Merger Agreement, the execution and delivery by the Company of the Merger Agreement, the performance by the Company of its obligations contained therein and the consummation of the Transactions on the terms and subject to the conditions contained in the Merger Agreement and (iii) resolved to recommend adoption and approval of the Merger Agreement and the Transactions to the Company’s stockholders.

The Parent Entities also considered a variety of risks and other countervailing factors related to the substantive and procedural fairness of the proposed Merger, including:

 

•

the Public Stockholders who do not continue to hold Class A Shares as of the closing of the Merger will not participate in any future earning, appreciation in value or growth of the Company’s business and will not benefit from any potential sale of the Company or its assets to a third party in the future;

 

•

the risk that the Merger might not be completed in a timely manner or at all;

 

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•

the fact that the Merger Consideration was reduced from the initial proposal of $1.50 per Class A Share to the current amount of $0.50 per Class A Share;

 

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that Parent and Merger Sub are newly formed entities with essentially no assets;

 

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the restrictions on the conduct of the Company’s business prior to the completion of the Merger set forth in the Merger Agreement, which may delay or prevent the Company from undertaking business opportunities that may arise and certain other actions it might otherwise take with respect to the operations of the Company pending completion of the Merger; and

 

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the negative effect that the pendency of the Merger, or a failure to complete the Merger, could potentially have on the Company’s business and relationships with its employees, vendors and customers.

The Parent Entities did not find it practicable to assign, nor did they assign, specific relative weights to the individual factors that they considered in reaching their conclusion as to fairness. The Parent Entities believe these factors provide a reasonable basis upon which to form their belief that the Merger is fair to the Public Stockholders. This belief should not, however, be construed as a recommendation to any Public Stockholders as to whether they should, and the Parent Entities do not make any recommendation as to whether any Public Stockholders should, exercise their appraisal rights under the DGCL.

Purposes and Reasons of the Company in Connection with the Merger

On July 28, 2023, the Board established the Special Committee for the purpose, at that time, solely to consider, approve and recommend to the Board whether the Potential Party A Financing was in the best interests of the Company and all of its stockholders, on both a stand-alone basis and in comparison with other potential financing transactions the Company was considering. On September 29, 2023, Mr. Kemp and Dr. London resigned as members of the Special Committee in light of their potential participation in a strategic or financing transaction involving the Company. Effective October 3, 2023, the Board delegated its authority and authorized and directed the Special Committee to evaluate, approve and recommend to the Board whether any potential strategic transactions or potential financings as identified or presented to the Company were the best interests of the Company and all of its stockholders.

Additionally, on December 19, 2023, following the evaluation and consideration by the Board of the information available to it and the advice by the Special Committee’s financial and legal advisors regarding the liabilities and liquidity situation of the Company, the strategic and financing alternatives available to the Company, and the going concern of the business of the Company, including the option to file or cause to be filed a voluntary petition for relief for the Company or put together and effectuate a plan of reorganization or liquidation, the Board delegated to the Special Committee the sole authority to review and approve any proposals for a strategic transaction, potential financing, bankruptcy filing or recapitalization, reorganization, liquidation or dissolution.

The Special Committee retained (i) Freshfields Bruckhaus Deringer LLP as its legal advisor and (ii) Houlihan Lokey as its financial advisor, and Houlihan Lokey rendered an opinion to the Special Committee to the effect that the Merger Consideration to be received by the Public Stockholders in the Merger, pursuant to the Merger Agreement, is fair to such stockholders, from a financial point of view, as more fully described in the section entitled “—Opinion of Houlihan Lokey Capital, Inc. to the Special Committee” beginning on page 71 of this Information Statement.

On March 5, 2024, the Special Committee, acting with the advice and assistance of its own independent legal and financial advisors, considered and evaluated the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, unanimously resolved that (i) the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth therein, are advisable, fair to and in the best interests of the Company and all of the Public Stockholders and

 

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(ii) recommended that the Board (a) approve the Merger Agreement and the Transactions, including the Merger, and (b) recommend adoption and approval of the Merger Agreement and the Transactions, including the Merger, to the Company’s stockholders.

Also on March 5, 2024, the Board (with Mr. Kemp, Dr. London and Mr. Stanford abstaining from voting on the approval of the Transactions, including the Merger) held a meeting, at which the Board, acting upon the unanimous recommendation of the Special Committee, (i) determined that the Merger Agreement and the Transactions, including the Merger, on the terms and subject to the conditions set forth therein, are advisable, fair to and in the best interests of the Company and its stockholders, (ii) approved the Merger Agreement, the execution and delivery by the Company of the Merger Agreement, the performance by the Company of its obligations contained therein and the consummation of the Transactions, including the Merger, on the terms and subject to the conditions contained in the Merger Agreement and (iii) resolved to recommend adoption and approval of the Merger Agreement and the Transactions, including the Merger, to the Company’s stockholders.

For more information, see the section entitled “—Recommendation of the Special Committee; Reasons for the Merger” beginning on page 66 of this Information Statement and the section entitled “—Recommendation of the Board; Reasons for the Merger” beginning on page 69 of this Information Statement.

Purposes and Reasons of the Parent Entities in Connection with the Merger

Under the SEC rules governing “going-private” transactions, the Parent Entities may be deemed to be affiliates of the Company and, therefore, required to express their reasons for the Merger to the Company’s Unaffiliated Stockholders as defined in Rule 13e-3 of the Exchange Act. The Parent Entities are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The Parent Entities believe that structuring the Transactions as a merger is preferable to other transaction structures because it (i) will enable Parent to acquire all of the Class A Shares (other than the Class A Rollover Shares, the Canceled Common Shares and any applicable Dissenting Shares) at the same time, (ii) will allow the Company to cease to be a publicly registered and reporting company which will provide for substantial cost savings and additional flexibility, and (iii) represents an opportunity for the holders of Class A Shares (other than the holders of the Class A Rollover Shares, the Canceled Common Shares and any applicable Dissenting Shares) to receive the Merger Consideration in cash, without interest and less any applicable withholding taxes, subject to and in accordance with the terms and conditions of the Merger Agreement.

For the Parent Entities, the primary purpose of the Merger is to allow Parent to own equity interests in the Company and to bear the rewards and risks of such ownership after the Merger is completed and the Class A Shares cease to be publicly traded. The Parent Entities have undertaken to pursue the Merger at this time because the deterioration of the market and operating environment of the Company during the second half of the 2023 fiscal year and the first fiscal quarter of 2024. The Parent Entities believe that, as a private company, the Company will be able to improve its ability to execute initiatives, including a recapitalization of the Company, that it cannot effectively execute as a public company, which, over time, will create additional enterprise value for the Company. The Parent Entities believe that this, along with the Company’s existing business and potential future opportunities, will allow the Parent Entities’ investment in the Company to achieve returns consistent with its investment objectives, which are in some cases more difficult for a business to achieve as a public company due to the reporting and associated costs and burdens placed on public companies. The Parent Entities also believe that the management and employees of the Company will be able to execute more effectively on future strategic plans. The Parent Entities have undertaken to pursue the Merger at this time for the reasons described above.

Interests of Our Directors and Executive Officers in the Merger

You should be aware that the Company’s executive officers and directors have interests in the Merger that are different from, or in addition to, the interests of the Company’s stockholders generally. The Board and the

 

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Special Committee were aware of these interests and considered them, among other matters, in approving the Merger Agreement. These interests are described below. For more information, see the section entitled “—Other Interests” beginning on page 89 of this Information Statement.

The Company’s executive officers as of the date hereof are Chris C. Kemp (Co-Founder, Chairman and Chief Executive Officer), Dr. Adam P. London (Co-Founder, Chief Technology Officer and a director), Axel Martinez (Chief Financial Officer), and Martin Attiq (Chief Business Officer).

Treatment of Company Equity Awards

For information regarding beneficial ownership of Class A Shares generally by each of the Company’s directors and named executive officers and all directors and executive officers as a group, please see the section entitled “Security Ownership of Certain Beneficial Owners and Management” beginning on page 125 of this Information Statement.

At the Effective Time, each outstanding Company Option, other than an Underwater Option, that is outstanding immediately prior to the Effective Time, whether vested or unvested, will be assumed by Parent and converted into a Converted Option to purchase Parent Class A Shares. The Converted Options will continue to be subject to substantially the same terms and conditions as were applicable to such Company Options immediately prior to the Effective Time, except that (i) each Converted Option will be exercisable for that number of Parent Class A Shares equal to the number of Class A Shares subject to such option immediately prior to the Effective Time and (ii) the per share exercise price for each Parent Class A Share issuable upon exercise of a Converted Option will be equal to the exercise price per share of Class A Shares of such option immediately before the Effective Time. Each Underwater Option will be canceled for no consideration at the Effective Time. As of April 8, 2024, all Company Options were Underwater Options.

At the Effective Time, each outstanding Director RSU Award will be accelerated in full. At the Effective Time, each Company RSU Award that has vested in accordance with its terms, or is so accelerated in the case of Director RSU Awards (except for Rollover Shares that are issued upon acceleration of Director RSU Awards) will be canceled and will only entitle the holder of such Company RSU Award to receive (without interest) an amount in cash equal to (i) the number of Class A Shares subject to such Company RSU Award immediately prior to the Effective Time multiplied by (ii) the Merger Consideration. At the Effective Time, each Company RSU Award that has not vested in accordance with its terms will be canceled for no consideration.

As of the date of this Information Statement, none of the Company’s directors and executive officers has entered into an agreement with Parent or any of its affiliates to provide for different treatment with respect to his or her Company Equity Awards.

Treatment of Company Equity Awards—Directors

The following table sets forth, for each non-employee director, (i) the number of Class A Shares subject to unvested Director RSU Awards as of April 8, 2024 and (ii) the estimated value of such Director RSU Awards in connection with the Merger. The values in the table below have been determined (a) based on the Merger Consideration of $0.50 per share and (b) assuming that the individuals identified below do not receive any additional grants of Director RSU Awards or forfeit any Director RSU Awards after April 8, 2024.

 

Name		Number of Unvested Director RSU Awards				Estimated Value of Unvested Director RSU Awards
Julie Cullivan			25,793			$	12,896.50
Michèle Flournoy			25,793			$	12,896.50
Michael Lehman			26,984			$	13,492.00
Lisa Nelson			25,793			$	12,896.50
Scott Stanford(1)			39,682			$	19,841.00

 

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(1)

Mr. Stanford holds the equity compensation he earns in connection with his service as a director of the Company for the benefit of his employer, ACME, LLC. Mr. Stanford currently intends to contribute the Class A Shares he receives upon acceleration of the vesting of his Director RSU Award to Parent in exchange for equity in Parent pursuant to a Rollover Agreement.

Treatment of Company Equity Awards—Executive Officers

The following table sets forth, for each executive officer, (i) the number of Company Options held by such individual and their applicable exercise price, and (ii) the number of Company RSU Awards held by such individual. The numbers in the table below assume that the individuals identified below do not receive any additional grants of Company Equity Awards or forfeit any Company Equity Awards after April 8, 2024.

 

Name		Number of Unexercised Company Options				Company Option Exercise Price				Number of Company RSU Awards
Martin Attiq			63,172			$	6.90				7,024
			49,999			$	7.30
			5,095			$	78.15
			15,287			$	135.60
Chris C. Kemp			443			$	6.90				21,694
			28,924			$	78.15
			86,774			$	135.60
Adam P. London			14,461			$	78.15				10,845
			43,386			$	135.60
Axel Martinez			16,666			$	7.30				68,750

Severance Entitlements

Each of Mr. Kemp, Dr. London, Mr. Martinez and Mr. Attiq are a party to an employment agreement with the Company (the “Employment Agreements”). The Employment Agreements with Mr. Kemp, Dr. London and Mr. Attiq provide that if such executive officer’s employment is terminated by the Company without “cause” or by the executive officer for “good reason” (in each case, as defined in the applicable Employment Agreement), other than in connection with a “change of control” (as defined in the applicable Employment Agreement), such executive officer will be entitled to severance consisting of (i) 12 months’ salary continuation; (ii) the target amount of any annual bonus that would otherwise be earned in the year of termination (offset by any amounts already paid toward the annual bonus); (iii) COBRA premium subsidy payments, at the rate of the Company’s normal contribution for active employees at the executive’s coverage level, for up to 12 months following termination; and (iv) accelerated vesting of unvested equity awards. All of the Employment Agreements provide that if a qualifying termination occurs within the three months prior to or twelve months following a “change of control,” the executive officer is entitled to receive a severance consisting of (i) twelve months’ salary continuation (24 months in the case of Mr. Kemp); (ii) the target amount of any annual bonus that would otherwise be earned in the year of termination (offset by any amounts already paid toward the annual bonus), except that Mr. Martinez is not entitled to any bonus amount as severance; (iii) COBRA premium subsidy payments, at the rate of the Company’s normal contribution for active employees at the executive’s coverage level, for up to 12 months following termination (18 months in the case of Mr. Kemp); and (iv) accelerated vesting of unvested equity awards (except that Mr. Martinez is entitled to accelerated vesting of only those unvested equity awards that are scheduled to vest within the twelve months following termination).

Other Arrangements

Prior to the Effective Time, Parent or their affiliates may, in their discretion, initiate negotiations of agreements, arrangements and understandings with any of the Company’s directors and executive officers regarding their employment or other future service or compensation or benefits and may enter into definitive agreements with

 

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such individuals regarding the foregoing. To the Company’s knowledge, as of the date of this Information Statement, none of Parent or their affiliates has initiated any such negotiations or entered into any such new agreements, arrangements or understandings. Current agreements, arrangements and understandings between Parent or their affiliates and any of the Company’s directors and executive officers are described below in the section entitled “—Other Interests” beginning on page 89 of this Information Statement.

Quantification of Payments and Benefits

In accordance with Item 402(t) of Regulation S-K, the table below shows the compensation that is based on or relates to the Merger and could become payable to each of Mr. Kemp, Dr. London, Mr. Martinez and Mr. Attiq, whom we refer to as “named executive officers.” The compensation in the table below is referred to as “golden parachute” compensation by the applicable SEC rules.

The table below summarizes the potential severance benefits that each named executive officer could be entitled to receive from the Company if such named executive officer incurs a qualifying termination of employment, as described above in “—Severance Entitlements,” irrespective of whether the Merger is consummated. The amounts indicated below are estimates based on multiple assumptions that may or may not actually occur and do not reflect certain compensation actions that may occur before the closing of the Merger. As a result, the actual amounts, if any, to be received by an executive officer may differ in material respects from the amounts set forth below. No final decisions have been made regarding the Company’s named executive officers’ continued employment with the Company after the completion of the Merger.

For purposes of calculating the amounts set forth in the table below, we have assumed that the Merger occurs on April 8, 2024 (which is the assumed date solely for purposes of this golden parachute compensation disclosure) and each applicable named executive officer experiences a qualifying termination of employment on that date.

Potential Change of Control Payments to Named Executive Officers

 

Name		Cash(1)				Equity(2)				Perquisites/Benefits(3)(4)				Total
Martin Attiq		$	500,000			$	3,512			$	13,566			$	517,078
Chris C. Kemp		$	600,000			$	10,847			$	44,677			$	1,255,524
Adam P. London		$	500,000			$	5,423			$	29,784			$	535,207
Axel Martinez		$	450,000			$	12,500			$	29,784			$	492,284

 

(1)

These amounts represent the cash severance benefits payable to the applicable individual upon a qualifying termination of employment, as described above in “—Severance Entitlements,” regardless of whether such termination occurs prior to, in connection with, or following the Merger. For purposes of this table, we consider these payments to be “double-trigger,” as they will only be payable in the event of a qualifying termination of employment. The amounts in this column include, (i) for Mr. Attiq, $500,000 in salary continuation and a target bonus of $0, (ii) for Mr. Kemp, $600,000 in salary continuation and a target bonus of $0, (iii) for Dr. London, $500,000 in salary continuation and a target bonus of $0, and (iv) for Mr. Martinez, $450,000 in salary continuation and a target bonus of $0. The individuals will not receive any pension or nonqualified deferred compensation benefit enhancements, tax reimbursement, or other benefits in connection with the Merger.

(2)

These amounts represent the value of each individual’s equity awards outstanding as of April 8, 2024, for which vesting would be accelerated under the individual’s severance agreement. The amounts in this column include, (i) for Mr. Attiq, 7,024 Company RSU Awards with a value of $3,512, (ii) for Mr. Kemp, 21,694 Company RSU Awards with a value of $10,847, (iii) for Dr. London, 10,845 Company RSU Awards with a value of $5,423, and (iv) for Mr. Martinez, 25,000 Company RSU Awards with a value of $12,500. No Company Options have been included as all Company Options were Underwater Options as of April 8, 2024.

 

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