BUSINESS COMBINATION

6 Months Ended

Jun. 30, 2023

BUSINESS COMBINATION AND ASSET ACQUISITION

SolAero

On January 18, 2022, the Company closed on the acquisition (the “SolAero Acquisition”) of SolAero Holdings, Inc. (“SolAero”) pursuant to an Agreement and Plan of Merger (the “SolAero Merger Agreement”), dated as of December 10, 2021, by and among the Company, Supernova Acquisition Corp. (“SolAero Merger Sub”), SolAero, and Fortis Advisors LLC as stockholder representative, which provides for, among other things, the merger of SolAero Merger Sub with and into SolAero, with SolAero being the surviving corporation of the merger and a direct, wholly owned subsidiary of the Company. Pursuant to the terms of the SolAero Merger Agreement, all of the issued and outstanding shares of SolAero were cancelled in exchange for aggregate consideration of $80,000 in cash, subject to customary adjustments at closing for cash, working capital, transaction expenses and indebtedness, and amounts held back by the Company (the “SolAero Merger Consideration”). In addition, $3,600 of the SolAero Merger Consideration was placed into escrow by the Company in order to secure recovery of any Adjustment Amount (as defined in the SolAero Merger Agreement) and as security against indemnity claims. In connection with the SolAero Acquisition, the Company entered into customary employment or consulting agreements with certain key employees of SolAero.

Acquisition Consideration

The acquisition-date consideration transferred consisted of cash of $76,181. The following table presents estimates of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition:


Description	Amount
Cash and cash equivalents	$	7,815
Accounts receivable		12,322
Inventories		17,765
Prepaids and other current assets		3,536
Property, plant and equipment		24,689
Intangible assets		33,600
Right-of-use assets - operating leases (1)		1,128
Right-of-use assets - finance leases (1)		16,174
Restricted cash		3,293
Trade payables		(9,795	)
Accrued expenses		(6,883	)
Contract liabilities (2)		(26,014	)
Other current liabilities		(10,145	)
Non-current operating lease liabilities (1)		(1,128	)
Non-current finance lease liabilities (1)		(15,874	)
Other assets and liabilities, net		(204	)
Identifiable net assets acquired		50,279
Goodwill		25,902
Total purchase price	$	76,181

_________________________

(1) SolAero, as a private company, had not adopted ASC 842 prior to the acquisition. Upon acquisition, SolAero adopted ASC 842 to align accounting policies with the Company.

(2) Contract liabilities was recorded under ASC 606 in accordance with ASU No. 2021-08; therefore a reduction in contract liabilities related to the estimated fair values of the acquired contract liabilities was not required.

The following is a summary of identifiable intangible assets acquired and the related expected lives for the finite-lived intangible assets:


Type	Estimated Life in Years	Fair Value
Developed technology	13	$	10,700
In-process technology	N/A		800
Capitalized software	3		5,400
Customer relationships	12		9,000
Trademark and tradenames	12		4,700
Backlog	2		3,000
Total identifiable intangible assets acquired		$	33,600

Goodwill of $25,902 was recorded for the SolAero Acquisition, representing the excess of the purchase price over the fair value of the identifiable net assets. Goodwill recognized primarily represents the future revenue and earnings potential and certain other assets which were acquired, but that do not meet the recognition criteria, such as assembled workforce. The goodwill is expected to be deductible for income tax purposes as, prior to the merger, SolAero held tax deductible goodwill in excess of the amount recorded.

Asset Purchase Agreement

On June 2, 2023, Company closed on the purchase of certain assets pursuant to an Asset Purchase Agreement (the “Virgin APA”) with Virgin Orbit Holdings, Inc. to acquire certain assets, including a real property lease for a property located in Long Beach, California and certain production assets, machinery and equipment.

The acquisition was accounted for as an asset acquisition and the total purchase price consideration of $17,118 (which includes $999 of transaction costs) was allocated to the assets acquired on a relative fair value basis. The following table presents estimates of the relative fair value of the assets acquired and the liabilities assumed by the Company in the acquisition:


Description	Amount
Property, plant and equipment	$	15,842
Right-of-use assets - operating leases		13,939
Other non-current assets		189
Other current liabilities		(1,125	)
Non-current operating lease liabilities		(10,375	)
Other non-current liabilities		(1,352	)
Total purchase price	$	17,118