Holicity
Inc. (“we”, “our” or “us”) is filing this Amendment No. 1 (this “Amendment”) to amend
our Annual Report on Form 10–K for the year ended December 31, 2020, originally filed with the Securities and Exchange Commission
(the “SEC”) on March 12, 2021 (the “Original Filing”), to amend and restate our financial statements and related
footnote disclosures as of December 31, 2020 and for the period from June 2, 2020 (inception) to December 31, 2020. This Amendment
also amends certain other items in the Original Filing, as listed in “Items Amended in This Filing” below.
We
are filing this Amendment to address matters discussed in the SEC’s April 12, 2021 Staff Statement on Accounting and Reporting
Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “SEC Statement”).
In the SEC Statement, the SEC staff noted that certain provisions in the typical SPAC warrant agreement may require that the warrants
be classified as a liability measured at fair value, with changes in fair value reported each period in earnings, as compared to the
historical treatment of the warrants as equity, which has been the practice of most SPACs, including us. We had previously classified
our private placement warrants and public warrants as equity (for a full description of our private placement warrants and public warrants,
refer to the registration statement on Form S-1 (File No. 333- 239926), filed in connection with the Company’s initial public offering,
declared effective by the SEC on August 4, 2020).
After
considering the SEC Statement, we have concluded that there are misstatements in our previously filed financial statements. Based on
the guidance in Accounting Standards Codification (“ASC”) 815-40, “Derivatives and Hedging — Contracts in
Entity’s Own Equity”, we concluded that provisions in the warrant agreement preclude the warrants from being accounted
for as components of equity. As the warrants meet the definition of a derivative as contemplated in ASC 815, the warrants should be
recorded as derivative liabilities on the balance sheet and measured at fair value at inception and at each reporting date in
accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the statement of operations
in the period of change. Further, ASC 815 requires that that
upfront costs and fees related to items for which the fair value option is elected (our warrant liabilities) should be recognized as expense
as incurred. Accordingly, a portion of the offering costs previously included in equity have been reclassed to expense for the period
from June 2, 2020 (inception) to December 31, 2020.
In
connection with the restatement, our management reassessed the effectiveness of our disclosure controls and procedures as of December
31, 2020. As a result of that reassessment and in light of the SEC Statement, our management determined that our disclosure controls
and procedures as of December 31, 2020 were not effective solely as a result of its classification of the warrants as components of equity
instead of as derivative liabilities. For more information, see Item 9A included in this Amendment.
The change in accounting
for the warrants did not have any impact on our liquidity, cash flows, revenues or costs of operating our business and the other non-cash
adjustments to the financial statements, in any of the Affected Periods (as defined below) or in any of the periods included in Item
8, Financial Statements and Supplementary Data in this filing. The change in accounting for the warrants does not impact the amounts
previously reported for the Company’s cash and cash equivalents, investments held in trust account, operating expenses or total
cash flows from operations for any of the reported periods.
See
“Note 3. Restatement of Previously Issued Financial Statements” to our financial statements in “Item 8. Financial
Statements and Supplementary Data” contained herein for a description of the effect of the restatement on the following financial
statements and related footnote disclosures (collectively, the “Affected Periods”):
We
believe that presenting all of the amended and restated information for the periods described above in this Amendment allows investors
and others to review all pertinent data in a single presentation. We do not intend to file amendments to any of our previously
filed Quarterly Reports on Form 10–Q for the periods affected by the restatement of our financial statements as described above
as we do not believe that restatement would provide information that would change investors’ and others’ decisions with regard
to investing in our securities and, therefore, the financial statements in those reports can still be relied upon.
In connection with the
restatement of our financial statements in this Amendment, management identified a material weakness in our internal control over financial
reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected and corrected
on a timely basis. For a discussion of management’s consideration of the material weakness identified, see Item 9A. Controls and
Procedures included in this Amendment.
In light of the SEC Statement,
our management reevaluated, with the participation of our chief executive officer and chief financial officer (our “Certifying
Officers”), the effectiveness of our disclosure controls and procedures as of December 31, 2020, pursuant to Rule 13a-15(b) under
the Exchange Act. Based solely on the restatement of the financial statements to reclassify the warrants as described in this Explanatory
Note, our Certifying Officers concluded that our disclosure controls and procedures were not effective as of
December 31, 2020.
Except
as otherwise expressly stated herein, this Amendment does not reflect events occurring after the date of the Form 10-K, nor does it modify
or update the disclosure contained in the Form 10-K in any way other than as required to reflect the amendments discussed above and reflected
below. Accordingly, this Amendment should be read in conjunction with the Form 10-K and the Company’s other filings made with the
SEC on or subsequent to March 12, 2021.
Our Principal Executive
Officer and Principal Financial Officer are providing currently dated certifications in connection with this Amendment. These
certifications are filed as Exhibits 31.1, 31.2, 32.1 and 32.2.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 1. DESCRIPTION OF ORGANIZATION
AND BUSINESS OPERATIONS
Holicity Inc. (the “Company”)
was incorporated in Delaware on June 2, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business
Combination”). Although the Company is not limited to a particular industry or sector for purposes of consummating a Business
Combination, the Company intends to initially focus its search on identifying a prospective target business in the technology,
media and telecommunications (“TMT”) industries in the United States and other developed countries. The Company’s sponsor
is X-icity Holdings Corporation (formerly Pendrell Holicity Holdings Corporation), a Washington corporation (the “sponsor”).
On February 2, 2021,
the Company entered into a business combination agreement by and among the Company, Holicity Merger Sub Inc., a wholly-owned subsidiary
of the Company (“Merger Sub”), and Astra Space, Inc. (“Astra”) (as it may be amended and/or restated from time
to time, the “Business Combination Agreement”). If the Business Combination Agreement is approved by the Company’s
and Astra’s stockholders, and the transactions contemplated by the Business Combination Agreement are consummated, Merger Sub will
merge with and into Astra with Astra surviving the merger as a wholly-owned subsidiary of the Company (the “Astra Merger”).
In addition, in connection with the consummation of the Astra Merger (the “Closing”), the Company will be renamed “Astra
Space, Inc.” and is referred to herein as “New Astra” as of the time following such change of name. For more detailed
information regarding the Astra Merger, see Note 11.
The Sponsor intends to finance the Astra Merger
in part with net proceeds from the initial public offering discussed below (see also Notes 4 and 5). Should the Astra Merger not be successful,
the Company will continue to search for another business combination.
All activity for the period from June 2,
2020 (inception) through December 31, 2020 relates to the Company’s formation, its Initial Public Offering (as defined below),
and identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the
completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income
from the proceeds of the Initial Public Offering.
The registration statement for the Company’s
Initial Public Offering was declared effective on August 4, 2020. On August 7, 2020, the Company consummated the Initial Public
Offering of 27,500,000 units (the “Units” and the shares of Class A common stock included in the Units,
the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $275.0 million.
Simultaneously with the closing of the
Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 5,000,000 warrants
(each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) to the sponsor, each
exercisable to purchase one share of Class A common stock at $11.50 per share, at a price of $1.50 per Private Placement Warrant,
generating gross proceeds to the Company of $7.5 million.
On August 11, 2020, the underwriters purchased
2,500,000 in a partial exercise of their option to purchase additional Units (the “Over-Allotment Units”) to cover over-allotments
(the “Over-Allotment Option”). The Over-Allotment Units were sold at an offering price of $10.00 per Unit, generating
gross proceeds of $25.0 million. Simultaneously with the sale of the Over-Allotment Units, the Company consummated a private sale
(the “Over-Allotment Private Placement”) of an additional 333,333 Private Placement Warrants to the sponsor, at a purchase
price of $1.50 per Private Placement Warrant, generating gross proceeds of approximately $0.5 million.
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
Transaction costs amounted to $16.9 million,
consisting of $6.0 million of underwriting fees, $10.5 million of deferred underwriting fees and $0.4 million of other offering
costs. At December 31, 2020, cash of approximately $1.0 million was held outside of the Trust Account (as defined below) and is
available for working capital purposes.
Following the closing of the Initial Public Offering, a total of $300.0 million, consisting of the net proceeds of the Initial
Public Offering, the Private Placement, the partial exercise of the Over-Allotment Option and the Over-Allotment Private Placement,
was placed in a trust account (“Trust Account”) with Continental Stock Transfer & Trust Company acting
as trustee, and is invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated
under the Investment Company Act which invest only in direct U.S. government treasury obligations, until the earlier of (i) the
completion of a Business Combination or (ii) the distribution of the Trust Account as described below.
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete
one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust
Account (as defined above) (net of amounts disbursed to management for working capital purposes and excluding the amount of any
deferred underwriting discount held in trust) at the time of the agreement to enter into the initial Business Combination. However,
the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the
voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required
to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
The Company will provide holders of the Company’s
outstanding shares of Class A common stock, par value $0.0001 per share, sold in the Initial Public Offering (the “Public
Stockholders”) with the opportunity to redeem all or a portion of their Public Shares (as defined below) upon the completion of
a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) without
a stockholder vote by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination
or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their
Public Shares for a pro rata portion of the amount then held in the Trust Account (initially anticipated to be $10.00 per Public Share,
plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred
underwriting commissions the Company will pay to the underwriters (as discussed in Note 7). These Public Shares will be recorded at a
redemption value and classified as temporary equity in accordance with the Financial Accounting Standards Board’s (“FASB”)
Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” The Company will
proceed with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination. The Company will
not redeem the Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001. If a stockholder vote
is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will,
pursuant to its Certificate of Incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the
tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior
to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides
to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation
pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each public stockholder may elect to redeem their
Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in
connection with a Business Combination, the initial stockholders (as defined below) have agreed to vote their Founder Shares (as defined
below in Note 6) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition,
the initial stockholders have agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection
with the completion of a Business Combination.
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
The Company’s Certificate of Incorporation
provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder
is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)), is restricted from redeeming its shares with respect to more than an aggregate of 20% or more
of the Public Shares, without the prior consent of the Company.
The sponsor and the Company’s officers
and directors (the “initial stockholders”) have agreed not to propose an amendment to the Certificate of Incorporation
to modify the substance or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company does not complete
a Business Combination within the Combination Period (as defined below) or with respect to any other material provisions relating
to stockholders’ rights or pre-initial Business Combination activity, unless the Company provides the Public Stockholders with
the opportunity to redeem their Public Shares in conjunction with any such amendment.
The Company will have until August 7, 2022
to complete a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination
within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly
as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable
in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (less amounts released to pay taxes
and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption
will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions,
if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders
and the Company’s board of directors, liquidate and dissolve, subject, in each case, to its obligations under Delaware law to provide
for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions
with respect to the warrants, which will expire worthless if the Company fails to complete a Business Combination within the 24-
month time period.
The initial stockholders have agreed to waive
their rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to complete
a Business Combination within the Combination Period. However, if the initial stockholders acquire Public Shares in or after the Initial
Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the
Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to
the deferred underwriting commission (see Note 7) held in the Trust Account in the event the Company does not complete a Business Combination
within in the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that
will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value
of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.00. In order to protect
the amounts held in the Trust Account, the sponsor has agreed to be liable to the Company if and to the extent any claims by a third
party (except for the Company’s independent registered public accounting firm) for services rendered or products sold to the Company,
or a prospective target business with which the Company has entered into a letter of intent, confidentiality or other similar agreement
or business combination agreement (a “Target”), reduce the amount of funds in the Trust Account to below the lesser of (i)
$10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation
of the Trust Account, if less than $10.00 per Public Share due to reductions in the value of the trust assets, less taxes payable, provided
that such liability will not apply to any claims by a third party or Target that executed a waiver of any and all rights to the monies
held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity
of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933,
as amended (the “Securities Act”). The Company will seek to reduce the possibility that the sponsor will have to indemnify
the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent
registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements
with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying financial statements are
presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and
pursuant to the rules and regulations of the SEC.
Emerging Growth Company
The Company is an “emerging growth
company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of
2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are
applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to
comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved.
Further, Section 102(b)(1) of the
JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statements declared effective or do not have
a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.
The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the
requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected
not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application
dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the
time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements
with those of another public company that is neither an emerging growth company nor an emerging growth company that has opted out
of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period.
Making estimates requires management to
exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or
set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future events. Accordingly, the actual results could differ significantly from
the Company’s estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents
as of December 31, 2020.
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
Warrant Liabilities
The Company accounts for warrants as either
equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative
guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC
815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition
of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including
whether the warrants are indexed to the Company’s common stock, among other conditions for equity classification. This assessment,
which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period
end date while the warrants are outstanding.
For issued or modified warrants that meet
all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital
at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are
required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated
fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the warrants
was estimated using a Monte Carlo simulation approach (see Note 10).
Class A Common Stock Subject to Possible
Redemption
The Company accounts for its common stock
subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”
Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable
common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption
upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other
times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights
that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at
December 31, 2020, there are 25,823,193 shares of Class A common stock subject to possible redemption presented as temporary equity,
outside of the stockholders’ equity section of the Company’s balance sheet.
Offering Costs
Offering costs consist of legal, accounting,
underwriting fees and other costs incurred through the Initial Public Offering date that are directly related to the Initial Public Offering.
Offering costs amounted to $16.9 million of which $0.7 million were allocated to the warrant liabilities and expensed immediately and
$16.2 million were charged to stockholders’ equity upon the completion of the Initial Public Offering and the partial exercise
of the Over-Allotment Option.
Income Taxes
The Company follows the asset and liability
method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included
the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized.
The Company’s currently taxable income
primarily consists of interest income on the Trust Account less any franchise taxes. The Company’s general and administrative
costs are generally considered start-up costs and are not currently deductible. During the period from June 2, 2020 (inception)
through December 31, 2020, the Company recorded no income tax expense. The Company’s effective tax rate for the period from
June 2, 2020 (inception) through December 31, 2020 was 0%, which differs from the expected income tax rate due to the Company recording
a full valuation allowance on its deferred tax assets as of December 31, 2020.
FASB ASC 740 prescribes a recognition threshold
and a measurement attribute for the financial statements recognition and measurement of tax positions taken or expected to be taken
in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination
by taxing authorities. There were no unrecognized tax benefits as of December 31, 2020. The Company recognizes accrued interest
and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and
penalties as of December 31, 2020. The Company is currently not aware of any issues under review that could result in significant
payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities
since inception.
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed
by dividing net income by the weighted average number of common shares outstanding for the period. The Company has not considered
the effect of warrants sold in the Initial Public Offering and the Private Placement to purchase 15,333,333 shares of Class A
common stock in the calculation of diluted income (loss) per share, since the exercise of the warrants is contingent upon the occurrence
of future events and the inclusion of such warrants would be anti-dilutive.
The Company’s statement of operations
includes a presentation of income per share for common shares subject to possible redemption in a manner similar to the two-class method
of income per share. Net income (loss) per common share, basic and diluted, for Class A common stock is calculated by dividing the
interest income earned on the Trust Account of $46,957 for the period from June 2, 2020 (inception) through December 31, 2020 (net of
applicable franchise and income taxes of approximately $47,000), by the weighted average number of Class A common stock for the
period. Net loss per common share, basic and diluted, for Class B common stock is calculated by dividing the net loss, less income
attributable to Class A common stock, by the weighted average number of Class B common stock outstanding for the period. Class B
common stock includes the Founder Shares as these shares do not have any redemption features and do not participate in the income earned
on the Trust Account.
The following table reflects the calculation
of basic and diluted net loss per common share (in dollars, except per share amounts):
|
|
For the period from
June 2,
2020 (inception) through
|
|
|
|
December 31,
2020
|
|
Class A Common Stock
|
|
|
|
Numerator: Earnings allocable to Class A common stock
|
|
|
|
Interest income
|
|
$
|
46,957
|
|
Income and franchise tax
|
|
|
(46,957
|
)
|
Net Income
|
|
$
|
—
|
|
Denominator: Weighted average Class A common stock
|
|
|
|
|
Class A common stock, basic and diluted
|
|
|
30,000,000
|
|
Earnings per share/basic and diluted Class A common stock
|
|
$
|
0.00
|
|
Class B Common Stock
|
|
|
|
|
Numerator: Net loss less Class A common stock net income
|
|
|
|
|
Net loss
|
|
$
|
(7,342,273
|
)
|
Class A common stock net income
|
|
|
—
|
|
Net loss
|
|
$
|
(7,342,273
|
)
|
Denominator: Weighted average Class B common stock
|
|
|
|
|
Class B common stock, basic and diluted
|
|
|
7,500,000
|
|
Loss per share/basic and diluted Class B common stock
|
|
$
|
(0.98
|
)
|
Note: for the period from June 2, 2020
(inception) through December 31, 2020, basic and diluted shares are the same as there are no non-redeemable securities that are
dilutive to the Company’s common stockholders.
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may
exceed the Federal Deposit Insurance Company Coverage of $250,000. At December 31, 2020, the Company has not experienced losses
on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets
and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates
the carrying amounts represented in the balance sheet, primarily due to their short-term nature.
Recent Accounting Pronouncements
The Company’s management does not
believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect
on the accompanying financial statements.
NOTE 3. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL
STATEMENTS
Background
of the Restatement
In April 2021, the Company concluded
that, because of a misapplication of the accounting guidance related to the Public Warrants (as defined below) and the Private
Placement Warrants that the Company issued in August 2020, the Company’s previously issued financial statements for the
periods ended September 30, 2020 and December 31, 2020 should no longer be relied upon. As such, the Company is restating its
financial statements for the such periods including in this Annual Report.
On April 12, 2021, the staff of the Securities
and Exchange Commission (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting
Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”).
In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the
warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. Since issuance in August 2020, the Company’s
warrants were accounted for as equity within the Company’s previously reported balance sheets, and after discussion and evaluation,
including with the Company’s independent auditors, management concluded that the warrants should be presented as liabilities with
subsequent fair value remeasurement.
Historically, the Company’s warrants
were reflected as a component of equity as opposed to liabilities on the balance sheets and the statements of operations did not include
the subsequent non-cash changes in estimated fair value of the warrants, based on our application of FASB ASC Topic 815-40, Derivatives
and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40”). The views expressed in the SEC Staff Statement were not
consistent with the Company’s historical interpretation of the specific provisions within its warrant agreement and the Company’s
application of ASC 815-40 to the warrant agreement. The Company reassessed its accounting for the warrants issued in August 2020 in light
of the SEC Staff’s published views. Based on this reassessment, management determined that the warrants should be classified as
liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in the Company’s Statement of
Operations for each reporting period. Further, a portion of the offering costs previously included in equity, and now attributed to the
warrant liabilities, have been reclassified as an expense.
Therefore, the Company, in consultation
with its Audit Committee, concluded that its previously issued Financial Statements for the periods ended December 31, 2020,
September 30, 2020 and its balance sheet as of August 7, 2020 (the “Affected Periods”) should be restated because of a
misapplication of the guidance with respect to accounting for certain of the Company’s outstanding warrants and should no
longer be relied upon.
The
Company’s accounting for the warrants as components of equity instead of as derivative liabilities did not have any effect on the
Company’s previously reported operating expenses, cash flows or cash.
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
Effects
of the Restatement
The
following tables summarize the effect of the restatement on each financial statement line item as of the dates, and for the period, indicated:
|
|
As Previously Reported
|
|
|
Adjustments
|
|
|
As Restated
|
|
Balance Sheet as of August 7, 2020
|
|
|
|
|
|
|
|
|
|
Warrant liabilities
|
|
$
|
-
|
|
|
$
|
21,313,333
|
|
|
$
|
21,313,333
|
|
Total liabilities
|
|
|
9,830,277
|
|
|
|
21,313,333
|
|
|
|
31,143,610
|
|
Class A common stock subject to possible redemption
|
|
|
262,053,310
|
|
|
|
(21,313,330
|
)
|
|
|
240,739,980
|
|
Class A common stock
|
|
|
129
|
|
|
|
464
|
|
|
|
593
|
|
Additional paid-in capital
|
|
|
5,002,671
|
|
|
|
746,645
|
|
|
|
5,749,316
|
|
Accumulated deficit
|
|
|
(3,581
|
)
|
|
|
(747,112
|
)
|
|
|
(750,693
|
)
|
Total Stockholders’ Equity
|
|
|
5,000,010
|
|
|
|
(3
|
)
|
|
|
5,000,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet as of December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liabilities
|
|
$
|
-
|
|
|
$
|
27,253,333
|
|
|
$
|
27,253,333
|
|
Total liabilities
|
|
|
10,761,772
|
|
|
|
27,253,333
|
|
|
|
38,015,105
|
|
Class A common stock subject to possible redemption
|
|
|
285,485,260
|
|
|
|
(27,253,330
|
)
|
|
|
258,231,930
|
|
Class A common stock
|
|
|
145
|
|
|
|
273
|
|
|
|
418
|
|
Additional paid-in capital
|
|
|
5,654,273
|
|
|
|
6,686,836
|
|
|
|
12,341,109
|
|
Accumulated deficit
|
|
|
(655,161
|
)
|
|
|
(6,687,112
|
)
|
|
|
(7,342,273
|
)
|
Total Stockholders’ Equity
|
|
|
5,000,007
|
|
|
|
(3
|
)
|
|
|
5,000,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations for the period from June 2, 2020 (Inception)
through December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant offering costs
|
|
$
|
-
|
|
|
$
|
(747,112
|
)
|
|
$
|
(747,112
|
)
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
(5,940,000
|
)
|
|
|
(5,940,000
|
)
|
Other expense, net
|
|
|
46,957
|
|
|
|
(6,687,112
|
)
|
|
|
(6,640,155
|
)
|
Loss before provision for income taxes
|
|
|
(655,161
|
)
|
|
|
(6,687,112
|
)
|
|
|
(7,342,273
|
)
|
Net loss
|
|
|
(655,161
|
)
|
|
|
(6,687,117
|
)
|
|
|
(7,342,273
|
)
|
Basic and diluted loss per share, Class B common stock
|
|
|
(0.09
|
)
|
|
|
(0.89
|
)
|
|
|
(0.98
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash Flows for the period from
June 2, 2020 (Inception) through December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(655,161
|
)
|
|
$
|
(6,687,112
|
)
|
|
$
|
(7,342,273
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred warrant offering costs
|
|
|
-
|
|
|
|
458,500
|
|
|
|
458,500
|
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
5,940,000
|
|
|
|
5,940,000
|
|
Net cash used in operating activities
|
|
|
(691,869
|
)
|
|
|
(288,612
|
)
|
|
|
(980,481
|
)
|
Proceeds from sale of Units, net of underwriting discounts paid
|
|
|
294,000,000
|
|
|
|
262,000
|
|
|
|
294,262,000
|
|
Payment of offering costs
|
|
|
(160,614
|
)
|
|
|
26,612
|
|
|
|
(134,002
|
)
|
Net cash provided by financing activities
|
|
|
301,682,297
|
|
|
|
288,612
|
|
|
|
301,970,909
|
|
Non-Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial measurement of warrants issued in connection with
the Initial Public Offering accounted for as liabilities
|
|
|
-
|
|
|
|
21,313,333
|
|
|
|
21,313,333
|
|
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
The
following tables set forth the effects of the restatement on the affected line items within our previously reported unaudited condensed
financial statements.
|
|
As Previously Reported
|
|
|
Adjustments
|
|
|
As Restated
|
|
Condensed Balance Sheet as of September 30, 2020
|
|
|
|
|
|
|
|
|
|
Warrant liabilities
|
|
$
|
-
|
|
|
$
|
24,546,666
|
|
|
$
|
24,546,666
|
|
Total liabilities
|
|
|
10,640,289
|
|
|
|
24,546,666
|
|
|
|
35,186,955
|
|
Class A common stock subject to possible redemption
|
|
|
285,990,770
|
|
|
|
(24,546,670
|
)
|
|
|
261,444,100
|
|
Class A common stock
|
|
|
140
|
|
|
|
246
|
|
|
|
386
|
|
Additional paid-in capital
|
|
|
5,148,768
|
|
|
|
3,980,203
|
|
|
|
9,128,971
|
|
Accumulated deficit
|
|
|
(149,656
|
)
|
|
|
(3,980,445
|
)
|
|
|
(4,130,101
|
)
|
Total Stockholders’ Equity
|
|
|
5,000,002
|
|
|
|
4
|
|
|
|
5,000,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statement of Operations for the
period from June 2, 2020 (inception) through September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant offering costs
|
|
$
|
-
|
|
|
$
|
(747,112
|
)
|
|
$
|
(747,112
|
)
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
(3,233,333
|
)
|
|
|
(3,233,333
|
)
|
Other expense, net
|
|
|
7,109
|
|
|
|
(3,980,445
|
)
|
|
|
(3,973,336
|
)
|
Loss before provision for income taxes
|
|
|
(149,656
|
)
|
|
|
(3,980,445
|
)
|
|
|
(4,130,101
|
)
|
Net loss
|
|
|
(149,656
|
)
|
|
|
(3,980,445
|
)
|
|
|
(4,130,101
|
)
|
Basic and diluted loss per share, Class B
|
|
|
(0.02
|
)
|
|
|
(0.53
|
)
|
|
|
(0.55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statement of Operations for the three months ended
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant offering costs
|
|
$
|
-
|
|
|
$
|
(747,112
|
)
|
|
$
|
(747,112
|
)
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
(3,233,333
|
)
|
|
|
(3,233,333
|
)
|
Other expense, net
|
|
|
7,109
|
|
|
|
(3,980,445
|
)
|
|
|
(3,973,336
|
)
|
Loss before provision for income taxes
|
|
|
(148,287
|
)
|
|
|
(3,980,445
|
)
|
|
|
(4,128,732
|
)
|
Net loss
|
|
|
(148,287
|
)
|
|
|
(3,980,445
|
)
|
|
|
(4,128,732
|
)
|
Basic and diluted loss per share, Class B
|
|
|
(0.02
|
)
|
|
|
(0.53
|
)
|
|
|
(0.55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statement of Cash Flows for the
period from June 2, 2020 (inception) through September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(149,656
|
)
|
|
$
|
(3,980,445
|
)
|
|
$
|
(4,130,101
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred warrant offering costs
|
|
|
-
|
|
|
|
458,500
|
|
|
|
458,500
|
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
3,233,333
|
|
|
|
3,233,333
|
|
Net cash used in operating activities
|
|
|
(321,572
|
)
|
|
|
(288,612
|
)
|
|
|
(610,184
|
)
|
Proceeds from sale of Units, net of underwriting discounts paid
|
|
|
294,000,000
|
|
|
|
262,000
|
|
|
|
294,262,000
|
|
Payment of offering costs
|
|
|
(160,614
|
)
|
|
|
26,612
|
|
|
|
(134,002
|
)
|
Net cash provided by financing activities
|
|
|
301,682,297
|
|
|
|
288,612
|
|
|
|
301,970,909
|
|
Non-Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial measurement of warrants issued in connection with
the Initial Public Offering accounted for as liabilities
|
|
|
-
|
|
|
|
21,313,333
|
|
|
|
21,313,333
|
|
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 4. INITIAL PUBLIC OFFERING
On August 7, 2020, the Company consummated
the Initial Public Offering of 27,500,000 Units at $10.00 per Unit, generating gross proceeds of $275.0 million.
Each Unit consists of one share of Class A common stock, par value $0.0001 per share, and one-third of one redeemable warrant
(each, a “Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock
at a price of $11.50 per share, subject to adjustment (see Note 8).
Additionally, the Company granted the underwriters
a 45-day option from the date of the final prospectus relating to the Initial Public Offering to purchase up to 4,125,000
additional Units to cover over-allotments, if any, at the Initial Public Offering price, less underwriting discounts and commissions.
On August 11, 2020, the underwriters purchased 2,500,000 Over-Allotment Units pursuant to the partial exercise of the Over-Allotment
Option. The Over-Allotment Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $25.0 million.
The underwriters did not exercise the remaining portion of their Over-Allotment Option. As a result, the initial stockholders forfeited
406,250 shares, resulting in the initial stockholders holding an aggregate of 7,500,000 shares of Class B common stock. The shares
forfeited by the initial stockholders were cancelled by the Company.
Including the partial exercise of the Over-Allotment
Option, there were an aggregate of 30,000,000 Units sold, generating total gross proceeds of $300.0 million.
NOTE 5. PRIVATE PLACEMENT
Simultaneously with the closing of the
Initial Public Offering, the Company consummated the Private Placement of 5,000,000 Private Placement Warrants to the sponsor,
at a purchase price of $1.50 per Private Placement Warrant, generating gross proceeds to the Company of $7.5 million.
On August 11, 2020, simultaneously with the
sale of the Over-Allotment Units discussed in Note 4, the Company consummated a private sale (the “Over-Allotment Private Placement”)
of an additional 333,333 Private Placement Warrants to the sponsor, at a purchase price of $1.50 per Private Placement Warrant, generating
gross proceeds of approximately $0.5 million.
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
Each whole Private Placement Warrant is
exercisable for one whole share of Class A common stock at a price of $11.50 per share. A portion of the proceeds from
the sale of the Private Placement Warrants to the sponsor was added to the proceeds from the Initial Public Offering to be held
in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement
Warrants will expire worthless. The Private Placement Warrants will be non-redeemable for cash and exercisable on a cashless
basis so long as they are held by the sponsor or its permitted transferees.
The sponsor and the Company’s officers
and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until
30 days after the completion of the initial Business Combination.
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
On June 4, 2020, Pendrell Corporation (“Pendrell”)
paid for certain offering costs for an aggregate price of $25,000 in exchange for issuance of 7,187,500 shares of the Company’s
Class B common stock, par value $0.0001 per share, (the “Founder Shares”). Pendrell transferred such shares to the sponsor
on June 9, 2020. In July 2020, the sponsor transferred shares to its independent directors and various other directors, officers, employees
and consultants of the Company and Pendrell, in each case for approximately the same per-share price as initially paid by the Company’s
sponsor. On August 4, 2020, the Company effected a 1.1-for-1 common stock split (the “Stock Split”) resulting in 7,906,250
shares outstanding held as follows: 33,000 shares by each of Wayne Perry, Dennis Weibling and Cathleen A. Massey, its independent directors,
165,000 shares held by Craig O. McCaw, 110,000 shares held by Randy Russell, 88,000 shares held by R. Gerard Salemme, 44,000 shares held
by Steve Ednie, 262,900 shares held by other directors, officers, employees and consultants of Pendrell, and 7,137,350 shares held by
the sponsor. On September 21, 2020, the sponsor forfeited 406,250 Founder Shares due to the partial exercise of the Over-Allotment Option
by the underwriters so that the Founder Shares represent 20.0% of the Company’s issued and outstanding shares after the Initial
Public Offering (see Note 4).
The initial stockholders agreed, subject
to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (i) one year
after the completion of the initial Business Combination and (ii) the date following the completion of the initial Business
Combination on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results
in all of the Company’s stockholders having the right to exchange their common stock for cash, securities or other property.
Notwithstanding the foregoing, the Founder Shares will be released from the lock-up if (1) the closing price of the Company’s
Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the
initial Business Combination or (2) the Company consummates a transaction after the initial Business Combination which results
in the stockholders having the right to exchange their shares for cash, securities or other property.
Related Party Loans
On June 4, 2020, Pendrell agreed to loan
the Company an aggregate of up to $0.3 million to cover expenses related to the Initial Public Offering pursuant to a promissory
note (the “Note”). Pendrell assigned the Note to the sponsor on June 9, 2020, which assumed all obligations thereunder.
The loan was non-interest bearing, unsecured and due at the earlier of December 31, 2021 or the completion of the Initial
Public Offering. The loan was repaid upon the closing of the Initial Public Offering out of the $1.0 million of offering proceeds
that was allocated to the payment of offering expenses.
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
In addition, in order to finance transaction
costs in connection with a Business Combination, the sponsor or an affiliate of the sponsor, or certain of the Company’s
officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).
If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust
Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust
Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust
Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital
Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements
exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination
or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the
post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants.
At December 31, 2020, the Company did not have any borrowings under the Working Capital Loans.
Administrative Support Agreement
The Company entered into an agreement whereby, commencing on
August 4, 2020 and continuing until the earlier of the Company’s consummation of a Business Combination or the Company’s
liquidation, the Company will pay an affiliate of the sponsor a total of $10,000 per month for office space, secretarial and administrative
services. For the period from June 2, 2020 (inception) through December 31, 2020, the Company incurred $48,710 in fees for these
services.
The sponsor, executive officers and directors,
or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities
on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable Business
Combinations. The Company’s audit committee will review on a quarterly basis all payments that were made to the sponsor,
officers, directors or their affiliates.
NOTE 7. COMMITMENTS
Registration Rights
The holders of Founder Shares, Private
Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any (and any shares of Class A
common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working
Capital Loans and upon conversion of the Founder Shares), are entitled to registration rights pursuant to a registration rights
agreement. These holders are entitled to certain demand and “piggyback” registration rights. The Company will bear
the expenses incurred in connection with the filing of any such registration statement. The registration rights agreement does
not provide for any maximum cash penalties nor any penalties connected with delays in registering the Company’s Class A common
stock.
Underwriting Agreement
The underwriters were paid a cash underwriting
discount of $0.20 per unit, or $6.0 million in the aggregate, upon the closing of the Initial Public Offering and the partial exercise
of the Over-Allotment Option. In addition, $0.35 per unit, or approximately $10.5 million in the aggregate, will be payable to
the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts
held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting
agreement.
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
Risks and Uncertainties
Management continues to evaluate the impact
of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative
effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact
is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments
that might results from the outcome of this uncertainty.
NOTE 8. STOCKHOLDERS’ EQUITY
Class A Common Stock—The
Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of $0.0001 per share. At December
31, 2020, there were 4,176,807 shares of Class A common stock issued and outstanding, excluding 25,823,193 shares of Class A common
stock subject to possible redemption.
Class B Common Stock—The
Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. In June 2020,
the Company issued 7,187,500 shares of Class B common stock. On August 4, 2020, the Company effected a Stock Split resulting in
7,906,250 shares of Class B common stock outstanding. On September 21, 2020, the Company forfeited 406,250 shares of Class B
common stock as a result of the partial exercise of the underwriters’ Over-Allotment Option so that the initial stockholders collectively
own 20% (7,500,000 shares) of the Company’s issued and outstanding common stock (see Note 4). At December 31, 2020, there were
7,500,000 shares of Class B common stock issued and outstanding.
Stockholders of record are entitled to
one vote for each share held on all matters to be voted on by stockholders. Holders of Class A common stock and holders of
Class B common stock will vote together as a single class on all matters submitted to a vote of our stockholders except as
required by law.
The Class B common stock will automatically
convert into Class A common stock at the time of the initial Business Combination on a one-for-one basis, subject to
adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment
as provided herein. In the case that additional shares of Class A common stock or equity-linked securities are issued or deemed
issued in connection with the initial Business Combination, the number of shares of Class A common stock issuable upon conversion
of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the total number of shares of Class A
common stock outstanding after such conversion (after giving effect to any redemptions of shares of Class A common stock by
Public Stockholders), including the total number of shares of Class A common stock issued, or deemed issued or issuable upon
conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or
in relation to the consummation of the initial Business Combination, excluding any shares of Class A common stock or equity-linked
securities or rights exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller
in the initial Business Combination and any Private Placement Warrants issued to the sponsor, officers or directors upon conversion
of Working Capital Loans, provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.
Preferred Stock—The Company
is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such designations, voting and
other rights and preferences as may be determined from time to time by the Company’s board of directors. As of December 31,
2020, there were no shares of preferred stock issued or outstanding.
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
Warrants—Public Warrants may
only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only
whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion
of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the
Company has an effective registration statement under the Securities Act covering the shares of Class A common stock
issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders
to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities
Act).
The Company has agreed that as soon as
practicable, but in no event later than 15 business days, after the closing of a Business Combination, the Company will use its
best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A
common stock issuable upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to become effective
and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration
of the Public Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Class A
common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the
definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option,
require holders of Public Warrants who exercise their warrants to do so on a “cashless” basis, and, in the event the
Company so elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will
be required to use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption
is not available. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption
or liquidation.
If (x) the Company issues additional shares
of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial
Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such
issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case
of any such issuance to the initial stockholders or their affiliates, without taking into account any Founder Shares held by the
initial stockholders or such affiliates, as applicable, prior to such issuance), (y) the aggregate gross proceeds from such issuances
represent more than 50% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination
(net of redemptions), and (z) the volume weighted average trading price of the Class A common stock during the 10 trading day period
starting on the trading day after the day on which the Company consummates the initial Business Combination (such price, the “Market
Value”) is below $9.20 per share, the exercise price of the Warrants will be adjusted (to the nearest cent) to be equal to
115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price of the Warrants
will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical
to the Public Warrants, except that the Private Placement Warrants and the shares of Class A common stock issuable upon exercise
of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business
Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so
long as they are held by the sponsor or its permitted transferees. If the Private Placement Warrants are held by someone other
than the sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable
by such holders on the same basis as the Public Warrants.
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
The Company may call the Public Warrants
for redemption:
|
●
|
in whole and not in part;
|
|
|
|
|
●
|
at a price of $0.01 per warrant;
|
|
|
|
|
●
|
upon a minimum of 30 days’ prior written notice of redemption;
and
|
|
|
|
|
●
|
if, and only if, the last sales price of the Class A common stock
equals or exceeds $18.00 per share on each of 20 trading days within the 30-trading day period ending on the third business
day prior to the date on which the Company sends the notice of redemption to the warrant holders.
|
If the Company calls the Public Warrants
for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a
“cashless basis,” as described in the warrant agreement.
In no event will the Company be required
to net cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination Period and the
Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to
their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the
respect to such warrants. Accordingly, the warrants may expire worthless.
NOTE 9. INCOME TAXES
The Company’s net deferred tax assets
are as follows:
|
|
December 31,
2020
|
|
Deferred tax asset
|
|
|
|
|
Organizational costs/Startup expenses
|
|
$
|
122,932
|
|
Net operating losses
|
|
|
14,645
|
|
Total deferred tax asset
|
|
|
137,577
|
|
Valuation allowance
|
|
|
(137,577
|
)
|
Deferred tax asset, net of allowance
|
|
$
|
—
|
|
The income tax provision consists of the
following:
|
|
For the period from
June 2,
2020 (inception) through
December 31,
2020
|
|
Federal
|
|
|
|
|
Current
|
|
$
|
—
|
|
Deferred
|
|
|
(137,577
|
)
|
|
|
|
|
|
State
|
|
|
|
|
Current
|
|
|
—
|
|
Deferred
|
|
|
—
|
|
Change in valuation allowance
|
|
|
137,577
|
|
Income tax provision
|
|
$
|
—
|
|
As of December 31, 2020, the Company had
U.S. federal net operating loss carryovers of $69,740 available to offset future taxable income.
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
In assessing the realization of the deferred
tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not
be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the
periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After
consideration of all of the information available, management believes that significant uncertainty exists with respect to future
realization of the deferred tax assets and has therefore established a full valuation allowance. For the period from June 2, 2020
(inception) through December 31, 2020, the change in the valuation allowance was $137,577.
A reconciliation of the federal income
tax rate to the Company’s effective tax rate at December 31, 2020 is as follows:
Statutory federal income tax rate
|
|
|
21.0
|
%
|
Non-deductible change in fair value of warrant liabilities
|
|
|
(17.0
|
)%
|
Non-deductible warrant offering costs
|
|
|
(2.1
|
)%
|
Change in valuation allowance
|
|
|
(1.9
|
)%
|
Income tax provision
|
|
|
—
|
%
|
The Company’s effective tax rate differs
from the U.S. statutory rate primarily due to the recognition of gain or loss from the change in the fair value of warrant liabilities
and the expensing of offering costs related to the issuance of warrants, both of which are not deductible for tax purposes.
The Company files income tax returns in
the U.S. federal jurisdiction and is subject to examination by the various taxing authorities.
NOTE 10. FAIR VALUE MEASUREMENTS
At December 31, 2020, assets held in the
Trust Account were comprised of $300,046,957 in money market funds which are invested in U.S. Treasury Securities. As of December
31, 2020, the Company had not withdrawn any of the interest earned on the Trust Account to pay franchise or income tax obligations.
At December 31, 2020, there were 10,000,000
Public Warrants and 5,333,333 Private Placement Warrants outstanding.
The fair value of the Company’s financial
assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with
the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize
the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal
assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify
assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
|
Level 1:
|
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
|
|
|
Level 2:
|
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
|
|
|
|
Level 3:
|
Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
The following table presents information about
the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2020, and indicates the
fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description
|
|
Level
|
|
|
December 31,
2020
|
|
Assets:
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account – U.S. Treasury
Securities Money Market Fund
|
|
|
1
|
|
|
$
|
300,046,957
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Warrant liabilities
|
|
|
3
|
|
|
|
27,253,333
|
|
Warrants
The warrants are accounted for as liabilities
in accordance with ASC 815-40 and are presented within warrant liabilities on the Balance Sheet. The warrant liabilities are measured
at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities
in the Statement of Operations.
The Company established the initial fair value
for the warrants on August 7, 2020, the date of the Company’s Initial Public Offering, using a Monte Carlo simulation model. The
Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one share of Class A common stock and one-third
of one Public Warrant), (ii) the sale of Private Placement Warrants, and (iii) the issuance of Class B common stock, first to the warrants
based on their fair values as determined at initial measurement, with the remaining proceeds allocated to Class A common stock subject
to possible redemption (temporary equity), Class A common stock (permanent equity) and Class B common stock (permanent equity) based
on their relative fair values at the initial measurement date.
The warrants were classified as Level 3 at
the measurement dates due to the use of unobservable inputs. There were no transfers between Levels 1, 2 or 3 during the year ended December
31, 2020.
The key inputs into the Monte Carlo simulation
model for the warrants were as follows at initial measurement and as of December 31, 2020:
Input
|
|
August
7,
2020
(Initial
Measurement)
|
|
|
December 31,
2020
|
|
Risk-free interest rate
|
|
|
0.28
|
%
|
|
|
0.41
|
%
|
Expected term (years)
|
|
|
5
|
|
|
|
5
|
|
Expected volatility
|
|
|
28.00
|
%
|
|
|
29.00
|
%
|
Exercise price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Stock price
|
|
$
|
9.50
|
|
|
$
|
10.11
|
|
The Company’s use of a Monte Carlo simulation
model required the use of subjective assumptions:
|
●
|
The
risk-free interest rate assumption was based on the U.S. Treasury rate for expected terms,
which was commensurate with the contractual term of the warrants, which expire on the earlier
of (i) five years after the completion of the initial business combination and (ii) upon
redemption or liquidation. An increase in the risk-free interest rate, in isolation, would
result in an increase in the fair value measurement of the warrant liabilities and vice versa.
|
|
●
|
The
expected term was determined based on the exercise period, the warrants become exercisable
on the later of (i) 30 days after the completion of a business combination and (ii) 12 months
from the Initial Public Offering date. An increase in the expected term, in isolation, would
result in an increase in the fair value measurement of the warrant liabilities and vice versa.
|
|
●
|
The
expected volatility assumption was based on the implied volatility from a set of comparable
publicly-traded warrants as determined based on the size and proximity of other similar business
combinations. An increase in the expected volatility, in isolation, would result in an increase
in the fair value measurement of the warrant liabilities and vice versa.
|
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
|
●
|
The
stock price at Initial Public Offering represents unit price less one-third of the warrant
price at the Initial Public Offering date. The stock price as of December 31, 2020 represents
closing price on the measurement date as observed from the ticker HOL.
|
Based on the applied volatility assumption
and the expected term to a business combination noted above, the Company determined that the fair value of the warrant liabilities upon
their issuance on August 7, 2020 was $21.3 million. As of December 31, 2020, the aggregate value of the warrants were $27.3 million.
The change in the fair value of the warrant liabilities of $5.9 million was recognized in the Statement of Operations.
The change in the fair value of the warrant liabilities for the
period from June 2, 2020 (inception) through December 31, 2020 is summarized as follows:
|
|
Warrant Liabilities
|
|
Fair value as of June 2, 2020 (inception)
|
|
$
|
—
|
|
Initial measurement on August
7, 2020(1)
|
|
|
21,313,333
|
|
Change in fair value of warrant liabilities
|
|
|
5,940,000
|
|
Fair value as of December 31, 2020
|
|
$
|
27,253,333
|
|
|
(1)
|
Includes 833,333 Public Warrants
issued as a result of the partial exercise of Over-Allotment Units and 333,333 Private Placement
Warrants as a result of the Over-Allotment Private Placement.
|
NOTE 11. PROPOSED BUSINESS COMBINATION
On February 2,
2021, the Company entered into a business combination agreement by and among the Company, Holicity Merger Sub Inc., a wholly-owned
subsidiary of the Company (“Merger Sub”), and Astra Space, Inc. (“Astra”) (as it may be amended and/or
restated from time to time, the “Business Combination Agreement”). The business combination was unanimously approved
by the Company’s board of directors (the “Board”) on January 29, 2021. If the Business Combination Agreement
is approved by the Company’s stockholders and Astra’s stockholders, and the transactions contemplated by the Business
Combination Agreement are consummated, Merger Sub will merge with and into Astra with Astra surviving the merger as a wholly-owned
subsidiary of the Company (the “Astra Merger”). In addition, in connection with the consummation of the Astra Merger
(the “Closing”), the Company will be renamed “Astra Space, Inc.” and is referred to herein as “New
Astra” as of the time following such change of name.
Pursuant to the
Business Combination Agreement, the Company has agreed to acquire all of the outstanding equity interests of Astra for approximately
$2.03 billion in aggregate consideration to be paid at the effective time of the Astra Merger (the “Effective Time”).
The consideration for the Astra Merger will be paid through stock in New Astra as follows: each share of Astra common stock and
each share of preferred stock of Astra (“Astra Preferred Stock”) that is issued and outstanding immediately prior to
the Effective Time (other than dissenting shares and shares of Astra common stock held in the treasury of Astra immediately prior
to the Effective Time) shall be converted into the right to receive, with respect to any Astra Class A common stock or Astra Preferred
Stock issued and outstanding immediately prior to the Effective Time, a number of shares of Class A common stock of the Company
equal to the “Per Share Merger Consideration Value” divided by $10.00 per share, where the “Per Share
Merger Consideration Value” is (a)(x) $2,030,000,000.00 plus (y) the aggregate exercise price of all of the options
to purchase shares of Astra common stock (“Astra Options”) and warrants to purchase shares of Astra common stock (“Astra
Warrants”) described in the Business Combination Agreement divided by (b) the number of all outstanding shares, as
of the date hereof, of Astra common stock (including (A) shares of Astra common stock issuable upon conversion of the Astra Preferred
Stock outstanding on the date hereof, (B) any shares of Astra common stock issued or issuable upon the exercise of all Astra Options
and Astra Warrants outstanding on the date of the Business Combination Agreement and (C) the vesting of Astra restricted shares
outstanding as of the date of the Business Combination Agreement). Each share of Astra Class A common stock and each share of Astra
Preferred Stock that is issued and outstanding immediately prior to the Effective Time (other than dissenting shares and shares
of Astra Class A common stock held in the treasury of Astra immediately prior to the Effective Time) shall be converted into the
right to receive a number of shares of the Company’s Class A common stock equal to (i) the Per Share Merger Consideration
Value, divided by (ii) $10.00 per share and each share of Astra Class B common stock and each share of Founders Preferred
Stock of Astra (other than dissenting shares and shares of Astra Class B common stock held in the treasury of Astra immediately
prior to the Effective Time) shall be converted into the right to receive a number of shares of the Company’s Class B Common
Stock equal to (i) the Per Share Merger Consideration Value, divided by (ii) $10.00 per share.
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
Pursuant to the
Business Combination Agreement, at the Effective Time, (i) each Astra Option that is outstanding and unexercised immediately prior
to the Effective Time shall be assumed and converted into a newly issued option exercisable for Class A common stock of New Astra,
(ii) each Astra Warrant that is issued and outstanding immediately prior to the Effective Time and has not been terminated pursuant
to its terms will be assumed and converted into a warrant exercisable for Class A common stock of New Astra on the same terms
and conditions as applied to the existing Astra Warrants, and (iii) in respect of each unvested share of restricted stock or restricted
stock unit that is unvested immediately prior to the effective time of the Astra Merger (A) each share of restricted stock or
restricted stock unit (other than those held by an individual who has waived the right to accelerate the vesting of such stock
or stock unit) will become immediately vested and the holder will be entitled to receive the applicable per share merger consideration,
less applicable tax withholding, if any and (B) each share of restricted stock or restricted stock unit held by an individual
who has waived the right to accelerate the vesting of such stock or stock unit will be cancelled and converted into restricted
shares of New Astra stock, subject to the same terms and conditions as the Astra awards.
The shares of
Class B common stock of New Astra will have the same economic terms as the shares of Class A common stock of New Astra, but the
shares of Class B common stock of New Astra will have 10 votes per share, whereas the shares of Class A common stock will have
one (1) vote per share. The outstanding shares of Class B common stock of New Astra will be subject to a “sunset” provision
permitted whereby such shares of Class B common Stock of New Astra will automatically convert to shares of Class A common stock
if the Founders and other qualified holders of Class B common stock collectively cease to beneficially own at least twenty percent
(20%) of the number of shares of Class B common stock of New Astra collectively held by the Founders and their permitted transferees
as of the Effective Time.
The closing of
the Astra Merger is subject to certain customary conditions, including, among other things: (i) approval by the Company’s
stockholders and Astra’s stockholders of the Business Combination Agreement, the Astra Merger and certain other actions
related thereto; (ii) the expiration or termination of the waiting period (or any extension thereof) applicable under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 as amended; (iii) the Company having at least $250 million of cash at the closing of the Astra
Merger, consisting of cash held in its trust account and the aggregate amount of cash actually invested in (or contributed to)
the Company pursuant to the Subscription Agreements (as defined below), after giving effect to redemptions of public shares, if
any, but before giving effect to the consummation of the closing of the Astra Merger and the payment of Astra’s and the
Company’s outstanding transaction expenses as contemplated by the Business Combination Agreement; (iv)
the shares of Class A common stock of New Astra to be issued in connection with the Astra Merger having been approved for listing
on The Nasdaq Capital Market (“Nasdaq”) subject only to official notice of issuance thereof; (v) no material adverse
effect, as defined in the Business Combination Agreement, has occurred with respect to Astra; and (vi) each Founder is employed
by and devotes his full time and attention to Astra, and has not died or become disabled.
Other Agreements
Subscription Agreements
The Company entered into subscription agreements (the “Subscription
Agreements”), each dated as of February 2, 2021, with certain institutional investors, pursuant to which, among other things,
the Company agreed to issue and sell, in private placements to close immediately prior to the closing of the Astra Merger, an aggregate
of 20,000,000 shares of Class A common stock for $10 per share for aggregate gross proceeds of $200 million. As a consequence of
the Astra Merger, as of the closing of the Astra Merger, each of the holders of shares of Class A common stock issued pursuant
to the Subscription Agreements will automatically receive, on a one-for-one basis, shares of New Astra Class A common stock.
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
Investors’
Rights Agreement
The Company entered into an investors’ rights agreement
(the “Investors’ Rights Agreement”), dated as of February 2, 2021, among the Company, Astra and certain of their
respective stockholders including the Founders and X-icity Holdings Corporation (the “Sponsor”), which will become
effective upon consummation of the Astra Merger. Pursuant to the Investors’ Rights Agreement, New Astra will be required
to register for resale securities held by the stockholders party thereto. New Astra will have no obligation to facilitate more
than one demand made by the Sponsor, or its affiliates, that New Astra register such stockholders’ securities. In addition,
the holders have certain “piggyback” registration rights with respect to registrations initiated by New Astra. New
Astra will bear the expenses incurred in connection with the filing of any registration statements pursuant to the Investors’
Rights Agreement. The Investors’ Rights Agreement restricts the ability of the Sponsor and the Founders to transfer their
shares of New Astra common stock, subject to certain permitted transfers, until the earlier of (i) the first anniversary of the
closing of the Astra Merger and (ii) following the closing of the Astra Merger, if the closing price of the New Astra common stock
equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like)
for any 20 trading days within any 30-trading day period commencing at least 150 days after the closing of the Astra Merger. The
Investors’ Rights Agreement also restricts the ability of each other stockholder who is a party thereto, including the directors
and officers of Astra, to transfer their shares of New Astra common stock, subject to certain permitted transfers, until six (6)
months after the closing of the Astra Merger.
Support
Agreements
In connection with and following the execution of the Business
Combination Agreement, certain Astra stockholders (the “Astra Supporting Stockholders”) entered into Astra support
agreements with the Company (the “Support Agreements”). Under the Support Agreements, each Astra Supporting Stockholder
agreed, on (or effective as of) the third business day following the SEC declaring effective the proxy statement/prospectus relating
to the approval by the Company’s stockholders of the Astra Merger, to execute and deliver a written consent with respect
to the outstanding shares of Astra common stock and preferred stock held by such Astra Supporting Stockholder adopting the Business
Combination Agreement and approving the Astra Merger. The shares of Astra common stock and preferred stock that are owned by the
Astra Supporting Stockholders and subject to the Support Agreements represent approximately seventy percent (70%) of the outstanding
voting power of Astra common stock and preferred stock (on an as converted basis). In addition, the Support Agreements prohibit
the Astra Supporting Stockholders from engaging in activities that have the effect of soliciting a competing acquisition proposal.
Sponsor Agreement
In connection with the execution of the Business Combination
Agreement, the Sponsor entered into an Agreement (the “Sponsor Agreement”) with Astra, pursuant to which the Sponsor
agreed to vote all shares of the Company’s common stock beneficially owned by it in favor of each of the proposals at the
Company’s stockholders meeting to vote on the Astra Merger and the adoption of the Business Combination Agreement, to use
its reasonable best efforts to take all actions reasonably necessary to consummate the Astra Merger, to waive any anti-dilution
protections provided to the Sponsor in the Company’s Certificate of Incorporation and to not take any action that would reasonably
be expected to materially delay or prevent the satisfaction of the conditions to the Astra Merger set forth in the Business Combination
Agreement.
The Sponsor Agreement
provides that the Sponsor will not redeem any shares of the Company’s common stock and will take all actions necessary to
opt out of any class in any class action with respect to any claim, derivative or otherwise, against the Company, Astra, any affiliate
or designee of the Sponsor acting in his or her capacity as director or any of their respective successors and assigns relating
to the negotiation, execution or delivery of the Sponsor Agreement, the Business Combination Agreement or the consummation of the
transactions contemplated in such agreements.
HOLICITY INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
Director Nomination Agreement
In connection with the Closing, New Astra
and the Sponsor will enter into a director nomination agreement (the “Director Nomination Agreement”). Pursuant
to the Director Nomination Agreement, the Sponsor will hold certain rights to nominate a member of the Board effective as of the
Closing Date, subject to the conditions set forth in the Director Nomination Agreement. The Sponsor’s initial nominee to
the board is expected to be Craig McCaw. The Director Nomination Agreement will terminate as of the date that is twelve (12) months
after of the Closing.
NOTE 12. SUBSEQUENT EVENTS
The Company evaluated subsequent events and
transactions that occurred after the balance sheet date through April 30, 2021, the date the audited financial statements were issued.
Based upon this review, the Company did not identify any subsequent events that, except as noted above, would have required adjustment
or disclosure in the financial statements.