ORBIT2ORBIT FINANCING INC.
NON-BROKERED PRIVATE PLACEMENT OF SUBSCRIPTION RECEIPTS
U.S. OFFERS ONLY PURSUANT TO AVAILABLE PRIVATE PLACEMENT EXEMPTIONS
TERM SHEET
This term sheet (the “Term Sheet”) summarizes the principal terms of a proposed offering of C$8.0 million of subscription receipts of Orbit2Orbit Financing Inc.. This Term Sheet is for discussion purposes only. This Term Sheet is not intended to represent an “offering memorandum” for purposes of applicable securities legislation. Any investment by the Investor will be in all respects contingent upon and subject to, among other things, satisfactory completion of due diligence and the negotiation of satisfactory documentation.
The securities described herein have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities legislation and may not be offered or sold in the United States except in compliance with the registration requirements of the U.S. Securities Act and applicable state securities legislation or pursuant to an exemption therefrom. This Term Sheet does not constitute a public offering of securities in the United States, and any offer or sale of securities in the United States will be made only to eligible U.S. Accredited Investors or Qualified Institutional Buyers pursuant to Rule 506(b) or Rule 506(c) of Regulation D under the U.S. Securities Act, as determined by the Company, and similar exemptions under applicable state securities laws.
| Issuer: | Orbit2Orbit Financing Inc. (the “Company”), a special purpose company incorporated solely for the purposes of the Offering. |
| Shell: | Credissential Inc. (the “Shell”). |
| Offering: | Non-brokered private placement of up to 10,000,000 subscription receipts of the Company (each, a “Subscription Receipt”) for aggregate gross proceeds of up to C$8,000,000, or such other amount as may be determined by the Company in its sole discretion (the “Offering”). |
| Issue Price: | C$0.80 per Subscription Receipt (the “Issue Price”), which has been determined based on a basic pre-money market capitalization of Orbit2Orbit Pty Ltd (“Orbit2Orbit”) of approximately C$19.0 million and Orbit2Orbit’s basic ordinary share count (as outlined below). |
| Subscription Receipts: | Each Subscription Receipt shall be deemed to be automatically exercised, without payment of any additional consideration and without further action on the part of the holder thereof, into one unit of the Company, consisting of one (1) common share in the capital of the Company (each, a “Common Share”) and one-half of one (1/2) common share purchase warrant (each whole common share purchase warrant, a “Warrant”), upon satisfaction of the Escrow Release Conditions subject to adjustment in certain events. Each Warrant will entitle the holder to acquire one (1) common share in the capital of the Company at a price of C$1.50 per share until the date that is 24 months following the satisfaction or waiver of the Escrow Release Conditions. |
| Reverse Take-Over: | Orbit2Orbit has entered into an agreement with the Shell and the Company to complete a going public transaction by way of a reverse take-over (the “RTO”), either directly or indirectly through a wholly owned subsidiary of Orbit2Orbit and the Shell, as applicable. The final structure of the RTO is subject to receipt of final tax, corporate and securities law advice by both Orbit2Orbit and the Shell. Pursuant to the RTO, the securities of Orbit2Orbit will be exchanged for the equivalent securities of the resulting issuer (the “Resulting Issuer”) at the Exchange Ratio (as defined herein). |
| Exchange Ratio: | The Common Shares and Warrants will ultimately be exchanged into common shares and warrants of the Resulting Issuer, pursuant to the RTO at an exchange ratio (the “Exchange Ratio”) satisfactory to the Company and at the same rate as all other ordinary shares of Orbit2Orbit are exchanged in the RTO. |
| Use of Proceeds: | The net proceeds of the Offering will be used to fund research and development related to the “Lab2Space” pathfinder program, which provides stratospheric and suborbital test-flight services to third-party payload customers delivered using launch capacity procured from third-party launch providers and using Orbit2Orbit’s standardized payload housing unit (PHU) and Stacked Payload Interface and Node Element (SPINE) interfaces, and advancement of Mission 0, which is being designed to validate controlled orbital operations and rendezvous, proximity operations and docking (RPOD) behaviour, and for general working capital purposes. |
| Escrow of Proceeds: | On the Closing Date, the gross proceeds of the Offering (the “Escrowed Proceeds”) will be delivered to and held by an escrow agent mutually acceptable to the Company (the “Escrow Agent”) and the Shell and invested in an interest bearing account (the Escrowed Proceeds, together with all interest and other income earned thereon, are referred to herein as the “Escrowed Funds”) pursuant to the terms and conditions of a subscription receipt agreement to be entered into on the Closing Date among the Company, the Shell and the Escrow Agent (the “Subscription Receipt Agreement”). The balance of Escrowed Funds will be released from escrow by the Escrow Agent to the Company upon the satisfaction of the following conditions (collectively, the “Escrow Release Conditions”): a) written confirmation from each of the Company, Orbit2Orbit and the Shell that all conditions to the completion of the RTO have been satisfied or waived, other than the release of the Escrowed Funds; b) the common shares of the Resulting Issuer being approved for listing on the Canadian Securities Exchange (the “Exchange”); c) the receipt of all regulatory, shareholder and third-party approvals, if any, required in connection with the RTO; d) the Company, the Shell and the Resulting Issuer shall not be in breach or default of any of its covenants or obligations under the Subscription Receipt Agreement, which shall all be confirmed to be true in a certificate of a senior officer of the Resulting Issuer; and e) the delivery of the release certificate to the Escrow Agent in accordance with the terms of the Subscription Receipt Agreement. For greater certainty, the Escrow Release Conditions shall have the meaning in the Subscription Receipt Agreement, regardless of any summary in the Term Sheet. If (i) the Escrow Release Conditions are not satisfied on or before the date that is 120 days from the Closing Date (the “Escrow Deadline”) or, (ii) if prior to the Escrow Deadline, the definitive agreements in respect of the RTO are terminated or the Company has advised the Escrow Agent, or announced to the public, that the RTO will not be completed (the date upon which such event occurs, the “Termination Date”), starting on the second Business Day following the Termination Date, the Escrowed Funds shall be returned to the holders of Subscription Receipts pro rata, plus a pro rata amount of any interest accrued in respect of the Escrowed Funds to the date of redemption. To the extent that the Escrowed Funds (plus accrued interest) are not sufficient to purchase all of the Subscription Receipts on the foregoing terms, the Company hereby agrees to contribute such amounts as are necessary to satisfy any shortfall. |
| Jurisdictions: | The Subscription Receipts will be offered for sale to purchasers: (i) in all provinces of Canada pursuant to available private placement exemptions, (ii) in the United States on a private placement basis pursuant to Rule 506(b) or Rule 506(c) of Regulation D under the U.S. Securities Act, as determined by the Company, and similar exemptions under applicable state securities laws, and (iii) in such offshore jurisdictions pursuant to available prospectus and registration exemptions in accordance with applicable laws. |
| Eligibility: | The Subscription Receipts will not be eligible for registered accounts. |
| Capital Structure of Orbit2Orbit: | Orbit2Orbit currently has 11,000,000 ordinary shares issued and outstanding (approximately 17,080,714 on a diluted basis including (i) C$1,550,000 of notes convertible into ordinary shares at a price equal to 35% of the Issue Price; and (ii) A$300,000 of SAFE notes convertible into ordinary shares at a price equal to 85% of the Issue Price. |
| Finder’s Commission: | Certain finders will be entitled to receive, in connection with subscribers introduced by the finder, the following upon completion of the Business Combination: (a) a cash commission equal to 7% of the aggregate gross proceeds of the Offering purchased by such subscribers; and (b) such number of common share purchase warrants (each, a “Finder’s Warrant”) as is equal to 7% of the aggregate number of Subscription Receipts issued to such subscribers. Each Finder’s Warrant will entitle the holder thereof to purchase one (1) Resulting Issuer Share at a price of C$1.50 per share for a period of 24 months following the satisfaction or waiver of the Escrow Release Conditions. No commission, fee or other transaction-based compensation will be paid in connection with any offer or sale of Subscription Receipts in the United States unless the Company has determined, after consultation with counsel, that such payment may be made in compliance with applicable U.S. federal and state broker-dealer registration requirements. |
| Closing Date: | The closing of the Offering will occur on such date as determined by the Company (the “Closing Date”). |