Joint Venture |
9 Months Ended |
|---|---|
Sep. 30, 2024 | |
| Equity Method Investments and Joint Ventures [Abstract] | |
| Joint Venture |
Note P – Joint Venture
The Company, through its wholly-owned subsidiary, Space NV, participated in a joint venture operation with SES Techcom S.A. (“Techcom”) for the purpose of performing maintenance and operations services (“M&O Services”) for the European Space Agency (“ESA”), among others. Pursuant to a shareholders agreement dated June 28, 2007, this joint venture was created under the form of two companies: Redu Space Service SA/NV (“RSS”) and Redu Operation Services SA/NV (“ROS”), both of which are organized under Belgian law. Total authorized share capital for RSS and ROS was €250 thousand. The Company had an ownership interest in RSS and ROS of 48% and 52%, respectively, while Techcom had ownership interests in RSS and ROS of 52% and 48%, respectively. Voting rights, board representation and distribution of residual returns are proportionate to these equity interests.
M&O Services provided under the joint venture include development, operation and maintenance of satellite communication systems and ground facilities as well as in-orbit testing and educational support services on delivered infrastructure. These services are jointly performed with ROS serving as a subcontractor to RSS. Pursuant to an agreement dated April 1, 2022 (the “Transfer Agreement”), all M&O activities were transferred from ROS to RSS, including personnel, and the subcontractor relationship between ROS and RSS was terminated on the same date.
The joint venture automatically terminated on the earlier of: (i) the expiration of the M&O Service agreement with ESA, unless other business is conducted by either company at the time of expiration, (ii) complete withdrawal of ownership interests held by Space NV or Techcom, or (iii) unanimous consent by the shareholders that both RSS and ROS are dissolved.
In May 2024, Space NV (“seller”) and Techcom (“purchaser”) entered into a share purchase agreement (the “SPA Agreement”), whereby the seller sold to the purchaser all the shares owned by the seller in both ROS and RSS for total cash consideration of $4.9 million (€4.5 million), effectuating a complete withdrawal of ownership interests held by Space NV, and terminating the joint ventures, resulting in an aggregate gain on the sale of joint ventures of $1.3 million. As of June 30, 2024, the Company had no remaining ownership interest in ROS and RSS. As a result of the sale, the Company reclassified $0.2 million out of accumulated other comprehensive income (loss) related to the accumulated translation adjustments of ROS and RSS. The reclassified accumulated translation adjustments are included in other (income) expense, net on the condensed consolidated statements of operations and comprehensive income (loss).
Prior to the SPA Agreement, the Company had significant influence over the joint venture operations and received a management fee in exchange for administrative services. Both RSS and ROS were accounted for under the VIE model due to insufficient equity investment at risk to finance operations without subordinated financial support. Additional information with regard to these entities is provided below.
Consolidated Variable Interest Entity
ROS was formed with an initial issued share capital of €0.1 million representing 1,000 shares of €100 par value each. The shares were fully paid upon incorporation with Space NV and Techcom owning 52% and 48%, respectively. ROS’s board of directors is composed of five members elected for renewable terms of 2 years.
Prior to the SPA Agreement, the Company evaluated its interests in the joint venture and determined that Space NV had a variable interest in ROS as of December 31, 2023. Due to their power to direct activities of the VIE that most significantly impact its economic performance, Space NV was determined to be the primary beneficiary and, therefore, consolidated ROS as of December 31, 2023. Total assets and total liabilities for ROS were $0.5 million and $0.1 million, respectively, as of December 31, 2023.
As a result of the SPA Agreement, the Company evaluated its interests in the joint venture and determined that Space NV no longer had a variable interest in ROS. Therefore, the Company deconsolidated ROS as of June 30, 2024, resulting in a $0.1 million gain, which is included in other (income) expense, net on the condensed consolidated statements of operations and comprehensive income (loss). Net income from ROS for the three and nine months ended September 30, 2024 and 2023 was de minimis for disclosure.
Nonconsolidated Variable Interest Entity
RSS was formed with an initial issued share capital of €0.1 million representing 1,000 shares of €100 par value each. The shares were fully paid upon incorporation with Techcom and Space NV owning 52% and 48%, respectively. RSS’s board of directors is composed of five members elected for renewable terms of 2 years.
Prior to the SPA Agreement, the Company determined that Space NV was not the primary beneficiary of RSS due to Techcom having the power to direct the activities of the VIE that most significantly impact its economic performance. As a result of having ownership greater than 20% but less than 50% and holding two of five board seats, Space NV had the ability to exercise significant influence over the entity. Accordingly, RSS was accounted for as an equity method investment.
Net income (loss) from RSS was de minimis for disclosure for the nine months ended September 30, 2024 and 2023, respectively. The Company recognized a loss from RSS of $0.2 million for the three months ended September 30, 2023. Net income (loss) from RSS is included in other (income) expense, net on the condensed consolidated statements of operations and comprehensive income (loss). As a result of the SPA Agreement, the Company determined it no longer had a variable interest in RSS. Therefore, the Company derecognized the carrying value of the equity method investment as of June 30, 2024, resulting in a gain of $1.2 million, which is included in other (income) expense, net on the condensed consolidated statements of operations and comprehensive income (loss). The carrying value of the equity method investment was $3.6 million as of December 31, 2023.
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