Table of Contents
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

Mark One)
☒

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterquarterly period ended September 30, 2020

2021
OR
☐

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission file number: number 001-39113

OSPREY

BLACKSKY TECHNOLOGY ACQUISITION CORP.INC.

(Exact Namename of Registrantregistrant as Specifiedspecified in Its Charter)

its charter)
Delaware83-183376047-1949578

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

13241 Woodland Park Road
Suite 300
Herndon, Virginia
20171
(Address of Principal Executive Offices)(Zip Code)

1845 Walnut Street, Suite 1111

Philadelphia, PA 19103

(Address of principal executive offices)

(212) 920 -1345

(Issuer’s

(571) 267-1571
Registrant’s telephone number)number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.0001 per shareBKSYSFTWThe New York Stock Exchange
Warrants, each to purchasewhole warrant exercisable for one share of Class A common stock at an exercise price of $11.50BKSY.WSFTW.WSThe New York Stock Exchange
Units, each consisting of one share of Class A common stock, $0.0001 par value per share, and one-half of one redeemable warrantSFTW.UNew York Stock Exchange

Check

Indicate by check mark whether the issuerregistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the pastpreceding 12 months (or for such shorter period that the registrant was required to file such reports),; and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒ No ☒

☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”,filer,” “accelerated filer”, and “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

(Check one):
Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☒Smaller reporting company☒
Emerging growth company☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☒.Yes ☐ No ☐

☒


As of November 16, 2020, 39,531,25012, 2021, there were 116,116,470 shares of the registrant’s class A common stock, at $0.0001 par value, $0.0001 per share were issued and outstanding.

OSPREY TECHNOLOGY ACQUISITION CORP.

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2020

TABLE OF CONTENTS


Table of Contents
Page

Part I. Financial Information

Table of Contents

Item 1.

Page No
PART IFinancial Statements

Information

Item 1.

Financial Statements
2
Condensed Consolidated Balance Sheets (Unaudited)

1
2

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

2
3

Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ EquityEquity/(Deficit) (Unaudited)

3
4

Condensed Consolidated Statements of Cash Flows (Unaudited)

4
5

Notes to Unaudited Condensed Consolidated Financial Statements (Unaudited)

5
7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14
38

Item 3.

Quantitative and Qualitative Disclosures RegardingAbout Market Risk

17
56

Item 4. Controls

Control and Procedures

17
56

Part II. Other Information

Item 1. Legal Proceedings

PART II		Other Information17
57

Item 1A. Risk Factors

1.		Legal Proceedings17
57

Item 1A.

Risk Factors
57
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

18
58

Item 3.

Defaults Upon Senior Securities

19
59

Item 4.

Mine Safety Disclosures

19
59

Item 5.

Other Information

19
59

Item 6. Exhibits

Exhibits19
60

Part III. Signatures

20
Signatures
62

1

Table of Contents
PART I—I - FINANCIAL INFORMATION

Item 1. Interim Financial Statements.

OSPREYSTATEMENTS


BLACKSKY TECHNOLOGY ACQUISITION CORP.

INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

   September 30,
2020		  December 31,
2019		 
   (Unaudited)    

ASSETS

   

Current assets

   

Cash

  $501,925  $1,083,611 

Prepaid expenses

   137,507   202,472 

Prepaid income taxes

   255,364   —   
  

 

 

  

 

 

 

Total Current Assets

   894,796   1,286,083 

Deferred tax asset

   4,300   1,361 

Marketable securities held in Trust Account

   318,009,666   316,958,514 
  

 

 

  

 

 

 

TOTAL ASSETS

  $318,908,762  $318,245,958 
  

 

 

  

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

   

Current liabilities

   

Accounts payable and accrued expenses

  $1,873,034  $181,732 

Income taxes payable

   —     94,636 
  

 

 

  

 

 

 

Total Current Liabilities

   1,873,034   276,368 

Deferred underwriting fee payable

   11,068,750   11,068,750 
  

 

 

  

 

 

 

Total Liabilities

   12,941,784   11,345,118 
  

 

 

  

 

 

 

Commitments (Note 7)

   

Common stock subject to possible redemption, 29,908,965 and 30,142,702 shares at redemption value at
September 30, 2020 and December 31, 2019, respectively

   300,966,968   301,900,836 
  

 

 

  

 

 

 

Stockholders’ Equity

   

Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding

   —     —   

Class A Common stock, $0.0001 par value; 150,000,000 shares authorized; 1,716,035 and 1,482,298 shares issued and outstanding (excluding 29,908,965 and 30,142,702 shares subject to possible redemption) at September 30, 2020 and December 31, 2019, respectively

   171   148 

Class B Common stock, $0.0001 par value; 25,000,000 shares authorized; 7,906,250 shares issued and outstanding at September 30, 2020 and December 31, 2019

   791   791 

Additional paid-in capital

   5,584,194   4,650,349 

(Accumulated deficit)/Retained earnings

   (585,146)   348,716 
  

 

 

  

 

 

 

Total Stockholders’ Equity

   5,000,010   5,000,004 
  

 

 

  

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

  $318,908,762  $318,245,958 
  

 

 

  

 

 

 

The accompanying

(unaudited)
(in thousands, except par value)
September 30,December 31,
20212020
Assets
Current assets:
Cash and cash equivalents$194,942 $5,098 
Restricted cash2,7305,475
Accounts receivable, net of allowance of $0 and $0, respectively4,9092,903
Prepaid expenses and other current assets5,481965
Contract assets2,3133,796
Total current assets210,37518,237
Property and equipment - net21,70320,852
Goodwill9,3939,393
Investment in equity method investees4,0703,277
Intangible assets - net2,8173,831
Satellite procurement work in process73,75862,664
Other assets1,556 1,661 
Total assets$323,672 $119,915 
Liabilities and stockholders’ equity/(deficit)
Current liabilities:
Accounts payable and accrued liabilities$10,240 $7,966 
Amounts payable to equity method investees—8,762
Contract liabilities - current14,45314,537
Debt - current portion—16,739
Other current liabilities2,7017,439
Total current liabilities27,39455,443
Liability for estimated contract losses7,6376,252
Long-term contract liabilities6832,559
Derivative liabilities51,973—
Long-term debt - net of current portion78,02284,869
Other liabilities5,1663,605
Total liabilities170,875152,728
Commitments and contingencies (Note 21)00
Stockholders’ equity/(deficit):
Preferred stock, $0.0001 par value; 100,000 shares authorized; none issued and outstanding.——
Class A common stock, $0.0001 par value-authorized, 300,000 and 65,169 shares; issued, 116,116 and 35,582 shares; outstanding, 113,324 shares and 34,692 shares as of September 30, 2021 and December 31, 2020, respectively.113
Additional paid-in capital629,090191,168
Accumulated deficit(476,304)(223,984)
Total stockholders’ equity/(deficit)152,797(32,813)
Total liabilities, and stockholders’ equity$323,672 $119,915 

See notes are an integral part of theto unaudited condensed consolidated financial statements.

statements

OSPREY

2
Table of Contents
BLACKSKY TECHNOLOGY ACQUISITION CORP.

INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

   Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
   2020  2019  2020  2019 

Operating costs

  $2,205,105  $1,061  $2,661,813  $2,881 
  

 

 

  

 

 

  

 

 

  

 

 

 

Loss from operations

   (2,205,105)   (1,061)   (2,661,813)   (2,881) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Other income:

     

Interest income

   101,658   —     1,745,490   —   

Unrealized loss on marketable securities held in Trust Account

   (16,279)   —     (20,478)   —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Other income, net

   85,379   —     1,725,012   —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Loss before provision for income taxes

   (2,119,726)   (1,061)   (936,801)   (2,881) 

Benefit from income taxes

   251,353   —     2,939   —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss

  $(1,868,373)  $(1,061)  $(933,862)  $(2,881) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted average shares outstanding, basic and diluted (1)

   9,411,691   6,875,000   9,403,795   7,353,480 
  

 

 

  

 

 

  

 

 

  

 

 

 

Basic and diluted net loss per common share (2)

  $(0.21)  $(0.00)  $(0.25)  $(0.00) 
  

 

 

  

 

 

  

 

 

  

 

 

 

(1)

Excludes an aggregate of up AND COMPREHENSIVE LOSS

(unaudited)
(in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenues:
Imagery & software analytical services$6,529 $5,534 $17,645 $13,260 
Engineering & systems integration1,408 (217)4,951 1,468 
Total revenues$7,937 $5,317 $22,596 $14,728 
Costs and expenses:
Imagery & software analytical service costs, excluding depreciation and amortization7,266 3,692 15,816 10,132 
Engineering & systems integration costs, excluding depreciation and amortization5,387 4,430 8,754 9,614 
Selling, general and administrative40,674 6,972 57,979 21,035 
Research and development57 68 85 164 
Depreciation and amortization3,503 2,691 9,804 6,448 
Satellite impairment loss— — 18,407 — 
Operating loss(48,950)(12,536)(88,249)(32,665)
Gain on debt extinguishment— — — 284 
Gain/(loss) on derivatives3,813 (139)(11,162)(418)
(Loss)/income on equity method investment(170)(297)793 (878)
Interest expense(1,225)(784)(3,663)(4,043)
Other (expense)/income, net(365)(155)(147,735)126 
Loss before income taxes(46,897)(13,911)(250,016)(37,594)
Income tax (provision)/benefit— — — — 
Loss from continuing operations(46,897)(13,911)(250,016)(37,594)
Discontinued operations:
(Loss)/gain from discontinued operations, (including (loss)/gain from disposal of Spaceflight Inc. of $(1,022) and $30,672 for the nine months ended September 30, 2021 and 2020, respectively)— (511)(1,022)28,449 
Income tax (provision)/benefit— — — — 
(Loss)/gain from discontinued operations, net of tax— (511)(1,022)28,449 
Net loss$(46,897)$(14,422)$(251,038)$(9,145)
Other comprehensive income541 — — — 
Total comprehensive loss$(46,356)$(14,422)$(251,038)$(9,145)
Basic and diluted loss per share of common stock:
Loss from continuing operations$(0.67)$(0.41)$(4.29)$(1.16)
(Loss)/gain from discontinued operations, net of tax— (0.01)(0.02)0.87 
Net loss per share of common stock$(0.67)$(0.42)$(4.31)$(0.29)

See notes to 29,908,965 shares subject to possible redemption at September 30, 2020 and 1,031,250 shares at September 30, 2019 subject to forfeiture if the underwriters’ over-allotment option was not exercised in full or in part (see Note 6). In April 2019, the Sponsor contributed back to the Company, for no consideration, 1,581,250 shares of common stock (as adjusted for the 1.1 stock dividend in October 2019) (see Note 6).

(2)

Net loss per common share – basic and diluted excludes income attributable to common stock subject to possible redemption of $80,743 and $1,409,901 for the three and nine months ended September 30, 2020, respectively (see Note 3).

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

statements

OSPREY

3
Table of Contents


BLACKSKY TECHNOLOGY ACQUISITION CORP.

INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(UNAUDITED)

THREE AND NINE MONTHS ENDED SEPTEMBEREQUITY/(DEFICIT)

Nine Months Ended September 30, 2021 and 2020

   Class A
Common Stock		   Class B
Common Stock		   Additional  Retained
Earnings/		  Total 
   Shares   Amount   Shares   Amount   Paid-in
Capital		  Accumulated
Deficit		  Stockholders’
Equity		 

Balance – January 1, 2020

   1,482,298   $148    7,906,250   $791   $4,650,349  $348,716  $5,000,004 

Change in value of common stock subject to possible redemption

   22,510    2    —      —      (1,048,951)   —     (1,048,949) 

Net income

       —      —      —     1,048,954   1,048,954 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Balance—March 31, 2020

   1,504,808    150    7,906,250    791    3,601,398   1,397,670   5,000,009 

Change in value of common stock subject to possible redemption

   633    —      —      —      114,438   —     114,438 

Net loss

   —      —      —      —      —     (114,443)   (114,443) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Balance—June 30, 2020

   1,505,441    150    7,906,250    791    3,715,836   1,283,227   5,000,004 

Change in value of common stock subject to possible redemption

   210,594    21    —      —      1,868,358   —     1,868,379 

Net loss

   —      —      —      —      —     (1,868,373)   (1,868,373) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Balance—September 30, 2020

   1,716,035   $171    7,906,250   $791   $5,584,194  $(585,146)  $5,000,010 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019

   Class B
Common Stock (2)		  Additional
Paid-In
Capital		   Accumulated
Deficit		  Total
Stockholders’
Equity		 
   Shares  Amount           

Balance—January 1, 2019

   9,487,500  $949  $24,051   $(2,177)  $22,823 

Net loss

   —     —     —      (801)   (801) 
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Balance—March 31, 2019

   9,487,500  $949  $24,051   $(2,978)  $22,022 

Forfeiture of common stock by Sponsor (1)

   (1,581,250)   (158)   158    —     —   

Net loss

   —     —     —      (1,019)   (1,019) 
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Balance—June 30, 2019

   7,906,250  $791  $24,209   $(3,997)  $21,003 

Net loss

   —     —     —      (1,061)   (1,061) 
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Balance—September 30, 2019 (2)

   7,906,250  $791  $24,209   $(5,058)  $19,942 
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

(1)

In April 2019, the Sponsor contributed back to the Company, for no consideration, 1,581,250 shares of Class B common stock (as adjusted for the 1.1 stock dividend in October 2019) (see Note 6).

(2)

Included 1,031,250 shares subject to forfeiture if the underwriters’ over-allotment option was not exercised in full or in part. In October 2019, the Company effected a 1.1 for 1 stock dividend for each share of Class B common stock outstanding (see Note 6).

(unaudited)
(in thousands)


Nine Months Ended September 30, 2021
Redeemable Convertible Preferred StockClass A Common StockClass B Common StockCommon StockAdditional Paid-InTreasury StockAccumulatedTotal Stockholders'
SharesAmountSharesAmountSharesAmountSharesAmountCapitalSharesAmountDeficitEquity
Balance as of December 31, 2020, as previously reported79,055$174,568 101,022$1 83,987$1 —$— $29,101 11,500$(12,500)$(223,984)$(207,381)
Retroactive application of the recapitalization(79,055)(174,568)(101,022)(1)(83,987)(1)34,6923162,067(11,500)12,500—174,568
Balance as of January 1, 2021, as adjusted—— —— —— 34,6923 191,168 —— (223,984)(32,813)
Stock-based compensation————————29,265———29,265 
Issuance of common stock due to Bridge Notes——————20,3432106,351———106,353 
Issuance of common stock upon exercise of stock options——————968—100———100 
Issuance of common stock upon exercise of warrants(1)
——————3,251—2,289———2,289 
Issuance of common stock upon vesting of restricted stock awards——————461—————— 
Issuance of common stock upon vesting of restricted stock units——————102—————— 
Conversion of bridge notes and accrued interest into common stock——————7,736177,096———77,097 
Exercise of warrants in connection with merger——————11,187138,328———38,329 
Issuance of sponsor earn-out shares————————(17,659)———(17,659)
Reverse recapitalization, net (Note 4)——————34,5844202,152——(1,282)200,874
Net loss———————————(251,038)(251,038)
Balance as of September 30, 2021——————113,324 $11 $629,090 —$— $(476,304)$152,797 
1.Inclusive of warrants exercised for preferred stock then exchanged into common stock in connection with merger.

Nine Months Ended September 30, 2020
Redeemable Convertible Preferred StockClass A Common StockClass B Common StockCommon StockAdditional Paid-InTreasury StockAccumulatedTotal Stockholders'
SharesAmountSharesAmountSharesAmountSharesAmountCapitalSharesAmountDeficitDeficit
Balance as of December 31, 2019, as previously reported76,971171,32172,319183,9871——$26,681 11,500$(12,500)$(203,799)$(189,616)
Retroactive application of the recapitalization(76,971)(171,321)(72,319)(1)(83,987)(1)31,074$3 158,820(11,500)12,500—171,321
Balance as of December 31, 2019, as adjusted——————31,0743185,501——(203,799)(18,295)
Adoption of Accounting Standards Updates "ASU", ASU 2014-09
———————————(650)(650)
Balance as of January 1, 2020, as adjusted——————31,0743185,501——(204,449)(18,945)
Stock based compensation, including $218 thousand in the sale of Spaceflight, Inc.———————2,101———2,101 
Issuance of preferred stock in the sale of Spaceflight, Inc—————999—3,247———3,247 
Issuance of common stock upon exercise of stock options—————93—30———30 
Issuance of common stock upon vesting of restricted stock awards—————2,143—————— 
Issuance of common stock as contingent consideration for the purchase of OpenWhere, Inc—————55—————— 
Net loss——————————(9,145)(9,145)
Balance as of September 30, 2020——————34,364$3 $190,879 —$— $(213,594)$(22,712)

See notes to unaudited condensed consolidated financial statements


4
Table of Contents
BLACKSKY TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
September 30,
20212020
Cash flows from operating activities:
Net loss$(251,038)$(9,145)
(Loss)/gain from discontinued operations, net of tax(1,022)28,449 
Loss from continuing operations(250,016)(37,594)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Depreciation and amortization expense9,804 6,448 
Loss/(gain) on debt extinguishment75 (284)
Bad debt expense4 — 
Stock-based compensation expense29,265 1,692 
Loss on issuance of Bridge Notes99,669 — 
Issuance costs for derivative liabilities and debt carried at fair value48,009 — 
Amortization of debt discount and issuance costs1,311 955 
(Gain)/loss on equity method investment(793)878 
Loss on disposal of property and equipment24 — 
Loss on derivatives11,162 418 
Satellite impairment loss18,407 — 
Changes in operating assets and liabilities:
Accounts receivable(2,010)481 
Contract assets1,487 (1,898)
Prepaid expenses, and other current assets(4,428)(137)
Other assets(423)(806)
Accounts payable and accrued liabilities(15)275 
Other current liabilities(2,195)191 
Contract liabilities - current and long-term(1,960)7,932 
Liability for estimated contract losses1,385 6,344 
Other long-term liabilities2,496 2,595 
Cash flows used in operating activities - continuing operations(38,742)(12,510)
Cash flows used in operating activities - discontinued operations— (14,894)
Net cash used in operating activities(38,742)(27,404)
Cash flows from investing activities:
Purchase of property and equipment(532)(157)
Satellite procurement work in process(48,951)(18,092)
Purchase of domain name(7)— 
Cash flows used in investing activities - continuing operations(49,490)(18,249)
Cash flows provided by investing activities - discontinued operations— 8,410 
Net cash used in investing activities(49,490)(9,839)
Cash flows from financing activities:
Proceeds from recapitalization transaction, net of payment of equity issuance costs245,222 — 
Payments of transaction costs related to sponsor earn-out shares(291)— 
Proceeds from issuance of debt58,573 3,600 
Proceeds from options exercised100 30 
Proceeds from warrants exercised163 — 
Capital lease payments— (21)
Debt payments(22,198)— 
Payments for debt issuance costs(6,238)(108)
Cash flows provided by financing activities - continuing operations275,331 3,501 
Cash flows used in financing activities - discontinued operations— — 
Net cash provided by financing activities275,331 3,501 
Net increase/(decrease) in cash, cash equivalents, and restricted cash187,099 (33,742)
Cash, cash equivalents, and restricted cash – beginning of year10,573 37,190 
Cash reclassified to assets held for sale at beginning of period— 11,383 
Cash, cash equivalents, and restricted cash – end of period$197,672 $14,831 

See notes to unaudited condensed consolidated financial statements

5
Table of Contents
The accompanying notes are an integral partfollowing table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the unaudited condensed financial statements.

OSPREY TECHNOLOGY ACQUISITION CORP.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

   Nine Months Ended
September 30,		 
   2020  2019 

Cash Flows from Operating Activities:

   

Net loss

  $(933,862)  $(2,881) 

Adjustments to reconcile net income (loss) to net cash used in operating activities:

   

Interest earned on marketable securities held in Trust Account

   (1,745,490)   —   

Unrealized loss on marketable securities held in Trust Account

   20,478   —   

Deferred tax benefit

   (2,939)  

Changes in operating assets and liabilities:

   

Prepaid expenses

   64,965   —   

Prepaid income taxes

   (255,364)   —   

Accounts payable and accrued expenses

   1,691,302   365 

Income taxes payable

   (94,636)   —   
  

 

 

  

 

 

 

Net cash used in operating activities

   (1,255,546)   (2,516) 
  

 

 

  

 

 

 

Cash Flows from Investing Activities:

   

Cash withdrawn from Trust account for franchise and income tax payments

   673,860   —   
  

 

 

  

 

 

 

Net cash provided by investing activities

   673,860   —   
  

 

 

  

 

 

 

Cash Flows from Financing Activities:

   

Proceeds from promissory note—related party

   —     87,600 

Payment of offering costs

   —     (91,740) 
  

 

 

  

 

 

 

Net cash used in financing activities

   —     (4,140) 
  

 

 

  

 

 

 

Net Change in Cash

   (581,686)   (6,656) 

Cash – Beginning

   1,083,611   42,061 
  

 

 

  

 

 

 

Cash – Ending

  $501,925  $35,405 
  

 

 

  

 

 

 

Supplementary cash flow information:

   

Cash paid for income taxes

  $350,000  $—   
  

 

 

  

 

 

 

Non-cash investing and financing activities:

   

Change in value of common stock subject to possible redemption

  $(933,868)  $—   
  

 

 

  

 

 

 

Deferred offering costs included in accrued offering costs

  $—    $171,966 
  

 

 

  

 

 

 

The accompanying notes are an integral partconsolidated balance sheets that sum to the total of the same such amounts shown in the unaudited condensed consolidated statements of cash flows:

September 30,
20212020
Cash and cash equivalents$194,942 $9,356 
Restricted cash2,730 5,475 
Total cash, cash equivalents, and restricted cash$197,672 $14,831 
September 30,
20212020
(in thousands)
Supplemental disclosures of cash flows information:
Cash paid for interest$398 $954 
Supplemental disclosures of non-cash financing and investing information:
Property and equipment additions accrued but not paid$1,184 $4,496 
Equity costs accrued but not paid$388 $— 
Capitalized interest$735 $1,086 
Issuance of common stock due to Bridge Notes and rights offering, net of issuance$106,353 $— 
Issuance of common stock warrants due to Bridge Notes$18,800 $— 
Net exercise of common stock warrants$210 $— 
Net exercise of common stock warrants in connection with merger$1,324 $— 
Conversion of Bridge Notes$77,097 $— 
Net exercise of Bridge Note warrants$38,329 $— 
Contingent liability for working capital adjustment to M&Y Space Co. Ltd$1,022 $— 
Issuance of preferred stock in the sale of Spaceflight, Inc.$— $3,247 
Application of Secured Loan against a share purchase agreement purchase price$— $26,182 
Equipment acquired under capital lease$— $22 
See notes to unaudited condensed consolidated financial statements.

statements

OSPREY

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BLACKSKY TECHNOLOGY ACQUISITION CORP.

INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER

September 30, 2020

(Unaudited)

NOTE 1—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

2021

1. Organization and Business
On September 9, 2021, Osprey Technology Acquisition Corp. (“Osprey”) consummated the previously announced merger (the “Company”“Merger”) was incorporated inwith BlackSky Holdings, Inc. (f/k/a Spaceflight Industries, Inc.), a Delaware ascorporation (“Legacy BlackSky”), pursuant to the agreement and plan of merger, dated February 17, 2021, by and among Osprey, Osprey Technology Merger Sub, Inc., a blank check company underdirect, wholly owned subsidiary of Osprey, and Legacy BlackSky. Immediately following the name “Osprey Acquisition Corp. II” on June 15, 2018. The CompanyMerger, Osprey changed its name to “Osprey Energy Acquisition Corp. II” on September 27, 2018BlackSky Technology Inc. (“BlackSky” or the “Company”). Legacy BlackSky survived the Merger and thenis now a wholly owned subsidiary of BlackSky. As a special purpose acquisition corporation, Osprey had no pre-Merger operations other than to “Osprey Technology Acquisition Corp.” on June 17, 2019. Theidentify and consummate a merger. Therefore, BlackSky’s operations post-Merger are attributable to those of Legacy BlackSky and its subsidiaries, and references to “BlackSky” or the “Company” should be read to include BlackSky’s wholly owned subsidiaries. References in this report to Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganizationactions, assets/liabilities, or similar business combination withcontracts may be references to actions taken, assets/liabilities held, or contracts entered into by one or more businesses (the “Business Combination”).

current Company subsidiaries; however, the Company has distinguished between actions taken by Legacy BlackSky or Osprey for certain time based, historical transactions.

BlackSky, headquartered in Herndon, Virginia, is a leading provider of real-time geospatial intelligence, imagery and related data analytic products and services, and mission systems. The Company has generatedmonitors activities and facilities worldwide by leveraging its own small satellite constellation and harnessing the world’s expanding sensor networks. BlackSky processes millions of observations daily in its propriety geospatial data and analytics platform (the “Platform”), which supports data from satellites in space, air sensors, environmental sensors, asset tracking sensors, industrial internet-of-things (“IoT”) connected devices, internet-enabled narrative sources, and a variety of additional geotemporal data feeds. The Company monitors for economic and pattern-of-life anomalies to produce alerts and enhance situational awareness for government and commercial customers worldwide. BlackSky’s monitoring service is powered by industry leading computing techniques including machine learning and artificial intelligence. Through the Platform, customers access global, real-time awareness monitoring solutions. The Platform itself requires basic online infrastructure with little or no revenues to date and it does not expect that it will generate operating revenues until it consummates an initial business combination at the earliest. Although the Company may pursue an acquisition opportunity in any business or industry, it intends to focus on opportunities in the technology sector, particularly companies pursuing a Software-as-a-Service (“SaaS”) model.

setup.

As of September 30, 2020,2021, BlackSky had 6 satellites in commercial operation. BlackSky has 2 primary operating subsidiaries, BlackSky Global LLC and BlackSky Geospatial Solutions, Inc. The Company also owns 50 percent of LeoStella LLC (“LeoStella”), its joint venture with Thales Alenia Space US Investment LLC (“Thales”). LeoStella is a vertically-integrated small satellite design and manufacturer based in Tukwila, Washington, from which the Company had not yet commenced operations. All activity through September 30,procures satellites to operate its business. The Company accounts for LeoStella and X-Bow Launch Systems Inc. (“X-Bow”), a space technology company specializing in additive manufacturing of solid rocket motors of which BlackSky owns approximately 17.9%. as equity method investments (Note 7)
Prior to the Merger, Legacy BlackSky owned a division called Spaceflight, Inc. (“Spaceflight”), a Delaware corporation based in Seattle, Washington, that provided small satellite launch brokerage services to customers. On June 12, 2020, relatesBlackSky sold 100% of its equity interests in Spaceflight to M&Y Space Co. Ltd. (“M&Y Space”) for a final purchase price of $31.6 million. Spaceflight’s financial results were material to the Company’s formation, the initial public offering (the “Initial Public Offering”), which is described below,financial results and, identifying a target company for a Business Combination.

The registration statements for the Company’s Initial Public Offering were declared effective on October 31, 2019. On November 5, 2019, the Company consummated the Initial Public Offering of 27,500,000 units (the “Units” and, with respect to the shares of Class A common stock includedas such, are reported as discontinued operations in the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceedsunaudited condensed consolidated statements of $275,000,000, which is described in Note 4.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 7,500,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to Osprey Sponsor II, LLC (the “Sponsor”), generating gross proceeds of $7,500,000, which is described in Note 5.

Following the closing of the Initial Public Offering on November 5, 2019, an amount of $275,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offeringoperations and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act of 1940, as amended (the “Investment Company Act”), as determined by the Company, until the earlier of: (i) the completion of a Business Combination or (ii) the distribution of the Trust Account, as described below.

On November 11, 2019, the underwriters notified the Company of their intention to exercise their over-allotment option in full on November 13, 2019. As such, on November 13, 2019, the Company consummated the sale of an additional 4,125,000 Units, at $10.00 per Unit, and the sale of an additional 825,000 Private Placement Warrants, at $1.00 per Private Placement Warrant, generating total gross proceeds of $42,075,000. A total of $41,250,000 of the net proceeds was deposited into the Trust Account, bringing the aggregate proceeds deposited in the Trust Account to $316,250,000.

Transaction costs for the Initial Public Offering amounted to $18,047,876 consisting of $6,325,000 of underwriting fees, $11,068,750 of deferred underwriting fees and $654,126 of other offering costs.

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 the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (excluding the deferred underwriting fees and taxes payable on income earned on the Trust Account) at the time of the signing an agreement to enter into a Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding 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. There is no assurance that the Company will be able to complete a Business Combination successfully.

The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) 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 on deposit in the Trust Account ($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 franchise and income tax obligations)comprehensive loss (Note 8). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.

OSPREY TECHNOLOGY ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(Unaudited)

The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination. 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 Amended and Restated Certificate of Incorporation, conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “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 Public Shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor has agreed to vote its Founder Shares (as defined below in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.

Notwithstanding the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended and Restated 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”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.

The Sponsor and the Company’s officers and directors have agreed (a) to waive their redemption rights with respect to their Founder Shares and Public Shares held by them in connection with the completion of a Business Combination and (b) not to propose an amendment to the Company’s Amended and Restated Certificate of Incorporation (a) that would modify the substance or timing of the Company’s obligation to allow redemption in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination or (b) with respect to any other provision 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 November 5, 2021 to consummate 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 earned on the funds held in the Trust Account and not previously released to the Company to pay franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish the public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s 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 Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.

The Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor or any of the Company’s officers, directors or any of their affiliates acquires 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 their deferred underwriting commission (see Note 7) held in the Trust Account in the event the Company does not complete a Business Combination within 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 assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).

In order to protect the amounts held in the Trust Account, Mr. Jonathan Cohen, the Company’s Co-Chairman, has agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a definitive agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account or 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”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, Mr. Jonathan Cohen will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that Mr. Jonathan Cohen will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, 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.

Risks and Uncertainties

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States and the World. As of the date the financial statements were available to be issued, there was considerable uncertainty around the expected duration of this pandemic. We have concluded that while it is reasonably possible that COVID-19 could have a negative effect on identifying a target company for a Business Combination, 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 result from the outcome of this uncertainty.


OSPREY TECHNOLOGY ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(Unaudited)

NOTE 2—LIQUIDITY AND GOING CONCERN

As of September 30, 2020, the Company had $501,925 in its operating bank accounts, $318,009,666 in marketable securities held in the Trust Account to be used for a Business Combination or to repurchase or redeem its Public Shares in connection therewith and a working capital deficit of $1,203,602, which excludes franchise taxes payable of $30,000 and prepaid income taxes of $255,364. As of September 30, 2020, approximately $1,760,000 of the amount on deposit in the Trust Account represented interest income, which is available to pay the Company’s tax obligations, if any.

Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating target businesses, performing due diligence on prospective target businesses, traveling to and from the offices, plants or similar location of prospective target businesses or their representatives or owners, reviewing corporate documents and material agreements of prospective target businesses and structuring, negotiating and completing a Business Combination.

The Company will need to raise additional capital through loans or additional investments from its Sponsor, an affiliate of the Sponsor, or its officers or directors. The Company’s officers, directors and Sponsor, or their affiliates, may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through November 5, 2021, which is the date the Company is required to cease all operations except for the purpose of winding up if it has not completed a Business Combination. These condensed financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. Basis of Presentation

and Summary of Significant Accounting Policies


Basis of Preparation
The accompanyingCompany has prepared its unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of AmericaGeneral Accepted Accounting Principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rulesSecurities and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, theExchange Commission (the “SEC”). The accompanying unaudited condensed consolidated financial statements include the accounts of the
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Company and its wholly-owned subsidiaries. In addition, the unaudited condensed consolidated financial statements include the Company’s proportionate share of the earnings or losses of its joint venture and a corresponding increase or decrease to its investment, with recorded losses limited to the carrying value of the Company’s investment. All intercompany transactions and balances have been eliminated upon consolidation.
For accounting purposes, the Merger constituted a reverse recapitalization (the “Reverse Recapitalization”), with Osprey treated as the “acquired” company and Legacy BlackSky as the “acquirer”. The Reverse Recapitalization was treated as the equivalent of Legacy BlackSky issuing equity for the net assets of Osprey, accompanied by a recapitalization, rather than a business combination, which would include goodwill and intangible assets. Legacy BlackSky was considered the acquirer based on the facts and circumstances, including the following:
•Legacy BlackSky’s former stockholders hold a majority ownership interest in BlackSky;
•Legacy BlackSky’s existing senior management team comprise senior management of BlackSky;
•Legacy BlackSky was able to designate all adjustments, consistingbut one director to BlackSky’s board prior to the registration on Form S-4 being declared effective;

•Legacy BlackSky is the larger of the companies based on historical operating activity and employee base; and
•Legacy BlackSky’s operations comprise the ongoing operations of BlackSky.
Accordingly, all historical financial information presented in these unaudited condensed consolidated financial statements represents the accounts of Legacy BlackSky and its wholly owned subsidiaries “as if” Legacy BlackSky is the predecessor and legal successor. The historical operations of Legacy BlackSky are deemed to be those of the Company. Thus, the financial statements included in this report reflect (i) the historical operating results of Legacy BlackSky prior to the Merger; (ii) the combined results of Osprey and Legacy BlackSky following the Merger; (iii) the assets and liabilities of Legacy BlackSky at their historical carrying value; and (iv) the Company’s equity structure for all periods presented.
The Company’s unaudited condensed consolidated financial statements have been prepared on a normal recurring nature,historical cost basis, except for certain financial assets and liabilities, including derivative financial instruments and certain outstanding debt, which are necessary for astated at fair presentation of the financial position, operating results and cash flows for the periods presented.

The accompanyingvalue. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Reportannual consolidated financial statements and notes included in the Company’s registration statement on Form 10-K for the year ended December 31, 2019 asS-1 filed with the SEC on March 6, 2020, which contains the audited financial statements and notes thereto. The financial information as of December 31, 2019 is derived from the audited financial statementsOctober 22, 2021. Unless otherwise indicated, amounts presented in the Notes pertain to the Company’s Annual Report on Form 10-Kcontinuing operations (Note 8). In management’s opinion, all adjustments of a normal recurring nature that are necessary for the year ended December 31, 2019. The interim results for the three and nine months ended September 30, 2020 are not necessarily indicativea fair statement of the results to be expected for the year ending December 31, 2020 or for any future interim periods.

accompanying unaudited condensed consolidated financial statements have been included.


Emerging Growth Company

The Company is an “emergingemerging growth company” (“EGC”), as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS“Jobs Act”), and it may. The JOBS Act permits companies with EGC status to 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 requiredan extended transition period to comply with new or revised financialaccounting standards, delaying the adoption of these accounting standards until they would apply to private companies. The Company has elected to use this extended transition period to enable it to defer the adoption of new or revised accounting standards that have different effective dates for public and private companies (thatuntil the earlier of the date it (i) is thoseno longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided for by the JOBS Act. As a result, the Company’s financial statements may not be comparable to companies that have not had a Securities Act registration statement declared effective or do not

OSPREY TECHNOLOGY ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(Unaudited)

have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. Thestandards as of public company effective dates.

In addition, the Company intends to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, provides that a company can electif, as an EGC, the Company intends to opt outrely on such exemptions, the Company is not required to, among other things: (i) provide an auditor’s attestation report on its system of internal controls over financial reporting pursuant to Section 404(b) of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such 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 comparisonSarbanes-Oxley Act; (ii) provide all of the Company’scompensation disclosure that may be required of non-emerging growth public companies under the Dodd Frank Wall Street Reform and Consumer Protection Act; (iii) comply
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with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements with another public company, which is neither an emerging growth company nor an emerging growth company,(auditor discussion and which has opted out of usinganalysis); and (iv) disclose certain executive compensation related items such as the extended transition period, difficult or impossible becausecorrelation between executive compensation and performance and comparisons of the potential differences in accounting standards used.

Chief Executive Officer’s compensation to median employee compensation.


Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, andthe disclosure of contingent assets and liabilitiescontingencies at the reporting date, of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Making These estimates requires managementare based on management’s best knowledge of current events and actions the Company may undertake in the future. Actual results could materially differ from these estimates. Significant estimates made by the Company relate to exercise significant judgment. It is at least reasonably possible thatrevenue and associated cost recognition, the estimatecollectability of accounts receivable, the recoverability and useful lives of property and equipment, the valuation of equity warrants and warrant liabilities, fair value estimates, the recoverability of goodwill and intangible assets, the provision for income taxes, and stock-based compensation.


Revenue Recognition
The Company generates revenues from the sale of imagery & software analytical services and engineering & systems integration. Imagery & software analytical services revenues include imagery, data, software, and analytics, including professional services. These revenues are recognized from the rendering of imagery & software analytical services under cost-plus-fixed-fee contracts, firm fixed price contracts, or on a time and materials basis. Engineering & systems integration revenues include engineering and integration from long-term construction contracts.
The Company adopted the provisions of the effect of a condition, situation or set of circumstancesnew revenue recognition standard, Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”(“ASC 606”), for the fiscal year beginning January 1, 2020 using the modified retrospective adoption method for the contracts that existedwere not completed at the date of initial application. Concurrent with the financial statements, which management consideredadoption of the new standard, the Company has updated its revenue recognition policy in formulating its estimate, could change inaccordance with the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.

Cash and Cash Equivalents

five-step model set forth under ASC 606.

The Company considers all short-term investmentsgenerates revenues primarily through contracts with an original maturitygovernment agencies. Most of three monthsthe contracts include multiple promises, which are generally separated as distinct performance obligations. The Company allocates the transaction price to each performance obligation based on the relative standalone selling prices using observable sales transactions where applicable.
Revenue is measured at the fair value of consideration received or lessreceivable and net of discounts. The Company applies a policy election to exclude transaction taxes collected from customer sales when purchased to be cash equivalents.the tax is both imposed on and concurrent with a specific revenue-producing transaction. The Company estimates any variable consideration, and whether the transaction price is constrained, upon execution of each contract. The Company did not have any cash equivalentsactive contracts with significant variable consideration as of September 30, 20202021.
The estimation of total revenue and December 31, 2019.

Marketable Securities Heldcosts at completion for fixed price projects is subject to many variables and requires judgment. The Company typically recognizes changes in Trust Account

Atcontract estimates on a cumulative catch-up basis in the period in which the changes are identified. Such changes in contract estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially satisfied in a prior period. Changes in contract estimates may also result in the reversal of previously recognized revenue, if the current estimate differs from the previous estimate. If at any time, the estimate of profitability for a performance obligation indicates a probable anticipated loss, the Company recognizes the total loss for the performance obligation in the period it is identified. Changes in estimates related to contracts accounted for using the cost-to-cost measure of progress are recognized in the period in which such changes are made for the inception-to-date effect of the changes. For the three and nine months ended September 30, 2021, the Company recognized a $1.6 million unfavorable impact to revenue attributable to changes in estimates for 2 engineering and systems integration contracts. During the three and nine months ended September 30, 2020, the Company’s change in estimate for a contract in a forward loss position accounted for using the cost-to-cost

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measure increased $4.0 million and December 31, 2019, the assets heldremaining engineering & systems integration costs was $6.3 million. During the nine months ended September 30, 2021, there was no revenue recognized from performance obligations satisfied in previous periods.
Imagery & Software Analytical Services
Imagery
Imagery services include imagery delivered from the Company’s satellites in orbit via its Platform and in limited cases directly uploaded to certain customers. Imagery performance obligations are recognized as service revenues at the point-in-time when the Company delivers images to the Platform or, in limited circumstances, ratably over the subscription period when the customer has a right to access the Platform for unlimited images.
Data, Software, and Analytics
The Company leverages proprietary artificial intelligence and machine learning algorithms to analyze data coming from both the Company’s proprietary sensor network and third-party sources to provide hard-to-get data, insights, and analytics for customers. The Company continues to integrate and enhance its offerings by performing contract development, while retaining the intellectual property rights. The Company also provides technology enabled professional service solutions to support customer-specific software development requests, integration, testing, and training. The Company uses system engineers to support customer efforts to manage mass quantities of data. The Company also offers professional service solutions related to object detection, site monitoring, and enhanced analytics, through which the Company can detect key objects in critical locations such as ports, airports, and construction sites; monitor changes at, damages to or other anomalies in key infrastructure; and analyze stockpiles or other critical inventory.
Imagery & software analytical services revenues from data, software, and analytics contracts are recognized from the rendering of services over time on a cost-plus-fixed-fee, firm fixed price, or time and materials basis. For firm fixed price contracts, the Company recognizes revenue using a cost-to-cost measure of progress, pursuant to which the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs to complete the performance obligation (“EAC”). A performance obligation’s EAC includes all direct costs such as labor, materials, subcontract costs, overhead and an allocable portion of general and administrative costs. In addition, an EAC of a performance obligation includes future losses estimated to be incurred on contracts, as and when known. For contracts structured as cost-plus-fixed-fee or on a time and materials basis, the Company generally recognizes revenue based on the right-to-invoice practical expedient, as the Company is contractually able to invoice the customer based on the control transferred to the customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date.
Engineering & Systems Integration
The Company develops and delivers advanced launch vehicle, satellite and payload systems for a limited number of customers that leverage the Company’s capabilities in mission systems engineering and operations, ground station operations, and software and systems development. These systems are sold to government customers under fixed price contracts. The Company generally recognizes revenue over time using the cost-to-cost method to measure progress, pursuant to which the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total EAC.
Imagery & Software Analytical Service and Engineering & Systems Integration Costs
Imagery & software analytical service costs primarily include internal aerospace and geospatial software development labor, third-party data and imagery, internal labor to support the ground stations and space operations, and cloud computing and hosting services.
Engineering & systems integration costs primarily include the cost of internal labor for product design, integration and engineering in support of long-term development contracts for launch vehicle, satellite and payload systems. The Company also incurs subcontract direct materials and external labor costs to build and test specific components such as the communications system, payload demands and sensor integration.
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Costs are expensed as incurred except for incremental costs to obtain or fulfill a contract, which are capitalized and amortized on a systematic basis consistent with the transfer of goods and services. Fringe costs incurred within or allocated to the Company’s customers are classified as overhead (included in imagery & software analytical services and engineering & systems integration costs based on the nature of the contract). The Company does not have any contracts that are subject to U.S. Government Cost Accounting Standards.

Stock-Based Compensation
Restricted Stock Awards and Restricted Stock Units
The estimated fair value of RSAs and RSUs are measured based on the grant date estimated fair value of Legacy BlackSky’s class A common stock.In order to determine the fair value of its class A common stock on the date of grant and prior to the Merger, Legacy BlackSky historically performed a valuation analysis using a combination of market and income approaches. Subsequent to the Merger, the Company uses the New York Stock Exchange (“NYSE”) trading price as the fair value of the class A common stock for valuation purposes. For all awards for which vesting is only subject to a service condition, including those subject to graded vesting, the Company has elected to use the straight-line method to amortize the fair value as compensation cost over the requisite service period.
Certain of the Company’s outstanding RSUs had performance vesting conditions that were triggered upon the consummation of the Merger. Therefore, since the performance conditions attributable to these RSUs had been met, the Company commenced recording the associated compensation expense, inclusive of a catch-up amount for the service period between their grant date and satisfaction of the performance condition, as of the closing of the Merger. The fair value of the RSUs that include a performance condition is amortized to compensation expense over the requisite service period using the accelerated attribution method, which accounts for RSUs with discrete vesting dates as if they were a separate award. Expense related to share-based payments is classified in the Trust Account were substantially heldunaudited condensed consolidated statements of operations and comprehensive loss based upon employees’ cash compensation. The Company recognized share-based compensation expense in imagery & software analytical service costs, excluding depreciation and amortization, and selling, general and administration expense on its unaudited condensed consolidated statements of operations.
Stock Options
The Company uses the Black-Scholes option pricing model to value all options and the straight-line method to amortize the fair value as compensation cost over the requisite service period. The fair value of each option granted was estimated as of the date of grant. Having elected to move towards RSAs and RSUs, the Company did not grant any options during the nine months ended September 30, 2021 under the 2014 Plan; however, the Company expects to award options to certain of its officers under the 2021 Plan (defined below). The Company's uses the following inputs under Black-Scholes as follows:.
Expected Dividend Yield. The Black-Scholes valuation model requires an expected dividend yield as an input. The dividend yield is based on historical experience and expected future changes. The Company currently has no plans to pay dividends on its class A common stock.
Expected Volatility. The expected volatility of Legacy BlackSky’s class A common stock was estimated based upon the historical share price volatility of comparable publicly traded companies.
Risk-free Interest Rate. The yield on actively traded non-inflation indexed U.S. Treasury Bills.

Common Stock Subjectnotes was used to Possible Redemption

extrapolate an average risk-free interest rate based on the expected term of the underlying grants.

Expected Term. The expected term is the estimated duration to a liquidation event based on a weighted average consideration of the most likely exit prospects for this stage of development. Legacy BlackSky was privately funded, and the lack of marketability was factored into the expected term of options granted. The Company will review its estimate in the future and adjust it, if necessary, due to changes in the Company’s historical exercises.
The most significant assumption used to determine the fair value of the Legacy BlackSky equity-based awards was the estimated fair value of the class A common stock on the grant date. In order to the determine the
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fair value of the class A common stock on the date of grant, Legacy BlackSky historically performed a valuation analysis using a combination of market and incomes approaches. Subsequent to the Merger, the Company uses the NYSE trading price as the fair value of its common stock for valuation purposes.
Legacy BlackSky historically adjusted the exercise price of certain outstanding stock options. For each award with an adjusted exercise price, Legacy BlackSky calculated the incremental fair value, which was the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. The incremental fair value was recognized as stock-based compensation expense immediately to the extent that the modified stock option already vested, and for stock options that were not yet vested, the incremental fair value has been recognized as stock-based compensation expense over the remaining vesting period.

Segment Information
The Company’s Chief Operating Decision Maker (as defined under US GAAP), who is the Company’s Chief Executive Officer, has determined the allocation of resources and assessed performance based upon the consolidated results of the Company. Accordingly, the Company is currently deemed to be comprised of only 1 operating segment and 1 reportable segment. This segment, which comprises the continuing operations of the Company’s single operating and reportable segment, provides geospatial intelligence, imagery and related data analytic products and services, and mission systems that include the development, integration, and operation of satellite and ground systems to government and commercial customers.

Debt - Application of the Fair Value Option
During the nine months ended September 30, 2021, the Company issued 3 tranches of subordinated, unsecured convertible promissory notes (collectively, the “Bridge Notes”) (refer to the discussion included in Note 13). The Company elected to account for the Bridge Notes under the fair value option. In accordance with the application of the fair value option, the Company (i) recorded the Bridge Notes at their fair values as of the dates of issuance and (ii) remeasured the fair value of the Bridge Notes at each balance sheet date and at the conversion date, which was the date of the Merger. Both the initial and subsequent measurement of the fair value of the Bridge Notes contemplated all of their terms and all of the notes’ features. Accordingly, when the fair value option was applied, the Company did not separately evaluate the Bridge Notes for the existence of embedded features that would require bifurcation as embedded derivatives under other accounting guidance. Changes to the fair value of the Bridge Notes between balance sheet dates are reported within other (expense)/income, net in the unaudited condensed consolidated statements of operations and comprehensive loss if such changes are attributable to base market risk. Changes to the fair value of the Bridge Notes are reported in other comprehensive loss in the unaudited condensed consolidated statements of operations and comprehensive loss if such changes were attributable to instrument-specific credit risk. All debt issuance costs incurred in connection with Bridge Notes accounted for pursuant to the fair value option were expensed as incurred. The Company did not separately report interest expense attributable to the Bridge Notes accounted for pursuant to the fair value option in the unaudited condensed consolidated statements of operations and comprehensive loss. Accrued interest, which did not become due until maturity of the Bridge Notes, was included in the determination of the fair value of the Bridge Notes and changes thereto. These Bridge Notes converted at the closing of the Merger (Note 13) and as of September 30, 2021, the Company did not have any Bridge Notes outstanding.

WarrantLiability
The Company accounts for itswarrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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 that would require classification as a liability under ASC 480, as well as whether the warrants qualify for equity classification or require liability classification after consideration of the guidance and criteria outlined in ASC 815, including whether the warrants are indexed to the Company’s own common stock subjectshares and whether the warrant holders could potentially require “net cash
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settlement” in a circumstance outside of the Company’s control, among other conditions that impact 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 possible redemptionbe recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all of the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and remeasured at fair value as of each balance sheet date thereafter. The Company accounted for the warrants issued in connection with the Bridge Notes in accordance with the guidance contained in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stockASC 815-40-15-7D, under which the warrants did not meet the criteria for equity treatment and were recorded as liabilities. Accordingly, the Company classified the warrants as liabilities at their fair value and adjusted the warrants to fair value at each reporting period and at conversion. These liabilities were subject to mandatory redemption is classified as a liability instrumentre-measurement at each balance sheet date until exercised, and is measured atany change in fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either withinvalue was recognized in the controlCompany’s unaudited condensed consolidated statements of operations and comprehensive loss. At the consummation of the holder or subject to redemption uponMerger, all of 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 Classoutstanding Legacy BlackSky class A common stock features certain redemption rights that are considered to be outside ofwarrants issued in connection with the Company’s controlBridge Notes and subject to occurrence of uncertain future events. Accordingly, Classaccounted for as liabilities were automatically net exercised into Legacy BlackSky class A common shares and then exchanged for 3.9 million BlackSky common shares based upon the class A common stock subject to possible redemption isexchange ratio. As such, these warrants issued in connection with the Bridge Notes are no longer presented at redemption value as temporary equity, outside of the stockholders’ equity section ofin the Company’s unaudited condensed consolidated balance sheets.

Income Taxes

The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement 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.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement 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. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penaltiessheets as of September 30, 2020 and December 31, 2019. The Company is currently not aware2021.

As of any issues under review that could result in significant payments, accruals or material deviation from its position.

OSPREY TECHNOLOGY ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(Unaudited)

The Company may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and city tax laws. The Company is subject to income tax examinations by major taxing authorities since inception. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

Net Loss Per Common Share

Net loss per common share is computed by dividing adjusted net loss by the weighted average number of common shares outstanding during the period. Weighted average shares outstanding at September 30, 20192021, the Company’s balance sheet included an aggregate of 1,031,250 shares of common stockcertain liability classified warrants that were subjectissued at the time of Osprey’s initial public offering ("the IPO") and remained unexercised subsequent to forfeiture if the over-allotment option was not exercised by the underwriters (see Note 6). The Company applies the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption at September 30, 2020, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic loss per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company has not considered the effect of warrants to purchase 24,137,500 shares of common stock that were sold in the Initial Public Offering and the private placement in the calculation of diluted loss per share, since the exercise of the warrants is contingent upon the occurrence of future events. As a result, diluted loss per share is the same as basic loss per share for the periods presented.

Reconciliation of Net Loss Per Common Share

The Company’s net (loss) income is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares only participate in the earning of the Trust Account and not the income or losses of the Company. Accordingly, basic and diluted loss per common share is calculated as follows:

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2020   2019   2020   2019 

Net loss

  $(1,868,373)   $(1,061)   $(933,862)   $(2,881) 

Less: Income attributable to common stock subject to possible redemption

   (80,743)    —      (1,409,901)    —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net loss

  $(1,949,116)   $(1,061)   $(2,343,763)   $(2,881) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding, basic and diluted

   9,411,691    6,875,000    9,403,795    7,353,480 
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted net loss per share

  $(0.21)   $(0.00)   $(0.25)   $(0.00) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

Fair Value of Financial Instruments

Merger. The fair value of the Company’s assetsredeemable warrants sold as part of the units issued upon consummation of Osprey’s IPO (the “Public Warrants”), and liabilities, which qualifythe Company has recorded as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximatesa long-term liability, was estimated as of the carrying amounts representeddate of the Merger and as of September 30, 2021 using the Public Warrants’ quoted market price. The non-redeemable private placement warrants (“Private Placement Warrants”) were valued using a Black-Scholes option pricing model for initial and subsequent measurements and were also recorded as a long-term liability in the accompanyingCompany's unaudited condensed consolidated balance sheets. The liabilities associated with the Public Warrants and the Private Placement Warrants are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss.


Sponsor Shares
Osprey pre-Merger class B common shares were exchanged for the Company's class A common shares at the consummation of the merger ("Sponsor Shares"). A portion of these shares are subject to specific lock-up provisions and potential forfeitures depending upon the post-Merger performance of the Company's class A common stock ("Sponsor Earn-Out Shares"). Variable-settled equity instruments that do not meet all the criteria for equity classification are required to be recorded at their initial fair value on the date of issuance, and remeasured at fair value as of each balance sheet date thereafter. The Company accounted for the Sponsor Shares in accordance with the guidance contained in ASC 815-40, under which the Sponsor Shares did not meet the criteria for equity treatment and were recorded as liabilities at their fair value and adjusted to fair value at each reporting period. The change in fair value was recognized in loss on derivatives in the unaudited condensed consolidated statements of operations and comprehensive loss.
Transaction Costs
Transaction costs consist of legal fees, accounting fees, underwriting fees, and other third-party costs related directly to the Reverse Recapitalization. In a reverse recapitalization transaction between a private operating company and a public shell company that has cash on its balance sheet that is accounted for as the issuance of equity by the accounting acquirer for the cash of the shell company, the transaction costs incurred by Legacy BlackSky were permitted to be charged directly to equity. Upon the closing of the Merger, $19.2 million of transaction costs that had been incurred by Legacy BlackSky, inclusive of amounts that previously had been capitalized as other assets prior to the closing of the Merger, were recorded as a reduction to additional paid-in capital in the unaudited condensed consolidated statements of changes in redeemable preferred stock
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and stockholders’ equity/(deficit) and unaudited condensed consolidated balance sheets, primarily dueand as a reduction to their short-term nature.

Recentproceeds from the transaction in the unaudited condensed consolidated statements of cash flows. The transaction costs of $0.3 million related to the Sponsor Earn-Out Shares were expensed. There were no deferred transaction costs capitalized as of December 31, 2020.


3. Accounting Standards

Management does Updates (“ASU”)


Accounting Standards Recently Adopted
In August 2018, the FASB issued ASU No. 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The update requires an entity to determine which implementation costs to capitalize as an asset related to the service contract and subsequently expense over the term of the hosting arrangement, versus which costs to expense as activities are performed. In addition, the update provides specific guidance regarding the income statement, cash flow statement, and balance sheet presentation of amounts recognized for, payments of, and prepayments attributable to capitalized implementation costs, respectively. This ASU can be applied on a prospective or retrospective basis. The guidance is effective for all public business entities for fiscal years beginning after December 15, 2019, including interim periods therein. For all other entities, the guidance is effective for fiscal years beginning after December 15, 2020, and for interim periods beginning after December 15, 2021. The update also permits early adoption, including adoption in any interim period. The Company adopted the guidance on January 1, 2021. Adoption of the standard did not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effectimpact to the consolidated financial statements.

Accounting Standards Recently Issued But Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02“Leases”. Theamendments in this update require the recognition of lease assets and lease liabilities on the Company’s condensed financial statements.

OSPREY TECHNOLOGY ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(Unaudited)

NOTE 4—INITIAL PUBLIC OFFERING

Pursuantbalance sheet, as well as certain qualitative disclosures regarding leasing arrangements. The guidance requires the use of the modified retrospective method, with the cumulative effect of initially applying these updates recognized at the date of initial application. The guidance is effective for public business entities for annual periods, including interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. For all other entities, the guidance is effective for fiscal years beginning after December 15, 2021, and for interim periods beginning after December 15, 2022, with early adoption permitted. The Company is currently in the planning stage and will adopt the guidance for the fiscal year beginning on January 1, 2022. The Company expects the adoption of the standard to have a material impact to the Initial Public Offering,unaudited condensed consolidated balance sheets, since the Company sold 31,625,000 Units,will be required to report operating leases in the unaudited condensed consolidated balance sheets for the first time. The Company is in the early stages of its adoption efforts and cannot yet reasonably estimate the impact to the consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13,“Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The amendments in this update are primarily for entities holding financial assets and net investment leases measured under an incurred loss impairment methodology. A new methodology must be adopted to reflect expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates, which includeswould include losses on trade accounts receivable. This ASU requires modified retrospective application. The guidance is effective for public business entities that are not smaller reporting companies for fiscal years beginning after December 15, 2019, including interim periods therein. For all other entities, the full exercise byguidance is effective for fiscal years beginning after December 15, 2022, including interim periods therein. The Company is currently in the underwritersplanning stage and will adopt the guidance on January 1, 2023. The Company has not yet determined the potential impact, if any, that this guidance will have on its consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): “Simplifying the Accounting for Income Taxes”. The amendments in this update are intended to simplify various aspects related to accounting for income taxes. This ASU removes certain exceptions to the general principles in Topic 740 and
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also clarifies and amends existing guidance to improve consistent application. This ASU can be applied on a retrospective, modified retrospective or prospective basis. The guidance is effective for all public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. For all other entities, the guidance is effective for fiscal years beginning after December 15, 2021, and for interim periods beginning after December 15, 2022. Early adoption is also permitted. The Company is currently in the planning stage and will adopt the guidance for the fiscal year beginning on January 1, 2022. The Company has not yet determined the potential impact, if any, that this guidance will have on its consolidated financial statements.
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting For Convertible Instruments and Contracts in an Entity’s Own Equity”. The amendments in this update address issues identified as a result of the complexity associated with applying GAAP to certain financial instruments with characteristics of liabilities and equity. This ASU can be applied on a prospective basis. The guidance is effective for public business entities that are not smaller reporting companies for fiscal years beginning after December 15, 2021, including interim periods therein, with early adoption permitted. For all other entities, the guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The Company is currently in the planning stage and expects to adopt the guidance on January 1, 2024. The Company has not yet determined the potential impact, if any, that adoption will have on its consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, “Earnings per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)”, which clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified upon modification or exchange. This ASU is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted for all entities, including adoption in an interim period. The Company plans to adopt this guidance as of January 1, 2022 and is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.

4. Reverse Recapitalization
As described in Note 1, the Merger between Osprey and Legacy BlackSky closed on September 9, 2021. In connection with the Merger:
•A number of parties agreed to purchase an additional 4,125,000 Units, ataggregate of 18.0 million shares of Osprey class A common stock (the “PIPE Shares”), for a purchase price of $10.00 per Unit. Each Unit consistsshare, and an aggregate purchase price of one share$180.0 million, pursuant to the subscription agreement dated February 17, 2021. While executed pre-Merger, the sale of ClassPIPE Shares was consummated substantially concurrently with the closing of the Merger and participants received shares of BlackSky class A common stock.
•As part of a strategic partnership, Palantir Technologies Inc. (“Palantir”) agreed to purchase an aggregate of 0.8 million shares of Osprey class A common stock for a purchase price of $10.00 per share and one-halfan aggregate purchase price of one warrant (“Public Warrant”$8.0 million pursuant to a subscription agreement entered into on August 31, 2021, which contained substantially similar terms as the PIPE subscription agreement described above. The Palantir subscription agreement closed on September 13, 2021, 2 business days subsequent to the closing of the Merger and Palantir received 0.8 million shares of BlackSky class A common stock.
•79.0 million shares of Osprey class A common stock were issued for all of the issued and outstanding equity interests of Legacy BlackSky, inclusive of shares of Osprey’s class A common stock issued in exchange for Legacy BlackSky’s (1) issued and outstanding class A common stock, (2) issued and outstanding preferred stock, (3) shares of common stock issued upon the conversion of Legacy BlackSky’s convertible promissory notes (inclusive of interest accrued thereon), as if each had converted into Legacy BlackSky class A common stock immediately prior to the Merger, and (4) shares of preferred stock and common stock issued upon the manual or automatic exercise of certain
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warrants immediately prior to the Merger. Both outstanding preferred stock shares and preferred stock share activity related to all of Legacy BlackSky’s redeemable convertible preferred stock have been retrospectively adjusted for the exchange and included as equity in the Company’s unaudited condensed consolidated balance sheets and statements of changes in redeemable preferred stock and stockholders’ equity/(deficit) from the beginning of the earliest period presented in order to reflect the Company’s equity structure for all reporting periods.
•Outstanding Legacy BlackSky RSUs, RSAs, options, and common stock warrants that were neither exercised nor forfeited immediately prior to the Merger were exchanged, based on the exchange ratio applicable to shares of Legacy BlackSky’s class A common stock, for RSUs, RSAs, options, and warrants, respectively, that vest into or become exercisable for the Company’s class A common stock. Upon exchange, these awards remained subject to the same vesting and exercise terms and conditions as were applicable to the awards pre-Merger.
•21.4 million shares of Osprey class A common stock were redeemed by Osprey pre-Merger public shareholders. The price paid in excess of the pro-rata portion of additional paid-in capital was recorded in accumulated deficit in the unaudited condensed consolidated balance sheets and unaudited condensed consolidated statements of changes in redeemable preferred stock and stockholders’ equity/(deficit) as of and for the nine months ended September 30, 2021.
•7.9 million shares of Osprey class B common stock that were outstanding immediately prior to the Merger were converted to 7.9 million shares of Osprey class A common stock, inclusive of 2.4 million shares that are subject to (1) up to a seven year lockup period, with release terms that are based upon the performance of the Company’s common stock or a change in control event and (2) potential forfeiture.
The following table reconciles the elements of the Merger to the unaudited condensed consolidated statements of cash flows and the unaudited condensed consolidated statement of changes in stockholder's equity/(deficit) for the nine months ended September 30, 2021 (in thousands):
Cash – Osprey’s trust and cash (net of redemptions)$103,049 
Cash - PIPE financings (PIPE Shares and Palantir)188,000 
Gross Merger proceeds$291,049 
Less: fees paid to Osprey IPO underwriters(11,173)
Less: other Osprey transaction costs(15,831)
Less: BlackSky transaction costs(18,823)
Proceeds from Reverse Recapitalization, net payment of BlackSky equity issuance costs$245,222 
Less: non-cash assets and warrant liabilities assumed from Osprey(43,963)
Less: accrued BlackSky transaction costs(385)
Net impact from Reverse Recapitalization to BlackSky's equity$200,874 

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The number of shares of Company class A common stock originally issued by Osprey prior to Merger and the recapitalization of the class A common stock following the Merger are as follows:
Number of Shares
(in thousands)
Osprey class A common stock, outstanding prior to Merger31,625 
Less: redemption of Osprey class A common stock(21,375)
Total Osprey class A common stock pre-Merger10,250 
Osprey Founder class A common stock5,534 
Class A common stock issued in PIPE and Palantir financing18,800 
Total Merger, PIPE, and Palantir financing class A common stock34,584

5. Revenues
Remaining Performance Obligations
As of September 30, 2021, the Company had $36.4 million of remaining performance obligations, which represents the transaction price of executed contracts less inception to date revenue recognized. Remaining performance obligations exclude unexercised contract options. The Company expects to recognize revenue relating to remaining funded contractual performance obligations, of which a portion is recorded in deferred revenue in the unaudited condensed consolidated balance sheets, of $11.7 million, $23.1 million, and $1.6 million during the three months ending December 31, 2021, during fiscal year 2022, and thereafter, respectively.
Disaggregation of Revenue
The Company earns revenue through the sale of imagery & software analytical services and engineering & systems integration. The Company’s management primarily disaggregates revenue as follows: (i) imagery; (ii) data, software and analytics; and (iii) engineering and integration. This disaggregation allows the Company to evaluate market trends and certain imagery & software analytical services and engineering & systems integration services. These offerings currently have both recurring and non-recurring price attributes, particularly the engineering & systems integration offerings.
The following table disaggregates revenue by type of imagery & software analytical services and engineering & integration for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)(in thousands)
 Imagery$2,773 $814 $5,621 $1,222 
Data, software and analytics3,756 4,720 12,023 12,038 
Engineering & integration1,408 (217)4,952 1,468 
Total revenues$7,937 $5,317 $22,596 $14,728 
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The approximate revenue based on geographic location of customers is as follows for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)(in thousands)
US$6,704 $3,875 $19,063 $11,853 
Middle East607 1,249 1,987 2,446 
Asia343 183 1,113 397 
Other283 10 433 32 
Total revenues$7,937 $5,317 $22,596 $14,728 

Revenue from significant customers for the three and nine months ended September 30, 2021 and 2020 is as follows:

Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)(in thousands)
U.S. federal government and agencies$6,590 $3,831 $18,897 $11,699 
Commercial and other1,347 1,486 3,699 3,029 
Total revenues$7,937 $5,317 $22,596 $14,728 

As of September 30, 2021 and December 31, 2020, accounts receivable consisted of the following:
September 30,December 31,
20212020
(in thousands)
U.S. federal government and agencies$4,584 $1,335 
Commercial and other325 1,568 
Allowance for doubtful accounts— — 
Total accounts receivable$4,909 $2,903 
The following table disaggregates revenue for the three and nine months ended September 30, 2021 and 2020 by when control is transferred:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)(in thousands)
Point in time$3,104 $2,128 $7,565 $3,300 
Over time4,833 3,189 15,031 11,428 
Total revenues$7,937 $5,317 $22,596 $14,728 

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6. Contract Assets and Liabilities
The components of contract assets and contract liabilities consisted of the following:
September 30,December 31,
20212020
(in thousands)
Contract assets - current
Unbilled revenue$649 $749 
Other contract assets1,664 3,047 
Total contract assets - current$2,313 $3,796 
Contract liabilities - current
Deferred revenue - short-term$14,199 $14,030 
Other contract liabilities254 507 
Total contract liabilities - current$14,453 $14,537 
Contract liabilities - long-term$— $— 
Deferred revenue - long-term683 2,559 
Total contract liabilities - long-term$683 $2,559 
Deferred revenue and other contract liabilities are reported as contract liabilities in the accompanying unaudited condensed consolidated balance sheets. Contract liabilities include payments received and billings made in advance of the satisfaction of performance obligations under the contract and are realized when the associated revenue is recognized under the contract. Contract assets include (i) unbilled revenue, which is the amount of revenue recognized in excess of the amount billed to customers, where the rights to payment are not just subject to the passage of time; and (ii) costs incurred to fulfill contract obligations. Other contract assets and other contract liabilities primarily relate to contract commissions on customer contracts.
Changes in short-term and long-term contract assets and contract liabilities reported as of January 1, 2021 were as follows:
Contract AssetsContract Liabilities
(in thousands)
Balance as of January 1, 2021$3,796 $17,096 
Reclassification of the beginning contract liabilities to revenue— (8,375)
Cash payments in advance of revenue recognition— 8,268 
Reclassification of the beginning contract assets to receivables(740)— 
Cumulative catch-up adjustment arising from changes in estimates of transaction price— (1,663)
Changes of contract costs(743)(190)
Balance as of September 30, 2021$2,313 $15,136 

7. Equity Method Investments
LeoStella
The Company accounts for its investment in LeoStella as an equity method investment. The Company did not make any additional capital investments in LeoStella during the nine months ended September 30, 2021 and 2020. During the nine months ended September 30, 2021 and 2020, respectively, the Company remitted $15.0 million and $8.2 million of payments to LeoStella for satellite manufacturing and satellite software development.
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X-Bow
In 2017, the Company entered into a stock subscription and technology transfer agreement with X-Bow, whereby the Company assigned and transferred certain intellectual property rights owned by the Company to X-Bow in exchange for 13.5 million shares of X-Bow, a strategic investment in a space technology company specializing in additive manufacturing of solid rocket motors. As of September 30, 201, the Company's interest in X-Bow was 17.9%.
The following tables present summarized financial information for the Company’s equity method investments as of September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021, and September 30, 2020.
September 30,December 31,
Summarized balance sheets20212020
(in thousands)
Current assets$73,494 $64,355 
Non-current assets6,305 7,468 
Total assets$79,799 $71,823 
Current liabilities$59,139 $57,040 
Non-current liabilities896 6,589 
Total liabilities$60,035 $63,629 
Three Months Ended September 30,Nine Months Ended September 30,
Summarized statements of operations2021202020212020
(in thousands)(in thousands)
Revenue$3,494 $9,604 $24,212 $12,946 
Gross margin$553 $1,381 $7,110 $1,924 
Net income/(loss)$(1,590)$184 $570 $(1,494)
Current assets of the Company’s equity method investees primarily consisted of inventories of $41.1 million as of September 30, 2021 and $47.3 million as of December 31, 2020. Total liabilities of the Company’s equity method investees primarily consisted of customer advances from related parties of $52.5 million as of September 30, 2021 and $51.4 million as of December 31, 2020.
The revenue related to equity method investments attributable to related parties was $3.5 million and $20.9 million for the three and nine months ended September 30, 2021, respectively. The revenue related to equity method investments attributable to related parties was $9.6 million and $12.9 million for the three and nine months ended September 30, 2020, respectively. The Company eliminates intercompany transactions;, therefore, the revenue of the equity method investees is not included in the Company's unaudited condensed consolidated financial statements. The Company has differences between the carrying value of its equity method investments and the underlying equity in the net assets of the investees of $0.6 million as of September 30, 2021 and $0.5 million as of December 31, 2020. The differences are a result of the elimination of upstream intra-entity profits from the sale of satellites, the recognition of unearned profits as the satellites are depreciated, and the elimination of bad debt expense reserves arising from intra-entity sales.

8. Discontinued Operations
On June 12, 2020, the Company completed the sale of 100% of its equity interests in Spaceflight to M&Y Space for a final purchase price of $31.6 million. In connection with the sale, a bridge loan of $26.0 million, plus unpaid, accrued interest of $0.2 million, was extinguished and deducted from the net proceeds. Accrued interest of $0.5 million was also forgiven in accordance with the terms of the bridge loan.
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Under a transition services agreement, the Company provides, post-closing transition services to Spaceflight, including, but not limited to, the sublease of the Company’s office facility in Seattle, Washington and common area maintenance fees related to the sublease.
Settlement Arrangement for the Sale of the Spaceflight
On March 30, 2021, the Company settled certain disputes with respect to the purchase price in the total amount of $6.8 million, which was accrued as a liability as of December 31, 2020 (Note 12). The Company paid the settlement amount in 2 tranches—(i) $2.0 million on April 1, 2021 and (ii) the remaining $4.8 million was triggered at the closing of the Merger. In April 2021, the Company also terminated a launch arrangement with Spaceflight and, as agreed upon by the parties, offset the amount due to M&Y Space with a contractual refund of $3.9 million of which the net amount of $819 thousand was settled for cash in the three months ended September 30, 2021. As a result, the Company recorded a reduction to the accrued liability and a reduction to satellite procurement in the unaudited condensed consolidated balance sheets. Additionally, the Company recognized an unfavorable working capital adjustment of $1.0 million related to a potential shortfall in accounts receivable in the closing balance sheet delivered to M&Y Space. This number may be adjusted in future periods as the Company continues to analyze payments on account and legal remediation through the collection period ending in December 2021.
The following summarizes the components of the gain from discontinued operations, net of tax, that the Company has reported in the unaudited condensed consolidated statements of operations and comprehensive loss:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)(in thousands)
Major classes of line items constituting gain from discontinued operations:
Revenue - launch services$— $— $— $26,925 
Total operating cost and expenses$— $511 $— $29,129 
Operating loss$— $(511)$— $(2,204)
Loss from discontinued operations, before income taxes.$— $(511)$— $(2,223)
(Loss)/gain on disposal of discontinued operations$— $— $(1,022)$30,672 
Total (loss)/gain from discontinued operations, net of income taxes$— $(511)$(1,022)$28,449 

9. Property and Equipment - net
The following summarizes property and equipment - net as of:
September 30,December 31,
20212020
(in thousands)
Satellites$41,380 $32,340 
Computer equipment and software1,5671,315
Office furniture and fixtures8701,388
Other equipment653434
Site equipment1,3771,311
Ground station equipment1,2641,415
Total47,11138,203
Less: accumulated depreciation(25,408)(17,351)
Property and equipment — net$21,703 $20,852 
On May 15, 2021, a Rocket Lab Electron rocket carrying 2 of the Company's satellites suffered a failure during flight, resulting in the loss of both satellites. This resulted in the total carrying value of $18.4 million being impaired in the second quarter of 2021. The $18.4 million includes satellite procurement, launch,
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shipping, launch support and other associated costs. Of this amount, $8.4 million was included in satellite procurement work in progress in the unaudited condensed consolidated balance sheets as of December 31, 2020. There was no impairment for the nine months ended September 30, 2020.
Depreciation of property and equipment from continuing operations during the three months ended September 30, 2021 and 2020 was $3.2 million and $2.4 million, respectively. Depreciation of property and equipment from continuing operations during the nine months ended September 30, 2021 and 2020 was $8.8 million and $5.4 million, respectively. During the nine months ended September 30, 2021, the Company had disposed of $0.8 million of property and equipment, which consisted of site equipment, furniture and ground station equipment, at a loss of $24 thousand.

10. Goodwill and Intangible Assets

Goodwill
The Company performed an annual qualitative goodwill assessment of the goodwill held related to the BlackSky reporting unit as of December 31, 2020. The Company determined that no triggering events occurred that would require the Company to test goodwill for impairment during the nine months ended September 30, 2021. Goodwill was as follows::
September 30, 2021December 31, 2020
(in thousands)
Gross carrying amount$9,393 $9,393 
Accumulated impairment losses— — 
Net carrying value of goodwill$9,393 $9,393 

Intangible Assets
Intangible assets consisted of the following:
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
(in thousands)
September 30, 2021
Customer relationships$6,530 $(3,910)$2,620 
Distribution agreements326 (326)— 
Technology and domain name4,054 (3,857)197 
Total intangible assets at September 30, 2021$10,910 $(8,093)$2,817 
December 31, 2020
Customer relationships$6,530 $(3,489)$3,041 
Distribution agreements326 (326)— 
Technology and domain name4,047 (3,257)790 
Total intangible assets at December 31, 2020$10,903 $(7,072)$3,831 
For each of the three months ended September 30, 2021 and 2020, amortization expense related to intangible assets was $0.3 million. For each of the nine months ended September 30, 2021 and 2020, amortization expense related to intangible assets was $1.0 million. These amounts were included in depreciation and amortization expense in the unaudited condensed consolidated statements of operations and comprehensive loss.

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11. Accounts Payable and Accrued Liabilities
The components of accounts payable and accrued liabilities were as follows:
September 30,December 31,
20212020
(in thousands)
Accounts payable$2,055 $4,177 
Accrued payroll3,006 2,577 
Other accrued expenses5,179 1,212 
Total accounts payable and accrued liabilities$10,240 $7,966 

12. Other Current Liabilities
The components of other current liabilities were as follows:
September 30,December 31,
20212020
(in thousands)
Warrant liability$— $558 
Other current liabilities163 28 
Current portion of capital lease49 48 
Contingent liability1,432 — 
Working capital liability1,057 6,805 
Total other current liabilities$2,701 $7,439 
The contingent liability represents a liability for estimated indirect taxes, previously classified as long-term. Refer to Note 21 for more information.
The working capital liability as of December 31, 2020 was reduced by payments of $2.8 million and a contractual refund of $3.9 million for a terminated launch services agreement for which a right of setoff exists and increased by a working capital adjustment related to a potential shortfall in accounts receivable in the closing balance sheet of $1.0 million. Refer to Note 8 for more information.

13. Debt and Other Financing
The carrying value of the Company’s outstanding debt, inclusive of debt instruments reported at fair value, consisted of the following amounts:
September 30,December 31,
20212020
(in thousands)
Current portion of long-term debt$— $16,798 
Non-current portion of long-term debt81,237 86,637 
Total long-term debt81,237 103,435 
Unamortized debt issuance cost(3,215)(1,827)
Outstanding balance$78,022 $101,608 
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September 30,December 31,
Name of LoanEffective Interest Rate20212020
(in thousand)
Loans from related parties4.00% - 6.00%$81,237 $83,737 
Small Business Administration Loan (Paycheck Protection Program)1.86 %— 3,600 
Line of credit3.65 %— 16,098 
Total$81,237 $103,435 
Bridge Notes and Related Transactions
On February 2, 2021, Legacy BlackSky amended its omnibus agreement dated June 27, 2018 (the “2021 Omnibus Amendment”). Each whole Public Warrant entitlesAs a result of the holderamendment, Legacy BlackSky was permitted to enter into additional indebtedness by issuing new subordinated, unsecured convertible promissory notes, the Bridge Notes, between February 2, 2021 and June 30, 2021, for up to an aggregate principal amount of $60 million.
During the period from February 2, 2021 through February 3, 2021, Legacy BlackSky completed the closing of its initial tranche of the Bridge Notes from existing stockholders. The aggregate principal amount of the Bridge Notes issued in the initial tranche was $18.1 million. All investors participating in the initial tranche also received incentive equity equal to 7 shares of class A common stock of Legacy BlackSky for each dollar invested. Certain investors participating in the initial tranche additionally received warrants exercisable for shares of Legacy BlackSky class A common stock in amounts ranging from 0.14% of Legacy BlackSky’s fully-diluted share capital for each dollar invested divided by $1.0 million to 3.5% of Legacy BlackSky’s fully-diluted share capital (Note 14). On February 18, 2021, the Company completed the closing of a second tranche of the Bridge Notes, raising an aggregate principal amount of $40.0 million from an existing stockholder and from new investors. Participants in the second tranche did not receive shares of Legacy BlackSky class A common stock or warrants to purchase one shareLegacy BlackSky class A common stock.
Upon the closing of Classthe 2 previously mentioned tranches, $1.9 million of Bridge Notes remained available to be offered to certain shareholders under terms similar to the initial tranche pursuant to a rights offering (“Rights Offering”). The Company subsequently completed the Rights Offering in June 2021 with a total of $0.5 million additional investment, resulting in final aggregate proceeds of $58.6 million in principal investments pursuant to the Bridge Notes. As the terms of the Rights Offering were substantially identical to those offered in the initial tranche of the Bridge Notes, participants received 7 shares of the Legacy BlackSky's class A common stock for each dollar invested, as well as warrants.
The Bridge Notes, in all 3 tranches, bore interest at a rate of 10% and had a maturity date of April 30, 2025. There were no covenants in the Bridge Notes that were tied to financial metrics. The Company made an irrevocable election to carry the Bridge Notes at fair value. The Company made an irrevocable election to carry the Bridge Notes at fair value.
In connection with the Merger, all of the Company's issued and outstanding Bridge Notes were converted into Legacy BlackSky class A common stock at a purchaseconversion price of $11.50 per80% of the deemed value of a single Legacy BlackSky class A common share subjectand, immediately thereafter, those Legacy BlackSky class A common shares were exchanged for Osprey class A common shares based the class A common stock exchange ratio. As of September 30, 2021, the Company had no convertible Bridge Notes outstanding.
In connection with the 2021 Omnibus Amendment, the investors guaranteeing the Silicon Valley Bank ("SVB") line of credit further reaffirmed their guarantees and received a one-time issuance of 7 shares of Legacy BlackSky class A common stock for every dollar guaranteed. Additionally, Legacy BlackSky agreed to adjustment (see Note 8)pay a fee to each of its senior secured lenders (“Consent Fees”).

NOTE 5—PRIVATE PLACEMENT

Simultaneously with The Consent Fees were payable in either cash or shares of Legacy BlackSky’s class A common stock at the choice of the lender. The Consent Fees were considered variable share-settled liabilities and were recorded at fair value (Note 20). All of the Consent Fees were settled for cash at the closing of the Initial Public OfferingMerger.

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The following table summarizes the additional shares of Legacy BlackSky class A common stock and warrants to purchase Legacy BlackSky class A common stock issued as a result of the Bridge Notes.
Legacy BlackSky Class A Common Stock(1)
Legacy BlackSky Class A Common Stock Warrants(1)
(in thousands)
Issued to SVB guarantors8,485 — 
Issued in connection with the initial tranche of Bridge Notes11,544 3,873 
Issued as incentive shares and as incentive warrants, in connection with the Rights Offering314 51 
Total20,343 3,924 
1.Issuance of class A common stock and class A common stock has been retroactively restated to give effect to the reverse recapitalization.
In connection with the Merger, all issued and outstanding Legacy BlackSky Bridge Notes and class A common stock warrants granted in accordance with the Bridge Notes were automatically exercised into Legacy BlackSky class A common stock and those shares were exchanged for Legacy Osprey common shares at the exchange rate applicable to the Company’s common stock.
In connection with the merger, the Company repaid $21.4 million in outstanding loans due to the settlement of the SVB line of credit of $16.1 million, the small business administration paycheck protection program loan of $3.5 million and $1.8 million in required payments on other loans, inclusive of accrued interest. As a result of these repayments, the Company recorded a loss on debt extinguishment of $12 thousand, which is recorded in other (expense)/income, net in the unaudited condensed consolidated statements of operations and comprehensive loss.
Loans from Related Parties
After the Merger, the Company’s primary debt (and its sole secured debt) consists of its amended and restated loan and security agreement dated October 31, 2019, as amended or modified from time to time, with Intelsat Jackson Holdings SA (“Intelsat”) and Seahawk SPV Investment LLC (“Seahawk”). Interest accrues on the amounts outstanding under this facility at a fixed rate of 4% until October 31, 2022, 9% from November 1, 2022 to October 31, 2023, and 10% from November 1, 2023 to the maturity date of October 31, 2024. During the 4% interest period, the amount of accrued interest is added, on a pro-rata basis, to the outstanding principal amount of each lender’s advances on October 31, 2020, October 31, 2021, and October 31, 2022. Thereafter, interest is payable in cash semi-annually in arrears commencing on May 1, 2023. This facility is secured by substantially all of the Company’s assets, is guaranteed by the Company’s subsidiaries, and contains customary covenants and events of default. There are no covenants tied to financial metrics.
The Company also has debt in the form of unsecured notes owed to Legacy BlackSky's founders for $10.0 million, which accrues interest at 6% per annum, are non-convertible and mature upon a change of control or event of default.
Fair Value of Debt
The estimated fair value of all of the Company’s outstanding long-term debt, excluding the SVB line of credit that was outstanding as of December 31, 2020, was $78.5 million and $79.7 million as of September 30, 2021, and December 31, 2020, respectively, which is different than the historical costs of such long-term debt as reflected in the Company's unaudited condensed consolidated balance sheets. As of December 31, 2020, the carrying value of the SVB line of credit of $16.1 million approximated its fair value. The fair value of the long-term debt was estimated using Level 3 inputs, based on interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements and credit rating.
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Compliance with Debt Covenants
As of September 30, 2021, all debt instruments contain customary covenants and events of default. There are no covenants tied to financial metrics and the Company was in compliance with all non-financial covenants as of September 30, 2021.

14. Warrants

Legacy BlackSky Class A Common Stock Warrant Liabilities
As part of the Bridge Notes discussed in Note 13, the Company issued warrants to purchase Legacy BlackSky class A common stock which had an exercise price of underwriters’ over-allotment option,$0.11 (after adjustment for the Sponsor purchasedcommon stock exchange ratio) and a contractual life of ten years. The number of shares of Legacy BlackSky class A common stock for which the warrants were exercisable was not fixed and adjusted based on the fully diluted capitalization of the Company, as defined in the warrant agreements, at the time of exercise. The Company analyzed the provisions of the respective warrant agreements, which requires a multi-step approach to evaluate whether an aggregateequity-linked financial instrument has features that require treatment as a derivative liability. Based upon the fact that the number of 8,325,000shares of class A common stock that the warrants were exercisable for was not fixed and was subject to changes based on the Company’s capital structure, the warrants were not considered to be indexed to Legacy BlackSky’s stock. Therefore the warrants met the criteria for derivative liability treatment and, as such, were initially recorded as other current liabilities in the unaudited condensed consolidated balance sheets.
In connection with the Merger, all outstanding warrants granted with the Bridge Notes were automatically exercised into Legacy BlackSky class A common stock and those shares were exchanged for Osprey class A common stock. Therefore, the derivative liability for these financial instruments was zero as of September 30, 2021.

Public Warrants and Private Placement Warrant Liabilities
The Public Warrants and Private Placement Warrants atissued by Osprey are governed by the terms of the warrant agreement, dated October 31, 2019 (the “Warrant Agreement”) and the Sponsor Support Agreement entered into on February 17, 2021. In connection with Osprey’s IPO, Osprey had issued 15,812,500 Public Warrants, each providing a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $8,325,000. Each Private Placement Warrant is exercisableright to purchase one1 share of Class A common stock at an exercise price of $11.50.$11.50 per share. The proceeds fromPublic Warrants were not exercisable until October 9, 2021. Simultaneously, with the consummation of the Osprey IPO, Osprey issued 8,325,000 Private Placement Warrants were addedto Osprey’s sponsor, of which 4,162,500 are exercisable beginning on October 9, 2021, at a price of $11.50 per share, and 4,162,500 are exercisable when the Company’s common stock reaches a trading price of $20.00 per share. In addition to the proceeds fromexercise prices, once the Initial Public Offering held in the Trust Account. IfWarrants become exercisable, the Company does not completemay call the warrants for redemption:
•at a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and all underlying securities will expire worthless.

NOTE 6—RELATED PARTY TRANSACTIONS

Founder Shares

In June 2018, the Sponsor purchased 125,000 shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregate price of $25,000. In September 2018, the Company effectuated a 69-for-1 forward stock split of its Class B common stock, resulting in an aggregate of 8,625,000 Founder Shares outstanding, of which an aggregate of up to 1,125,000 shares were subject to forfeiture to the extent the underwriters’ over-allotment option was not exercised in full or in part. As adjusted for the 1.1 for 1 stock dividend in October 2019 (see below), such amounts totaled 9,487,500 Founder Shares outstanding, of which 1,237,500 shares were subject to forfeiture. In April 2019, the Sponsor contributed back to the Company, for no consideration, 1,581,250 Founder Shares (as adjusted for the 1.1 for 1 stock dividend in October 2019), resulting in an aggregate of 7,187,500 Founder Shares outstanding, of which an aggregate of up to 937,500 shares were subject to forfeiture. In October 2019, the Company effected a 1.1 for 1 stock dividend for each share of Class B common stock outstanding, resulting in an aggregate of 7,906,250 Founder Shares outstanding, of which an aggregate of up to 1,031,250 shares were subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment option was not exercised in full or in part so that the Sponsor will own, on an as-converted basis, 20% of the Company’s issued$0.01 per whole warrant; and outstanding shares after the Initial Public Offering. The Founder Shares will automatically convert into Class A common stock upon the consummation of a Business Combination on a one-for-one basis, subject to adjustments as described in Note 8. In connection with the underwriters’ exercise of the over-allotment option in full, 1,031,250 Founder Shares are no longer subject to forfeiture.

The Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (i) one year after the completion of a Business Combination or (ii) the date 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 shares of common stock for cash, securities or other property. Notwithstanding the foregoing,

•if, and only if, the last saleclosing price of the ClassCompany's class A common stock equals or exceeds $12.00$18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizationsrecapitalization and the like) for any 20 trading days within any a 30-trading day period commencing at least 150 days after a Business Combination, the Founder Shares will be released from the lock-up.

Promissory Note—Related Party

On September 12, 2018, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering. The Promissory Note was non-interest bearing and payableending on the earlier of December 31, 2019 or the completion of the Initial Public Offering. The outstanding balance under the Promissory Note in the amount of $224,992 was repaid in full on November 5, 2019.

Administrative Support Agreement

The Company entered into an agreement whereby, commencing on November 5, 2019, the Company agreed to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. For the three and nine months ended September 30, 2020, the Company incurred and paid $30,000 and $90,000 in fees for these services, respectively.

Related Party Loans

In order to finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or the Company’s officers and directors may, but are not obligated to, loan the Company funds from time to time or at any time, as may be required (“Working

OSPREY TECHNOLOGY ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(Unaudited)

Capital Loans”). Each Working Capital Loan would be evidenced by a promissory note. The Working Capital Loans would either be paid upon consummation of a Business Combination, without interest, or, at the holder’s discretion, up to $1,500,000 of the Working Capital Loans may be converted into warrants at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of the 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.

NOTE 7—COMMITMENTS

Registration Rights

Pursuant to a registration rights agreement entered into on October 31, 2019, the Sponsor and holders of warrants issued upon conversion of Working Capital Loans, if any, will have registration rights to require the Company to register a sale of any of its securities held by them (in the case of the Founder Shares, only after conversion to Class A common stock). These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include such securities in other registration statements filed by the Company and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

The Company granted the underwriters a 45-day option to purchase up to 4,125,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price, less the underwriting discounts and commissions. On November 13, 2019, the underwriters exercised their over-allotment option in full for an additional 4,125,000 Units.

The underwriters were paid a cash underwriting discount of $0.20 per Unit, or $6,325,000 in the aggregate. The underwriters are entitled to a deferred fee of $0.35 per Unit, or $11,068,750 in the aggregate. The deferred fee will be forfeited by the underwriters solely in the event that the Company fails to complete a Business Combination, subject to the terms of the underwriting agreement.

NOTE 8—STOCKHOLDERS’ EQUITY

Preferred Stock—The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $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. At September 30, 2020 and December 31, 2019 there were no shares of preferred stock issued or outstanding.

Class A Common Stock—The Company is authorized to issue 150,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At September 30, 2020 and December 31, 2019, there were 1,716,035 and 1,482,298 shares of Class A common stock issued or outstanding, excluding 29,908,965 and 30,142,702 shares of Class A common stock subject to possible redemption, respectively.

Class B Common Stock—The Company is authorized to issue 25,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. At September 30, 2020 and December 31, 2019, there were 7,906,250 shares of Class B common stock issued and outstanding.

Holders of Class B common stock will have the right to elect all of the Company’s directorsthird trading day prior to the consummation of a Business Combination. Holders of Class A common stock and Class B common stock will vote together as a single classdate on all other matters submitted to a vote of stockholders, except as required by law. These provisions of the Company���s Amended and Restated Certificate of Incorporation may only be amended if approved by holders of a majority of at least 90% of the Company’s common stock voting in a stockholder meeting.

The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering (not including the shares of Class A common stock underlying the Private Placement Warrants) plus all shares of Class A common

OSPREY TECHNOLOGY ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(Unaudited)

stock and equity-linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination, any private placement-equivalent securities issued, or to be issued, to any seller in a Business Combination, or any private placement equivalent securities issued to the Sponsor or its affiliates upon conversion of loans made to the Company). Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time.

Warrants—Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole 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 common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available. 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 warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Company’s 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” in accordance with Section 3(a)(9) of the Securities Act 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.

Once the warrants become exercisable, the Company may redeem the Public Warrants:

in whole and not in part;

at a price of $0.01 per warrant;

upon not less than 30 days’ prior written notice of redemption;

if, and only if, the reported last sale price of the Company’s Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders; and

holders.

If, and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying such warrants.

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will notWarrants: (i) may be transferable, assignableexercised for cash or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis, (ii) may not be transferred, assigned or sold until thirty days after the closing date of the Merger and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will(iii) shall not be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

In addition, (x) ifCompany.

If the Company calls the Public Warrants for redemption, managementthe board of directors 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. Warrant Agreement.
The exercise price and number of shares of Classclass A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances, including in the event of a stock dividend, orsplits, stock dividends, recapitalization, reorganization, merger or consolidation. Additionally, in no event willIn addition, the Company be requiredhad the right to net cash settle the warrants. If the Company issues issue
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additional common shares or securities convertible into or exercisable/exchangeable for shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combinationthe Merger at a newly issuedan issue or effective price of less than $9.20$9.20. In connection with the Merger, the Company did not exercise this option. As of September 30, 2021, all of the Public Warrants and 4,162,500 of the Private Placement Warrants, that have an exercise price of $11.50, are exercisable.
Subsequent Accounting for Warrant Liabilities
Derivative liabilities must be measured at fair value upon issuance and re-valued at the end of each reporting period through expiration and are included in derivative liabilities on the unaudited condensed consolidated balance sheets. Any change in fair value between the respective reporting dates is recognized as an unrealized gain or loss in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss (Note 20).
The following table is a summary of the number of outstanding shares of the Company’s class A common stock issuable upon exercise of warrants at September 30, 2021:
Number of Shares
(in thousands)		Exercise PriceRedemption PriceExpiration DateClassificationGain/(loss) in value from September 9, 2021 (close of the Merger) to September 30, 2021
 (in thousands)		Fair Value at September 30, 2021
 (in thousands)
Public Warrants15,813 $11.50 $18.00 9/9/2026Liability$4,902 $24,193 
Private Placement Warrants4,163 $11.50 $18.00 9/9/2026Liability$1,956 $9,449 
Private Placement Warrants4,163 $20.00 $18.00 9/9/2026Liability$583 $2,914 
In addition, the Company has 1.8 million class A common stock warrants outstanding which have an exercise price of $0.11 and expiration dates from June 27, 2028 to October 31, 2029. These warrants are equity classified and are included in additional paid-in capital in the unaudited condensed consolidated balance sheets.

15. Other (Expense)/Income
For The Three Months Ended September 30,For The Nine Months Ended September 30,
2021202020212020
(in thousands)(in thousands)
Loss on issuance of Bridge Notes tranche one$— $— $(84,291)$— 
Loss on issuance of Bridge Notes tranche two— — (12,185)— 
Loss on issuance of Bridge Notes Rights Offering— — (3,193)— 
Loss on debt extinguishment of Bridge Notes(75)— (75)— 
Debt issuance costs expensed for debt carried at fair value— — (47,718)— 
Transaction costs associated with derivative liabilities(291)— (291)— 
Other1 (155)18 126 
$(365)$(155)$(147,735)$126 
In February 2021, Legacy BlackSky issued Bridge Notes in 2 tranches (Note 13). The first tranche of the Bridge Notes were issued at par to several existing investors at a principal amount of $18.1 million and a fair value of $24.2 million. Additionally, certain investors in the first tranche of Bridge Notes received 11.5 million
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shares of Legacy BlackSky class A common stock with a fair value of $59.8 million and warrants to purchase 3.9 million shares of Legacy BlackSky class A common stock with a fair value of $18.4 million. The transaction involved investments primarily by the existing Legacy BlackSky investors at that time. Legacy BlackSky, which had an external valuation performed on the Bridge Notes, Legacy BlackSky class A common stock, and Legacy BlackSky warrants, determined that the fair value of the financial instruments issued exceeded the cash proceeds received. Since no unstated rights and/or privileges were identified with the first tranche of the Bridge Notes, Legacy BlackSky recorded a loss on issuance of $84.3 million.
The second tranche of the Bridge Notes were issued at par to several new investors and an existing investor at a principal amount of $40.0 million and a fair value of $52.2 million, resulting in a loss on issuance of $12.2 million.
In June 2021, Legacy BlackSky offered eligible stockholders an opportunity to invest in a portion of the Bridge Notes as part of a rights offering on substantially the same terms as offered to investors in the initial tranche of the Bridge Notes. The aggregate principal amount and fair value of the Bridge Notes issued to the participating shareholders in the rights offering were $0.5 million and $0.6 million, respectively. Additionally, the investors received 0.3 million incentive shares of Legacy BlackSky class A common stock with a fair value of $2.6 million and 51 thousand incentive warrants exercisable for Legacy BlackSky class A common stock with a fair value of $0.5 million. No unstated rights and/or privileges were identified with respect to the Bridge Notes issued in connection with the rights offering, and Legacy BlackSky recorded a loss on issuance of $3 million.
Legacy BlackSky incurred and expensed $47.6 million in debt issuance cost related to the Bridge Notes issued in February 2021 and the modification of existing debt arrangements at that time. These debt issuance costs consisted of 8.5 million shares of Legacy BlackSky class A common stock valued at $43.9 million that were issued to certain guarantors in conjunction with modification of Legacy BlackSky’s SVB line of credit and $3.7 million paid to third-parties in cash. Additionally, the Company incurred $0.1 million in debt issuance costs related to the rights offering, which was expensed.
The debt issuance costs were expensed because the Bridge Notes were being carried on the balance sheet at fair value. The modification of existing debt did not qualify as a troubled debt restructuring nor did it result in the extinguishment of the debt.

16. Stockholders’ Equity

Class A Common Stock
As of September 30, 2021, the Company was authorized to issue 300.0 million shares of class A common stock and 100.0 million shares of preferred stock.
Issued and outstanding stock as of September 30, 2021 consisted of 116.1 million and 113.3 million shares of class A common stock, respectively. The par value of each share of the class A common stock is $0.0001 per share.
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The Company had reserved shares of class A common stock for issuance in connection with the following:
September 30,December 31,
20212020
(in thousands)
Common stock warrants (as exercised for class A common stock) treated as equity1,770 12,312 
Stock options outstanding2,344 3,489 
Restricted stock units outstanding9,158 — 
Public Warrants (as exercised for class A common stock) treated as liability15,813 — 
Private Placement Warrants (as exercised for class A common stock) treated as liability8,325 — 
Shares available for future grant146,474 13,787 
Total class A common stock reserved183,884 29,588 

The Company has approximately 2.4 million Sponsor Earn-Out Shares that are subject to specific lock-up provisions and potential forfeitures depending upon the post-Merger performance of the Company's class A common stock, and therefore, are required to be recorded as liabilities at their fair value and adjusted to fair value at each reporting period. The Sponsor Earn-Out Shares have the following provisions:
Terms
Contractual LifeSeven years from the closing date of the Merger
Release ProvisionExactly half of the Sponsor Earn-Out Shares have a release provision ("Release") at such time that the volume weighted average price ("VWAP") is equal to, or greater than, $15.00 per share for 10 of any 20 consecutive trading days. The remaining Sponsor Shares Release at such time that the VWAP is equal to, or greater than, $17.50 per share for the of any 20 consecutive trading days. There is an additional provision for acceleration of the Release upon a defined change in control.
Forfeiture Provision
If, within the seven year period, the Sponsor Earn-Out Shares have not met the Release provisions, the Sponsor Earn-Out Shares will automatically forfeit and be cancelled.
As a result, the Company recorded a long-term liability of $15.4 million as of September 30, 2021 and a loss on fair value of $2.2 million in both the three and nine months ended September 30, 2021.

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17. Net (Loss)/Income Per Share of Class A Common Stock
The following table includes the calculation of basic and diluted net (loss)/income per share:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands except per share information)(in thousands except per share information)
Loss from continuing operations$(46,897)$(13,911)$(250,016)$(37,594)
(Loss)/gain from discontinued operation— (511)(1,022)28,449 
Net loss available to common stockholders$(46,897)$(14,422)$(251,038)$(9,145)
Basic and diluted net loss per share - continuing operations$(0.67)$(0.41)$(4.29)$(1.16)
Basic and diluted net (loss)/income per share - discontinued operations— (0.01)(0.02)0.87 
Basic and diluted net loss per share$(0.67)$(0.42)$(4.31)$(0.29)
Shares used in the computation of basic and diluted net loss per share69,975 34,258 58,297 32,515 
The potentially dilutive securities listed below were not included in the calculation of diluted weighted average common shares outstanding, as their effect would have been anti-dilutive during the three and nine months ended September 30, 2021 and 2020. BlackSky’s pending Form S-1 registration statement filed with the SEC seeks to register approximately 24.1 million shares underlying the Public Warrants and Private Placement Warrants outlined below, which equates to less than 16% of the total fully diluted outstanding common shares of BlackSky. While the Public Warrants and certain of the Private Placement Warrants are now exercisable, the exercise prices (of either $11.50 per share or $20 per share, depending on the class of warrant) both currently exceed the trading price for BlackSky’s common stock. Shares issued to Legacy BlackSky stockholders as part of the Merger consideration remain locked up pursuant to BlackSky’s bylaws through at least the middle of the first quarter of 2022.
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)(in thousands)
Restricted class A common stock420 1,022 420 1,022 
Restricted stock units9,158 — 9,158 — 
Common Stock warrants1,770 12,312 1,770 12,312 
Public Warrants (as exercised for class A common stock) treated as liability15,813 — 15,813 — 
Private Placement Warrants (as exercised for class A common stock) treated as liability8,325 — 8,325 — 
Sponsor earn-out shares2,372 — 2,372 — 
Stock options2,344 3,561 2,344 3,561 

18. Stock-Based Compensation
The Company adopted 2 equity incentive plans in prior years, the 2011 Plan and 2014 Plan. Both Plans allowed the board of directors to grant stock options, designated as incentive or nonqualified, and stock awards to employees, officers, directors, and consultants. Stock options are granted with an exercise price per share equal to at least the estimated fair value of the underlying class A common stock (with such issue price or effective issue price to beon the date of grant. The vesting period is determined in good faiththrough individual award agreements and is generally over a four-year period. Awards generally expire 10 years from the date of grant. Legacy BlackSky issued equity and equity-based awards under its 2014 stock incentive plan (the “2014 Plan”) and 2011 stock incentive plan (the “2011 Plan”,
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together with the 2014 Plan, collectively the “Plans”), which are now administered by the Company’s board of directorsdirectors. The Plans are no longer active; however, outstanding awards granted under these Plans will not be affected. As of September 30, 2021, the Company had 41 thousand and 2.3 million options outstanding, respectively, under the 2011 and 2014 Plans.
As part of the Merger, Osprey’s shareholders approved the Company’s 2021 Equity Incentive Plan (the “2021 Plan”) and the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which are administered by the Company’s board of directors. Under the 2021 Plan, the number of shares initially subject to issuance is 15.0 million, with automatic increases beginning in 2022. Additionally, up to 13.1 million shares can be added to the 2021 Plan pursuant to assumed awards granted under the 2011 Plan and 2014 Plan that are subsequently forfeited or fail to vest. Under the 2021 ESPP, the maximum number of shares made available for sale is 3.0 million, with automatic increases beginning in 2022. The Company has not issued equity awards in any form—options, RSUs, RSAs, warrants, etc.—since the closing of the Merger, and the Company does not intend to issue awards until the effectiveness of our first form S-8 registration statement registering the shares issuable under our 2021 Plan.
The stock-based compensation expense attributable to continuing operations was included in imagery & software analytical service costs, excluding depreciation and amortization and selling, general and administrative expense in the caseunaudited condensed consolidated statements of any such issuanceoperations and comprehensive loss as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)(in thousands)
Imagery & software analytical service costs, excluding depreciation and amortization$2,898 $— $2,949 $— 
Selling, general and administrative25,595 550 26,316 1,692 
Total stock-based compensation expense$28,493 $550 $29,265 $1,692 

The stock-based compensation expense recorded for the RSUs during the three and nine months ended September 30, 2021 included a cumulative adjustment for service completed from the grant date to the Sponsor or its affiliates, without taking into account any Founder Shares held by them,close of the Merger.

Stock Options
Following the Merger, the outstanding stock options issued under the 2014 Plan may be exercised (subject to their original vesting, exercise and other terms and conditions) to purchase a number of shares of class A common stock equal to the number of shares of Legacy BlackSky class A common stock subject to the same terms and conditions as were applicable prior to such issuance), (y)Legacy BlackSky stock option (each an “Assumed Company Stock Option”). The exercise price per share of each Assumed Company Stock Option was equal to the aggregate gross proceeds fromquotient obtained by dividing the exercise price per share applicable to such issuances represent more than 60%Legacy BlackSky stock option by the common stock exchange ratio.
The Black-Scholes option pricing model is used to determine the fair value of options granted. The Company utilized assumptions concerning expected life, a risk-free interest rate, and expected volatility to determine such values.
A summary of the total equity proceeds, and interest thereon, availableweighted-average assumptions used by Legacy BlackSky is presented below for the fundingnine months ended September 30, 2020; there were no stock options awarded during the nine months ended September 30, 2021:
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Nine Months Ended September 30,
2020
Fair value per common share$0.0121 
Weighted-average risk-free interest rate0.83 %
Volatility65.00 %
Expected term (in years)2.50
Dividend rate0 %
A summary of the initial Business CombinationCompany’s stock option activity under the Plans during the nine months ended September 30, 2021 is presented below:
Nine Months Ended September 30, 2021
OptionsWeighted-Average Exercise PriceWeighted Average Remaining Contractual Term (Years)Aggregate Intrinsic Value
(in thousands)
(in thousands)
Outstanding - December 31, 20203,489 $0.2160 
Granted— — 
Exercised(969)0.1030 
Forfeited(176)0.1507 
Outstanding - September 30, 20212,344 0.2500 7.7$23,670 
Exercisable - September 30, 20211,241 0.4367 7.2$12,302 
For options exercised, intrinsic value is calculated as the difference between the estimated fair value on the date of exercise and the consummationexercise price. The total intrinsic value of options exercised during the three months ended September 30, 2021 and 2020 was $2.4 million and $0.3 million, respectively. The total intrinsic value of options exercised during the nine months ended September 30, 2021 and 2020 was $6.8 million and $0.4 million, respectively. The total fair value of options vested during the nine months ended September 30, 2021 and 2020, was $0.6 million and $0.6 million, respectively.
As of September 30, 2021, there was $0.5 million of total unrecognized compensation cost, which is expected to be recognized over a weighted-average period of 1.1 years.

Restricted Stock Awards
In the year ended December 31, 2020, the Company granted RSAs, which vest based upon the individual award agreements and generally over a three to four-year period. These shares are deemed issued as of the initial Business Combination (netdate of redemptions), and (z)grant, but not outstanding until they vest. The Company intends to settle the market value (as definedRSAs in the warrant agreement) is below $9.20 per share, the exercise price of the Public 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 described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the market value and the newly issued price.

OSPREY TECHNOLOGY ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(Unaudited)

If the Company is unable to complete a Business Combination within the Combination Periodstock, and the Company liquidateshas the funds held in the Trust Account, holdersshares available to do so.

A summary 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 outsidenonvested RSA activity during the nine months ended September 30, 2021 is presented below:
Nine Months Ended September 30, 2021
Restricted Stock AwardsWeighted-Average Grant-Date Fair Value
(in thousands)
Nonvested - January 1, 2021891$0.0121
Granted——
Vested(461)0.0121
Canceled(10)0.0121
Nonvested - September 30, 20214200.0121
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As of September 30, 2021, there was $98 thousand of total unrecognized compensation cost related to nonvested RSAs granted under the Trust Account with respectPlans, which is expected to such warrants. Accordingly, the warrants may expire worthless.

NOTE 9—FAIR VALUE MEASUREMENTS

be recognized over a weighted-average period of 1.5 years. The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

Thetotal grant date fair value of shares vested during the nine months ended September 30, 2021 was $6 thousand.


Restricted Stock Units
The Company granted an aggregate of 9.3 million RSUs to certain employees and service providers during the nine months ended September 30, 2021 under the 2014 Plan as follows:
Grant DateNumber of Shares
(in thousands)		First TrancheSecond TrancheThird Tranche
February 20218,53350% of such RSUs will vest 180 days subsequent to consummation of the Merger50% of such units will vest ratably over eight consecutive quarters, on specified quarterly vesting dates with the first of such quarterly vesting dates occurring at least three months after the vesting of the initial 50% of the RSUsN/A
March 202122950% of such RSUs will vest 180 days subsequent to consummation of the Merger50% of such units will vest ratably over eight consecutive quarters, on specified quarterly vesting dates with the first of such quarterly vesting dates occurring at least three months after the vesting of the initial 50% of the RSUsN/A
March 202113725% vested immediately upon issuance50% of these RSUs vested on the date of the MergerThe remaining 25% of the RSUs will vest ratably over 12 months, on the same day of the month that the Merger closed, commencing as of the month following satisfaction of the performance condition
June 202116425% of such RSUs will vest at the later of: a) 180 days subsequent to consummation of Merger or b) the one year anniversary of the vesting commencement date75% of such units will vest ratably over twelve consecutive quarters, on specified quarterly vesting dates with the first of such quarterly vesting dates occurring at least three months after the vesting of the initial 25% of the RSUsN/A
July 202128525% of such RSUs will vest at the later of: a) 180 days subsequent to consummation of the Merger or b) the one year anniversary of the vesting commencement date75% of such units will vest ratably over twelve consecutive quarters, on specified quarterly vesting dates with the first of such quarterly vesting dates occurring at least three months after the vesting of the initial 25% of the RSUsN/A
Total9,348 

A summary of the Company’s financial assetsnonvested RSU activity during the nine months ended September 30, 2021 is presented below:
Nine Months Ended September 30, 2021
Restricted Stock UnitsWeighted-Average Grant-Date Fair Value
(in thousands)
Nonvested - January 1, 2021— $— 
Granted9,348 7.0844 
Vested(103)8.0407 
Canceled(88)7.0633 
Nonvested - September 30, 20219,158 7.0738 
Unrecognized compensation costs related to nonvested restricted stock units totaled $37.1 million as of September 30, 2021, which is expected to be recognized over a weighted-average period of 2.4 years.

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19. Related Party Transactions
Amount Due to Related Party as of
September 30,December 31,
20212020
NameNature of RelationshipDescription of the Transactions(in thousands)
SeahawkDebt IssuerIn 2019, the Company raised and converted $18.4 million from prior debt into new, outstanding debt and issued 13.5 million warrants to purchase Legacy BlackSky common stock.$19,198 $19,198 
IntelsatDebt IssuerIn 2019, the Company entered into a term loan facility for $50.0 million and issued 20.2 million warrants to purchase Legacy BlackSky common stock.$52,039 $52,039 
Jason and Marian Joh AndrewsThe former co-founders and employees of Legacy BlackSkyIn 2018, the Company executed the notes totaling $12.5 million to repurchase an aggregate 11.5 million of Legacy BlackSky common stock shares.$10,000 $12,500 
Amount Due to Related Party as of
Total payments in Nine Months Ended September 30,September 30,December 31,
2021202020212020
NameNature of RelationshipDescription of the Transactions(in thousands)(in thousands)
LeoStellaJoint VentureDesign, development and manufacture of multiple satellites$15,060 $8,205 $— $8,012 
Palantir TechnologiesStrategic PartnerMulti-year software subscription agreement for $8.0 million$375 $— $— $— 
X-BowEquity Method InvesteeIn 2017, the Company received stock in X-Bow. As of September 30, 2021, the Company had a 17.9% investment in X-Bow and had one Board seat. As described in Note 7, the Company has engaged X-Bow to develop a rocket for the Company.$1,865 $3,079 $— $750 
Interest on the term loan facility is accrued and liabilities reflects management’s estimatecompounded annually. No significant interest payments were made in the nine months ended September 30, 2021 or 2020. The Company has interest due to related parties in the amount of amounts that the Company would have received$4.7 million as of September 30, 2021, which has been recorded as accrued interest. In February 2021, in connection with the saleBridge Notes, the Company agreed to pay Consent Fees of $2.5 million that were due to Intelsat and Seahawk. These Consent Fees were settled for cash at the closing of the assets or paid in connection withMerger (Note 13).
In 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,nine months ended September 30, 2021, the Company seekspaid $2.5 million to maximizeformer co-founders towards the useprincipal balance due to them, along with a $25 thousand interest payment (Note 13).

20. Fair Value 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). Financial Instruments

Recurring basis
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 the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability.

The following table presentstables present information about the Company’s assetsliabilities that are measured at fair value on a recurring basis atas of September 30, 20202021 and December 31, 2019, and indicates2020, as well as indicate the fair value hierarchy level of the valuation techniques and inputs that the Company utilized to determine such fair value:

Description

  Level   September 30,
2020		   December 31,
2019		 

Assets:

      

Marketable securities held in Trust Account

   1   $318,009,666   $316,958,514 

NOTE 9—SUBSEQUENT EVENTS

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September 30, 2021Quoted Prices in Active MarketsSignificant Other Observable InputSignificant Other Unobservable Inputs
(Level 1)(Level 2)(Level 3)
(in thousands)
Liabilities
Public Warrants24,193 — — 
Private Placement Warrants— — 12,363 
Sponsor Shares— — 15,418 
$24,193 $— $27,781 
December 31, 2020Quoted Prices in Active MarketsSignificant Other Observable InputSignificant Other Unobservable Inputs
(Level 1)(Level 2)(Level 3)
(in thousands)
Liabilities
Series B Preferred Stock Warrants$— $— $508 
Series C Preferred Stock Warrants— — 50 
$— $— $558 
The carrying values of the following financial instruments approximated their fair values as of September 30, 2021 and December 31, 2020 based on their maturities: cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, leases payable and short-term debt and other current liabilities.
There were no transfers into or out of any of the levels of the fair value hierarchy during the nine months ended September 30, 2021 or 2020.
The following is a summary of changes in the fair value of the Level 3 liabilities during the nine months ended September 30, 2021 and 2020:
Bridge NotesConsent Fee LiabilitySponsor SharesPrivate Placement WarrantsClass A Common Stock WarrantsPreferred Stock Warrant Series B and C
(in thousands)
Balance, January 1, 2021$— $— $— $— $— $558 
Issuance of financial instruments carried at fair value— — — — 18,800 0
Liability recorded at fair value77,033 2,715 17,659 14,902 — — 
Loss/(gain) from changes in fair value64 (251)(2,241)(2,539)19,529 1,568 
Settlement(1)
(77,097)(2,464)— — (38,329)(2,126)
Balance, September 30, 2021$— $— $15,418 $12,363 $— $— 
1.Bridge Notes were converted to class A common stock, Consent fees were settled for cash and all warrants were exercised.

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21. Commitments and Contingencies

Legal Proceedings
In the normal course of business, the Company may become involved in various legal proceedings which, by their nature, may be inherently unpredictable and which could have a material effect in the unaudited condensed consolidated financial statements, taken as a whole.
Prior to the Merger closing and related SEC filings, Osprey received 6 demands from putative Osprey stockholders (together, the “Demands”) and had a derivative lawsuit filed against it in the Supreme Court of the State of New York by a purported Osprey stockholder: Luster v. Osprey Technology Acquisition Corp., et al., Index No. 653633/2021 (Sup. Ct. N.Y. Cnty.). In addition, the Osprey board of directors also received 6 demands from putative stockholders of Osprey (together, the “Demands”). Prior to closing, Osprey reached agreements with Luster and the 6 putative stockholders that Osprey’s supplement disclosures and a modification to the authorized share count fairly resolved their claims. Osprey did not reach agreements with these stockholders on attorneys’ fees and BlackSky inherited this task post-closing.
The Company evaluated the specific facts and circumstances including, but not limited to, any historical outcomes for industry-specific complaints with respect to mergers and anticipated negotiations. As a result, the Company has deemed an unfavorable outcome to be probable and has estimated an expense of $0.7 million, which was recorded in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive loss.
As of September 30, 2021, with the exception of the items above, the Company was not aware of any additional pending, or threatened, governmental actions or legal proceedings to which the Company is, or will be, a party that, if successful, would result in a material impact to its business or financial condition or results of operations.

Other Contingencies
The Company analyzed its unique facts and circumstances related to potential obligations in a certain state jurisdiction, including the delivery nature of its prior year intercompany services, payroll and other benefits-related services, current shared services between the parent and subsidiaries, and changing state laws and interpretations of those laws, and has determined that the Company may have an indirect tax obligation.
The Company has continued correspondence with the applicable authorities in an effort toward identifying a taxpayer-favorable resolution of the potential liabilities. The Company has recognized a liability including interest and penalties based on its best estimate as of September 30, 2021.
The following table summarizes the estimated indirect tax liability activity during the nine months ended September 30, 2021:
September 30,
2021
(in thousands)
Balance, January 1, 2021$921 
Additions1,040 
Payments(162)
 Adjustment to Expense(27)
Balance, September 30, 2021$1,772 
The Company continues to analyze the additional obligations it may have, if any, and it will adjust the liability accordingly.

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Other Commitments
The Company has commitments for multi-launch and integration services with launch services providers. As of September 30, 2021, the Company has commitments for 5 launches to include up to 10 satellites at estimated launch dates totaling an amount of $16.1 million with options for additional launches. The terms of the arrangements also allow for the Company to remanifest the satellites if significant delays in excess of 365 days or other inexcusable delays occur with the provider. Subsequent to remanifest efforts four months after the 365 days, the Company can request a refund of all recoverable costs. The launch service provider invoices based on the later of closing the Merger or time-based milestone payments from estimated launch dates. Payment terms are 15 days from invoice date.
As of September 30, 2021, the Company has a remaining commitment of $9.4 million on its satellite purchase contract with LeoStella. In addition, the Company entered into a non-refundable commitment to acquire additional satellite components from LeoStella for $2.2 million. The delivery schedule for the components are not specified and subject to certain engineering milestones. Payment terms are 15 days from invoice date.

22. Concentrations, Risks, and Uncertainties
The Company maintains all cash and cash equivalents with one financial institution. Financial instruments that potentially subject the Company to concentrations of credit risk are primarily accounts receivable and cash deposits.
For the nine months ended September 30, 2021 and 2020, revenue from customers representing 10% or more of the consolidated revenue from continuing operations was $9.3 million and $11.7 million, respectively. Accounts receivable related to these customers as of September 30, 2021 and December 31, 2020 was $3.2 million and $2.0 million, respectively. Revenue from the U.S. federal government and agencies was $18.9 million and $11.7 million for the nine months ended September 30, 2021 and 2020, respectively. Accounts receivable related to U.S. federal government and agencies was $4.6 million and $1.3 million as of September 30, 2021 and December 31, 2020, respectively.
The Company generally extends credit on account, without collateral. Outstanding accounts receivable balances are evaluated by management, and accounts are reserved when it is determined collection is not probable. As of September 30, 2021 and December 31, 2020, the Company evaluated the realizability of the aged accounts receivable, giving consideration to each customer’s financial history and liquidity position, credit rating and the facts and circumstances of collectability on each outstanding account, and concluded that no reserve for uncollectible account was required.

23. Subsequent Events
The Company evaluated subsequent events through November 15, 2021 and transactionsdetermined that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any subsequentthere have been no events that have occurred that would have required adjustmentrequire adjustments to our disclosures or disclosure in the unaudited condensed consolidated financial statements.

Item 2. Management’s Discussion and Analysis

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Table of Financial Condition and Results of Operations

References in this report (this “Quarterly Report”) to “we,” “us” or the “Company” refer to Osprey Technology Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Osprey Sponsor II, LLC. Contents


MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company’sBlackSky’s financial condition and results of operations should be read in conjunction with theBlackSky’s financial statements and the notes thereto contained elsewhere in this Quarterly Report.Report on Form 10-Q. Certain information contained in the discussion, including, but not limited to, those factors described under the heading “Risk Factors” and the analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within Unless the meaningcontext otherwise requires, all references in this section to “we”, “us”, “our”, and “the Company” are intended to mean the business and operations of Section 27ALegacy BlackSky, including its consolidated subsidiaries, prior to the Merger and BlackSky, including Legacy BlackSky and its consolidated subsidiaries after the Merger.

General Overview
On September 9, 2021, Osprey consummated the Merger with Legacy BlackSky. Immediately following the Merger, Osprey changed its name to “BlackSky Technology Inc.” Legacy BlackSky survived the Merger and is now a wholly owned subsidiary of BlackSky. As a special purpose acquisition corporation, Osprey had no pre-Merger operations other than to identify and consummate a merger. Therefore, BlackSky’s operations post-Merger are attributable to those of Legacy BlackSky and its subsidiaries, and references to “BlackSky” or the “Company” should be read to include BlackSky’s wholly owned subsidiaries. References in this report to Company actions, assets/liabilities, or contracts may be references to actions taken, assets/liabilities held, or contracts entered into by one or more Company current subsidiaries; however the Company has distinguished between the actions taken by Legacy BlackSky or Osprey for certain time based, historical transactions.
The Company’s results of operations and statements of assets and liabilities may not be comparable between periods as a result of the Securities Act of 1933 and Section 21EMerger. For example, the Company recorded a one-time loss on issuance of the Bridge Notes of $147.2 million in the nine months ended September 30, 2021. This had the effect of significantly increasing the Company's net loss for the nine months ended September 30, 2021 and is not expected to reoccur as the Bridge Notes were converted into class A common stock with the consummation of the Merger and extinguished. In addition, the Company incurred a significant stock-based compensation expense of $28.2 million resulting from a one-time cumulative adjustment from grants of restricted stock units that had both performance and service conditions contingent upon the consummation of the Merger.
Company Overview
We monitor activities and facilities worldwide by harnessing the world’s emerging sensor networks and leveraging our own satellite constellation. We process millions of observations daily in our SaaS Platform, which supports data from satellites in space, air sensors, environmental sensors, asset tracking sensors, IoT connected devices, internet-enabled narrative sources, and a variety of additional geotemporal data feeds. We monitor for economic and pattern-of-life anomalies to produce alerts and enhance situational awareness. Our monitoring service is powered by industry leading computer techniques including machine learning and artificial intelligence. Our global real-time awareness monitoring solution is available via access to our propriety geospatial data and analytics Platform and requires basic online infrastructure with little or no setup. Pricing for the Platform is moving towards a multi-year fixed price subscription model of time-based services with either minimum usage commitments or not-to-exceed volumes. We currently derive revenue from variable and fixed pricing plans that allow our customers to choose what matters most to them—platform licensing-levels, priority for imagery tasking and whether to apply analytics or monitoring capabilities overtop the imaging service.
Our proprietary satellite constellation enables high-frequency observation of the Earth. We currently have six proprietary satellites in commercial operations. We expect to grow our smallsat constellation by between two and six satellites by the end of 2021. Once our constellation is fully deployed, we anticipate that we will be able to revisit targeted locations on Earth with what we believe will be the most frequent Earth observation revisit rate commercially available to most governments and all commercial enterprises. This revisit rate is further bolstered with BlackSky’s partner constellation, which consists of optical imaging, synthetic aperture radar (SAR), and multi-spectral imaging allowing us to provide a comprehensive analysis of the globe’s most populated and economically active regions that consume and generate 90% of global GDP. The data we collect from our constellation and other sources populates a proprietary data lake and our Platform through which our customers derive unique insights and
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commercially valuable information and analytics that informs them and allows them to run their businesses with greater efficiency and certainty.
Our next generation (“Gen-3”) satellites are designed to improve our imaging resolution and include short wave infrared imaging technology for a broad set of imaging conditions, including nighttime, low-light, and all-weather. We believe these advancements will expand the relevance and certainty of our analytics to continue to ensure our relevance to our customers. The combination of our high-revisit, small satellite constellation, our Platform, and low constellation cost is disrupting the market for geospatial imagery and space-based data and analytics.
Our operating strategy is to monetize our satellite capacity and ground station network to existing and new customers in government and commercial markets as well as further leverage, market, and sell our analytic offerings, powered by machine learning and proprietary algorithms. We intend to continue to improve the capabilities of our Platform, including our artificial intelligence and machine learning algorithms, to improve the speed and quality of the insights we provide to our customers. At present, the majority of our revenue comes from our professional services offerings. Over time, we expect imagery & software analytical services to be an increasing portion and the primary drivers of consolidated revenue.
Our current customer base, end market mix, and pipeline are weighted towards U.S. and international defense and intelligence customers and markets. We believe there are significant opportunities and numerous use cases to extend our imagery & software analytical services and engineering & systems integration offerings domestically and internationally to a wide variety of commercial market sectors including, but not limited to, energy and utilities, insurance, commodities, mining, manufacturing, logistics, agriculture, environmental monitoring, disaster and risk management, engineering and construction, and consumer behavior.
We offer a variety of pricing and utilization options for our imagery & software analytical service offerings, including subscriptions and transactional licenses. These varied options allow customers to utilize our imagery & software analytical services in a manner that best suits their needs. In addition, this structure allows the customer to prioritize their requirements such that at critical times they can satisfy their needs immediately at higher pricing rates and at other times allow for more economical utilization.
Merger with Osprey Technology Acquisition Corp
Upon the consummation of the Merger, a number of parties purchased an aggregate of 18.0 million shares of our class A common stock (the “PIPE Shares”), for a purchase price of $10.00 per share, or an aggregate purchase price of $180.0 million, pursuant to a separate subscription agreement.
78,993,201 shares of Osprey common stock were issued for all of the issued and outstanding equity interests of Legacy BlackSky, inclusive of shares of Osprey’s common stock issued in exchange for both Legacy BlackSky’s issued and outstanding preferred stock and issued and outstanding convertible notes, (inclusive of interest accrued thereon), as if each had converted into BlackSky common stock immediately prior to the Merger.
The Merger was accounted for as a Reverse Recapitalization in accordance with GAAP. Under this method of accounting, Osprey is treated as the acquired company for financial reporting purposes, and Legacy BlackSky is treated as the accounting acquiror. In accordance with this accounting, the Merger is treated as the equivalent of Legacy BlackSky issuing stock for Osprey's net assets, accompanied by a recapitalization. Osprey's net assets are stated at historical cost, with no goodwill or other intangible assets recorded, and the Legacy BlackSky operations will be those of BlackSky. Legacy BlackSky is the deemed accounting acquiror for purposes of the Merger based on the evaluation of the following facts and circumstances:
•Legacy BlackSky’s former stockholders hold a majority ownership interest in BlackSky;
•Legacy BlackSky’s senior management team comprise senior management of BlackSky;
•Legacy BlackSky is the larger of the companies based on historical operating activity and employee base; and
•Legacy BlackSky’s operations comprise the ongoing operations of BlackSky.
We are a new SEC-registered and New York Stock Exchange Actlisted company, which requires us to hire additional personnel and implement processes and procedures to address public company regulatory requirements
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and customary practices. We expect to incur incremental annual expenses as a public company for, among other things, increased directors’ and officers’ liability insurance; director fees; and additional internal and external accounting, legal, and administrative resources.
In conjunction with the consummation of the Merger, we received approximately $283.0 million in gross proceeds, comprised of approximately $103.0 million in cash held in trust by Osprey and the proceeds of a $180.0 million sale of PIPE Shares. Transaction expenses paid on closing totaled approximately $39.9 million. Additionally, we repaid approximately $21.4 million in debt and accrued interest and $6.1 million in other close-related expenses. On September 13, 2021, we raised an additional $8.0 million through a direct sale of class A common stock to Palantir at $10.00 per share. Net cash proceeds from the Merger, the PIPE Shares, and the Palantir financing, less transaction costs, debt repayments, accrued interest and other closing payments, totaled approximately $223.6 million.

Components of Operating Results
Operating Revenues
We have developed several imagery & software analytical service and engineering & systems integration that leverage our proprietary constellation and satellite economics and generate revenue:
•Imagery & Software Analytical Service Revenues—Imagery & software analytical service revenues primarily consist of data, software, and analytics and imagery revenue.
◦Data, Software, and Analytics—We leverage our proprietary artificial intelligence and machine learning algorithms to analyze data coming from both our proprietary sensor network and third-party sources in real-time to provide data, insights, and analytics for our customers. We provide services related to object detection, site monitoring, and enhanced analytics through which we can detect key pattern of life changes in critical locations. These critical locations include, amongst other things, infrastructure such as ports, airports, construction sites, retail activity, stockpiles, and other critical inventory.
We continue to enhance and integrate our offerings by performing capability development for customers while retaining the intellectual property rights. We provide technology enabled professional service solutions to support customer-specific software development requests, integration, testing, and training in order to embed our imagery & software analytical services into the customers organizational processes. We also provide software systems engineering development to support the efforts of certain customers to manage mass quantities of data.
◦Imagery—We offer our customers high-revisit, on-demand satellite imaging solutions. The combination of our proprietary satellite constellation, our third party constellation, and our Platform provides our customers with around the clock autonomous tasking, processing, and delivery.
We expect continued imagery & software analytical services revenue growth in the year ending December 31, 2021, as compared to the prior year as a result of growth in satellite capacity and sales orders.
•Engineering & Systems Integration Revenues—Revenues primarily consist of engineering and integration revenue. We develop and deliver advanced launch vehicle, satellite and payload systems for a limited number of customers that leverage our capabilities in mission systems engineering and operations, ground station operations, and software and systems development. These systems are sold to government customers under fixed price contracts.
We expect engineering & systems integration revenue growth as we continue to deliver on contracts by engineering unique solutions and delivering critical design review.
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Operating Expenses

Our operating expenses are incurred from the following categories:

•Imagery & software analytical services costs primarily include internal aerospace and geospatial software development labor, third-party data and imagery, internal labor to support the ground stations and space operations, and cloud computing and hosting services.
•Engineering & systems integration costs primarily include the cost of internal labor for design, integration, and engineering in support of long-term development contracts for launch vehicle, satellite, and payload systems. We also incur subcontract direct materials and external labor costs to build and test specific components, such as the communications system, payload demands, and sensor integration. Costs are expensed as incurred except for incremental costs to obtain or fulfill a contract, which are capitalized and amortized on a systematic basis consistent with the transfer of goods and services.
•Selling, general, and administrative expense consists of salaries and benefit costs, development costs, professional fees, and other expenses which includes other personnel related costs, stock-based compensation, expenses, and occupancy costs. Our development cost include internal labor costs to develop critical real-time software and geospatial analytic solutions, solution enhancements, including mapping, analysis, site target monitoring, and news feeds. We expect our selling, general, and administrative expense, which includes transaction, audit, legal, and insurance costs, investor relations activities, and other administrative and professional services, to increase as we expand our business and continue to operate as a public company.
•Research and development expense consists primarily of employees’ salaries, taxes, and benefits costs incurred for data science modeling and algorithm development related to our Platform, and to the design, development, and testing of our Gen-3 satellites. We intend to continue to invest appropriate resources in research and development efforts, as we believe that investment is critical to maintaining our competitive position.
•Depreciation expense is related to property and equipment which mainly consists of operational satellites. Amortization expense is related to intangible assets.

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Results of Operations for the Three and Nine Months Ended September 30, 2021 and 2020

The following table provides the components of results of operations for the three and nine months ended September 30, 2021 and 2020. Period to period comparisons are not necessarily indicative of future results.
Three Months Ended September 30,$%Nine Months Ended September 30,$%
20212020ChangeChange20212020ChangeChange
Revenues:(dollars in thousands)(dollars in thousands)
Imagery & software analytical services$6,529 $5,534 $995 18.0 %$17,645 $13,260 $4,385 33.1 %
Engineering & systems integration1,408 (217)1,625 748.8 %4,951 1,468 3,483 237.3 %
Total revenues7,937 5,317 2,620 49.3 %22,596 14,728 7,868 53.4 %
Costs and expenses:
Imagery & software analytical service costs, excluding depreciation and amortization7,266 3,692 3,574 96.8 %15,816 10,132 5,684 56.1 %
Engineering & systems integration costs, excluding depreciation and amortization5,387 4,430 957 21.6 %8,754 9,614 (860)(8.9)%
Selling, general and administrative40,674 6,972 33,702 483.4 %57,979 21,035 36,944 175.6 %
Research and development57 68 (11)(16.2)%85 164 (79)(48.2)%
Depreciation and amortization3,503 2,691 812 30.2 %9,804 6,448 3,356 52.0 %
Satellite impairment loss— — — — %18,407 — 18,407 — %
Operating loss(48,950)(12,536)(36,414)(290.5)%(88,249)(32,665)(55,584)(170.2)%
Gain on debt extinguishment— — — — %— 284 (284)(100.0)%
Gain/(loss) on derivatives3,813 (139)3,952 2,843.2 %(11,162)(418)(10,744)2,570.3 %
(Loss)/income on equity method investment(170)(297)127 42.8 %793 (878)1,671 190.3 %
Interest expense(1,225)(784)(441)(56.3)%(3,663)(4,043)380 9.4 %
Other (expense)/income, net(365)(155)(210)(135.5)%(147,735)126 (147,861)117,350.0 %
Loss before income taxes(46,897)(13,911)(32,986)(237.1)%(250,016)(37,594)(212,422)(565.0)%
Income tax (provision)/benefit— — — — %— — — — %
Loss from continuing operations(46,897)(13,911)(32,986)(237.1)%(250,016)(37,594)(212,422)(565.0)%
Discontinued operations:
(Loss)/gain from discontinued operations, (including (loss)/gain from disposal of Spaceflight of ($1,022) and $30,672 for the nine months ended September 30, 2021 and 2020, respectively)— (511)511 (100.0)%(1,022)28,449 (29,471)(103.6)%
Income tax (provision)/benefit— — — — %— — — — %
(Loss)/gain from discontinued operations, net of tax— (511)511 (100.0)%(1,022)28,449 (29,471)(103.6)%
Net loss$(46,897)$(14,422)(32,475)225.2 %$(251,038)$(9,145)(241,893)2,645.1 %

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Revenue
Three Months Ended September 30,$%Nine Months Ended September 30,$%
20212020ChangeChange20212020ChangeChange
(dollars in thousands)(dollars in thousands)
Imagery & software analytical revenues$6,529$5,534$99518.0 %$17,645$13,260$4,38533.1 %
% of total revenue82 %104 %78 %90 %
Engineering & systems integration revenues$1,408$(217)$1,625748.8 %$4,951$1,468$3,483237.3 %
% of total revenue18 %(4)%22 %10 %
Total revenues$7,937$5,317$2,62049.3 %$22,596$14,728$7,86853.4 %
Imagery & Software Analytical Service Revenues
Imagery & software analytical service revenues increased for the three and nine months ended September 30, 2021, as compared to the same periods in 2020, primarily driven by increased imagery orders from both new and existing customers. Revenue growth from imagery was made possible by expansion of our constellation and related imagery capacity in 2021 and growing capabilities of our constellation. Data, monitoring, and analytics revenue increased from additional integration and enhancements to our monitoring and analytic offerings and was partially offset by a reduction in professional services.
Engineering & System Integration Revenues
Engineering & systems integration revenues increased for the three and nine months ended September 30, 2021, as compared to the same periods in 2020, primarily due to an increase in progress of percentage completion of two contracts, driven by delivery of major components of the contract requirements. Engineering & systems integration revenues in the three months ended September 30, 2021 and September 30, 2020 were negatively impacted by $1.6 million and $1.5 million, respectively, from cumulative catch-up adjustments from changes in estimates to complete a long-term fixed price engineering and integration contract which decreased the percent completion. This resulted in negative revenue in the three months ended September 30, 2020.

Costs and Expenses
Three Months Ended September 30,$%Nine Months Ended September 30,$%
20212020ChangeChange20212020ChangeChange
(dollars in thousands)(dollars in thousands)
Imagery & software analytical service costs, excluding depreciation and amortization$7,266$3,692$3,57496.8 %$15,816$10,132$5,68456.1 %
Engineering & system integration costs, excluding depreciation and amortization5,3874,43095721.6 %8,7549,614(860)(8.9)%
Total costs$12,653$8,122$4,53155.8 %$24,570$19,746$4,82424.4 %
Imagery & Software Analytical Service Costs
Imagery & software analytical service costs increased for the three and nine months ended September 30, 2021 as compared to the same periods in 2020, primarily driven by increased labor costs from supporting an increased customer base, as well as increased hosting costs to meet demand and maintaining the growth of our satellite and ground stations networks. Additionally, we recorded $2.9 million of stock-based compensation expense during the three and nine months ended September 30, 2021, which was triggered by the successful execution of the Merger.

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Engineering & System Integration Costs
Engineering & system integration costs increased for the three months ended September 30, 2021, as compared to the same period in 2020, primarily attributable to the delivery of major contract deliverables that did not occur in the three months ended September 30, 2020.
Engineering & systems integration costs decreased for the nine months ended September 30, 2021, as compared to the same period in 2020, primarily attributable to the recognition of forward loss reserves for the design, development, and manufacture under customer contracts associated with the Gen-3 satellites of approximately $3.5 million during the nine months ended September 30, 2020. The decrease was partially offset by delivering major contract deliverables, which increased the engineering & systems integration costs.

Selling, General, and Administrative Expense
Three Months Ended September 30,$%Nine Months Ended September 30,$%
20212020ChangeChange20212020ChangeChange
(dollars in thousands)(dollars in thousands)
Development costs$3,887 $1,691 $2,196 129.9 %$7,487 $2,907 $4,580 157.6 %
Salaries and benefit costs3,666 3,866 (200)(5.2)%11,873 12,229 (356)(2.9)%
Professional fees1,305 438 867 197.9 %4,305 1,776 2,529 142.4 %
Stock-based compensation expense25,544 550 24,994 NM26,316 1,692 24,624 NM
Rent expense351 466 (115)(24.7)%1,588 1,608 (20)(1.2)%
Other5,921 (39)5,960 NM6,410 823 5,587 678.9 %
Selling, general administrative expense$40,674 $6,972 $33,702 483.4 %$57,979 $21,035 $36,944 175.6 %
•NM - Fluctuation in terms of percentage change is not meaningful.
Selling, general, and administrative expense increased for the three and nine months ended September 30, 2021, as compared to the same periods in 2020, primarily driven by stock-based compensation expense related to vesting of RSUs triggered by the successful execution of the Merger. Development labor costs continued to incrementally increase over the same period as we expand and enhance the capabilities of the Platform. Other drivers of the increase include increased professional fees associated with the Merger, as well as, expenses related to public company readiness, including building out our business development, internal and external sales teams, recruiting and onboarding expenses, and increased trade show spend. These expenses, included in Other above, totaled $4.4 million for the nine months ended September 30, 2021.

Research and Development Expense
Research and development was consistent period over period.

Depreciation and Amortization Expense
Three Months Ended September 30,$%Nine Months Ended September 30,$%
20212020ChangeChange20212020ChangeChange
(dollars in thousands)(dollars in thousands)
Depreciation expense$3,161 $2,353 $808 34.3 %$8,784 $5,435 $3,349 61.6 %
Amortization expense342 338 4 1.2 %1,020 1,013 7 0.7 %
Depreciation and amortization expense$3,503 $2,691 $812 30.2 %$9,804 $6,448 $3,356 52.0 %
Depreciation expense increased for the three and nine months ended September 30, 2021 as compared to the same periods in 2020 primarily driven by two satellites placed in service in the second half of 2020 and one satellite placed in service in the first half of 2021.

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Satellite Impairment Loss
We recorded a satellite impairment loss for the nine months ended September 30, 2021 resulting from the loss of two of our satellites, which occurred on May 15, 2021 when a Rocket Lab Electron rocket carrying those satellites suffered a failure during flight. This resulted in an impairment loss of $18.4 million, the full carrying value of the satellites, recorded to earnings during the three months ended June 30, 2021. The $18.4 million loss includes satellite procurement, launch, shipping, launch support, and other associated costs. There were no satellite impairment losses for the nine months ended September 30, 2020.
We did not have any satellite impairment losses for the three months ended September 30, 2021 or 2020.

Non-Operating Expenses

Three Months Ended September 30,$%Nine Months Ended September 30,$%
20212020ChangeChange20212020ChangeChange
(dollars in thousands)(dollars in thousands)
Gain on debt extinguishment$— $— $— — %$— $284 $(284)(100.0)%
Gain/(loss) on derivatives$3,813 $(139)$3,952 2,843.2 %$(11,162)$(418)$(10,744)2,570.3 %
(Loss)/income on equity method investment$(170)$(297)$127 42.8 %$793 $(878)$1,671 190.3 %
Interest expense$(1,225)$(784)$(441)(56.3)%$(3,663)$(4,043)$380 9.4 %
Other (expense)/income, net$(365)$(155)$(210)(135.5)%(147,735)126 (147,861)117,350.0 %
Gain/(loss) on derivatives
Fluctuations in our derivative and other financial instruments measured at fair value created a loss in the three and nine months ended September 30, 2021 as compared to the same periods in 2020.
(Loss)/income on equity method investment
The fluctuations in earnings from our equity method investment is directly related to the operating performance of our joint venture- LeoStella.
Interest expense
Interest expense increased for the three months ended September 30, 2021, as compared to the same period in 2020, due to the increased amortization of debt issuance costs from a 2021 debt amendment related to the Bridge Notes. Interest expense decreased in the nine months ended September 30, 2021, as compared to the same period in 2020, due to the extinguishment of debt in June 2020. This decrease was partially offset by the increased amortization of debt issuance costs from the 2021 debt amendment related to the Bridge Notes.
Other (expense)/income, net
The change in other expense for the three months ended September 30, 2021, as compared to the same period in 2020, was insignificant.
Other expenses significantly increased in the nine months ended September 30, 2021, compared to the same period in 2020, primarily due to an initial loss of $99.7 million upon issuances of the Bridge Notes executed in the first half of 2021 as the fair value of these notes and the accompanying common shares and class A common stock warrants that were granted to certain investors was in excess of the proceeds received.
We also incurred $47.7 million in debt issuance costs related to the Bridge Notes and the modification of existing debt arrangements. We expensed the debt issuance costs because the Bridge Notes were carried in the unaudited condensed consolidated balance sheets at fair value. Upon consummation of the Merger, the Bridge Notes and associated warrant liabilities were converted to equity and extinguished. We do not expect similar charges in future periods.

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(Loss)/gain from discontinued operations, net of tax
Three Months Ended September 30,$%Nine Months Ended September 30,$%
20212020ChangeChange20212020ChangeChange
(dollars in thousands)(dollars in thousands)
Discontinued operations:
Loss from discontinued operations, before income taxes.$— $(511)$511 (100.0)%$— $(2,223)$2,223 (100.0)%
(Loss)/Gain on disposal of discontinued operations— — — — %(1,022)30,672 (31,694)(103.3)%
Total (loss)/gain from discontinued operations, net of income taxes$— $(511)$511 (100.0)%$(1,022)$28,449 $(29,471)(103.6)%
On June 12, 2020, we completed the sale of 100% of our interests in Spaceflight to M&Y Space for a final purchase price of $31.6 million. During the nine months ended September 30, 2020, Spaceflight’s normal operations resulted in a gain from discontinued operations prior to the completion of the sale. During the nine months ended September 30, 2021, we recorded a liability for a potential working capital adjustment related to target accounts receivable amount in accordance with sale.

Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, management utilizes certain non-GAAP performance measures, EBITDA and Adjusted EBITDA, and free cash flow for purposes of evaluating our ongoing operations and for internal planning and forecasting purposes. Our management and board of directors believe that these non-GAAP operating measures, when reviewed collectively with our GAAP financial information, provide useful supplemental information to investors in assessing our operating performance.
EBITDA and Adjusted EBITDA

EBITDA is defined as earnings before interest income and expense, income tax expense or benefit, and depreciation and amortization. Adjusted EBITDA has been calculated using EBITDA adjusted for (gain)/loss from discontinued operations, net of tax, launch employee retention bonuses, launch related shared services, satellite impairment loss, (gain)/loss on debt extinguishment, unrealized loss/(gain) on derivative, stock-based compensation expense, realized gain on conversion of notes, (gain)/loss on equity method investment, loss on issuance of the Notes, debt issuance cost expensed and transaction cost expensed. We have presented EBITDA and Adjusted EBITDA because both are key measures used by our management and board of directors to understand and evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the exclusion of certain items in calculating Adjusted EBITDA can produce a useful measure for period-to-period comparisons of our business. Accordingly, we believe that Adjusted EBITDA provides useful information in understanding and evaluating our operating results. In addition, we believe that both EBITDA and Adjusted EBITDA provide additional information for investors to use in evaluating our ongoing operating results and trends. These non-GAAP measures provide investors with incremental information for the evaluation of our performance after isolation of certain items deemed unrelated to our core business operations.
EBITDA and Adjusted EBITDA are presented as supplemental measures to our GAAP measures of performance. When evaluating EBITDA and Adjusted EBITDA, you should be aware that we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Furthermore, our computation of Adjusted EBITDA may not be directly comparable to similarly titled measures computed by other companies, as the nature of the adjustments that other companies may include or exclude when calculating Adjusted EBITDA may differ from the adjustments reflected in our measure. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered in isolation, nor should these measures be viewed as a substitute for the most directly comparable GAAP measure, which is net loss. We compensate for the limitations of non-GAAP measures by relying primarily on our GAAP results. You should review the reconciliation of our net loss to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate our performance.
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The table below reconciles our net loss to Adjusted EBITDA for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(dollars in thousands)(dollars in thousands)
Net loss$(46,897)$(14,422)$(251,038)$(9,145)
Interest expense1,225 784 3,663 4,043 
Income tax (provision) benefit— — — — 
Depreciation and amortization3,503 2,691 9,804 6,448 
Loss/(gain) from discontinued operations, before income tax— 511 1,022 (28,449)
Spaceflight, Inc. employee retention bonuses— 322 — 983 
Spaceflight, Inc. related shared services— — — (678)
Satellite impairment loss— — 18,407 — 
Loss/(gain) on debt extinguishment75 — 75 (284)
(Gain)/loss on derivatives(3,813)139 11,162 418 
Contingent legal liability700 — 700 — 
Stock-based compensation expense28,493 550 29,265 1,692 
Loss/(gain) on equity method investment170 297 (793)878 
Loss on issuance of Bridge Notes, including debt issuance costs expensed for debt carried at fair value— — 147,387 — 
Transaction costs associated with derivative liabilities291 — 291 — 
Adjusted EBITDA$(16,253)$(9,128)$(30,055)$(24,094)
Free Cash Flow
We define free cash flow as cash flows (used in) provided by operating activities—continuing operations plus cash flows (used in) provided by operating activities—discontinued operations less purchase of property and equipment and satellite procurement work in process. We have presented free cash flow because it is used by our management and board of directors as an indicator of the amount of cash we generate or use and to evaluate our ability to satisfy current and future obligations and to fund future business opportunities. Accordingly, we believe that free cash flow provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our ability to satisfy our financial obligations and pursue business opportunities, and allowing for greater transparency with respect to a key financial metric used by our management in their financial and operational decision-making.
Free cash flow is not defined by GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of free cash flow rather than net cash from (used in) operating activities, which is the most directly comparable GAAP equivalent. Some of these limitations are:
•free cash flow is not a measure of cash available for discretionary expenditures since we have certain non-discretionary obligations such as debt repayments or capital lease obligations that are not deducted from the measure; and
•other companies, including companies in our industry, may calculate free cash flow differently, which reduces its usefulness as a comparative measure.
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The table below reconciles our net cash used in operating activities to free cash flow for the nine months ended September 30, 2021 and 2020:
Nine Months Ended September 30, 2021
(dollars in thousands)
BlackSkyLaunchTotal
Cash flows used in operating activities - continuing operations$(38,742)$— $(38,742)
Cash flows used in operating activities - discontinued operations— — — 
Net cash used in operating activities(38,742)— (38,742)
Purchase of property and equipment(532)— (532)
Satellite procurement work in process(48,951)— (48,951)
Free cash flow$(88,225)$— $(88,225)
Net cash (used in) provided by investing activities$(49,490)$— $(49,490)
Net cash provided by financing activities$275,331 $— $275,331 
Nine Months Ended September 30, 2020
(dollars in thousands)
BlackSkyLaunchTotal
Cash flows used in operating activities - continuing operations$(12,510)$— $(12,510)
Cash flows provided by operating activities - discontinued operations— (14,894)(14,894)
Net cash (used in) provided by operating activities(12,510)(14,894)(27,404)
Purchase of property and equipment(157)8,410 8,253 
Satellite procurement work in process(18,092)— (18,092)
Free cash flow$(30,759)$(6,484)$(37,243)
Net cash (used in) investing activities$(18,249)$8,410 $(9,839)
Net cash (used in) financing activities$3,501 $— $3,501 

Liquidity and Capital Resources
Our cash and cash equivalents excluding restricted cash totaled $194.9 million and $9.4 million as of September 30, 2021 and 2020, respectively. We have incurred losses and generated negative cash flows from operations since our inception in September 2014. At September 30, 2021, we had an accumulated deficit of $476.3 million.
The increase in our cash and cash equivalents resulted from net cash proceeds from the Merger, PIPE Shares and other financings of $223.6 million. We expect the proceeds received will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future long-term capital requirements will depend on many factors including our growth rate, the timing and extent of spending to support solution development efforts, the expansion of sales and marketing activities, the ongoing investments in technology infrastructure, the introduction of new and enhanced solutions, and the continuing market acceptance of our solutions. From time to time, we may seek additional equity or debt financing to fund capital expenditures, strategic initiatives or investments and our ongoing operations. If we decide, or are required, to seek additional financing from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition and results of operations could be adversely affected.

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Funding Requirements
We expect our expenses to increase substantially as we increase investments in sales, marketing and product to increase our market share. In addition, we expect to incur increased costs in support of public company operations. We will also continue to incur capital expenditures as we procure and launch satellites to increase capture capacity, as well as investing in our Gen-3 satellites that will significantly enhance our imagery capabilities in the future.

As of September 30, 2021, our current assets were approximately $210.4 million, consisting primarily of cash and cash equivalents, restricted cash, trade receivables, prepaid expenses and other current assets, and contract assets.
As of September 30, 2021, our current liabilities were approximately $27.4 million, consisting primarily of accounts payable and accrued liabilities, contract liabilities, current debt obligations, and other non-recurring current liabilities.

Long-Term Liquidity Requirements
We anticipate that our most significant long-term liquidity and capital needs will relate to continued funding of operations, satellite development capital expenditures, launch capital expenditures, and ongoing investments in our Platform and internal infrastructure that will enable us to scale the business efficiently and securely. We believe the cash available to us from the consummation of the Merger, including the sale of the PIPE Shares, managed responsibly, will be sufficient to cover forecasted capital needs and operating expenditures for fiscal year 2022 through fiscal year 2023. If adequate funds are not available to accomplish our anticipated long-term growth, we believe we will be able to fund future cash needs through a combination debt financing or equity raises. If we raise funds by issuing debt securities, these debt securities would have rights, preferences, and privileges senior to those of holders of our common stock. The availability and the terms under which we can borrow additional capital could be disadvantageous, and the terms of debt securities or borrowings could impose significant restrictions on our operations. Macroeconomic conditions and credit markets could also impact the availability and cost of potential future debt financing.

Cash Flow Analysis
For the Nine Months Ended September 30, 2021 and 2020
The following table provides a summary of cash flow data for the nine months ended September 30, 2021 and 2020:
Nine Months Ended September 30,
20212020
(dollars in thousands)
Cash flows (used in) operating activities - continuing operations$(38,742)$(12,510)
Cash flows (used in) operating activities - discontinued operations— (14,894)
Net cash used in operating activities(38,742)(27,404)
Cash flows (used in) investing activities - continuing operations(49,490)(18,249)
Cash flows provided by investing activities - discontinued operations— 8,410 
Net cash (used in) investing activities(49,490)(9,839)
Cash flows provided by financing activities - continuing operations275,331 3,501 
Cash flows used in financing activities - discontinued operations— — 
Net cash provided by financing activities275,331 3,501 
Net increase (decrease) in cash, cash equivalents, and restricted cash187,099 (33,742)
Cash, cash equivalents, and restricted cash – beginning of year10,573 37,190 
Cash reclassified to assets held for sale at beginning of period— 11,383 
Cash reclassified to assets held for sale at the end of period— — 
Cash, cash equivalents, and restricted cash – end of year197,672 14,831 
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Operating activities
For the nine months ended September 30, 2021, net cash used in operating activities was approximately $38.7 million. The significant contributor to the increase in cash used during this period were operating loss increases, adjusted for depreciation, amortization and stock-based compensation expenses in the nine months ended September 30, 2021 from the comparable period. Operating loss increases in the nine months ended September 30, 2021 were primarily due to increased salaries and payroll-related benefits for headcount growth in sales, marketing, executive and administrative functions and professional fees incurred for public company readiness efforts, partially offset by the increase in gross margin and imagery sales.
Net cash from operating activities was unfavorably impacted by payments of $6.8 million for working capital liabilities related to the sale of the Spaceflight and business insurance outflows of $4.8 million.

Investing activities
We continue to have significant cash outflows for satellite procurement and launch related services. In the nine months ended September 30, 2021, net cash used in investing activities increased approximately $30.7 million related to cash paid for the procurement of satellites and other launch-related costs. The increase in costs is a result of the cash flows from the Merger and the commitment to increase our constellation by launching additional satellites.

Financing activities
The most significant impact in the change in cash inflows from financing activities in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020 was primarily related to Merger proceeds received, $264.0 million, net of transaction costs, and $58.6 million loan proceeds from the Bridge Notes offset by $6.2 million of debt issuance costs. This was partially offset by debt repayments of $22.2 million in the nine months ended September 30, 2021, which did not occur in the nine months ended September 30, 2020.

Off-Balance Sheet Arrangements
As of September 30, 2021 and December 31, 2020, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates
The preparation of our unaudited condensed consolidated financial statements and related notes requires management to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Management has based its estimates on historical factsexperience and involve riskson various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and uncertaintiesliabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
For a description of our significant accounting policies see Note 2—“Basis of Presentation and Summary of Significant Accounting Policies,” of the notes to the unaudited condensed consolidated financial statements. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could cause actual resultshave been used, or changes in the accounting estimates that are reasonably likely to differoccur periodically, could materially impact the unaudited condensed consolidated financial statements. Management believes the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our unaudited condensed consolidated financial statements.

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Revenue Recognition
The recognition and measurement of revenue requires the use of judgments and estimates. Specifically, judgment is used in interpreting complex arrangements with nonstandard terms and conditions and determining when all criteria for revenue recognition have been met.
We primarily generate revenues from those expectedthe sale of products and projected. All statements, other thanservices. Service revenues include imagery, data, software, and analytics, including professional services. Product revenues include engineering and integration from long-term construction contracts.
Identifying the performance obligations contained in a contract, determining transaction price, allocating transaction price, and determining when performance obligations are satisfied can require the application of significant judgment, as further discussed below.
Identifying the performance obligations in a contract

Our contracts typically include multiple promises which are accounted for as separate performance obligations. Significant judgment is required in determining performance obligations, and these decisions could change the amount of revenue and profit or loss recorded in each period.
Classification of Revenue
We classify revenue as products or services on our unaudited condensed consolidated statements of operations and comprehensive loss based on the predominant attributes of the performance obligations.
Determination of and Allocation of Transaction Price
Each customer purchase order sets forth the transaction price for the products and services purchased under the arrangement. For contracts with multiple performance obligations, we evaluate whether the stated selling prices for the products or services represent their standalone selling prices. When it is necessary to allocate the transaction price to multiple performance obligations, management typically uses the expected cost plus a reasonable profit margin to estimate the standalone selling price of each product or service. We also sell standard products or services with observable standalone revenue transactions. In these situations, the observable standalone revenue transactions are used to determine the standalone selling price.
Determination of when Performance Obligations are Satisfied
Service revenues from imagery are recognized at the point-in-time the customer receives access to the imagery, or ratably over the subscription period. Service revenues from data, software, and analytics, including professional service solutions, are recognized from the rendering of services over time on a cost-plus-fixed-fee, firm fixed price, or a time and materials basis. Product revenues are primarily generated from fixed price long-term engineering and integration construction contracts. Due to the long-term nature of these contracts, we generally recognize revenue over time using a cost-to-cost measure of progress because it best depicts the transfer of control to the customer as we incur costs on the contracts. Under the percentage-of-completion cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs to complete the performance obligation(s). The estimation of total estimated costs at completion is subject to many variables and requires judgment. We recognize changes in contract estimates on a cumulative catch-up basis in the period in which the changes are identified. If at any time, the estimate of contract profitability indicates a probable anticipated loss on the contract, we recognize the total loss as and when known.

Equity Valuations
As there was not a market for Legacy BlackSky equity, valuations of Legacy BlackSky equity instruments required the application of significant estimates, assumptions, and judgments. These valuations impacted various amounts and accounting conclusions that impacted our unaudited condensed consolidated financial statements, inclusive of the recognition of equity-based compensation, debt discounts when debt issuances are accompanied by the issuance of equity (e.g., warrants), and the evaluation of whether beneficial conversion features exist within our convertible financial instruments. The following discussion provides additional details regarding the significant estimates, assumptions, and judgments that impacted the determination of the fair values of equity-based
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compensation awards, warrants, and the preferred stock and common stock that comprised our capital structure prior to the Merger. The following discussion also explains why these estimates, assumptions, and judgments could be subject to uncertainties and future variability.
Equity-Based Compensation
Legacy BlackSky issued equity and equity-based awards under our 2014 Plan and the 2011 Plan. Awards issued as of the year ended December 31, 2020 include stock options and RSAs. Subsequent to December 31, 2020, we also issued RSUs. Awards under these Plans were approved by the board of directors, and awards that have been canceled, forfeited, or expired are available for issuance in connection with BlackSky's 2021 Stock Incentive Plan.
For purposes of recognizing equity-based compensation related to RSAs, RSUs, and stock options granted to employees, management estimates the grant date fair values of such awards to measure the costs to be recognized for services received. We then recognize compensation costs based upon the straight-line amortization of the grant date fair value of the awards over the requisite service period. When equity-based compensation awards include a performance condition, no compensation is recognized until the performance condition is deemed probable to occur.
We now estimate the grant date fair value of RSAs and RSUs based upon the trading price of BlackSky’s class A common stock. Our historical fact includedapproach to estimating the fair value of Legacy BlackSky’s class A common stock is subsequently described in the discussion of “Preferred Stock and Common Stock Valuations.” We estimated the fair value of Legacy BlackSky's stock options using the Black-Scholes option-pricing model, as subsequently described.
Stock Option and Class A Common Stock Warrant Valuations
Legacy BlackSky used the Black-Scholes option-pricing model to value all options and class A common stock warrants. Estimating the fair value of stock options using the Black-Scholes option-pricing model requires the application of significant assumptions, such as the fair value of our class A common stock, the estimated term of the options, risk-free interest rates, the expected volatility of the price of our class A common stock, and an expected dividend yield. Each of these assumptions is subjective, requires significant judgement, and is based upon management’s best estimates. If any of these assumptions were to change significantly in the future, equity-based compensation related to future awards may differ significantly, as compared with awards previously granted.
Having elected to move towards RSAs and RSUs, the Company did not grant any options in the nine months ended September 30, 2021 under the 2014 Plan; however, the Company expects to award options to certain of its officers under the 2021 Plan (defined below). The Company's uses the following inputs under Black-Scholes as follows:
Fair Value of Class A Common Stock—Refer to the subsequent discussion of “Preferred Stock and Common Stock Valuation” for a detailed discussion of the valuation techniques and assumptions applied to value the class A common stock.
Expected Dividend Yield—The Black-Scholes valuation model requires an expected dividend yield as an input. The dividend yield is based on historical experience and expected future changes. We currently have no plans to pay dividends on our class A common stock and, accordingly, have assumed no dividend yield upon valuation of our stock options.
Expected Volatility—As there was no observable volatility with respect to our Legacy BlackSky class A common stock, the expected volatility of our Legacy BlackSky class A common stock was estimated based upon the historical share price volatility of guideline comparable companies.
Risk-free Interest Rate—The yield on actively traded, non-inflation indexed U.S. Treasury notes was used to extrapolate an average risk-free interest rate based on the expected term of the underlying grants.
Expected Term—The expected term is the estimated duration to a liquidation event based on a weighted average consideration of our most likely exit prospects for this Quarterly Reportstage of development. As we were privately funded, the lack of marketability of the Legacy BlackSky equity was factored into the expected term of options granted. We will continue to review our estimate in the future and adjust it, if necessary, due to changes in our historical exercises.

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Preferred Stock and Class A Common Stock Valuations
We use valuations of our class A common stock for various purposes, including, without limitation, statementsbut not limited to, the determination of the exercise price of stock options and inclusion in the Black-Scholes option pricing model. Prior to the Merger, as a privately held company, the lack of an active public market for Legacy BlackSky’s preferred stock and class A common stock required management and the board of directors to exercise reasonable judgment and consider a number of factors in order to make the best estimate of fair value of our equity. These factors include:
•    industry outlook;
•general economic outlook, including economic growth, inflation and unemployment, interest rate environment and global economic trends;
•    our operating and financial performance;
•    current business conditions and projections;
•    our prospects as a going concern; and
•    the likelihood of achieving a liquidity event for the underlying equity instruments, such as an initial public offering or sale of the company, given prevailing market conditions.
As Legacy BlackSky's structure pre-Merger consisted of multiple classes of equity, Legacy BlackSky, with the assistance of a third-party valuation specialist, utilizes an option pricing model (“OPM”) to determine the fair value of each class of equity. Under this approach, Legacy BlackSky first estimated the fair value of its total enterprise value and total equity value using a combination of the income approach, guideline public company method, and guideline transaction method and subsequently use the OPM model to allocate values to each individual equity class by creating a series of call options on our equity value, with exercise prices based on the liquidation preferences, participation rights, and exercise prices of the equity instruments. Estimating our total enterprise value, total equity value and, ultimately, the share values of our various classes of equity requires the application of significant judgment and assumptions. Factors considered in connection with estimating these values include those previously cited, as well as the following:
•    arms-length transactions involving the sale or transfer of our class A common stock, when applicable;
•    the rights, preferences and privileges of Legacy BlackSky's Series A, B, B-1, and C preferred stock relative to those of its class A common stock; and
•    the lack of marketability of our equity.
The fair value ultimately assigned to our class A common stock may take into account any number or combination of the various factors described above, based upon their applicability at the time of measurement. Determination of the fair value of our class A common stock also may involve the application of multiple valuation methodologies and approaches, with varying weighting applied to each methodology as of the grant date. Application of these approaches involves the use of estimates, judgment, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses, and future cash flows; discount rates; market multiples; the selection of comparable companies; and the probability of possible future events. Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of our class A common stock.
As of December 31, 2020, we estimated that our enterprise fair value was approximately $92.7 million. This enterprise value consists primarily of the enterprise value attributable directly to BlackSky, adjusted to give further effect to the value attributable to our equity method investments. The estimated enterprise value of $92.7 million considered the enterprise value implied using a discounted cash flow model and applied the probability-weighted expected return method ("PWERM") to give effect to different scenarios regarding our financial prospects and ability to continue as a going concern based upon whether we obtained near-term additional financing to support our ongoing operations and growth potential.
In February 2021, we issued equity compensation awards, at which point in time, we engaged our third-party valuation specialist to perform a contemporaneous valuation of our enterprise value and class A common stock. In February 2021, we also obtained new Bridge Notes to fund ongoing operations, signed a letter of intent for a merger
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with a special purpose acquisition company, and subsequently announced that we had entered into a definitive agreement with Osprey for a merger that would result in us becoming a publicly listed company. Based upon the impact of the new Bridge Notes on our financial condition and the impact that the proposed merger was expected to have on our future prospects and ability to fund our growth strategy, as described in our discussion of “Long-Term Liquidity Requirements” elsewhere in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regardingOperations, the Company’s financial position, business strategy andvaluation that was performed as of February 15, 2021 resulted in a significant increase to our estimated enterprise value. Upon updating the plans and objectivesestimate of management for future operations, are forward-looking statements. Words suchour enterprise value as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intendedof February 15, 2021, the proposed merger with Osprey was deemed to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A numberbe an observable indicator of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please referour enterprise value pursuant to the Risk Factors section of this Quarterly Reportmarket approach, and the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessedan 80% weighting was placed on the EDGAR sectionlikelihood that the proposed merger would occur when applying the PWERM to our valuation approach and assumptions. Given the substantial weight placed on the implied value of the SEC’s website at www.sec.gov. Exceptmerger transaction when valuing the enterprise, we concluded that our equity value was approximately $740.0 million as expressly required by applicable securities law,of February 15, 2021. We updated the Company disclaims any intention or obligationestimate of our enterprise value as of March 31, 2021, the proposed merger with Osprey was deemed to update or revise any forward-looking statements whetherbe an observable indicator of our enterprise value pursuant to the market approach, and a 90% weighting was placed on the likelihood that the proposed merger would occur when applying the PWERM to our valuation approach and assumptions. Given the substantial weight placed on the implied value of the merger transaction when valuing the enterprise, we concluded that our equity value was approximately $832.5 million as of March 31, 2021. These enterprise values were used to derive the underlying value of our equity in connection with all equity compensation awards issued to date during 2021 and, accordingly, our future equity compensation expense is expected to materially increase.
As a result of new information, future events or otherwise.

Overview

We arethe Merger, it will not be necessary to estimate the fair value of our class A common stock, as the class A common stock of BlackSky will be traded in the public market.


Public and Private Placement Warrants
In October 2021, the Company filed a blank check company formedregistration statement on Form S-1 with the SEC to, among other things, register, under the lawsSecurities Act of 1933, as amended, the Private Placement Warrants and the stock issuable upon exercise of the StatePublic Warrants and the Private Placement Warrants. We classify the Public Warrants and Private Placement Warrants as long-term liabilities on our unaudited condensed consolidated balance sheets as of DelawareSeptember 30, 2021. Each Public and Private Placement Warrant is initially recorded at fair value on June 15, 2018,the date of the Merger. The Public Warrants are traded on the NYSE and are recorded at fair value using the closing stock price as of the measurement date. The Private Placement Warrants are recorded at fair value using a Black-Scholes option pricing model. The Public and Private Placement Warrants are re-measured to fair value at each subsequent reporting date through earnings. We will continue to adjust the liability for changes in fair value for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganizationPublic and Private Placement Warrants until the warrants are exercised, redeemed, or other similar Business Combination with one or more businesses. We intend to effectuate our Business Combination using cash from the proceedscancelled.
The fair value of the Initial Public OfferingPrivate Placement warrants is established using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires inputs such as the fair value of our class A common stock, the risk-free interest rate, expected term, expected dividend yield and expected volatility. The fair value of our class A common stock is the saleclosing stock price on the NYSE as of the measurement date. The risk-free interest rate assumption is determined by using the U.S. Treasury rates of the same period as the expected term of the Private Placement Warrants, which is 5 years from the closing of the Merger. The dividend yield assumption is based on the dividends expected to be paid over the expected life of the stock option. Our volatility is derived from several publicly traded peer companies. Changes in these assumptions can materially affect the estimate of the fair value of these instruments and ultimately change in fair value of Private Placement Warrants. The Company has historically been a private company and lacked sufficient company-specific historical and implied volatility information. Therefore, it estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies.

We account for the warrants issued in connection with Osprey IPO in accordance with the guidance contained in ASC 815-40-15-7D under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the warrants as non-current liabilities at their fair value and adjust the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our capital stock, debtunaudited condensed consolidated statements of operations.
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Goodwill Impairment
We assess goodwill for impairment at the reporting unit level, which is defined as an operating segment or a combinationone level below an operating segment. Goodwill is tested annually for impairment as of cash, stock and debt.

The issuanceDecember 31st, or more frequently if events or circumstances indicate the carrying value may be impaired. We identify potential impairment by comparing the fair value of additional shareseach of our stockreporting units with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in a Business Combination:

an amount equal to that excess.

may significantly diluteWe performed an annual qualitative goodwill assessment over the equity interestbalance of investors;

may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock;

could cause a change of control if a substantial number of shares of our Class A common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and

may adversely affect prevailing market prices for our Units, common stock and/or warrants.

Similarly, ifgoodwill we issue debt securities or otherwise incur significant indebtedness, it could result in:

default and foreclosure on our assets if our operating revenues after a Business Combination are insufficient to pay our debt obligations;

acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contains covenants that required the maintenance of certain financial ratios or reserves and we breach any such covenant without a waiver or renegotiation of that covenant;

our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;

our inability to obtain additional financing, if necessary, if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding;

our inability to pay dividends on our common stock;

using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes;

limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;

increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;

limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and

other disadvantages compared to our competitors who have less debt.

In March 2020, the COVID-19 outbreak was declared a National Public Health Emergency that continues to spread throughout the world and has adversely impacted global activity and contributed to significant declines and volatility in financial markets. The outbreak could have a continued material adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction asheld related to the ultimate material adverse impactBlackSky reporting unit as of the coronavirus outbreak. The financial statements do not include any adjustmentsDecember 31, 2020. We also determined that might result from the outcome of this uncertainty. Nevertheless, the outbreak presents uncertainty and risk with respect to the Company and its ability to successfully complete a Business Combination.

Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception to September 30, 2020 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the three months ended September 30, 2020, we had a net loss of $1,868,373, which consists of operating costs of $2,205,105 and an unrealized loss on marketable securities held in our Trust Account of $16,279, offset by interest income on marketable securities held in the Trust Account of $101,658 and income tax benefit of $251,353.

Forno triggering events occurred during the nine months ended September 30, 2020, we had a net loss of $933,862, which consists of interest income on marketable securities held in2021. We determined that it is more likely than not that the Trust Account of $1,745,490, offset by operating costs of $2,661,813 and an unrealized loss on marketable securities held in our Trust Account of $20,478 and an income taxe benefit of $2,939.

For the three and nine months ended September 30, 2019, we had a net loss of $1,061 and $2,881, which consisted of formation and operating costs.

Liquidity and Capital Resources

On November 5, 2019, we consummated the Initial Public Offering of 27,500,000 Units at a price of $10.00 per Unit, generating gross proceeds of $275,000,000. Simultaneously with the closingfair value of the Initial Public Offering,BlackSky reporting unit exceeds its carrying value, including goodwill. Although we consummated the salehave a history of 7,500,000 Private Placement Warrants to our Sponsor atrecurring losses from operations, negative cash flows from operations, and a price of $1.00 per Private Placement Warrant, generating gross proceeds of $7,500,000.

On November 13, 2019,significant accumulated deficit, as a result of the underwriters’ election to fully exercise their over-allotment option, we consummatedDecember 31, 2020 valuation, the salefair value was greater than 75% in excess of an additional 4,125,000 Units at $10.00 per Unit,its carrying value for BlackSky.


Long Lived Asset Impairment
We evaluate long-lived assets, including finite-lived intangible assets, property and equipment, satellite procurement work in process and other long-term assets, for impairment whenever events or changes in circumstances indicate that the sale of an additional 825,000 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant, generating total gross proceeds of $42,075,000.

Following the Initial Public Offering, the exercisecarrying amounts of the over-allotment option in full and the sale of the Private Placement Warrants, a total of $316,250,000 was placed in the Trust Account. We incurred $18,047,876 in transaction costs, including $6,325,000 of underwriting fees, $11,068,750 of deferred underwriting fees, and $654,126 of other costs in connection with the Initial Public Offering.

For the nine months ended September 30, 2020, cash used in operating activities was $1,255,546. Net loss of $933,862 was affected by interest earned on marketable securities held in the Trust Account of $1,745,490, an unrealized loss on marketable securities held in our Trust Account of $20,478 and a deferred income tax benefit of $2,939. Changes in operating assets and liabilities provided $1,406,267 of cash from operating activities.

As of September 30, 2020, we had marketable securities held in the Trust Account of $318,009,666 (including approximately $1,760,000 of interest income and unrealized gains) consisting of U.S. treasury bills with a maturity of 185 days or less. Interest income on the balance in the Trust Account may be used by us to pay taxes. Through September 30, 2020, we withdrew $673,860 of interest earned on the Trust Account to pay for our tax obligations.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income payable), to complete our Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants identical to the Private Placement Warrants, at a price of $1.00 per warrant at the option of the lender.

As of September 30, 2020, we had cash of $501,925 held outside of the Trust Account and working capital deficit of $1,203,602. Until the consummation of a Business Combination, we will be using the funds not held in the Trust Account for primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination. Our Sponsor, officers, directors or their affiliates are not under any obligation to advance us funds, or to invest in us. Accordingly, we may not be ablefully recoverable. Significant judgments in this area involve determining whether a triggering event has occurred and determining the future cash flows for assets involved. In conducting this analysis, we compare the undiscounted cash flows expected to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspendinggenerated from the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These conditions raise substantial doubt about our ability to continue as a going concern.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of September 30, 2020.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a monthly fee of $10,000 for office space, utilities and secretarial and administrative support. Upon completion of the Business Combination or our liquidation, we will cease paying these monthly fees.

The underwriters are entitled to a deferred fee of $0.35 per unit, or $11,068,750 in the aggregate. The deferred fee will be forfeited by the underwriters solely in the event that we fail to complete a Business Combination, subjectlong-lived assets (or asset group) to the terms ofrelated net book values. If the underwriting agreement.

Critical Accounting Policies

The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted inundiscounted cash flows exceed the United States of America requires managementnet book value, the long-lived assets are considered not to make estimates and assumptions that affectbe impaired. If the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities atnet book value exceeds the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:

Common Stock Subject to Possible Redemption

We account for common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument andundiscounted cash flows, an impairment charge is measured atand recognized based upon the difference between the carrying value of long-lived assets (or asset group) and their fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are 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. Our Class A common stock features certain redemption rights

that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of our condensed balance sheets.

Net Loss Per Common Share

We apply the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic net (loss) income per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. Our net income is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares only participate in the earnings of the Trust Account and not our income or losses.

Recent Accounting Standards

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.

Item

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

As of September 30, 2020, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust Account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 185 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

ItemQUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 4. Controls and Procedures

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our

Our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our principal executive officerChief Executive Officer and principal financial and accounting officer, we conducted an evaluationChief Financial Officer, evaluated, as of the end of the period covered by this report, the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2020, as such term is(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act.Act of 1934, as amended, or the Exchange Act). Based on thisthat evaluation, our principal executive officerChief Executive Officer and principal financial and accounting officer haveChief Financial Officer concluded that during the period covered by this report, our disclosure controls and procedures were not effective at athe reasonable assurance level as of September 30, 2021. Notwithstanding the identified material weakness, as subsequently described, management has concluded that the unaudited condensed consolidated financial statements included in this Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations and accordingly, providedcash flows for the period disclosed in accordance with GAAP.

In designing and evaluating the disclosure controls and procedures, management recognized that controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that the information requiredmisstatements due to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarizederror or fraud will not occur or that all control issues and reportedinstances of fraud, if any, within the time periods specified in the SEC’s rules and forms.

Company will be detected.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting, that occurred(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter of 2020 covered by this Quarterly Report on Form 10-Qended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Factors that could cause our actual results to differ materially from those in this report include

Material Weakness Remediation Efforts
In connection with the risk factors describedaudit of the consolidated financial statements of BlackSky Holdings Inc. as of and for the years ended December 31, 2020 and 2019, we identified a material weakness in our controls 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 our consolidated financial statements will not be prevented or detected in a timely basis. The material weakness identified was related to our reporting of forward loss contracts. We took various steps to address the material weakness identified above during the nine months ended September 30, 2021. This included implementing controls including, but not limited to, more comprehensive analyses of contract performance, increased review of the contract terms and contract accounting, enhanced documentation requirements, and an expansion of our accounting team of employees with technical accounting expertise to address complex transactions. Although we plan to complete this remediation process as quickly as possible, we cannot estimate at this time how long it will take. Until the controls described above have been in place long enough for management to conclude that they are operating effectively, the material weakness described above will continue to exist.
As previously disclosed in Part I, Item 9A of the amended 2020 Annual Report on Form 10-K10-K/A for Osprey Technology Acquisition Corp., the year endedmanagement of Osprey including the principal executive officer and principal financial officer, concluded that Osprey did not maintain effective controls over financial reporting as of December 31, 20192020, due to a material weakness. The material weakness in their internal control over financial reporting led to Osprey’s restatement of its financial statements to reclassify Osprey’s Public and Private Placement Warrants as described in the Explanatory Note to the Amendment on Form 10-K/A. In response, our management has enhanced its processes to identify and appropriately apply applicable accounting requirements to significant and unusual transactions in our financial statements including, but not limited to, increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications and increased review with an expanded accounting team with technical expertise and enhanced knowledge of research materials and documents.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
From time to time, we may be involved in claims and proceedings arising in the ordinary course of our business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain.
For a discussion of legal proceedings in which we are involved, see Note 21 of this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS
For risk factors relating to our business following the Merger, please refer to the section entitled “Risk Factors” in our definitive proxy statement/final prospectus dated August 11, 2021, and filed by us with the SEC on March 6, 2020. AsAugust 11, 2021. Any of the datethose factors could result in a significant or material adverse effect on our results of this Report, other than as described below, there have been no materialoperations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
The following risk factor supplements and should be read in conjunction with those risk factors disclosed inreferenced above.

Our results of operations are subject to fluctuation from period to period and may not be an accurate indication of future performance; our Annual Report filed with the SEC.

The securities in which we invest the funds held in the Trust Account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the per-share redemption amount received by public stockholders may be less than $10.00 per share.

The proceeds held in the Trust Account are invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. While short-term U.S. government treasury obligations currently yield a positive rate of interest, theyoperating results have, briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future, adopt similar policiesfall below our financial guidance or other projections or fail to meet the expectations of securities analysts and investors.


Our quarterly results of operations, including cash flows, have fluctuated significantly in the United States.past and are likely to continue to do so in the future. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly results, financial position, and operations are likely to fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business. Fluctuation in quarterly results may negatively impact the value of our Class A Common Stock. We have presented many of the factors that may cause our results of operations to fluctuate in this “Risk Factors” section in our definitive proxy statement/final prospectus dated August 11, 2021, and filed by us with the SEC on August 11, 2021. Fluctuations in our results of operations may cause such results to fall below our financial guidance or other projections, or the expectations of analysts or investors, which could cause the trading price of our Class A Common Stock to decline. In June 2021, we adjusted our fiscal year-end 2021 projections for revenue, net loss and Adjusted EBITDA. In November 2021, we further adjusted our fiscal year-end 2021 revenue projection and withdrew our previous fiscal year-end 2021 projections on net loss and Adjusted EBITDA. In the eventfuture, our operating results may again be below our guidance, our long-term financial model or the expectations of securities analysts or investors, and the price of our Class A Common Stock may decline.
Our financial performance is dependent on our ability to generate a sustainable order rate for our geospatial intelligence, imagery and related data analytic products and services, and mission systems that include the development, integration, and operations of satellite and ground systems. This can be challenging and may fluctuate on an annual basis as the number of contracts awarded varies. Many satellite operators in the space data and analytics industry have continued to defer new satellite construction awards to evaluate other competing satellite system architectures and other market factors. If we are unable to completewin new contracts or execute existing contracts as expected, our initial business, combinationresults of operations and financial position could be further adversely affected.
The timing of our sales and related revenue recognition is difficult to predict because of the length and unpredictability of the sales cycle for our products and services. We are often required to spend significant time and resources to better educate and familiarize potential customers with the value proposition of paying for our products and services. Therefore, our sales cycle is often long and can vary substantially from customer to customer. As a result, large individual sales have, in some cases, occurred in quarters subsequent to those we anticipated, or make certain amendmentshave not occurred at all. The loss or delay of one or more large sales transactions in a quarter would impact our results of operations and cash flow for that quarter and any future quarters in which revenue from that transaction is lost or delayed. In addition, downturns in new sales may not be immediately reflected in our revenue because we generally
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recognize revenue over the term of our contracts. The timing of customer billing and payment varies from contract to contract. A delay in the timing of receipt of such collections, or a default on a large contract, may negatively impact our liquidity for the period and in the future. Because a substantial portion of our expenses are relatively fixed in the short-term and require time to adjust, our results of operations and liquidity would suffer if revenue falls below our expectations in a particular period. In addition, our pricing model includes both subscription-based and fixed fee contracts, adding further variability to the timing of our revenue recognition across customer contracts.
Other factors that may cause fluctuations in our quarterly results of operations and financial position include, without limitation, those listed below:
• the number of satellites in our satellite constellation;

• unexpected weather patterns, natural disasters or other events that impact image quality or force a cancellation or rescheduling of satellite launches;

• satellite or geospatial data and analytics platform failures that reduce the planned network size below projected levels, which result in contract delays or cancellations;

• the cost of raw materials or supplied components for the manufacture and operation of our satellites;

• the timing and cost of, and level of investment in, research and development relating to our Amendedtechnologies;

• termination of one or more large contracts by customers, including for convenience;

• changes in the competitive dynamics of our industry; and Restated Certificate of Incorporation, our public stockholders are entitled to receive their pro-rata share

• general economic, regulatory, and market conditions, including the impact of the proceeds heldCOVID-19 pandemic.

The individual or cumulative effects of factors discussed above could result in the Trust Account, pluslarge fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. These factors make it difficult for us to accurately predict financial metrics for any interest income not releasedparticular period.
The variability and unpredictability of our quarterly results of operations, cash flows, or other operating metrics could also result in our failure to meet our expectations or those of analysts that cover us net of taxes payable. Negative interest rates could impact the per-share redemption amount that may be received by public stockholders.

The recent global coronavirus outbreak could harm the business prospects of the Company.

In December 2019, a coronavirus (COVID-19) outbreak was reported in China, and, in March 2020, the World Health Organization declared it a pandemic. Since that time, the coronavirus has spread throughout the United States. In response, many state and local governments, including the Commonwealth of Pennsylvania, have instituted emergency restrictions that have substantially limited the operation of non-essential businesses and the activities of individuals. The ultimate effect of COVID-19 on the local or broader economy is not known nor is the ultimate length of the restrictions described and any accompanying effects. Moreover, the Federal Reserve has taken action to lower the Federal Funds rate, which may negatively affect interest income and, therefore, earnings, of the Companyinvestors with respect to revenue or other key metrics for a particular period. If we fail to meet or exceed such expectations for these or any other reasons, the Trust Account.

The effecttrading price of COVID-19our Class A Common Stock could fall, and related events,we could face costly lawsuits, including those described above and those not yet known or knowable, could have a negative effect onsecurities class action suits.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Concurrently with the stock price and business prospectsexecution of the Company, including as a resultagreement and plan of quarantines, market volatility, market downturns, changes in consumer behavior, business closures and disruptionsmerger, dated February 17, 2021, Osprey entered into subscription agreements with certain investors, pursuant to which, at the closing of the creditmerger on September 9, 2021, the investors subscribed for and equity markets,purchased an aggregate of 18,000,000 PIPE Shares (of BlackSky Class A common stock) at a price of $10.00 per share for aggregate gross proceeds of $180,000,000.
On August 31, 2021, Osprey entered into a subscription agreement with Palantir, pursuant to which could have a material adverse effect ontwo business days subsequent to the Company’s ability to complete a Business Combination.

The outbreak has resulted in authorities implementing numerous measures to try to contain the virus, such as quarantines and shelter in place orders. These measures may remain in place for a significant period of time and may adversely affect the business, operations and financial conditionclosing of the companies we targetmerger, Palantir subscribed for and purchased 800,000 shares of BlackSky Class A common stock at a Business Combination, which may cause such companies to delay or terminate acquisition discussions in order to focus on their business operations. The spreadprice of the virus has also caused us to modify our due diligence practices with respect to target companies (including cancellation$10.00 per share for gross proceeds of physical participation in meetings) in ways that may be detrimental to our business prospects (including working remotely and its attendant cybersecurity risks). We may take further actions$8,000,000.

Except as may be required by government authorities or that we determine are in the best interests of the Company and its stockholders. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities.

Given the ongoing and dynamic nature of the circumstances, it is not possible to predict the ultimate impact of the coronavirus outbreak on the stock price or business prospects of the Company. Notwithstanding any actions by national, state and local governments to mitigate the impact of COVID-19 or by the Company to address the adverse impacts of COVID-19, there can be no assurance that anyindicated, none of the foregoing activities will be successful in mitigatingtransactions involved any underwriters, underwriting discounts or preventing significant adverse effects on the Company and its ability to successfully complete a Business Combination.

Item 2. Unregistered Salescommissions, or any public offering. We believe each of Equity Securities and Use of Proceeds.

In June 2018, the Sponsor purchased 125,000 shares of the Company’s Class B common stock for an aggregate price of $25,000. In September 2018, the Company effectuated a 69-for-1 forward stock split of its Class B common stock, resulting in an aggregate of 8,625,000 Founder Shares outstanding, of which an aggregate of up to 1,125,000 shares were subject to forfeiture to the extent the underwriters’ over-allotment optionthese transactions was not exercised in full or in part. As adjusted for the 1.1 for 1 stock dividend in October 2019 (see below), such amounts totaled 9,487,500 Founder Shares outstanding, of which 1,237,500 shares were subject to forfeiture. In April 2019, the Sponsor contributed back to the Company, for no consideration, 1,581,250 Founder Shares (as adjusted for the 1.1 for 1 stock dividend in October 2019), resulting in an aggregate of 7,187,500 Founder Shares outstanding, of which an aggregate of up to 937,500 shares were subject to forfeiture. In October 2019, the Company effected a 1.1 for 1 stock dividend for each share of Class B common stock outstanding, resulting in an aggregate of 7,906,250 Founder Shares outstanding. The foregoing issuance was made pursuant to the exemptionexempt from registration containedunder the Securities Act in reliance on Section 4(a)(2) of the Securities Act.

On November 5, 2019, the Company consummated the Initial Public OfferingAct (and Regulation D promulgated thereunder) as transactions by an issuer not involving any public offering or Rule 701 promulgated under Section 3(b) of 27,500,000 Units, at $10.00 per Unit, generating gross proceeds of $275,000,000. The securities issued in the offering were registered under the Securities Act on registration statements on Form S-1 (No. 333-234180as transactions by an issuer under benefit plans and 333-234418).contracts relating to compensation as provided under Rule 701. The Securities and Exchange Commission declared the registration statements effective on October 31, 2019.

Simultaneously with the closingrecipients of the Initial Public Offering,securities in each of these transactions represented their intentions to acquire the Company consummatedsecurities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed on the share certificates issued in these transactions. All

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recipients had adequate access, through their relationships with us, to information about us. The sales of these securities were made without any general solicitation or advertising.
After payment of Merger related expenses, as set forth above in this Quarterly Report, we expect that the proceeds from the sale of 7,500,000 warrants at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor, generating gross proceeds of $7,500,000. The issuance was made pursuant to the exemption fromabove referenced securities will be used for general corporate purposes. These securities are included for registration contained in Section 4(a)(2) of the Securities Act.

The Private Placement Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.

On November 13, 2019, the Company consummated the sale of an additional 4,125,000 Units, at $10.00 per Unit, and the sale of an additional 825,000 Private Placement Warrants, at $1.00 per Private Placement Warrant, generating total gross proceeds of $42,075,000.

Of the gross proceeds received from the Initial Public Offering, the exercise of the over-allotment in full and the Private Placement Warrants, $316,250,000 was placed in the Trust Account.

We paid a total of $6,325,000 in underwriting discounts and commissions and $654,126 for other costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer $11,068,750 in underwriting discounts and commissions.

For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Quarterly Report on Form 10-Q.

ItemS-1.


ITEM 3. Defaults Upon Senior Securities.

None.

ItemDEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. Mine Safety Disclosures.

MINE SAFETY DISCLOSURES

Not Applicable.

Itemapplicable.


ITEM 5. Other Information.

None.

ItemOTHER INFORMATION

Not applicable.

-59-


ITEM 6. Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

No.

Description of Exhibit

  31.1*Certification of Principal Executive Officer EXHIBITS
Exhibit No.Exhibit DescriptionFormSEC File No.Exhibit No.Filing DateFiled or Furnished Herewith
2.1
Agreement and Plan of Merger, dated as of February 17, 2021, by and among Osprey Technology Acquisition Corp., Osprey Technology Merger Sub, Inc., and BlackSky Technology Inc.
424(b)(3)333-256103Annex AAugust 11, 2021
3.1
Amended and Restated Certificate of Incorporation of the Company
8-K001-391133.1September 15, 2021
3.2
Amended and Restated Bylaws of the Company
8-K001-391133.2September 15, 2021
4.1
Specimen Warrant Certificate
S-1333-2341804.3October 11, 2019
4.2
Warrant Agreement, dated October 31, 2019, between Continental Stock Transfer & Trust Company and Osprey Technology Acquisition Corp.
8-K001-391134.1November 5, 2019
10.1
Private Placement Warrants Purchase Agreement, dated October 31, 2019, by and between Osprey Technology Acquisition Corp. and Osprey Sponsor II, LLC
8-K001-3911310.4November 5, 2019
10.2+
BlackSky Technology Inc. 2021 Equity Incentive Plan
424(b)(3)333-256103Annex EAugust 11, 2021
10.3+
BlackSky Technology Inc. 2021 Employee Stock Purchase Plan
424(b)(3)333-256103Annex FAugust 11, 2021
10.4+
BlackSky Technology Inc. Outside Director Compensation Policy
8-K001-3911310.13September 15, 2021
10.5+
BlackSky Technology Inc. Form of Indemnification Agreement
8-K001-3911310.4September 15, 2021
10.6
Right of First Offer Agreement, dated as of October 31, 2019, by and between Spaceflight Industries, Inc. and Intelsat Jackson Holdings, S.A.
S-4333-25610310.10May 13, 2021
10.7
Sponsor Support Agreement, dated as of February 17, 2021
8-K001-3911310.3February 22, 2021
10.8
Form of Stockholder Support Agreement
424(b)(3)333-256103Annex HAugust 11, 2021
10.9
Form of Registration Rights Agreement
8-K001-3911310.5February 22, 2021
10.10
Form of Subscription Agreement
8-K001-3911310.1February 22, 2021
10.11+
Executive Employment Agreement for Brian O’Toole
S-4/A333-25610310.15June 25, 2021
10.12+
Executive Employment Agreement for Brian Daum
S-4/A333-25610310.16June 25, 2021
10.13+
Offer Letter from BlackSky Holdings Inc. to Brian O’Toole, dated August 18, 2021
8-K001-3911310.1August 18, 2021
10.14+
Offer Letter from BlackSky Holdings Inc. to Johan Broekhuysen, dated August 18, 2021
8-K001-3911310.2August 18, 2021
10.15+
Offer Letter from BlackSky Holdings Inc. to Henry Dubois, dated August 18, 2021
8-K001-3911310.3August 18, 2021
10.16+
Offer Letter from BlackSky Holdings Inc. to Chris Lin, dated August 18, 2021
8-K001-3911310.4August 18, 2021
10.17+
Transition and Consulting Agreement from BlackSky Holdings Inc. to Brian Daum, dated August 18, 2021
8-K001-3911310.5August 18, 2021
10.18
Amended and Restated Loan and Security Agreement, dated October 31, 2019, by and between Intelsat Jackson Holdings SA, Seahawk SPV Investment LLC, Spaceflight Industries, Inc. and its subsidiaries.
S-4/A333-25610310.17June 25, 2021
10.19
Satellite Program Contract, dated March 12, 2018, by and between LeoStella LLC and BlackSky Global LLC
S-4/A333-25610310.18June 25, 2021
-60-


Exhibit No.Exhibit DescriptionFormSEC File No.Exhibit No.Filing DateFiled or Furnished Herewith
10.20
Amendment No. 1 to Satellite Program Contract, dated February 20, 2019, by and between LeoStella LLC and BlackSky Global LLC
S-4/A333-25610310.19June 25, 2021
10.21
Amendment No. 2 to Satellite Program Contract, dated May 27, 2020, by and between LeoStella LLC and BlackSky Global LLC
S-4/A333-25610310.20June 25, 2021
10.22
Palantir Subscription Agreement, dated as of September 13, 2021, by and between BlackSky Holdings, Inc. and Palantir Technologies, Inc.
8-K001-3911399.2September 1, 2021
10.23
Sponsor Support Agreement, dated as of February 17, 2021, by and among BlackSky Holdings, Inc., Osprey Sponsor II, LLC, and Osprey Technology Acquisition Corp.
8-K001-3911310.3February 22, 2021
10.24
First Amendment, Consent and Joinder to Amended and Restated Loan and Security Agreement, dated as of September 9, 2021, by and among BlackSky Holdings, Inc. and the subsidiaries named therein, Intelsat Jackson Holdings SA and Seahawk SPV Investment LLC.
8-K001-3911310.5September 15, 2021
10.25
BlackSky HQ Lease Agreement
S-1333-26045810.25October 25, 2021
10.26+
BlackSky Technology Inc. Executive Change in Control and Severance Plan, adopted August 16, 2021, and form of participation agreement attached as appendix A.
8-K001-3911310.6August 18, 2021
31.1
Certification of the Company’s Chief Executive Officer, Brian O’Toole, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
31.2
Certification of the Company’s Chief Financial Officer, Johan Broekhuysen, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
32.1
Certification of the Company’s Chief Executive Officer, Brian O’Toole, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
32.2
Certification of the Company’s Chief Financial Officer, Johan Broekhuysen, pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
X
101.INSInline XBRL Instance DocumentX
101.SCHInline XBRL Taxonomy Extension Schema DocumentX
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentX
101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentX
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentX
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)X
________________
+    Indicates management contract or compensatory plan.

-61-


SIGNATURES

Pursuant to Securities Exchange Act Rule 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  31.2*Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  32.1**Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  32.2**Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*XBRL Instance Document
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH*XBRL Taxonomy Extension Schema Document
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document

*

Filed herewith.

**

Furnished.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



November 15, 2021OspreyBlackSky Technology Acquisition Corp.Inc.
Date: November 16, 2020By:

/s/ David DiDomenico

Name:David DiDomenico
Title:Chief Executive Officer and President
(Principal Executive Officer)

By: /s/ Brian O’Toole Brian O’Toole
Chief Executive Officer and Director
(Principal Executive Officer)
Date: November 16, 2020By:

/s/ Jeffrey F. Brotman

/s/ Johan Broekhuysen Johan Broekhuysen
Name:Jeffrey F. BrotmanChief Financial Officer
Title:

Chief Financial Officer

(Principal Financial and Accounting Officer)

20

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