Business Context and Reporting Period
This Form 10-Q covers Osprey Technology Acquisition Corp. for the quarter and six months ended June 30, 2021. Although the requested company is BlackSky Technology Inc., the filing is for Osprey, a Delaware special purpose acquisition company that had not yet completed its proposed business combination with BlackSky Holdings, Inc. Osprey had generated no operating revenue and had not commenced operations beyond formation, its initial public offering, target-company diligence, and transaction activities.
On February 17, 2021, Osprey entered into a merger agreement with BlackSky Holdings. The proposed transaction contemplated approximately $925 million of base equity consideration, subject to adjustments, and an $180 million PIPE investment at $10.00 per share. The filing states that the transaction remained subject to closing conditions.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 |
|---|---|---|
| Operating revenue | $0 | $0 |
| Formation and operating costs | $935,607 | $3,137,239 |
| Loss from operations | $935,607 | $3,137,239 |
| Net loss | $1,823,714 | $14,694,704 |
| Net loss per non-redeemable share | $0.23 | $1.58 |
| Net income per redeemable Class A share | $0.00 | $0.00 |
| Net cash used in operating activities | Not separately provided | $574,262 |
The six-month net loss primarily reflected an $11.6 million increase in the fair value of warrant liabilities and $3.1 million of formation and operating costs. Interest income from Trust Account investments was $63,087 for the six months.
At June 30, 2021, cash outside the Trust Account was $52,304, compared with $399,516 at December 31, 2020. Marketable securities held in the Trust Account totaled $318.0 million, while total assets were $318.4 million. Working capital deficit was $4.7 million, excluding $20,000 of franchise taxes payable.
Total liabilities were $63.2 million, including $47.4 million of warrant liabilities, $11.1 million of deferred underwriting fees, $4.7 million of accounts payable and accrued expenses, and a $107,000 advance from a related party. Stockholders’ deficit was $63.1 million. The filing states that Osprey had no long-term debt, capital lease obligations, or operating lease obligations.
Material Changes Versus Prior Comparable Period
- Six-month net loss increased to $14.7 million from $2.7 million in 2020, primarily due to the larger increase in warrant-liability fair value and higher operating costs.
- Second-quarter net loss improved to $1.8 million from $9.1 million in the prior-year quarter because the warrant-liability fair-value loss declined to $899,000 from $9.0 million and Trust Account investment losses were substantially lower.
- Six-month formation and operating costs increased to $3.1 million from $456,708.
- Cash used in operating activities decreased to $574,262 from $664,904.
- Warrant liabilities increased to $47.4 million from $35.7 million at December 31, 2020, driven by higher fair values for both public and private placement warrants.
- Redeemable Class A common stock increased to $318.2 million from $264.8 million, while non-redeemable Class A shares outstanding declined to zero from 5.3 million.
Guidance, Outlook, Risks and Unusual Items
Management provided no operating or financial guidance. Osprey expected to generate no operating revenue until after completion of a business combination. The company was required to complete a business combination by November 5, 2021; otherwise, it would cease operations except for winding up, redeem public shares from the Trust Account, and liquidate.
Management stated that the company needed additional capital to fund working capital and transaction expenses. Sponsor, officer and director funding was discretionary and not guaranteed. These conditions raised substantial doubt about Osprey’s ability to continue as a going concern through November 5, 2021.
The proposed BlackSky transaction and $180 million PIPE financing were material contingencies. Closing depended on the applicable transaction conditions, including stockholder and regulatory processes. The proposed merger consideration and any resulting ownership were subject to adjustments and dilution from options, warrants, redemptions, and other equity issuances.
Warrants were classified as liabilities and remeasured through earnings each reporting period, creating potentially significant non-cash volatility. If the business combination were not completed, the warrants could expire worthless, and public stockholders could receive less than the $10.00 IPO price per share.
COVID-19 was identified as a potential adverse factor affecting the company’s financial position, operations, and ability to complete a business combination, although the specific impact was not determinable. Disclosure controls were deemed ineffective as of June 30, 2021 due solely to a material weakness previously reported in connection with the restatement of the 2020 financial statements.
Important Facts for Investors to Verify
- Verify that this filing relates to Osprey Technology Acquisition Corp., not a post-combination BlackSky operating-company filing.
- Verify the status and eventual closing, amendment, or termination of the February 17, 2021 merger agreement with BlackSky Holdings.
- Verify whether the $180 million PIPE investment closed and how proceeds, redemptions, and transaction expenses affected post-combination liquidity.
- Review the going-concern disclosure, the November 5, 2021 transaction deadline, and the availability of additional working-capital financing.
- Assess the potential dilution from 31.625 million redeemable public shares, 7.906 million founder shares, approximately 24.1 million warrants, PIPE shares, and transaction-related equity awards.
- Review the previously reported material weakness and subsequent remediation disclosures, since the filing states that disclosure controls remained ineffective.
- Reconcile the reported Trust Account balance, deferred underwriting fee, warrant-liability valuation, and redemption value before estimating transaction funding available to investors.