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BlackSky Technology Inc.

BlackSky Technology Inc.BKSYEarnings & Financial Report

NYSE · Consumer Discretionary · Radio & Tv Broadcasting & Communications Equipment

BlackSky Technology Inc. is a leading geospatial intelligence provider operating a constellation of high-revisit small Earth observation satellites. It delivers real-time satellite imagery, advanced data analytics, and dynamic monitoring solutions to government, defense, critical infrastructure, and commercial clients globally to support data-driven operational decision-making.

What changed in BlackSky Technology Inc.'s 10-K — 2022 vs 2023

Top changes in BlackSky Technology Inc.'s 2023 10-K

562 paragraphs added · 666 removed · 440 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

159 edited+64 added−111 removed62 unchanged
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 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 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.
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 Legacy BlackSky Class A common stock on the grant date.
The estimated useful lives are as follows: Estimated useful lives-years Satellites 3 Computer equipment and software 3 Site and other equipment 2 - 5 Office furniture and fixtures 5 Leasehold improvements shorter of useful life or remaining lease term Capitalized satellite costs include material costs, labor costs incurred from the start of the pre-acquisition stage through the construction stage, insurance, and the costs incurred to launch the satellite into orbit for its intended use.
The estimated useful lives are as follows: Estimated useful lives (years) Satellites 3 Computer equipment and software 3 Site and other equipment 3 - 5 Office furniture and fixtures 5 Capitalized software 3 Leasehold improvements shorter of useful life or remaining lease term Capitalized satellite costs include material costs, labor costs incurred from the start of the pre-acquisition stage through the construction stage, insurance, and the costs incurred to launch the satellite into orbit for its intended use.
We do not recognize a ROU asset and a F-12 lease liability for leases with an initial term of 12 months or less; we recognize lease expense for these leases on a straight-line basis over the lease term. Many of the Company’s lease agreements contain incentives for tenant improvements.
We do not recognize a ROU asset and a lease liability for leases with an initial term of 12 months or less; we recognize lease expense for these leases on a straight-line basis over the lease term. Many of the Company’s lease agreements contain incentives for tenant improvements.
For tenant improvement incentives received, if the incentive is determined to be a leasehold improvement owned by the lessee, the Company generally records the incentives as a reduction to the ROU asset, which reduces rent expense over the lease term.
For tenant improvement incentives received, if the incentive is determined to be a leasehold 91 improvement owned by the lessee, the Company generally records the incentives as a reduction to the ROU asset, which reduces rent expense over the lease term.
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.
In order to determine the fair value of its Class A common stock on the date of grant prior to the Merger, Legacy BlackSky historically relied on a valuation analysis performed using a combination of market and income approaches.
Subsequent to the Merger, the Company uses the NYSE trading price as the fair value of the Class A common stock for valuation purposes. Legacy BlackSky historically adjusted the exercise price of certain outstanding stock options.
Subsequent to the Merger, the Company uses the NYSE trading price as the fair value of the Company's Class A common stock for valuation purposes. Legacy BlackSky historically adjusted the exercise price of certain outstanding stock options.
If a loss is probable and a range of amounts can be reasonably estimated but no amount within the range is a better estimate than any other amount in the range, then the minimum of the range is accrued.
If a loss is probable and a range of amounts can be reasonably estimated but no amount within the range is a better estimate than any 93 other amount in the range, then the minimum of the range is accrued.
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.
For each award with an adjusted exercise price, Legacy BlackSky calculated the incremental fair value, which was the 98 excess of the fair value of the modified award over the fair value of the original award immediately before the modification.
Below is a summary of the Company's estimated loss and tax credit carryforwards. In the year ended December 31, 2022, the Company performed a historic ownership change analysis and concluded that $1.5 million of federal net operating loss carryforward pre-tax attributes were subject to limitations, as defined by the Internal Revenue Code Sections 382 and 383.
Below is a summary of the Company's estimated loss and tax credit carryforwards. In the year ended December 31, 2023, the Company performed a historic ownership change analysis and concluded that $1.5 million of federal net operating loss carryforward pre-tax attributes were subject to limitations, as defined by the Internal Revenue Code Sections 382 and 383.
The Company also offers services related to object, change and anomaly detection, site monitoring, and enhanced analytics, through which the Company can detect key pattern of life changes in critical locations such as ports, airports, and construction sites; retail activity; commodities stockpiles; and other sites that contain critical commodities and supply chain information .
The Company also offers services related to object, change and anomaly detection, site monitoring, and enhanced analytics, through which the Company can detect key pattern of life changes in critical locations such as ports, airports, and construction sites; retail activity; commodities stockpiles; and other sites that contain critical commodities and supply chain inventory .
As a result, the Company’s financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates. F-9 In addition, the Company intends to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act.
As a result, the Company’s financial statements may not be comparable to companies that comply with the new or revised accounting standards 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.
At launch, these costs, and other costs incurred to put a satellite into service, are aggregated and reclassified as property and equipment, subject to depreciation (Note 9). Contingent Liabilities The Company may become involved in litigation or other financial claims in the normal course of its business operations.
At launch, these costs, and other costs incurred to put a satellite into service, are aggregated and reclassified as property and equipment, subject to depreciation (Note 7). Contingent Liabilities The Company may become involved in litigation or other financial claims in the normal course of its business operations.
Debt Issuance Costs and Debt Discount F-13 Debt issuance costs are capitalized and amortized to interest expense using the effective interest method over the life of the related debt. In prior years, a debt discount was recorded upon the issuance of detachable warrants, which were granted in conjunction with the issuance of debt and calculated at fair market value.
Debt Issuance Costs and Debt Discount Debt issuance costs are capitalized and amortized to interest expense using the effective interest method over the life of the related debt. In prior years, a debt discount was recorded upon the issuance of detachable warrants, which were granted in conjunction with the issuance of debt and calculated at fair market value.
A full valuation allowance was recorded against the deferred tax assets as of December 31, 2022 and 2021. Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and the Company's effective tax rate in the future. The Company believes that its tax positions comply with applicable tax law.
A full valuation allowance was recorded against the deferred tax assets as of December 31, 2023 and 2022. Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and the Company's effective tax rate in the future. The Company believes that its tax positions comply with applicable tax law.
For options granted prior to 2021, the expected term was the estimated duration to a liquidation event based on a weighted average consideration of the most likely exit prospects for that stage of development. Legacy BlackSky was privately funded and, accordingly, the lack of marketability was factored into the expected term of options granted.
For options granted prior to 2021, the expected term was the estimated duration to a liquidity event based on a weighted average consideration of the most likely exit prospects for that stage of development. Legacy BlackSky was privately funded and, accordingly, the lack of marketability was factored into the expected term of options granted.
The warrants issued in the private placement provide that a holder of warrants will not have the right to exercise any portion of its warrants if such holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of common stock outstanding immediately after giving effect to such exercise; provided, however, that each holder may increase or decrease the beneficial ownership limitation by giving notice to the Company; but not to any percentage in excess of 9.99%.
The March 2023 Private Placement Warrants provide that a holder of warrants will not have the right to exercise any portion of its warrants if such holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of common stock outstanding immediately after giving effect to such exercise; provided, however, that each holder may increase or decrease the beneficial ownership limitation by giving notice to the Company; but not to any percentage in excess of 9.99%.
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. In addition, the consolidated financial statements include the Company’s proportionate share of the earnings or losses of its equity method investments and a corresponding increase or decrease to its investment, with recorded losses F-8 limited to the carrying value of the Company’s investment.
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. In addition, the consolidated financial statements include the Company’s proportionate share of the earnings or losses of its equity method investments and a corresponding increase or decrease to its investment, with recorded losses limited to the carrying value of the Company’s investment.
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 derivative liabilities in the Company’s consolidated balance sheets as of December 31, 2022.
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 derivative liabilities in the Company’s consolidated balance sheets as of December 31, 2023.
Equity Warrants Classified as Derivative Liabilities Equity warrants that are classified as 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 in the Company's consolidated balance sheets.
Warrant Valuation Equity warrants that are classified as 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 in the Company's consolidated balance sheets.
The incremental fair value was recognized as stock-based compensation expense immediately to the extent that the modified stock option already had vested, and for stock options that were not yet vested, the F-37 incremental fair value has been recognized as stock-based compensation expense over the remaining vesting period.
The incremental fair value was recognized as stock-based compensation expense immediately to the extent that the modified stock option already had 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.
F-16 Income Taxes The Company accounts for income taxes following the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements.
Income Taxes The Company accounts for income taxes following the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements.
Stock options were granted with an exercise price per share equal to at least the estimated fair value of the underlying class A common stock on the date of grant. The vesting period was determined through individual award agreements and was generally over a four-year period. Awards generally expired 10 years from the date of grant.
Stock options were granted with an exercise price per share equal to at least the estimated fair value of the underlying shares of Legacy BlackSky Class A common stock on the date of grant. The vesting period was determined through individual award agreements and was generally over a four-year period. Awards generally expired 10 years from the date of grant.
The Company estimates any variable consideration, and whether the transaction price is constrained, upon execution of each contract. The Company did not have any active contracts with significant variable consideration as of December 31, 2022.
The Company estimates any variable consideration, and whether the transaction price is constrained, upon execution of each contract. The Company did not have any active contracts with significant variable consideration as of December 31, 2023.
If the Company determines that it is more likely than not that a F-11 reporting unit's fair value is less than its carrying amount, the Company compares the reporting unit’s carrying amount to the fair value of the reporting unit.
If the Company determines that it is more likely than not that a reporting unit's fair value is less than its carrying amount, the Company compares the reporting unit’s carrying amount to the fair value of the reporting unit.
Satellite Procurement Work in Process Satellite procurement work in process primarily represents deposits paid to (a) LeoStella for the progress payments associated with the engineering, long lead procurement of satellite components, and manufacturing of the Company's satellites and (b) launch service vendors for the costs associated with launching the Company's satellites.
Satellite Procurement Work in Process Satellite procurement work in process primarily represents deposits paid to (a) third party vendors, including LeoStella, for progress payments associated with the engineering, long lead procurement of satellite components, and manufacturing of the Company's satellites and (b) launch service vendors for the costs associated with launching the Company's satellites.
The Company assessed all existing accounts receivable and recorded an allowance for doubtful accounts of $0 and $39 thousand as of December 31, 2022 and 2021, respectively. Prepaid Expenses and Other Current Assets Prepaid expenses are advance payments made in the ordinary course of business and are amortized on a straight-line basis over the period of benefit.
The Company assessed all existing accounts receivable and recorded an allowance for doubtful accounts of $151 thousand and $0 as of December 31, 2023 and 2022, respectively. Prepaid Expenses and Other Current Assets Prepaid expenses are advance payments made in the ordinary course of business and are amortized on a straight-line basis over the period of benefit.
A summary of the weighted-average assumptions used by the Company is presented below: Years Ended December 31, 2022 2021 Fair value per common share $2.06 - $2.15 $ 5.40 Weighted-average risk-free interest rate 3.20% - 4.72% 1.44 % Volatility 33.90% - 41.10% 33.40 % Expected term (in years) 7.63 8.00 Dividend rate 0 % 0 % Legacy BlackSky historically adjusted the exercise price of certain outstanding stock options.
A summary of the weighted-average assumptions used by the Company is presented below: Years Ended December 31, 2023 2022 Fair value per common share $1.27 $2.06 - $2.15 Weighted-average risk-free interest rate 4.31% 3.20% - 4.72% Volatility 31.20% 33.90% - 41.10% Expected term (in years) 8.00 7.63 Dividend rate 0 % 0 % Legacy BlackSky historically adjusted the exercise price of certain outstanding stock options.
Imagery & Software Analytical Services Revenue Imagery Imagery services include imagery delivered from the Company’s satellites in orbit via our Spectra AI platform and in limited cases directly uploaded to certain customers. Customers can directly task our proprietary satellite constellation to collect and deliver imagery over specific locations, sites and regions that are critical to their operations.
Imagery & Software Analytical Services Revenue Imagery Imagery services include imagery delivered from the Company’s proprietary satellite constellation and Spectra software platform and in limited cases directly uploaded to certain customers. Customers can directly task our proprietary satellite constellation to collect and deliver imagery over specific locations, sites and regions that are critical to their operations.
Professional and engineering service costs primarily include the cost of internal labor for design and engineering in support of long-term development contracts for launch vehicle, satellite, and payload systems, as well as subcontract direct materials and external labor costs to build and test specific components, such as the communications system, payload demands, and sensor integration.
Professional and engineering service costs primarily include the cost of internal labor for design and engineering in support of long-term development contracts for satellites and payload systems, as well as subcontract direct materials and external labor costs to build and test specific components, such as the communications system, payload demands, and sensor integration.
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.
In order to determine the fair value of its Class A common stock on the date of grant prior to the Merger, we historically performed a valuation analysis using a combination of market and income approaches.
As of December 31, 2022, the Company believes that the estimated fair values of the BlackSky reporting unit is still in excess of its respective carrying value and therefore is not at-risk of being impaired.
As of December 31, 2023, the Company believes that the estimated fair value of the BlackSky reporting unit is still in excess of its respective carrying value and therefore is not at-risk of being impaired.
On February 9, 2022, the Company received an indemnification claim notice regarding certain collection and tax payments related to the Share Purchase Agreement dated as of January 31, 2020 among BlackSky Holdings, Inc., Spaceflight, and M&Y Space.
Settlement Arrangement for the Sale of Spaceflight On February 9, 2022, the Company received an indemnification claim notice regarding certain collection and tax payments related to the Share Purchase Agreement dated as of January 31, 2020 among BlackSky Holdings, Inc., Spaceflight, and M&Y Space.
We offer customers several service level options that include basic plans for on-demand tasking or multi-year assured access programs, where customers can secure priority access and imaging capacity at a premium over a region of interest on a take or pay basis.
We offer customers several service level subscription options that include on-demand tasking or multi-year assured access programs, where customers can secure priority access and imaging capacity at a premium over a region of interest on a take or pay basis.
The balance of unrecognized tax benefits as of December 31, 2022 and 2021, if recognized, would not affect our effective tax rate and would result in adjustments to other tax accounts, primarily deferred tax assets and the net operating loss carry forward. 15.
The balance of unrecognized tax benefits as of December 31, 2023 and 2022, if recognized, would not affect our effective tax rate and would result in adjustments to other tax accounts, primarily deferred tax assets and the net operating loss carry forward. 13.
Below is a tabular reconciliation of the total amounts of unrecognized tax benefits: 2022 2021 (in thousands) Unrecognized tax benefits - January 1 $ 8,443 $ — Gross increase - tax positions in current period — 8,443 Gross increase - tax positions in prior period 563 — Unrecognized tax benefits - December 31 $ 9,006 $ 8,443 The majority of the unrecognized tax benefits as of the year ended December 31, 2022 is from the valuation of guaranteed incentives shares issued for SVB guarantors.
Below is a tabular reconciliation of the total amounts of unrecognized tax benefits: 2023 2022 (in thousands) Unrecognized tax benefits - January 1 $ 9,006 $ 8,443 Gross decrease - tax positions in current period — — Gross increase - tax positions in current period — 563 Unrecognized tax benefits - December 31 $ 9,006 $ 9,006 The majority of the unrecognized tax benefits in the year ended December 31, 2023 is from the valuation of guaranteed incentives shares issued for SVB guarantors.
The Company recorded a $3.0 million gain on derivatives in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2022 related to the fair value adjustments of these Sponsor Shares.
The Company recorded a $0.4 million gain on derivatives in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2023 related to the fair value adjustments of these Sponsor Shares.
During the year ended December 31, 2022 the Company incurred offering costs of $0.5 million, which are included in other assets in the Company's consolidated balance sheets as of December 31, 2022; there were no deferred offering costs capitalized as of December 31, 2021. 3.
During the year ended December 31, 2022 the Company incurred offering costs of $0.5 million, which were included in other assets in the Company's consolidated balance sheets as of December 31, 2022; there were no deferred offering costs capitalized as of December 31, 2023.
U.S. federal tax NOL carryforwards generated prior to 2018 of $37.9 million will expire, if unused, between 2033-2036. Under the Tax Cuts and Jobs Act of 2017, as modified by the Coronavirus Aid, Relief, and Economic Security Act, federal NOL carryforwards generated in tax years beginning after December 31, 2017 may be carried forward indefinitely.
U.S. federal tax NOL carryforwards generated prior to 2018 of $39.6 million will expire, if unused, between 2033-2037. Under the Tax Cuts and Jobs Act of 2017, as modified by the Coronavirus Aid, Relief, and Economic Security Act, federal NOL carryforwards generated in tax years beginning after December 31, 2017 may be carried forward indefinitely.
The majority of the Company's sales are with U.S. federal government and agencies, which limits uncollectible accounts receivable. The Company performs continuing credit evaluations on each customer’s financial condition and reviews accounts receivable on a periodic basis to determine if any accounts receivable will potentially be uncollectible.
The majority of the Company's sales are with domestic and international government and agencies, which limits uncollectible accounts receivable. The Company performs continuing credit evaluations on each customer’s financial condition and reviews accounts receivable on a periodic basis to determine if any accounts receivable will potentially be uncollectible.
Our analytics services are also offered on a subscription or consumption basis and provide customers with access to our site monitoring, event monitoring and global data services.
Our analytics services are also offered on a similar subscription basis and provide customers with access to our site monitoring, event monitoring and global data services.
Forfeiture Provision If, within the seven year period, the Sponsor Shares have not met the Release provisions, the Sponsor Shares will automatically forfeit and be cancelled. F-35 19.
Forfeiture Provision If, within the seven year period, the Sponsor Shares have not met the Release provisions, the Sponsor Shares will automatically forfeit and be cancelled.
The lease commenced in January 2023 with a lease term of 4 years. Ground Station Services The Company has purchase commitments for ground station services to be performed by third-parties subsequent to December 31, 2022.
The lease commenced in January 2024 with a lease term of 13 years. Ground Station Services The Company has purchase commitments for ground station services to be performed by third-parties subsequent to December 31, 2023.
Any change in fair value between the respective reporting dates is recognized as an unrealized gain or loss in the accompanying consolidated statements of operations and comprehensive loss (Note 23). In the year ended December 31, 2022, the Company's derivative liabilities were made up of only the equity warrants and the Sponsor Shares.
Any change in fair value between the respective reporting dates is recognized as an unrealized gain or loss in the accompanying consolidated statements of operations and comprehensive loss (see Note 21). The Company's derivative liabilities were made up of only equity warrants and the Sponsor Shares as of December 31, 2023 and December 31, 2022.
Satellite procurement work in process capitalized, but not yet paid, is recognized as the Company has the rights to the in-process assets that LeoStella is engineering on the Company's behalf or a refund of amounts paid to date, less certain costs.
Satellite procurement work in process capitalized, but not yet paid, is recognized as the Company has the rights to the in-process assets being engineered on the Company's behalf or a refund of amounts paid to date, less certain costs.
A summary of the Company’s nonvested RSA activity during the year ended December 31, 2022 is presented below: Restricted Stock Awards Weighted-Average Grant-Date Fair Value (in thousands) Nonvested - January 1, 2022 335 $ 0.01 Vested (200) 0.01 Canceled (78) 0.01 Nonvested - December 31, 2022 57 0.01 The Company has not granted any RSAs since 2020.
A summary of the Company’s nonvested RSA activity during the year ended December 31, 2023 is presented below: Restricted Stock Awards Weighted-Average Grant-Date Fair Value (in thousands) Nonvested - January 1, 2023 57 $ 0.01 Vested (34) 0.01 Canceled — 0.01 Nonvested - December 31, 2023 23 0.01 The Company has not granted any RSAs since 2020.
For options granted in 2021 and 2022, since there is not a history of option exercises as a public company, the Company considered the option vesting terms and contractual period, as well as the demographics of the holders, in estimating the expected term.
For options granted in 2021 through 2023, since there was not a history of option exercises as a public company, the Company considered the option vesting terms and contractual period, as well as the demographics of the holders, in estimating the expected term.
As a result, as of December 31, 2022 and December 31, 2021, the Company's derivative liabilities in the consolidated balance sheets included Sponsor Shares of $1.7 million and $4.7 million, respectively.
As a result, as of December 31, 2023 and December 31, 2022, the Company's derivative liabilities in the consolidated balance sheets included Sponsor Shares of $1.3 million and $1.7 million, respectively.
As of December 31, 2022 and 2021, 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 did not have a significant reserve for uncollectible account. F-44 26.
As of December 31, 2023 and 2022, 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 did not have a significant reserve for uncollectible accounts. 119 24.
Stock-Based Compensation The Company adopted two equity incentive plans in prior years. 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”, together with the 2014 Plan, collectively the “Plans”), which are now administered by the Company’s board of directors.
Stock-Based Compensation Legacy BlackSky adopted two equity incentive plans in prior years and issued equity and equity-based awards under the 2014 Equity Incentive Plan (the “2014 Plan”) and the Amended and Restated 2011 Equity Incentive Plan (the “2011 Plan”, together with the 2014 Plan, collectively the “Prior Plans”), which are now administered by the Company’s board of directors.
As of December 31, 2022, the Company had $214.9 million of NOL carryforwards generated after 2017 for U.S. federal tax purposes, which may be used to offset 80% of its taxable income annually. F-30 The Company files income tax returns in the United States federal jurisdiction and various state jurisdictions.
As of December 31, 2023, the Company had $235.8 million of NOL carryforwards generated after 2017 for U.S. federal tax purposes, which may be used to offset 80% of its taxable income annually. The Company files income tax returns in the United States federal jurisdiction and various state jurisdictions.
In the normal course of business, the Company is subject to examination by taxing authorities. Tax years 2014-2021 remain open for examination.
In the normal course of business, the Company is subject to examination by taxing authorities. Tax years 2015-2022 remain open for examination.
It comprises both F-22 funded backlog (firm orders for which funding is authorized and appropriated) and unfunded backlog. The Company's backlog excludes unexercised contract options. As of December 31, 2022, the Company had $259.4 million of backlog, which represents the transaction price of executed contracts less inception to date revenue recognized.
It comprises both 101 funded backlog (firm orders for which funding is authorized and appropriated) and unfunded backlog. The Company's backlog excludes unexercised contract options. As of December 31, 2023, the Company had $261.7 million of backlog, which represents the transaction price of executed contracts less inception to date revenue recognized.
F-38 Restricted Stock Units The Company granted an aggregate of 4.6 million RSUs to certain employees and service providers during the year ended December 31, 2022 under the 2021 Plan.
Restricted Stock Units The Company granted an aggregate of 14.4 million RSUs to certain employees and service providers during the year ended December 31, 2023 under the 2021 Plan.
For the years ended December 31, 2022 and 2021, the 401(k) employer match expense was $0.9 million and $0.6 million, respectively, for continuing operations. 14. Income Taxes The Company's consolidated effective income tax rate from continuing operations for the years ended December 31, 2022 and 2021 was 0.0%.
For the years ended December 31, 2023 and 2022, the 401(k) employer match expense was $1.1 million and $0.9 million, respectively. 12. Income Taxes The Company's consolidated effective income tax rate from continuing operations for the years ended December 31, 2023 and 2022 was -1.26% and 0%, respectively.
The warrants have an exercise price of $2.20 per share of common stock, and are exercisable beginning on September 8, 2023 until September 8, 2028.
The warrants have an exercise price of $2.20 per share of Class A common stock, and are exercisable until September 8, 2028.
F-34 The Company had reserved shares of Class A common stock for issuance in connection with the following: December 31, December 31, 2022 2021 (in thousands) Common stock warrants (exercisable for class A common stock) treated as equity 1,770 1,770 Stock options outstanding 8,641 5,022 Restricted stock units outstanding 7,854 10,959 Public Warrants (exercisable for class A common stock) treated as liability 15,813 15,813 Private Placement Warrants (exercisable for class A common stock) treated as liability 8,325 8,325 Shares available for future grant 135,645 140,951 Total class A common stock reserved 178,048 182,840 The Company has approximately 2.4 million Sponsor 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 derivative liabilities at their fair value and adjusted to fair value at each reporting period.
The Company had reserved shares of Class A common stock for issuance in connection with the following: December 31, December 31, 2023 2022 (in thousands) Common stock warrants (exercisable for Class A common stock) treated as equity 1,770 1,770 Stock options outstanding 8,340 8,641 Restricted stock units outstanding 16,132 7,854 Public Warrants (exercisable for Class A common stock) treated as liability 15,813 15,813 Private Placement Warrants (exercisable for Class A common stock) treated as liability 24,729 8,325 Shares available for future grant 87,984 135,645 Total Class A common stock reserved 154,768 178,048 110 The Company has approximately 2.4 million Sponsor 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 derivative liabilities at their fair value and adjusted to fair value at each reporting period.
Goodwill was as follows: December 31, 2022 December 31, 2021 (in thousands) Gross carrying amount $ 9,393 $ 9,393 Accumulated impairment losses — — Net carrying value of goodwill $ 9,393 $ 9,393 Intangible Assets The components of intangible assets were as follows: December 31, 2022 December 31, 2021 (in thousands) Gross carrying amount $ 6,530 $ 6,530 Accumulated amortization (4,612) (4,050) Net carrying amount (1) $ 1,918 $ 2,480 (1) For the years ended December 31, 2022 and 2021, the net carrying amount of intangible assets was made up entirely of customer relationships.
Goodwill was as follows: December 31, 2023 December 31, 2022 (in thousands) Gross carrying amount $ 9,393 $ 9,393 Accumulated impairment losses — — Net carrying value of goodwill $ 9,393 $ 9,393 Intangible Assets - net Intangible assets - net was as follows: December 31, 2023 December 31, 2022 (in thousands) Gross carrying amount $ 6,530 $ 6,530 Accumulated amortization (5,173) (4,612) Net carrying amount (1) $ 1,357 $ 1,918 (1) For the years ended December 31, 2023 and 2022, the net carrying amount of intangible assets was made up entirely of customer relationships.
Stock Options Following the Merger, the outstanding stock options issued under the 2011 Plan and 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, as adjusted for the common stock exchange ratio, subject to the same terms and conditions as were applicable to such Legacy BlackSky stock option (each an “Assumed Company Stock Option”).
These amounts are included in property, plant, and equipment - net in the consolidated balance sheets. 112 Stock Options Following the Merger, the outstanding stock options issued under the 2011 Plan and 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, as adjusted for the common stock exchange ratio in the Merger, subject to the same terms and conditions as were applicable to such Legacy BlackSky stock option (each an “Assumed Company Stock Option”).
Advertising Costs Advertising costs are expenses associated with promoting the Company’s services and products. Advertising costs are expensed as incurred and included in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss. For the years ended December 31, 2022 and 2021, advertising costs were $1.3 million and $1.1 million, respectively.
Advertising costs are expensed as incurred and included in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss. For the years ended December 31, 2023 and 2022, advertising costs were $1.5 million and $1.3 million, respectively.
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.
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 incremental to the contract and to fulfill contract obligations.
The Company estimates that it will have the following amortization expense for the future periods indicated below: For the years ending December 31: (in thousands) 2023 $ 561 2024 561 2025 561 2026 235 Total $ 1,918 F-27 11.
The Company estimates that it will have the following amortization expense for the future periods indicated below: For the years ending December 31: (in thousands) 2024 $ 561 2025 561 2026 235 Total $ 1,357 104 9.
The components of rent expense, which are included in selling, general and administrative expenses in the Company's consolidated statements of operations and comprehensive loss, were as follows: Year Ended December 31, 2022 (in thousands) Operating lease expense $ 1,861 Variable lease expense 960 Short-term lease expense 127 Sublease income (127) Total rent expense $ 2,821 F-39 Supplemental Balance Sheet Information Supplemental operating lease balance sheet information consists of the following: As of December 31, 2022 (in thousands) Operating lease right of use assets - net $ 3,586 Other current liabilities 530 Operating lease liabilities 3,132 Total operating lease liabilities $ 3,662 Other Supplemental Information Other supplemental operating lease information consists of the following for the year ended December 31, 2022: Operating cash flows for operating leases (in thousands) $ 1,771 ROU assets obtained in exchange for new lease liabilities (in thousands) $ 5,225 Weighted average remaining lease term (in years) 9.36 Weighted average discount rate 10.95 % 22.
Leases Total Lease Cost The components of rent expense, which are included in selling, general and administrative expenses in the Company's consolidated statements of operations and comprehensive loss, were as follows: Years Ended December 31, 2023 2022 (in thousands) Operating lease expense $ 1,287 $ 1,861 Variable lease expense 245 960 Short-term lease expense 273 127 Sublease income — (127) Total rent expense $ 1,805 $ 2,821 Supplemental Balance Sheet Information As of December 31, 2023 and 2022, supplemental operating lease balance sheet information consisted of the following: December 31, December 31, 2023 2022 (in thousands) Operating lease right of use assets - net $ 1,630 $ 3,586 Other current liabilities 621 530 Operating lease liabilities 3,041 3,132 Total operating lease liabilities $ 3,662 $ 3,662 115 Other Supplemental Information Other supplemental operating lease information consisted of the following for the years ended December 31, 2023 and 2022: Years Ended December 31, 2023 2022 (dollars in thousands) Operating cash flows for operating leases $ 586 $ 1,771 ROU assets obtained in exchange for new lease liabilities $ 222 $ 5,225 Weighted average remaining lease term (in years) 8.33 9.36 Weighted average discount rate 11.48 % 10.95 % 20.
We are not currently a party to any material claims or legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate, have a material adverse effect on our business, financial condition or results of operations.
The Company is not currently a party to any material claims or legal proceedings the outcome of which, if determined adversely to the Company, would individually or in the aggregate, have a material adverse effect on the Company's business, financial condition, results of operations, or cash flows.
For firm fixed price professional service contracts, the Company recognizes revenue using total estimated costs to complete the performance obligation, ("Estimate at Completion" or "EAC"). A performance obligation’s EAC includes all direct costs such as labor, materials, subcontract costs and overhead.
For firm fixed price professional and engineering service contracts, the Company recognizes revenue over time using the cost-to-complete method to measure progress to complete the performance obligation, ("Estimate at Completion" or "EAC"). A performance obligation's EAC includes all direct costs such as labor, fringe, materials, subcontract costs and overhead.
Fair Value of Financial Instruments The following tables present information about the Company’s liabilities that are measured at fair value on a recurring basis as of December 31, 2022 and 2021 and indicate the fair value hierarchy level of the valuation techniques and inputs that the Company utilized to determine such fair value: December 31, 2022 Quoted Prices in Active Markets Significant Other Observable Input Significant Other Unobservable Inputs (Level 1) (Level 2) (Level 3) (in thousands) Liabilities Public Warrants $ 2,097 $ — $ — Private Placement Warrants — — 1,332 Sponsor Shares — — 1,684 $ 2,097 $ — $ 3,016 December 31, 2021 Quoted Prices in Active Markets Significant Other Observable Input Significant Other Unobservable Inputs (Level 1) (Level 2) (Level 3) (in thousands) Liabilities Public Warrants $ 8,697 $ — $ — Private Placement Warrants — — 3,496 Sponsor Shares — — 4,732 $ 8,697 $ — $ 8,228 The carrying values of the following financial instruments approximated their fair values as of December 31, 2022 and December 31, 2021 based on their maturities: cash and cash equivalents, restricted cash, short-term investments, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, leases payable and other current liabilities.
Fair Value of Financial Instruments The following tables present information about the Company’s liabilities that are measured at fair value on a recurring basis as of December 31, 2023 and 2022 and indicate the fair value hierarchy level of the valuation techniques and inputs that the Company utilized to determine such fair value: December 31, 2023 Quoted Prices in Active Markets Significant Other Observable Input Significant Other Unobservable Inputs (Level 1) (Level 2) (Level 3) (in thousands) Liabilities Public Warrants $ 795 $ — $ — Private Placement Warrants - Issued October 2019 — — 583 Private Placement Warrants - Issued March 2023 — — 12,467 Sponsor Shares — — 1,304 $ 795 $ — $ 14,354 December 31, 2022 Quoted Prices in Active Markets Significant Other Observable Input Significant Other Unobservable Inputs (Level 1) (Level 2) (Level 3) (in thousands) Liabilities Public Warrants $ 2,097 $ — $ — Private Placement Warrants - Issued October 2019 — — 1,332 Sponsor Shares — — 1,684 $ 2,097 $ — $ 3,016 The carrying values of the following financial instruments approximated their fair values as of December 31, 2023 and 2022 based on their maturities: cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, and other current liabilities.
Net Loss Per Share of Class A Common Stock The following table includes the calculation of basic and diluted net (loss) income per share: Years Ended December 31, 2022 2021 (in thousands except per share information) Loss from continuing operations $ (74,879) $ (243,993) Gain (loss) from discontinued operations 707 (1,650) Net loss available to common stockholders $ (74,172) $ (245,643) Basic and diluted net loss per share - continuing operations $ (0.64) $ (3.37) Basic and diluted net gain (loss) per share - discontinued operations 0.01 (0.02) Basic and diluted net loss per share $ (0.63) $ (3.39) Shares used in the computation of basic and diluted net loss per share 117,821 72,462 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 years ended December 31, 2022 and 2021.
Net Loss Per Share of Class A Common Stock The following table includes the calculation of basic and diluted net (loss) income per share: Years Ended December 31, 2023 2022 (in thousands except per share information) Loss from continuing operations $ (53,859) $ (74,879) Gain from discontinued operations — 707 Net loss available to common stockholders $ (53,859) $ (74,172) Basic and diluted net loss per share - continuing operations $ (0.40) $ (0.64) Basic and diluted net gain per share - discontinued operations — 0.01 Basic and diluted net loss per share $ (0.40) $ (0.63) Shares used in the computation of basic and diluted net loss per share 135,451 117,821 111 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 years ended December 31, 2023 and 2022.
The Plans are no longer active; however, outstanding awards granted under these Plans will not be affected. 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.
The Prior Plans are no longer active; however, outstanding awards granted under these Prior Plans were not affected by the termination of the Prior Plans. Both of the Prior Plans allowed the board of directors of Legacy BlackSky to grant stock options, designated as incentive or nonqualified, and other equity awards to employees, officers, directors, and consultants.
F-29 Deferred tax assets and liabilities as of December 31, 2022 and 2021, consisted of the following: December 31, 2022 2021 (in thousands) Deferred tax assets: Net operating loss carryforwards $ 54,892 $ 45,181 Sec. 163(j) carryforward 7,741 6,414 Accruals and reserves 1,613 2,359 Deferred revenue 271 778 Capital loss carryforward 3,919 3,689 Section 174 - research expenditures 6,238 — Other deferred tax assets 6,385 3,631 Total deferred tax assets 81,059 62,052 Valuation allowance (80,137) (61,460) Total net deferred tax assets 922 592 Deferred tax liabilities Basis difference in intangibles (468) (588) Other deferred tax liabilities (454) (4) Total deferred tax liabilities (922) (592) Net deferred tax liabilities $ — $ — The Company continues to provide for a full valuation allowance on its net deferred tax assets as the Company does not believe it is more-likely-than-not that the losses will be utilized after evaluation of all significant positive and negative evidence including, but not limited to, historical cumulative losses over the prior three-year period, as adjusted for permanent items, insufficient sources of taxable income in prior carryback periods and unavailability of prudent and feasible tax-planning strategies.
Deferred tax assets and liabilities as of December 31, 2023 and 2022, consisted of the following: December 31, 2023 2022 (in thousands) Deferred tax assets: Net operating loss carryforwards $ 68,374 $ 54,892 Sec. 163(j) carryforward 9,214 7,741 Accruals and reserves 1,841 1,613 Deferred revenue 194 271 Capital loss carryforward 4,004 3,919 Section 174 - research expenditures 7,914 6,238 Other deferred tax assets 6,604 6,385 Total deferred tax assets 98,145 81,059 Valuation allowance (97,388) (80,137) Total net deferred tax assets 757 922 Deferred tax liabilities Basis difference in intangibles (332) (468) Other deferred tax liabilities (425) (454) Total deferred tax liabilities (757) (922) Net deferred tax liabilities $ — $ — The Company continues to provide for a full valuation allowance on its net deferred tax assets as the Company does not believe it is more-likely-than-not that the losses will be utilized after evaluation of all 106 significant positive and negative evidence including, but not limited to, historical cumulative losses over the prior three-year period, as adjusted for permanent items, insufficient sources of taxable income in prior carryback periods and unavailability of prudent and feasible tax-planning strategies.
The gross unrecognized holding losses as of December 31, 2022 and 2021 was $134 thousand and $0, respectively; there were not any gross unrecognized holding gains as of December 31, 2022 or 2021. Property and Equipment - net Property and equipment are stated at cost, less accumulated depreciation.
The gross unrecognized holding gains as of December 31, 2023 and 2022 were $6 thousand and $0, respectively; the gross unrecognized holding losses as of December 31, 2023 and 2022 were $0 and $134 thousand, respectively. 90 Property and Equipment - net Property and equipment are stated at cost, less accumulated depreciation.
The following table is a summary of the number of shares of the Company’s Class A common stock issuable upon exercise of warrants at December 31, 2022: Number of Shares Exercise Price Redemption Price Expiration Date Classification Gain in value for the year ended December 31, 2022 Fair Value at December 31, 2022 (in thousands) (in thousands) Public Warrants 15,813 $ 11.50 $ 18.00 9/9/2026 Liability $ 6,600 $ 2,097 Private Placement Warrants 4,163 $ 11.50 $ 18.00 9/9/2026 Liability 1,623 874 Private Placement Warrants 4,163 $ 20.00 $ 18.00 9/9/2026 Liability 541 458 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.
The following table is a summary of the number of shares of the Company’s Class A common stock issuable upon exercise of warrants at December 31, 2023: Number of Shares Exercise Price Redemption Price Expiration Date Classification Gain in Value for the Year Ended December 31, 2023 Fair Value as of December 31, 2023 (in thousands) (in thousands) Public Warrants 15,813 $ 11.50 $ 18.00 9/9/2026 Liability $ 1,301 $ 795 Private Placement Warrants - Issued October 2019 4,163 11.50 18.00 9/9/2026 Liability 458 416 Private Placement Warrants - Issued October 2019 4,163 20.00 18.00 9/9/2026 Liability 291 167 Private Placement Warrants - Issued March 2023 16,404 2.20 N/A 9/8/2028 Liability 5,249 12,467 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.
Deferred revenue and other contract liabilities are reported as contract liabilities in the accompanying 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 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.
As of December 31, 2022 and 2021, the Company’s short-term investments had a carrying value of $38.0 million and $0, respectively, which represents amortized cost, and an aggregate fair value of $37.9 million and $0, respectively.
As of December 31, 2023 and 2022, the Company’s short-term investments had a carrying value of $19.7 million and $38.0 million, respectively, which represents amortized cost, and an aggregate fair value of $19.7 million and $37.9 million, respectively, which represents a Level 1 measurement based off of the fair value hierarchy.
Finance leases are not material to our consolidated financial statements and the Company is not a lessor in any material arrangements. We do not have any material restrictions or covenants in our lease agreements, sale-leaseback transactions, land easements or residual value guarantees.
The Company's variable lease expense primarily consists of CAM expenses paid directly to lessors of real estate leases. Finance leases are not material to our consolidated financial statements and the Company is not a lessor in any material arrangements. We do not have any material restrictions or covenants in our lease agreements, sale-leaseback transactions, land easements or residual value guarantees.
Subject to certain conditions set forth in the JOBS Act, if, as an EGC, the Company intends to rely 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 Sarbanes-Oxley Act; (ii) provide certain of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd Frank Wall Street Reform and Consumer Protection Act; (iii) comply 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 (auditor discussion and analysis); and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
Subject to certain conditions set forth in the JOBS Act, if, as an EGC, the Company intends to rely 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 Sarbanes-Oxley Act; (ii) provide certain of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd Frank Wall Street Reform and Consumer Protection Act; (iii) comply with the requirement in Public Company Accounting Oversight Board Auditing Standard 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, to communicate critical audit matters in the auditor’s report; (iv) comply with any new audit rules adopted by the PCAOB after April 5, 2012 unless the SEC determines otherwise, and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
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. Compliance with Debt Covenants As of December 31, 2022, all debt instruments contain customary covenants and events of default.
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.
The total intrinsic value of options exercised during the years ended December 31, 2022 and 2021 was $1.8 million and $7.1 million, respectively. The total fair value of options vested during the years ended December 31, 2022 and 2021 was $1.2 million and $0.9 million, respectively.
The total intrinsic value of options exercised during the years ended December 31, 2023 and 2022 was $0.6 million and $1.8 million, respectively.
Future purchase commitments under non-cancellable ground station service contracts as of December 31, 2022 are as follows: (in thousands) For the years ending December 31, 2023 $ 619 2024 443 2025 298 2026 125 $ 1,485 Legal Proceedings From time to time, we may become involved in various claims and legal proceedings arising in the ordinary course of business, which, by their nature, are inherently unpredictable.
Future purchase commitments under non-cancellable ground station service contracts as of December 31, 2023 are as follows: (in thousands) For the years ending December 31, 2024 $ 759 2025 613 2026 441 2027 316 2028 78 $ 2,207 118 Legal Proceedings From time to time, the Company may become involved in various claims and legal proceedings arising in the ordinary course of business, which, by their nature, are inherently unpredictable.
Years Ended December 31, 2022 2021 (in thousands) Restricted class A common stock 57 335 Common Stock warrants 1,770 1,770 Stock options 8,641 5,022 Restricted stock units 7,854 10,959 Public Warrants (exercisable for class A common stock) treated as liability 15,813 15,813 Private Placement Warrants (exercisable for class A common stock) treated as liability 8,325 8,325 Sponsor Shares 2,372 2,372 20.
Years Ended December 31, 2023 2022 (in thousands) Restricted Class A common stock 23 57 Class A common stock warrants 1,770 1,770 Stock options 8,340 8,641 Restricted stock units 16,132 7,854 Public Warrants (exercisable for Class A common stock) treated as liability 15,813 15,813 Private Placement Warrants (exercisable for Class A common stock) treated as liability 24,729 8,325 Sponsor Shares 2,372 2,372 18.
For the years ended December 31, 2022 and 2021, amortization expense related to intangible assets was $0.6 million and $1.4 million, respectively. These amounts were included in depreciation and amortization expense in the consolidated statements of operations and comprehensive loss.
For the years ended December 31, 2023 and 2022, amortization expense related to intangible assets was $0.6 million. This amount is included in depreciation and amortization expense in the consolidated statements of operations and comprehensive loss.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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If we are unable to attract, hire, develop, retain, and motivate qualified sales personnel, if our new sales personnel are unable to achieve sufficient sales productivity levels in a reasonable period of time or at all, if our marketing programs are not effective or if we are unable to effectively build, expand, and manage our sales organization and operations, our sales and revenue may grow more slowly than expected or materially decline, and our business may be significantly harmed.
If we are unable to attract, hire, develop, retain, and motivate qualified sales personnel, if our new sales personnel are unable to achieve sufficient sales productivity levels in a reasonable period of time or at all, if our marketing programs are not effective or if we are unable to effectively build, expand, retain, and manage our sales organization and operations, our sales and revenue may grow more slowly than expected or materially decline, and our business may be significantly harmed.
We face intense competition that may cause us to have to either reduce our prices for our products and services or to lose market share. We operate in highly competitive industries that are evolving and many of our competitors are larger and have substantially greater resources than we have.
We face intense competition that may cause us to either reduce our prices for our products and services or lose market share. We operate in highly competitive industries that are evolving and many of our competitors are larger and have substantially greater resources than we have.
If any of these third-party services experience errors, disruptions, security issues, or other performance deficiencies, if they are updated such that they become incompatible, if these services, software, or hardware fail or become unavailable due to extended outages, interruptions, defects, or otherwise, or if they are no longer available on commercially reasonable terms or prices (or at all), these issues could result in errors or defects in the delivery of our products and services that include the development, integration, and operations of satellite and ground systems, our revenue and margins could decline, or our reputation and brand could be damaged, we could be exposed to legal or contractual liability, our expenses could increase, our ability to manage our operations could be interrupted, and our processes for managing our sales and servicing our customers could be impaired until equivalent services or technology, if available, are identified, procured, and implemented, all of which may take significant time and resources, increase our costs, and could adversely affect our business.
If any of these third-party services experience errors, disruptions, security issues, or other performance deficiencies, if they are updated such that they become incompatible, if these services, software, or hardware fail or become unavailable due to extended outages, interruptions, defects, or otherwise, or if they are no longer available on commercially reasonable terms or prices (or at all), these issues could result in errors or defects in the delivery of our products and services that include the development, integration, and operations of satellite and ground systems, our revenue and margins could decline, our reputation and brand could be damaged, we could be exposed to legal or contractual liability, our expenses could increase, our ability to manage our operations could be interrupted, and our processes for managing our sales and servicing our customers could be impaired until equivalent services or technology, if available, are identified, procured, and implemented, all of which may take significant time and resources, increase our costs, and adversely affect our business.
In addition, our federal and state net operating loss carryforwards and certain tax credits may be subject to significant limitations under Section 382 and Section 383 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), respectively, and similar provisions of state law.
In addition, our U.S. federal and state net operating loss carryforwards and certain tax credits may be subject to significant limitations under Section 382 and Section 383 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), respectively, and similar provisions of state law.
Failure to comply with the NISPOM or other security requirements may subject us to civil or criminal penalties, loss of access to sensitive information, loss of a U.S. government contract, or potentially debarment as a government contractor. Further, the DCSA has transitioned its review of a contractor’s security program to focus on the protection of controlled unclassified information and assets.
Failure to comply with the NISPOM or other security requirements may subject us to civil or criminal penalties, loss of access to sensitive information, loss of a U.S. government contract, or potentially debarment as a government contractor. Further, DCSA has transitioned its review of a contractor’s security program to focus on the protection of controlled unclassified information and assets.
In addition, any data that we license from third parties for potential use with our technologies may contain errors or defects, which could negatively impact our products and services. This may have a negative impact on how our products and services are perceived by our current and potential customers and could materially damage our reputation and brand.
In addition, any data that we license from third parties for use or potential use with our technologies may contain errors or defects, which could negatively impact our products and services. This may have a negative impact on how our products and services are perceived by our current and potential customers and could materially damage our reputation and brand.
In addition, others may independently discover or reverse engineer our trade secrets and proprietary information, and in such cases we could not assert any trade secret or proprietary rights against such party. Litigation may be necessary to enforce or protect our intellectual property rights, our trade secrets or determine the validity and scope of the proprietary rights of others.
In addition, others may independently discover or reverse engineer our trade secrets and proprietary information, and in such cases we could not assert any trade secret or proprietary rights against such party. Litigation may be necessary to enforce or protect our intellectual property rights or our trade secrets or determine the validity and scope of the proprietary rights of others.
We are required to obtain licenses or authorizations from U.S. government regulators in order to disclose technical data/technology associated with the development of our satellites, export of our satellites and related equipment for the launch, shipment of equipment to foreign ground stations, and to provide defense services to foreign persons.
We are required to obtain licenses or authorizations from U.S. government regulators in order to disclose technical data/technology associated with the development of our satellites, export of our satellites and related equipment for the launch, and shipment of equipment to foreign ground stations, and to provide defense services to foreign persons.
The export of our software, satellites and ground station equipment, and the provision of services and related technical data, in some cases, are subject to U.S. and international export control laws and regulations and trade and economic sanctions including the ITAR, the EAR, trade and economic sanctions maintained by the Office of Foreign Assets Control (“OFAC”).
The export of our software, satellites and ground station equipment, and the provision of services and related technical data, in some cases, are subject to U.S. and international export control laws and regulations and trade and economic sanctions including the ITAR, the EAR, and trade and economic sanctions maintained by the Office of Foreign Assets Control (“OFAC”).
For as long as we continue to be an emerging growth company, we are eligible for and intend to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including: • not being required to have an independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002; • reduced disclosure obligations regarding executive compensation in our periodic reports and annual report on Form 10-K; and 49 • exemptions from the requirements of holding non-binding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved.
For as long as we continue to be an emerging growth company, we are eligible for and intend to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including: • not being required to have an independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002; • reduced disclosure obligations regarding executive compensation in our periodic reports and Annual Report on Form 10-K; and • exemptions from the requirements of holding non-binding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved.
The loss of, or inability to obtain, certain third-party licenses or other rights or to obtain such licenses or rights on reasonable terms, or the need to engage in litigation regarding these matters, could result in product roll-backs, delays in product releases until equivalent or comparable technology can be identified, acquired, licensed, or developed, if at all, and integrated into our technologies, and may have a material adverse effect on our business, financial condition, and results of operations.
The loss of, or inability to obtain, certain third-party licenses or other rights or to obtain such licenses or rights on reasonable terms, or the need to engage in litigation regarding these matters, could result in product and service roll-backs and delays in product and service releases until equivalent or comparable technology can be identified, acquired, licensed, or developed, if at all, and integrated into our technologies, and may have a material adverse effect on our business, financial condition, and results of operations.
For example, if one or more of our satellite launches result in catastrophic failure or one or more of our in-orbit satellites or payloads fail, and we have not obtained insurance coverage, we could be required to record significant impairment charges for the satellite or payload. • If our satellites fail to operate as intended, it could have a material adverse effect on our business, financial condition and results of operations. • Currently we are dependent on LeoStella as the sole manufacturer of our satellites.
For example, if one or more of our satellite launches result in catastrophic failure or one or more of our in-orbit satellites or payloads fail, and we have not obtained insurance coverage, we could be required to record significant impairment charges for the satellite or payload. 13 • If our satellites fail to operate as intended, it could have a material adverse effect on our business, financial condition and results of operations. • Currently we are dependent on LeoStella as the sole manufacturer of our satellites.
As a result of such acquisitions, our current or potential competitors may be able to accelerate the adoption of new technologies that better address customer needs, devote greater resources to bring these products and services to market, initiate or withstand substantial price competition, or develop and expand their product and service offerings more quickly than we do.
As a result of such acquisitions, our current or potential competitors may be able to accelerate the adoption of new technologies that better address customer needs, devote greater resources to bring these products and services to market, initiate or withstand substantial price competition, or develop and 19 expand their product and service offerings more quickly than we do.
The U.S. government and foreign governments may develop, construct, launch and operate their own imagery satellites with capabilities similar to ours, which could reduce their need to rely on us and other commercial suppliers. In addition, such governments could sell or provide free of charge Earth imagery from their satellites and thereby compete with our products and services.
The U.S. government and foreign governments may develop, construct, launch and operate their own imagery satellites with capabilities comparable or similar to ours, which could reduce their need to rely on us and other commercial suppliers. In addition, such governments could sell or provide free of charge Earth imagery from their satellites and thereby compete with our products and services.
During any period of time in which a satellite is not fully operational, we may lose most or all of the revenue that would have otherwise been derived from that satellite. Our inability to repair or replace a defective satellite or correct any other technical problem in a timely manner could result in a significant loss of revenue.
During any period of time in which a satellite is not fully operational, we may lose most or all of the revenue that would have otherwise been derived from that satellite. Our inability to repair or replace a defective satellite or correct or mitigate any other technical problem in a timely manner could result in a significant loss of revenue.
We attempt to protect our trade secrets and other proprietary information by entering into confidentiality, licensing and invention assignment agreements or other contracts with similar provisions with third parties, our 37 employees and consultants. However, these agreements can be breached and, if they are, there may not be an adequate remedy available to us.
We attempt to protect our trade secrets and other proprietary information by entering into confidentiality, licensing and invention assignment agreements or other contracts with similar provisions with third parties, our employees and consultants. However, these agreements can be breached and, if they are, there may not be an adequate remedy available to us.
Competition for hiring these employees is intense, especially regarding engineers and data scientists with specialized skills and security clearances required for our business, and we may be unable to hire and retain enough engineers and data scientists to implement our growth strategy. 15 Certain U.S. government contracts require us, and some of our employees, to maintain national security clearances.
Competition for hiring these employees is intense, especially regarding engineers and data scientists with specialized skills and security clearances required for our business, and we may be unable to hire and retain enough engineers and data scientists to implement our growth strategy. Certain U.S. government contracts require us, and some of our employees, to maintain national security clearances.
While we have implemented policies and procedures to address 44 compliance with such laws, we cannot assure you that our employees, business partners, third-party intermediaries, representatives, and agents will not engage in conduct in violation of our policies or applicable law for which we might ultimately be held responsible.
While we have implemented policies and procedures to address compliance with such laws, we cannot assure you that our employees, business partners, third-party intermediaries, representatives, and agents will not engage in conduct in violation of our policies or applicable law for which we might ultimately be held responsible.
Our major existing and potential competitors for our products and services include commercial satellite imagery companies, state-owned imagery providers, aerial imagery companies, free sources of imagery and unmanned aerial vehicles. We also face competition from companies that provide geospatial data analytic information and services to the U.S. government, including defense prime contractors.
Our major existing and potential competitors for our products and services include commercial satellite imagery companies, state-owned imagery providers, aerial imagery companies, free sources of imagery and unmanned aerial vehicles. We also face competition from companies that provide geospatial data analytic information and services to the U.S. government, including defense contractors.
Delays in the construction of future satellites and the procurement of requisite components and launch vehicles, limited availability of appropriate launch windows, possible delays in obtaining regulatory approvals, satellite damage or destruction during launch, launch failures, or incorrect orbital placement could have a material adverse effect on our business, financial condition, and results of operations.
Delays in the construction of future satellites and the procurement of requisite components, limited availability of appropriate launch windows, possible delays in obtaining regulatory approvals, satellite damage or destruction during launch, launch failures, or incorrect orbital placement could have a material adverse effect on our business, financial condition, and results of operations.
Such claims, with or without merit, could result in litigation, could be time-consuming and expensive to settle or litigate, could divert our management’s attention and other resources, could require us to lease 36 some of our proprietary code, or could require us to devote additional research and development resources to change our technologies, any of which could adversely affect our business.
Such claims, with or without merit, could result in litigation, could be time-consuming and expensive to settle or litigate, could divert our management’s attention and other resources, could require us to lease some of our proprietary code, or could require us to devote additional research and development resources to change our technologies, any of which could adversely affect our business.
In addition, the U.S. government could in the future exercise “shutter control” authority – the interruption of service by limiting imagery collection and/or distribution as necessary to meet significant U.S. government national security or foreign policy interests or international obligations – which, for example, could limit the resolution, collection or distribution of imagery over certain geographies.
In addition, the U.S. government could in the future exercise “shutter control” authority – the interruption of service by limiting imagery collection and/or distribution as necessary to meet significant U.S. government national security or foreign policy interests or international obligations – which, for example, could limit the resolution, collection or distribution of imagery over 40 certain geographies.
If any of our current operations are deemed not to be in compliance with applicable regulatory requirements, we may be subject to various sanctions, including fines, loss of authorizations, or denial of applications for new authorizations or renewal of existing authorizations. It is not uncommon for licenses for new satellites to be granted just prior to launch.
If any of our current operations are deemed 41 not to be in compliance with applicable regulatory requirements, we may be subject to various sanctions, including fines, loss of authorizations, or denial of applications for new authorizations or renewal of existing authorizations. It is not uncommon for licenses for new satellites to be granted just prior to launch.
Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a material adverse effect on our business. 45 Increasing regulatory focus on privacy issues and expanding laws may impact our business or expose us to increased liability.
Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a material adverse effect on our business. Increasing regulatory focus on privacy issues and expanding laws may impact our business or expose us to increased liability.
U.S. government policy is subject to change and any change in policy away from supporting the use of commercial data and space infrastructure providers to meet U.S. government imagery and space infrastructure needs, or any material delay or cancellation of planned U.S. government programs, could materially adversely affect our revenue and our ability to achieve our growth objectives.
U.S. government policy is subject to change and any change in policy away from supporting the use of commercial data and space infrastructure providers to meet U.S. government imagery and 30 space infrastructure needs, or any material delay or cancellation of planned U.S. government programs, could materially adversely affect our revenue and our ability to achieve our growth objectives.
A decision to change manufacturers would result in longer times for design and production as we develop relationships with new suppliers. 34 We are dependent on a limited number of vendors to provide certain key raw materials, supplied components, products or services, including launch transport and launch services.
A decision to change manufacturers would result in longer times for design and production as we develop relationships with new suppliers. We are dependent on a limited number of vendors to provide certain key raw materials, supplied components, products or services, including launch transport and launch services.
Furthermore, our current financing arrangement contains certain restrictive financial and non-financial covenants that may impact our access to those facilities and significantly limit future operating and financial flexibility. We have in the past, and may continue in the future to, receive government grants and funding for research and development activities and other business initiatives.
Furthermore, our current financing arrangement contains certain restrictive financial and non-financial covenants that may impact our access to those facilities and significantly limit future operating and financial flexibility. We have in the past received, and may continue in the future to receive, government grants and funding for research and development activities and other business initiatives.
In addition, as we grow, we may hire employees in jurisdictions outside of the United States or engage a professional employer organization to hire and employ such persons, which may subject us to foreign export and import rules and regulations, as well as international sanctions, foreign direct investment requirements, and other international trade rules.
In addition, as we grow, we may hire employees in jurisdictions outside of the United States or engage a professional employer organization to hire and employ such 42 persons, which may subject us to foreign export and import rules and regulations, as well as international sanctions, foreign direct investment requirements, and other international trade rules.
In addition, there can be no assurance that the market for our products and services will develop or continue to expand or that we will be successful in newly identified markets as we currently anticipate. The failure of our technology to gain market acceptance could significantly reduce our revenue and harm our business.
In addition, there can be no assurance 22 that the market for our products and services will develop or continue to expand or that we will be successful in newly identified markets as we currently anticipate. The failure of our technology to gain market acceptance could significantly reduce our revenue and harm our business.
Failure to comply with applicable CAS requirements could adversely impact our ability to win future CAS-type contracts. • We are subject to the Defense Federal Acquisition Regulation Supplement (“DFARS”) and the Department of Defense (“DoD”) and other federal cybersecurity requirements, in connection with our defense work for the U.S. government and defense prime contractors.
Failure to comply with applicable CAS requirements could adversely impact our ability to win future CAS-type contracts. We are subject to the Defense Federal Acquisition Regulation Supplement (“DFARS”) and the Department of Defense (“DoD”) and other federal cybersecurity requirements, in connection with our defense work for the U.S. government and defense contractors.
In addition, if a satellite experiences a malfunction, our backup satellite capacity may be insufficient to meet all of our customers’ needs or cause service interruptions, and we may need to potentially blackout or reduce service to certain customers, which would adversely affect our relationships with our customers and result in loss of 32 revenue.
In addition, if a satellite experiences a malfunction, our backup satellite capacity may be insufficient to meet all of our customers’ needs or cause service interruptions, and we may need to potentially blackout or reduce service to certain customers, which would adversely affect our relationships with our customers and result in loss of revenue.
In addition, new laws and regulations, more stringent enforcement of existing laws and regulations, or the discovery of previously unknown contamination could result in material obligations and costs. Permits issued pursuant to certain environmental laws are required for our operations, and these permits are subject to renewal, modification and, in some cases, revocation.
In addition, new laws and regulations, more stringent enforcement of existing laws and regulations, or the discovery of previously unknown contamination could result in material obligations and costs. Permits issued 45 pursuant to certain environmental laws are required for our operations, and these permits are subject to renewal, modification and, in some cases, revocation.
We may be subject to assertions that taxes must be collected based on gross receipts, sales and use of our services and location of our remote employees in various states, which could expose us to liability and cause material harm to our business, financial condition, and results of operations.
We may be subject to assertions that taxes must be collected based on gross receipts, sales and use of our services and the location of our remote employees in various states, which could expose us to liability and cause material harm to our business, financial condition, and results of operations.
The market for our products and services has not been established with precision, is still emerging and may not achieve the growth potential we expect or may grow more slowly than expected. The market for our products and services has not been established with precision as the commercialization of space is a relatively new development and is rapidly evolving.
The market for our products and services has not been established with precision, is still emerging and may not achieve the growth potential we expect or may grow more slowly than expected. 18 The market for our products and services has not been established with precision as the commercialization of space is a relatively new development and is rapidly evolving.
We believe that, in order to remain competitive in the future, we will need to continue to invest significant financial resources to develop new offerings and technologies or to adapt or modify our existing offerings and technologies, including through internal research and development, acquisitions and joint ventures or other teaming 22 arrangements.
We believe that, in order to remain competitive in the future, we will need to continue to invest significant financial resources to develop new offerings and technologies or to adapt or modify our existing offerings and technologies, including through internal research and development, acquisitions and joint ventures or other teaming arrangements.
In general, an “ownership change” will occur if there is a cumulative change in our ownership (by value) by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws.
In general, an “ownership change” will occur if there is a cumulative change in our ownership (by value) by “5-percent shareholders” that exceeds 50 percentage points 26 over a rolling three-year period. Similar rules may apply under state tax laws.
Our current primary research and development objectives focus on the development of our satellites and our products and services. We have limited operational experience with our satellites, and our Gen-3 satellites are still in development and may not be completed on time or at all and the costs associated with it may be greater than expected.
Our current primary research and development objectives focus on the development of our satellites and our products and services. We have limited operational experience with our satellites, and our Gen-3 satellites are still in development and may not be completed on time or at all and the costs associated with development may be greater than expected.
A failure or operator error affecting tracking, telemetry and control operations might lead to a break-down in the ability to communicate with one or more satellites or cause the transmission of incorrect instructions to the affected satellites, which could lead to a temporary or permanent degradation in satellite performance or to the loss of one or more satellites.
A failure or operator error affecting tracking, telemetry and control operations might lead 35 to a break-down in the ability to communicate with one or more satellites or cause the transmission of incorrect instructions to the affected satellites, which could lead to a temporary or permanent degradation in satellite performance or to the loss of one or more satellites.
Risks Related to Our Indebtedness and Financings Our business is capital intensive, and we may not be able to adequately finance our capital needs through operations, or by raising capital, including funding future satellites, or we may be able to do so only on terms that significantly restrict our ability to operate our business.
Risks Related to Our Indebtedness and Alternative Financings Our business is capital intensive, and we may not be able to adequately finance our capital needs, including funding future satellites, through operations, or by raising capital, or we may be able to do so only on terms that significantly restrict our ability to operate our business.
Cancellation of or adjustments to contracts may occur. Additionally, all U.S. government contracts included in backlog may be terminated at the convenience of the U.S. government. If a U.S. government contract is terminated before completion of all of the contracted work, we may not receive all potential revenue from these orders.
Cancellation of or adjustments to contracts may occur. Additionally, all U.S. government contracts included in backlog may be terminated at the convenience of the U.S. government. If 17 a U.S. government contract is terminated before completion of all of the contracted work, we may not receive all potential revenue from these orders.
It may be necessary in the future to renew licenses relating to various aspects of these platforms or to seek new licenses for existing or new platforms or other products. There can be no assurance that the necessary licenses would be available on commercially acceptable terms, if at all.
It may be necessary in the future to renew licenses relating to various aspects of these platforms or to seek new licenses for existing or new platforms or other products. There can be no assurance that the necessary licenses would be available on commercially 36 acceptable terms, if at all.
If existing customers do not make subsequent purchases from us or renew their contracts with us, our revenue could decline, and our results of operations would be adversely impacted. 14 We also derive a significant portion of our revenue from existing customers that expand their relationships with us.
If existing customers do not make subsequent purchases from us or renew their contracts with us, our revenue could decline, and our results of operations would be adversely impacted. We also derive a significant portion of our revenue from existing customers that expand their relationships with us.
The value of our products and services may also be diluted by related products and services that are available free of charge. Competition in our imagery services business is highly diverse, and while our competitors offer different products, there is often competition for contracts that are part of governmental budgets.
The value of our products and services may also be diluted by related products and services that are made available free of charge. Competition in our imagery services business is highly diverse, and while our competitors offer different products and services, there is often competition for contracts that are part of governmental budgets.
Our competitors or potential competitors could, in the future, offer satellite-based imagery or other products and services with more attractive features than our products and services. The emergence of new remote imaging technologies or the continued growth of low-cost imaging satellites could negatively affect our marketing efforts.
Our competitors or potential competitors could, in the future, offer satellite-based imagery or other products and services with more attractive features than those of our products and services. The emergence of new remote imaging technologies or the continued growth of low-cost imaging satellites could negatively affect our marketing efforts.
There is a risk that one or more states may seek to 40 impose sales or use tax or other tax collection obligations on us for past sales and it could have a material adverse impact on our sales, profitability, cash flows and financial condition.
There is a risk that one or more states may seek to impose sales or use tax or other tax collection obligations on us for past sales and it could have a material adverse impact on our sales, profitability, cash flows and financial condition.
Even if a satellite is operated properly, technical flaws in that satellite’s sensors or other technical deficiencies or anomalies could significantly hinder its performance, which could materially affect our ability to collect imagery and market our products and services successfully.
Even if a satellite is operated properly, technical flaws in that satellite’s sensors or other 33 technical deficiencies or anomalies could significantly hinder its performance, which could materially affect our ability to collect imagery and market our products and services successfully.
Additionally, some space debris is too small to be tracked and therefore its orbital location is completely unknown; nevertheless, this debris is still large enough to potentially cause severe damage or a failure of our satellites should a collision occur.
Additionally, some space debris is too small to be tracked and therefore its orbital location is completely unknown; nevertheless, this debris may still be large enough to potentially cause severe damage or a failure of our satellites should a collision occur.
These changes in rules or regulatory policy may significantly affect our business. For example, the FCC recently adopted rules requiring the deorbiting of certain satellites – including those maintained by BlackSky – after five years to mitigate the risk of orbital debris.
These changes in rules or regulatory policy may significantly affect our business. For example, the FCC adopted rules requiring the deorbiting of certain satellites – including those maintained by BlackSky – after five years to mitigate the risk of orbital debris.
The principal factors and uncertainties that could adversely affect our business include, among others: 11 • We have a limited history of operating at our current scale and under our current strategy, which makes it difficult to predict our future operating results, and we may not achieve our expected operating results in the future. • We may not be able to sustain our revenue growth rate in the future. • Our results of operations are subject to fluctuation from period to period and may not be an accurate indication of future performance; our operating results have, and may in the future, fall below our financial guidance or other projections or fail to meet the expectations of securities analysts and investors. • The loss of one or more of our largest customers could adversely affect our results of operations. • We have incurred significant losses each year since our inception, we expect our operating expenses to increase, and we cannot give assurances of our future profitability, if any. • The market for our products and services has not been established with precision, is still emerging and may not achieve the growth potential we expect or may grow more slowly than expected. • Our business with various governmental entities is subject to the policies, priorities, regulations, mandates, and funding levels of such governmental entities and may be negatively or positively impacted by any change thereto. • Our ability to grow our business depends on the successful production, launch, commissioning and/or operation of our satellites and related ground systems, which is subject to many uncertainties, some of which are beyond our control. • Our business involves significant risks and uncertainties that may not be covered by insurance.
The principal factors and uncertainties that could adversely affect our business include, among others: • We have a limited history of operating at our current scale and under our current strategy, which makes it difficult to predict our future operating results, and we may not achieve our expected operating results in the future. • We may not be able to sustain our revenue growth rate in the future. • Our results of operations are subject to fluctuation from period to period and may not be an accurate indication of future performance; our operating results have fallen, and may in the future fall, below our financial guidance or other projections or the expectations of securities analysts and investors. • The loss of one or more of our largest customers could adversely affect our results of operations. • We have incurred significant losses each year since our inception, we expect our operating expenses to increase, and we cannot give assurances of our future profitability, if any. • The market for our products and services has not been established with precision, is still emerging and may not achieve the growth potential we expect or may grow more slowly than expected. • Our business with various governmental entities is subject to the policies, priorities, regulations, mandates, and funding levels of such governmental entities and may be negatively or positively impacted by any change thereto. • Our ability to grow our business depends on the successful production, launch, commissioning and/or operation of our satellites and related ground systems, which is subject to many uncertainties, some of which are beyond our control. • Our business involves significant risks and uncertainties that may not be covered by insurance.
We have implemented processes to help alleviate these risks, including a review process for evaluating open source software and using software tools to review our source code for identifying open source software, but we cannot be sure that such processes will be accurate or effective.
We have implemented processes to help alleviate these risks, including a review process for evaluating open source software and using software tools to review our source code for identifying open source software, but we cannot be sure that such processes will be comprehensive, accurate or effective.
Fluctuations in our results of operations have, and may in the future, 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.
Fluctuations in our results of operations have caused, and may in the future 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.
Our views of the total addressable market are based 17 on a number of third-party reports and management estimates, which may or may not accurately reflect future market size and growth. As a result, our views of the total addressable market may prove to be incorrect.
Our views of the total addressable market are based on a number of third-party reports and management estimates, which may or may not accurately reflect future market size and growth. As a result, our views of the total addressable market may prove to be incorrect.
More importantly, if competitors develop and launch satellites or other imagery-content sources with more advanced capabilities and technologies than ours, or offer products and services at lower prices than ours, our business and results of operations could be harmed.
More importantly, if competitors develop and launch satellites or other imagery-content sources with more advanced or sophisticated capabilities and technologies than ours, or offer products and services at lower prices than ours, our business and results of operations could be harmed.
However, there is no assurance that such alternative measures may be successful or permitted under the agreements governing our indebtedness and, as a result, we may not be able to meet our scheduled debt service obligations.
However, 38 there is no assurance that such alternative measures may be successful or permitted under the agreements governing our indebtedness and, as a result, we may not be able to meet our scheduled debt service obligations.
We face other risks and uncertainties associated with defense-related contracts, which may have a material adverse effect on our business. Our products and services are incorporated into many different domestic and international defense programs.
We face other risks and uncertainties associated with defense-related contracts, which may have a material adverse effect on our business. 28 Our products and services are incorporated into many different domestic and international defense programs.
Changes could be accelerated due to changes in our mix of business, in federal regulations, or in the interpretation of federal regulations, which may subject us to increased oversight by the Defense Contract Audit Agency (“DCAA”) for certain of our products or services.
Changes could be accelerated due to changes in our mix of business, in federal regulations, or in the interpretation of federal regulations, which may subject us to increased oversight by the Defense Contract Audit Agency for certain of our products or services.
If a joint venture or similar arrangement were subject to regulatory review, such regulatory review might limit our ability to enter into the desired strategic alliance and thus limit our ability to carry out our long-term business strategy.
If a joint venture or similar arrangement were subject to regulatory review, such regulatory review might limit our 46 ability to enter into the desired strategic alliance and thus limit our ability to carry out our long-term business strategy.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to consent to the provisions of our amended and restated certificate of incorporation described above.
Any person or entity purchasing or otherwise acquiring 50 any interest in shares of our capital stock shall be deemed to have notice of and to consent to the provisions of our amended and restated certificate of incorporation described above.
Our systems may not be successfully implemented, pass required acceptance criteria, or operate or give the desired output, or we may not be able to detect and fix all defects in the satellites and our products and services.
Our systems may not be successfully implemented, pass required acceptance criteria, or operate or give the desired output, or we may not be able to detect and fix all defects and errors in the satellites and our products and services.
To the extent that there are interpretations or changes in the FAR regarding the qualifications necessary to sell 29 commercial items, there could be a material impact on our business and operating results.
To the extent that there are interpretations or changes in the FAR regarding the qualifications necessary to sell commercial items, there could be a material impact on our business and operating results.
If we do not maintain regulatory authorizations for our existing satellites, associated ground facilities and terminals, and services we provide, or obtain authorizations for our future satellites, associated ground facilities 41 and terminals, and services we provide, we may not be able to operate our existing satellites or expand our operations.
If we do not maintain regulatory authorizations for our existing satellites, associated ground facilities and terminals, and services we provide, or obtain authorizations for our future satellites, associated ground facilities and terminals, and services we provide, we may not be able to operate our existing satellites or expand our operations.
If our reputation or relationship with U.S. government agencies were impaired, or if 28 the U.S. government otherwise ceased doing business with us or significantly decreased the amount of business it does with us, our revenue would decline.
If our reputation or relationship with U.S. government agencies were impaired, or if the U.S. government otherwise ceased doing business with us or significantly decreased the amount of business it does with us, our revenue would decline.
While certain software deficiencies may be corrected remotely, most, if not all, of the satellite anomalies or debris collision damage cannot be corrected once the satellites are placed in orbit.
While certain software deficiencies may be corrected or mitigated remotely, most, if not all, of the satellite anomalies or debris collision damage cannot be corrected or mitigated once the satellites are placed in orbit.
If we are unable to coordinate our satellites by specified 42 deadlines, we may not be able to use our satellites or certain frequencies for our proposed service or coverage area or we may lose interference protection for our satellites.
If we are unable to coordinate our satellites by specified deadlines, we may not be able to use our satellites or certain frequencies for our proposed service or coverage area or we may lose interference protection for our satellites.
Market acceptance of our commercial high-resolution imagery and related products and services depends on a number of factors, including the quality, scope, timeliness, sophistication, price and the availability of substitute products and services.
Market acceptance of our commercial high-resolution imagery and related products and services depends on a number of factors, including their quality, scope, timeliness, sophistication, and price and the availability of substitute products and services.
A failure to meet contractual obligations under such agreements and 38 grants and a consequent requirement to repay money received could negatively impact our business, financial condition, and results of operations.
A failure to meet contractual obligations under such agreements and grants and a consequent requirement to repay money received could negatively impact our business, financial condition, and results of operations.
Failure to invest in such infrastructure may limit our ability to obtain new contracts 30 with defense programs or maintain existing contracts that contain such contractual or regulatory security requirements.
Failure to invest in such infrastructure may limit our ability to obtain new contracts with defense programs or maintain existing contracts that contain such contractual or regulatory security requirements.
In addition, space weather, such as solar flares, could take our satellites out of orbit, disrupt our ground communication networks, and affect the decay rate of our satellites. Further, if there is high demand on our constellation to capture images in a certain area, we may have difficulty tasking sufficient satellite coverage to capture high-resolution images in another region.
In addition, space weather, such as solar flares, could take our satellites out of orbit, disrupt our ground communication networks, and affect the decay rate of our satellites. Further, if there is high demand on our constellation to capture images in a certain area, we may have difficulty tasking sufficient satellite coverage to capture high-resolution images in this region.
A delay in the timing of receipt of such 13 collections, or a default on a large contract, may negatively impact our liquidity for the period and in the future.
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.
Although our revenue increased in 2022, there can be no assurances that revenue will continue to grow or do so at current rates, and you should not rely on the revenue of any prior quarterly or annual period as an indication of our future performance. Our revenue growth rate may decline in future periods.
Although our revenue increased in 2023, there can be no assurances that revenue will continue to grow or do so at current rates, and you should not rely on the revenue of any prior quarterly or annual period as an indication of our future performance. Our revenue growth rate may decline in future periods.
You may not be able to resell your shares at an attractive price due to a number of factors such as those listed in this Risk Factors section and the following: • results of operations that vary from the expectations of securities analysts and investors; 48 • results of operations that vary from those of our competitors; • changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; • declines in the market prices of stocks generally; • strategic actions by us or our competitors; • announcements by us or our competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments; • any significant change in our management; • changes in general economic or market conditions or trends in our industry or markets; • changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • future sales of our Class A common stock or other securities; • investor perceptions or the investment opportunity associated with our Class A common stock relative to other investment alternatives; • the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; • litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; • the development and sustainability of an active trading market for our stock; • actions by institutional or activist stockholders; • changes in accounting standards, policies, guidelines, interpretations or principles; • general economic and political conditions such as recessions, interest rates, fuel prices, trade wars, pandemics (such as COVID-19), currency fluctuations and acts of war (including ongoing geopolitical tensions related to Russia’s actions in Ukraine, resulting sanctions imposed by the United States and other countries, and retaliatory actions taken by Russia in response to such sanctions) or terrorism; and • the effects of natural disasters, terrorist attacks and the spread and/or abatement of infectious diseases, such as COVID-19, including with respect to potential operational disruptions, labor disruptions, increased costs, and impacts to demand related thereto.
You may not be able to resell your shares at an attractive price due to a number of factors such as those listed in this Risk Factors section and the following: • results of operations that vary from the expectations of securities analysts and investors; • results of operations that vary from those of our competitors; • changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; • declines in the market prices of stocks generally; • strategic actions by us or our competitors; • announcements by us or our competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments; • any significant change in our management; • changes in general economic or market conditions or trends in our industry or markets; • changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • future sales of our Class A common stock or other securities; 47 • investor perceptions or the investment opportunity associated with our Class A common stock relative to other investment alternatives; • the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; • litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; • the development and sustainability of an active trading market for our stock; • actions by institutional or activist stockholders; • changes in accounting standards, policies, guidelines, interpretations or principles; • general economic and political conditions such as recessions, interest rates, fuel prices, trade wars, pandemics, currency fluctuations and acts of war (including ongoing geopolitical tensions related to the conflict in the Middle East or Russia’s actions in Ukraine, resulting sanctions imposed by the United States and other countries, and retaliatory actions taken by other countries in response to such sanctions) or terrorism; and • the effects of natural disasters, terrorist attacks and the spread and/or abatement of infectious diseases, including with respect to potential operational disruptions, labor disruptions, increased costs, and impacts to demand related thereto.
Similarly, assumptions are made regarding the future impact of our efficiency initiatives and cost reduction efforts. Incentives, 52 awards or penalties related to performance on contracts are considered in estimating revenue and profit rates and are recorded when there is sufficient information to assess anticipated performance. Suppliers’ assertions are also assessed and considered in estimating costs and profit rates.
Similarly, assumptions are made regarding the future impact of our efficiency initiatives and cost reduction efforts. Incentives, awards or penalties related to performance on contracts are considered in estimating revenue and profit rates and are 51 recorded when there is sufficient information to assess anticipated performance. Suppliers’ assertions are also assessed and considered in estimating costs and profit rates.
Our amended and restated certificate of incorporation provides that, subject to limited exceptions, any (1) derivative action or proceeding brought on behalf of us, (2) action asserting a claim of breach of a duty (including any fiduciary duty) owed by any of our current or former directors, officers, stockholders, employees or agents to us or our stockholders, (3) action asserting a claim against us or any of our current or former directors, officers, stockholders, employees or agents arising out of or relating to any provision of the DGCL or our amended and restated certificate of incorporation or our amended and restated bylaws (each, as in effect from time to time) or (4) action asserting a claim against us or any of our current or former directors, officers, stockholders, employees or agents governed by the internal affairs doctrine of the State of Delaware shall, to the fullest extent permitted by applicable law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court lacks subject matter jurisdiction thereof, another state or federal court located within the State of Delaware, provided that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint against any person in connection with any offering of our securities, asserting a cause of action arising 51 under the Securities Act.
Our amended and restated certificate of incorporation provides that, subject to limited exceptions, any (1) derivative action or proceeding brought on behalf of us, (2) action asserting a claim of breach of a duty (including any fiduciary duty) owed by any of our current or former directors, officers, stockholders, employees or agents to us or our stockholders, (3) action asserting a claim against us or any of our current or former directors, officers, stockholders, employees or agents arising out of or relating to any provision of the Delaware General Corporation Law (“DGCL”) or our amended and restated certificate of incorporation or our amended and restated bylaws (each, as in effect from time to time) or (4) action asserting a claim against us or any of our current or former directors, officers, stockholders, employees or agents governed by the internal affairs doctrine of the State of Delaware shall, to the fullest extent permitted by applicable law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court lacks subject matter jurisdiction thereof, another state or federal court located within the State of Delaware, provided that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint against any person in connection with any offering of our securities, asserting a cause of action arising under the Securities Act.
If we fail to maintain the compatibility of our products 24 and services with our customers’ network and security infrastructures, our customers may not be able to fully adopt our offerings, and we may, among other consequences, experience reduced demand for our products and services, which could adversely affect our business, financial condition, and results of operations.
If we fail to maintain the compatibility of our products and services 24 with our customers’ network and security infrastructures, our customers may not be able to fully adopt our offerings, and we may, among other consequences, experience reduced adoption of or demand for our products and services, which could adversely affect our business, financial condition, and results of operations.
Further, although we have some ability to actively maneuver our satellites to avoid potential collisions with space debris or other spacecraft, this ability is limited by, among other factors, uncertainties and inaccuracies in the projected orbit location of and predicted conjunctions with debris objects tracked and cataloged by the U.S. government.
Further, although we have some ability to actively maneuver our satellites to avoid potential collisions with space debris or other spacecrafts, this ability is limited by, among other factors, uncertainties and inaccuracies in the projected orbit location of and predicted conjunctions with debris objects tracked and cataloged by the U.S. government.
If we were to fail to comply with such export controls laws and regulations, economic sanctions, international trade regulations, or other similar laws, we could be subject to both civil and criminal penalties, including substantial fines, possible incarceration for employees and managers for willful violations, and the possible loss of our export or import privileges.
If we were to fail to comply with such export control laws and regulations, economic sanctions, international trade regulations, or other similar laws, we could be subject to both civil and criminal penalties, including substantial fines, possible incarceration for employees and managers for willful violations, and the possible loss of our export or import privileges.
We have presented many of the factors that may cause our results of operations to fluctuate in this “Risk Factors” section.
We have presented many of the factors that may cause our 14 results of operations to fluctuate in this “Risk Factors” section.
Failure to meet DCSA’s new, broader requirements could adversely impact the ability to win new business as a government contractor. • We may need to invest additional capital to build out higher level security infrastructure/obtain certain security accreditations to win contracts, and maintain them, related to defense programs with higher level security requirements.
Failure to meet DCSA’s broader requirements could adversely impact our ability to win new business as a government contractor. We may need to invest additional capital to build out higher level security infrastructure/obtain certain security accreditations to win contracts, and maintain them, related to defense programs with higher level security requirements.
Our reliance on our satellite manufacturers poses a number of risks, including lack of control over the manufacturing process and ultimately over the quality and timing of delivery of our satellites. An infrastructure failure at a manufacturer’s facilities could result in the destruction of satellites under construction or inventory, manufacturing delays or additional costs incurred.
Our reliance on our satellite manufacturer poses a number of risks, including lack of control over the manufacturing process and ultimately over the quality and timing of delivery of our satellites. An infrastructure failure at a manufacturer’s facilities could result in the destruction of satellites under construction or inventory, manufacturing delays or additional costs incurred.
This may increase the risk to our employees, subcontractors or other third parties, and/or increase the risk of a wide range of liabilities, as well as loss of property. 53 We cannot predict the timing, strength, or duration of any crisis, economic slowdown or any subsequent recovery generally, or for any industry in particular.
This may increase the risk to our employees, subcontractors or other third parties, and/or increase the risk of a wide range of liabilities, as well as loss of property. 52 We cannot predict the timing, strength, or duration of any crisis, economic slowdown or any subsequent recovery generally, or for any industry in particular.

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Item 2. Properties

Properties — owned and leased real estate

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ITEM 2. PROPERTIES We lease approximately 23,728 square feet of office space in Herndon, Virginia for our U.S. administrative headquarters. The building also houses the majority of our sales and marketing support staff and other administrative personnel. The lease for the building expires on August 31, 2024. We also lease approximately 37,472 square feet of office space in Seattle, Washington.
ITEM 2. PROPERTIES We lease approximately 23,738 square feet of office space in Herndon, Virginia for our U.S. administrative headquarters. The building also houses the majority of our sales and marketing support staff and other administrative personnel. The current lease for the building expires on August 31, 2024.
The space serves as the primary satellite operations center and a secondary office space for employees. The lease for the building expires in March 2023. As a result, we entered into a subsequent lease for approximately 14,503 square feet in Seattle, Washington.
We entered into a subsequent lease for approximately 17,119 square feet in Herndon, Virginia effective January 2023. The lease for the new building expires in August 2036. We also lease approximately 14,503 square feet of office space in Seattle, Washington. The space serves as the primary satellite operations center and a secondary office space for employees.
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The lease for the building expires in November 2033.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. 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.
ITEM 3. 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. 54 ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 55 PART II
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For a discussion of legal proceedings in which we are involved, see Note 24 to the financial statements and supplementary data included in Part 2, Item 8 of this Annual Report on Form 10-K. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 55 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Holders of Common Stock As of March 1, 2023, there were approximately 679 holders of record of our Class A common stock. Because many of the shares of Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners represented by these record holders.
Holders of Common Stock As of March 15, 2024, there were approximately 693 holders of record of our Class A common stock. Because many of the shares of Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners represented by these record holders.
Further, our ability to pay dividends may be limited by covenants of any future outstanding indebtedness we or our subsidiaries incur. Unregistered Sales of Equity Securities and Use of Proceeds None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. ITEM 6. [RESERVED]
Further, our ability to pay dividends may be limited by covenants of any future outstanding indebtedness we or our subsidiaries incur.
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Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities On December 15, 2022, we entered into an "at the market" (ATM) sales agreement with Jefferies LLC as our sales agent, under which we may offer and sell from time to time up to $75 million of shares of our Class A common stock in negotiated transactions or transactions that are deemed to be an ATM offering.
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During the year ended December 31, 2023, we raised gross proceeds of $5.0 million through the sale of 3,462,155 shares in our ATM offering. We sold such shares at an average purchase price per share of $1.45.
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After deducting commissions and other offering expenses associated with the ATM offering of $1.2 million, the net proceeds to us from the transactions were $3.8 million. We currently intend to use the net proceeds from the sale of the shares for working capital and other general corporate purposes. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Our next generation satellites (“Gen-3”), expected to launch in 2024, are designed to improve our imaging resolution even further and include short wave infrared imaging technology for a broad set of imaging conditions, including nighttime and low-light. We believe these advancements will expand the relevance and certainty of our analytics to continue to ensure our importance to our customers.
Our next generation satellites (“Gen-3”), expected to launch in 2024, are designed to improve imaging resolution even further and include short wave infrared imaging technology for a broad set of imaging conditions, including nighttime and low-light. We believe these advancements will expand the relevance and certainty of our analytics to continue to ensure our importance to our customers.
In addition, our services and products can benefit customers in a variety of commercial markets including, but not limited to, energy and utilities, insurance, commodities, mining, manufacturing, logistics, supply chain management, agriculture, environmental monitoring, disaster and risk management, engineering and construction, retail and consumer behavior.
In addition, our services and products can benefit customers in a variety of commercial markets including, but not limited to, energy and utilities, insurance, commodities, mining, manufacturing, logistics, supply chain management, agriculture, environmental monitoring, disaster and risk management, engineering and construction, and retail and consumer behavior.
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.
Estimating the fair value of stock options using the Black-Scholes option-pricing model requires the application of significant assumptions, such as 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.
We offer customers several service level options that include basic plans for on-demand tasking or multi-year assured access programs, where customers can secure priority access and imaging capacity at a premium over a region of interest on a take or pay basis. ◦ Data, Software, and Analytics: Our analytics services are also offered on a subscription basis and provide customers with access to our site monitoring, event monitoring and global data services.
We offer customers several service level options that include basic plans for on-demand tasking or multi-year assured access programs, where customers can secure priority access and imaging capacity at a premium over a region of interest on a take or pay basis. ◦ Data, Software, and Analytics: Our analytics services are also offered on a subscription or consumption basis and provide customers with access to our site monitoring, event monitoring and global data services.
Because of these limitations, Adjusted EBITDA should not be considered in isolation, nor should this measure 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 66 GAAP results.
Because of these limitations, Adjusted EBITDA should not be considered in isolation, nor should this measure 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.
When equity-based compensation awards include a performance condition, no compensation is recognized until the 72 performance condition is deemed probable to occur; we then recognize compensation costs based on the accelerated attribution method, which accounts for awards with discrete vesting dates as if they were a separate award.
When equity-based compensation awards include a performance condition, no compensation is recognized until the performance condition is deemed probable to occur; we then recognize compensation costs based on the accelerated attribution method, which accounts for awards with discrete vesting dates as if they were a separate award.
If the undiscounted cash flows exceed the net book value, the long-lived assets are considered not to be impaired. If the net book value exceeds the undiscounted cash flows, an impairment charge is measured and recognized based upon the difference between the carrying value of long-lived assets (or asset group) and their fair value. ITEM 7A.
If the undiscounted cash flows exceed the net book value, the long-lived assets are considered not to be impaired. If the net book value exceeds the undiscounted 72 cash flows, an impairment charge is measured and recognized based upon the difference between the carrying value of long-lived assets (or asset group) and their fair value. ITEM 7A.
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.
Furthermore, our computation of 64 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.
Due to the long-term nature of our engineering and construction 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.
Due to the long-term nature of our engineering and construction contracts, we generally recognize revenue over time using a cost-to-complete measure of progress because it best depicts the transfer of control to the customer as we incur costs on the contracts.
Expected Volatility—As there was no observable volatility with respect to our Legacy BlackSky Class A common stock and due to the lack of sufficient history of BlackSky Class A common stock, the expected volatility of our Legacy BlackSky and BlackSky Class A common stock was estimated based upon the historical share price volatility of guideline comparable companies.
Expected Volatility—As there was no observable volatility with respect to Legacy BlackSky Class A common stock and due to the lack of sufficient history of BlackSky Class A common stock, the expected volatility of Legacy BlackSky and BlackSky Class A common stock was estimated based upon the historical share price volatility of guideline comparable companies.
Professional and engineering services revenue is generated from both time and materials basis contracts and firm-fixed price service solutions contracts and firm-fixed price long-term engineering and construction contracts.
Professional and engineering services revenue is generated from time and materials basis contracts, firm-fixed price service solutions contracts and firm-fixed price long-term engineering and construction contracts.
Components of Operating Results Revenue Our revenue is generated by selling imagery and software analytics services through our Spectra AI platform and by providing professional and engineering services to strategic customers on a project basis. • Imagery and Software Analytical Services Revenue ◦ Imagery: We offer our customers high-revisit, on-demand high resolution electro optical satellite imaging services.
Components of Operating Results Revenue Our revenue is generated by selling imagery and software analytics services through our Blacksky Spectra platform and by providing professional and engineering services to strategic customers on a project basis. • Imagery and Software Analytical Services Revenue ◦ Imagery: We offer our customers high-revisit, on-demand high resolution electro optical satellite imaging services.
We performed an annual qualitative goodwill assessment over the balance of goodwill we held related to the BlackSky reporting unit as of October 1, 2022. We also determined that no triggering events occurred during the year ended December 31, 2022 that would require a quantitative assessment.
We performed an annual qualitative goodwill assessment over the balance of goodwill we held related to the BlackSky reporting unit as of October 1, 2023. We also determined that no triggering events occurred during the year ended December 31, 2023 that would require a quantitative assessment.
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.
Each of these assumptions is subjective, requires significant judgment, 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.
Our operating strategy is to continue to enhance the capabilities of our satellite constellation, to increase the number of third-party data sources processed by our Spectra AI platform, and to expand our analytics offerings in order to increase the value we deliver to our customers.
Our operating strategy is to continue to enhance the capabilities of our satellite constellation, to increase the number of third-party data sources processed by our BlackSky Spectra platform, and to expand our analytics offerings in order to increase the value we deliver to our customers.
Expected Term—For options granted in 2021 and 2022, since there is not a history of option exercises as a public company, we considered the option vesting terms and contractual period, as well as the demographics of the holders, in estimating the expected term.
Expected Term—For options granted since 2021, as there is not a significant history of option exercises as a public company, we considered the option vesting terms and contractual period, as well as the demographics of the holders, in estimating the expected term.
As of December 31, 2022, we believe that the estimated fair values of the BlackSky reporting unit is still in excess of its respective carrying value and therefore is not at-risk of being impaired.
As of December 31, 2023, we believe that the estimated fair values of the BlackSky reporting unit is still in excess of its respective carrying value and therefore is not at-risk of being impaired.
The parties agreed to the framework for a global settlement of such indemnification claims, to include a settlement payment by the Company of $1.0 million and a holdback amount of $0.1 million subject to M&Y Space Co.’s ability to collect against certain receivables. As a result, we reduced our existing contingent liability by $707 thousand.
The parties agreed to the framework for a global settlement of such indemnification claims, to include a settlement payment by the Company of $1.0 million and a holdback amount of $0.1 million subject to M&Y Space Co.’s ability to collect against certain receivables. As a result, we reduced our existing contingent liability by $0.7 million.
We have largely moved towards granting RSAs and RSUs to the bulk of our employees, for which the grant date fair value is equal to the trading price fair value of the Class A common stock on the date of grant.
We have largely moved towards granting RSUs to the bulk of our employees, for which the grant date fair value is equal to the trading price fair value of our Class A common stock on the date of grant.
Our Spectra AI software platform can, among other things, process millions of observations a day from our proprietary satellite constellation and from multiple external data sources including imaging, radar and radio frequency satellites, environmental sensors, asset tracking sensors, Internet-of-Things (“IoT”) connected devices, internet-enabled narrative sources, and a variety of geotemporal data feeds.
Our BlackSky Spectra software platform can, among other things, process millions of observations a day from our proprietary satellite constellation and from multiple external data sources including imaging, radar and radio frequency satellites, environmental sensors, asset tracking sensors, Internet-of-Things connected devices, internet-enabled narrative sources, and a variety of geotemporal data feeds.
Spectra AI employs advanced, proprietary AI and machine learning (“ML”) techniques to process, analyze, and transform these data feeds into alerts, information, and insights that our customers receive, all fully automated. Customers can access Spectra AI's data and analytics through easy-to-use web services or through platform application programming interfaces.
BlackSky Spectra employs advanced, proprietary AI and machine learning (“ML”) techniques to process, analyze, and transform these data feeds into alerts, information, and insights that our customers receive, all fully automated. Customers can access BlackSky Spectra's data and analytics through easy-to-use web services or through platform application programming interfaces.
Our two strategic assets—our satellite constellation and our Spectra AI platform—are mutually reinforcing: as we capture ever more information about the world’s most important strategic and economic assets and locations, our proprietary database expands and increases its utility; enabling us to better detect, understand, and predict changes that matter most to our customers.
Our two strategic assets—our satellite constellation and our BlackSky Spectra platform—are mutually reinforcing: as we capture more information about the world’s most important strategic and economic assets and locations, our proprietary database expands and increases its utility, enabling us to better detect, understand, and predict changes that matter most to our customers.
We recognize 59 stock-based compensation expense for those employees whose work supports the imagery and software analytical service costs we provide to customers, under imagery and software analytical service costs, excluding depreciation and amortization. • Professional and engineering service costs primarily include the cost of internal labor for design and engineering in support of long-term development contracts for launch vehicle, satellite, and payload systems as well as subcontract direct materials and external labor costs to build and test specific components, such as the communications system, payload demands, and sensor integration.
We recognize stock-based compensation expense for those employees whose work supports the imagery and software analytical service costs we provide to customers, under imagery and software analytical service costs, excluding depreciation and amortization. • Professional and engineering service costs primarily include the cost of internal labor for design and engineering in support of long-term development contracts for satellites and payload systems as well as subcontract direct materials and external labor costs to build and test specific components, such as the communications system, payload demands, and sensor integration.
Classification of Revenue We classify revenue as imagery and software analytical services, and professional and engineering services in our consolidated statements of operations and comprehensive loss based on the predominant attributes of the performance obligations. 71 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.
Classification of Revenue We classify revenue as imagery and software analytical services, and professional and engineering services in our 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 contract sets forth the transaction price for the products and services purchased under the arrangement.
Our development costs include internal labor costs to develop critical real-time software and geospatial analytic solutions and solution enhancements, including mapping, analysis, site target monitoring, and news feeds. • Research and development expense consists of employees’ salaries, taxes, and benefits costs incurred for data science modeling and algorithm development related to our Spectra AI platform, and for the strategic development efforts to support our long-term strategy.
Our development costs include internal labor costs to design and plan critical real-time software and geospatial analytic solutions and solution enhancements, including mapping, analysis, site target monitoring, and news feeds. • Research and development expense consists of employees’ salaries, taxes, and benefits costs incurred for data science modeling and algorithm development related to our Blacksky Spectra software platform, and for the strategic development efforts to support our long-term strategy.
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 Spectra AI platform and internal infrastructure that will enable us to scale the business efficiently and securely.
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 Blacksky Spectra software platform and internal infrastructure that will enable us to continue to scale the business efficiently and securely.
Funding Requirements While our expenses may continue to exceed our revenues in the near term due to investments we are making in sales, marketing and products to increase our market share, we expect this difference to decline as we progress to becoming operating cash flow positive.
Funding Requirements While our expenses may continue to exceed our revenues in the near term due to investments we are making in sales, marketing and products to increase our market share, this difference has declined as we progress to becoming operating cash flow positive.
Through our Spectra AI platform, customers can directly task our proprietary satellite constellation to collect and deliver imagery over specific locations, sites, and regions that are critical to their operations.
Through our BlackSky Spectra software platform, customers can directly task our proprietary satellite constellation to collect and deliver imagery over specific locations, sites, and regions that are critical to their operations.
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.
Our future long-term capital requirements 65 will depend on many factors including our growth rate, customer demand for capacity, 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.
Although we have a history of recurring losses from operations, negative cash flows from operations, and a significant accumulated deficit, as of the October 1, 2022 analysis, the fair value was greater than 34% in excess of the carrying value for BlackSky.
Although we have a history of recurring losses from operations, negative cash flows from operations, and a significant accumulated deficit, as of the October 1, 2023 analysis, the fair value was greater than 82% in excess of the carrying value for BlackSky.
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.
Under this 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 significant judgment.
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.
We historically have not paid, and 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.
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.
For purposes of recognizing equity-based compensation related to RSAs, RSUs, and stock options granted to employees and other service providers, management estimates the grant date fair values of such awards to measure the costs to be recognized as services are received.
Non-GAAP Financial Measures In addition to our results determined in accordance with GAAP, management utilizes certain non-GAAP performance measures, Adjusted EBITDA, and free cash flow for purposes of evaluating our ongoing operations and for internal planning and forecasting purposes.
Non-GAAP Financial Measures In addition to our results determined in accordance with GAAP, management utilizes certain non-GAAP performance measures, such as Adjusted EBITDA, for purposes of evaluating our ongoing operations and for internal planning and forecasting purposes.
We recognize changes in contract 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.
We recognize changes in the estimation of total costs at completion on a cumulative catch-up basis in the period in which the changes are identified. Such changes in 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.
The contributor to the decrease in cash used during the year ended December 31, 2022 was the decrease in the operating loss, adjusted for depreciation, amortization, stock-based compensation expense, and other non-cash items in the year ended December 31, 2022 as compared to the year ended December 31, 2021.
The contributor to the significant decrease in cash used during the year ended December 31, 2023 as compared to the year ended December 31, 2022 was the decrease in the operating loss, adjusted for depreciation, amortization, stock-based compensation expense, gain on derivatives, and other non-cash items.
Stock Option and Class A Common Stock Warrant Valuations We use the Black-Scholes option-pricing model to value all options and Class A common stock warrants.
Stock Option and Class A Common Stock Warrant Valuations We use the Black-Scholes option-pricing model to value all options, including options under our ESPP, and Class A common stock warrants.
Our cash and cash equivalents excluding restricted cash totaled $34.2 million and $165.6 million as of December 31, 2022 and December 31, 2021, respectively, and our short-term investments totaled $38.0 million and $0 as of December 31, 2022 and December 31, 2021, respectively. We have incurred losses and generated negative cash flows from operations since our inception in September 2014.
Our cash and cash equivalents excluding restricted cash totaled $32.8 million and $34.2 million as of December 31, 2023 and 2022, respectively, and our short-term investments totaled $19.7 million and $38.0 million as of December 31, 2023 and 2022, respectively. We have incurred losses and generated negative cash flows from operations since our inception in September 2014.
We also believe the combination of our high-revisit, small satellite constellation, our Spectra AI platform, and low constellation cost is transforming the market for geospatial imagery and space-based data and analytics.
We also believe the combination of our high-revisit, small satellite constellation, our BlackSky Spectra platform, and low constellation cost is transforming the market for real-time, space-based imagery and analytics.
Costs are expensed as incurred except for incremental costs to obtain a contract, primarily sales commissions, which are capitalized and amortized to selling, general, and administrative expenses on a systematic basis consistent with the transfer of goods and services.
Costs are expensed as incurred except for incremental costs to obtain a contract, primarily sales commissions on contracts greater than one year, which are capitalized and amortized to selling, general, and administrative expenses on a systematic basis consistent with the transfer of goods and services and directly identifiable costs to fulfill a contract.
In addition, we entered into various other operational commitments for the next several years totaling $9.8 million as of December 31, 2022. Critical Accounting Policies and Estimates The preparation of our 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.
In addition to the above, we have entered into various non-refundable operational commitments for the next several years totaling $6.6 million as of December 31, 2023. Critical Accounting Estimates The preparation of our 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.
We expect continued imagery and software analytical services revenue growth in the year ending December 31, 2023, as compared to the prior year, as a result of increases in our sales orders driven by stronger customer demand. • Professional and Engineering Services Revenue— We develop and deliver advanced launch vehicle, satellite and payload systems for specific strategic customers that desire to leverage our capabilities in mission systems engineering and operations, ground station operations, software, analytics and systems development.
We expect continued imagery and software analytical services revenue growth as a result of increases in our sales orders driven by stronger customer demand. • Professional and Engineering Services Revenue— We develop and deliver advanced satellites and payload systems for specific strategic customers that desire to leverage our capabilities in mission systems engineering and operations, ground station operations, software, analytics and systems development.
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.
Variable and fixed price plans 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 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.
Our management and board of directors believe that this non-GAAP operating measure, when reviewed with our GAAP financial information, provides useful supplemental information to investors in assessing our operating performance.
Such indicators may include (a) a significant decline in our common stock value; (b) a significant decline in our expected future cash flows; (c) a significant adverse change in legal factors or the business climate; (d) unanticipated competition; or (e) slower growth rates.
A significant amount of judgement is involved in determining if an indicator of impairment has occurred. Such indicators may include (a) a significant decline in our common stock value; (b) a significant decline in our expected future cash flows; (c) a significant adverse change in legal factors or the business climate; (d) unanticipated competition; or (e) slower growth rates.
As of December 31, 2022, our current liabilities were approximately $26.9 million, consisting primarily of accounts payable and accrued liabilities, contract liabilities, and other non-recurring current liabilities. Accordingly, we have sufficient cash and working capital to fund our short-term liquidity requirements.
As of December 31, 2023, our current liabilities were $27.5 million, consisting primarily of accounts payable and accrued liabilities. Accordingly, we have sufficient cash and working capital to fund our short-term liquidity requirements.
Our constellation is optimized to cost-efficiently capture imagery at high revisit rates where and when our customers need it. The orbital configuration of our constellation is designed to collect data on the most critical and strategic locations in the world.
Company Overview We own and operate one of the industry's leading high-performance low earth orbit small satellite constellations. Our constellation is optimized to cost-efficiently capture imagery at high revisit rates where and when our customers need it. The orbital configuration of our constellation is designed to collect data on the most critical and strategic locations in the world.
We believe that our focus on critical strategies and economic infrastructure and the AI-enabled tasking of our constellation differentiates us from our competitors, who are dedicated primarily to mapping the entirety of the Earth on a routine basis and who, therefore, require up to hundreds of satellites or incrementally more expensive satellites to support their mission.
We believe that our focus on critical strategic and economic infrastructure and the AI-enabled tasking of our constellation differentiates us from many of our competitors, who are primarily dedicated to mapping the entirety of the Earth on a routine basis.
Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “BlackSky”, “the Company”, “we”, “us” and “our” refer to the business and operations of Legacy BlackSky and its consolidated subsidiaries prior to the Merger and to BlackSky Technology Inc. and its consolidated subsidiaries, following the closing of the Merger. 56 General Overview On September 9, 2021, Osprey consummated the Merger with Legacy BlackSky.
Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “BlackSky,” “the Company,” “we,” “us” and “our” refer to the business and operations of Legacy BlackSky and its consolidated subsidiaries prior to the Merger and to BlackSky Technology Inc. and its consolidated subsidiaries, following the closing of the Merger.
We do not expect similar charges in future periods. 65 Gain (loss) from discontinued operations, net of income taxes Years Ended December 31, $ % 2022 2021 Change Change (dollars in thousands) Gain (loss) from discontinued operations, net of income taxes $ 707 $ (1,650) $ 2,357 142.8 % 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.
Gain from discontinued operations, net of income taxes Years Ended December 31, $ % 2023 2022 Change Change (dollars in thousands) Gain from discontinued operations, net of income taxes $ — $ 707 $ (707) (100.0) % On June 12, 2020, we completed the sale of 100% of our interests in Spaceflight, Inc. to M&Y Space Co., Ltd for a final purchase price of $31.6 million.
We will continue to review our estimate in the future and adjust it, if necessary, due to changes in our historical exercises. Private Placement Warrants and Sponsor Shares We have classified the Private Placement Warrants and Sponsor Shares as long-term liabilities in our consolidated balance sheets as of December 31, 2022 and December 31, 2021.
We will continue to review our estimate in the future and adjust it, if necessary, due to changes in our historical exercises. 71 Private Placement Warrants and Sponsor Shares We have classified the Private Placement Warrants issued in October 2019 and March 2023 and the Osprey pre-merger Class B common shares that were exchanged for shares of our Class A common stock (the "Sponsor Shares") as long-term liabilities in our consolidated balance sheets as of December 31, 2023 and December 31, 2022.
(2) Short-term investments are included in cash flows from investing activities in the consolidated statements of cash flows. We expect cash and cash equivalents and cash generated from operating activities to be sufficient to meet our working capital and capital expenditure needs for the foreseeable future.
We expect cash and cash equivalents and cash generated from operating activities to be sufficient to meet our working capital and capital expenditure needs for the foreseeable future.
The following discussion provides additional details regarding the significant estimates, assumptions, and judgments that impacted the determination of the fair values of equity-based compensation awards, warrants, and the preferred stock and common stock that comprised our capital structure prior to the Merger.
The following 70 discussion provides additional details regarding the significant estimates, assumptions, and judgments that impacted the determination of the fair values of equity-based compensation awards, warrants, and the common stock that comprise our capital structure. The following discussion also explains why these estimates, assumptions, and judgments could be subject to uncertainties and future variability.
Our satellites are designed with agile pointing capabilities that enable our customers to task our constellation on demand to collect specific locations of interest. Our tasking methodology employs proprietary artificial intelligence (“AI”)-enabled software to efficiently collect images of the most important strategic and economic assets and areas of interest to our customers.
Our tasking methodology employs proprietary artificial intelligence (“AI”)-enabled software to efficiently collect images of the most important strategic and economic assets and areas of interest to our customers.
As of December 31, 2022, we had an accumulated deficit of $545.1 million.
As of December 31, 2023, we had an accumulated deficit of $599.0 million.
These items include, but are not limited to, realized loss on conversion of Bridge Notes, stock-based compensation expense, unrealized (gain) loss on certain warrants/shares classified as derivative liabilities, satellite impairment loss, proceeds from an earnout payment, gain on debt extinguishment, (gain) loss from discontinued operations, net of income taxes, severance, income on equity method investment, transaction-related legal settlements, and transaction costs associated with equity instruments accounted for as derivative liabilities.
These items include, but are not limited to stock-based compensation expense, unrealized (gain) loss on certain warrants/shares classified as derivative liabilities, severance, impairment losses, income on equity method investment, investment loss on short-term investments, transaction costs associated with debt and equity financings, forgiveness of non-trade receivables, and gain from discontinued operations, net of income taxes.
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.
When it is necessary to allocate the transaction price to multiple performance obligations, management uses the listed price for imagery and analytics subscriptions and the expected cost plus a reasonable profit margin to estimate the standalone selling price of each product or service, which is mostly professional services.
We also provide technology enabled professional service solutions to support customer-specific feature request and to support the integration, testing, and training of our imagery and software analytical services into the customers organizational processes and workflows. We also provide software systems engineering development services to support the integration of high volume and mass quantities of data in their operating platforms.
We also provide technology enabled professional service solutions, that are highly-interrelated, to support customer-specific feature request and to support the integration, testing, and training of our imagery and software analytical services into the customer's organizational processes and workflows.
For options granted prior to 2021, the expected term was the estimated duration to a liquidation event based on a weighted average consideration of the most likely exit prospects for that stage of development. Legacy BlackSky was privately funded and, accordingly, the lack of marketability was factored into the expected term of options granted.
For options granted prior to 2021 when we were a private company, the expected term was the estimated duration to a liquidity event based on a weighted average consideration of the most likely exit prospects for that stage of development.
These systems are sold to government customers under fixed price contracts and are often bundled with our imagery services offerings. In certain cases, we retain rights to intellectual property for developed technology of certain systems, and this paid effort offsets some of our product development effort.
These systems are sold to government customers under fixed price contracts and are often sold with imagery 58 service subscriptions. We generally retain rights to intellectual property for developed technology of certain systems.
Depreciation expense from all other property and equipment increased for the year ended December 31, 2022 as compared to 2021, primarily driven by capitalization of software in 2022 and additional computer equipment that was placed into service.
Depreciation expense from all other property and equipment increased for the year ended December 31, 2023 as compared to the same period in 2022, primarily driven by capitalization of software and the buildout of new office space. Amortization expense remained flat for the year ended December 31, 2023 as compared to the same period in 2022.
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 revenue from the sale of imagery, data, software, and analytics, as well as, professional and engineering services.
Specifically, judgment is used in interpreting complex arrangements with nonstandard terms and conditions and determining when all criteria for revenue recognition have been met.
Professional and Engineering Service Costs Professional and engineering service costs decreased slightly for the year ended December 31, 2022 as compared to the same period in 2021, primarily due to fewer active contracts in 2022, partially offset by an increase of $1.3 million in the estimate to complete on two contracts in 2022 as compared to the prior year.
Professional and Engineering Service Costs Professional & engineering service costs, excluding depreciation and amortization, decreased for the year ended December 31, 2023 as compared to the same period in 2022, primarily due to fewer costs incurred on two engineering services contracts, driven by an increase in the programs' maturity year-over-year.
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 Imagery revenue is recognized ratably over the subscription period or at the point in time the customer receives access to the imagery.
In these situations, the observable standalone revenue transactions are used to determine the standalone selling price. Determination of when Performance Obligations are Satisfied Imagery and analytics revenue is recognized ratably over the subscription period based on the promise to continuously provide contractual satellite capacity for tasked imagery or software analytical services at the discretion of the customer.
Each liability was initially recorded at fair value on the date of the Merger. The Private Placement Warrants were recorded at fair value using a Black-Scholes option pricing model and the Sponsor Shares were recorded at fair value using a Monte Carlo simulation model.
The Private Placement Warrants were recorded at fair value using a Black-Scholes option pricing model and the Sponsor Shares were recorded at fair value using a Monte Carlo simulation model. These liabilities are re-measured to fair value at each subsequent reporting date and recorded to gain on derivatives in our consolidated statements of operations and comprehensive loss.
Stock-based compensation expense decreased approximately $20.3 million related to the cumulative vesting of RSUs triggered by the successful execution of the Merger in the third quarter of 2021. Salaries and payroll-related benefits increased due to headcount growth in sales, software engineers, and administrative functions.
Stock-based compensation expense decreased $8.0 million related to the 2022 cumulative vesting of restricted stock units ("RSUs") triggered by the successful execution of the Merger in 2021. Salaries and payroll-related benefits increased due to expansion of our sales team and investments in AI capabilities.
If we are unable to raise additional capital when desired, our business, financial condition and results of operations could be adversely affected.
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.
With fourteen satellites in orbit as of December 31, 2022, our constellation is able to image certain locations every 60 to 90 minutes, from dawn to dusk, providing our customers with insights and situational awareness throughout the day.
Our constellation is able to image certain locations approximately every 90 minutes, from dawn-to-dusk, providing our customers with insights and situational awareness throughout the day. Our satellites are designed with agile pointing capabilities that enable our customers to task our constellation on demand to collect specific locations of interest.
The risk-free interest rate assumption is determined by using U.S. Treasury rates for the same period as the expected terms of the financial instruments. The dividend yield assumption is based on the dividends expected to be paid over the expected life of the financial instruments.
The fair value of our Class A common stock is the closing stock price on the NYSE as of the measurement date. The risk-free interest rate assumption is determined by using U.S. Treasury rates for the same period as the expected terms of the financial instruments.
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 We execute contracts for a single promise or multiple promises.
We primarily generate revenue from the sale of imagery, data, software, and analytics, as well as, professional and engineering services. 69 Identifying the contract with the customer, 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.
We believe that the impact to our operations, vendors and customers is immaterial to our liquidity. From time to time, we may seek additional equity or debt financing to fund capital expenditures, strategic initiatives or investments and our ongoing operations.
From time to time, we may seek additional equity or debt financing to fund capital expenditures, strategic initiatives or investments and our ongoing operations. We do not have a line of credit or access to immediate funds.
Specifically, our firm fixed price 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.
Significant judgment is required in determining performance obligations, including if some of the customized services are highly-interrelated, and these decisions could change the amount of revenue and profit or loss recorded in each period.
The fair value models require inputs including, but not limited to, 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 closing stock price on the NYSE as of the measurement date.
We will continue to adjust the liability for changes in fair value until the financial instruments are exercised, redeemed, cancelled or released. The fair value models require inputs including, but not limited to, the fair value of our Class A common stock, the risk-free interest rate, expected term, expected dividend yield and expected volatility.
The following table provides the components of results of operations for the years ended December 31, 2022 and 2021: Years Ended December 31, $ % 2022 2021 Change Change (dollars in thousands) Revenue Imagery & software analytical services $ 47,415 $ 15,365 $ 32,050 208.6 % Professional & engineering services 17,935 18,720 (785) (4.2) % Total revenue 65,350 34,085 31,265 91.7 % Costs and expenses Imagery & software analytical service costs, excluding depreciation and amortization 14,462 13,013 1,449 11.1 % Professional & engineering service costs, excluding depreciation and amortization 21,365 21,735 (370) (1.7) % Selling, general and administrative 79,672 86,655 (6,983) (8.1) % Research and development 739 112 627 559.8 % Depreciation and amortization 35,661 14,306 21,355 149.3 % Satellite impairment loss — 18,407 (18,407) NM Operating loss (86,549) (120,143) 33,594 28.0 % Gain on debt extinguishment — 4,059 (4,059) NM Gain on derivatives 11,812 23,885 (12,073) (50.5) % Income on equity method investment 2,087 1,027 1,060 103.2 % Interest income 1,116 — 1,116 NM Interest expense (5,426) (5,165) (261) (5.1) % Other income (expense), net 2,081 (147,656) 149,737 101.4 % Loss before income taxes (74,879) (243,993) 169,114 69.3 % Income tax (expense) benefit — — — — % Loss from continuing operations (74,879) (243,993) 169,114 69.3 % Discontinued operations: Gain (loss) from discontinued operations, net of income taxes 707 (1,650) 2,357 142.8 % Income tax (expense) benefit — — — — % Gain (loss) from discontinued operations, net of income taxes 707 (1,650) 2,357 142.8 % Net loss $ (74,172) $ (245,643) $ 171,471 69.8 % • NM – Fluctuation in terms of percentage change is not meaningful. 61 Revenue Years Ended December 31, $ % 2022 2021 Change Change (dollars in thousands) Imagery & software analytical revenue $ 47,415 $ 15,365 $ 32,050 208.6 % % of total revenue 72.6 % 45.1 % Professional & engineering services revenue 17,935 18,720 (785) (4.2) % % of total revenue 27.4 % 54.9 % Total revenue $ 65,350 $ 34,085 $ 31,265 91.7 % Imagery and Software Analytical Services Revenue Imagery and software analytical services revenue significantly increased for the year ended December 31, 2022, as compared to the same period in 2021, driven by increased imagery and analytics orders from existing customers and several firm-fixed price subscription contracts with new domestic and international customers.
Amortization expense is related to intangible assets which mainly consists of customer relationships. 59 Results of Operations for the Years Ended December 31, 2023 and 2022 The following table provides the components of results of operations for the years ended December 31, 2023 and 2022: Years Ended December 31, $ % 2023 2022 Change Change (dollars in thousands) Revenue Imagery & software analytical services $ 65,391 $ 47,415 $ 17,976 37.9 % Professional & engineering services 29,101 17,935 11,166 62.3 % Total revenue 94,492 65,350 29,142 44.6 % Costs and expenses Imagery & software analytical service costs, excluding depreciation and amortization 13,793 14,462 (669) (4.6) % Professional & engineering service costs, excluding depreciation and amortization 19,988 21,365 (1,377) (6.4) % Selling, general and administrative 72,617 79,672 (7,055) (8.9) % Research and development 643 739 (96) (13.0) % Depreciation and amortization 43,431 35,661 7,770 21.8 % Operating loss (55,980) (86,549) 30,569 35.3 % Gain on derivatives 7,679 11,812 (4,133) (35.0) % Income on equity method investments 4,165 2,087 2,078 99.6 % Interest income 2,063 1,116 947 84.9 % Interest expense (9,306) (5,426) (3,880) (71.5) % Other (expense) income, net (1,807) 2,081 (3,888) (186.8) % Loss before income taxes (53,186) (74,879) 21,693 29.0 % Income tax expense (673) — (673) (100.0) % Loss from continuing operations (53,859) (74,879) 21,020 28.1 % Discontinued operations: Gain from discontinued operations — 707 (707) (100.0) % Income tax (expense) benefit — — — — % Gain from discontinued operations, net of income taxes — 707 (707) (100.0) % Net loss $ (53,859) $ (74,172) $ 20,313 27.4 % Revenue Years Ended December 31, $ % 2023 2022 Change Change (dollars in thousands) Imagery & software analytical revenue $ 65,391 $ 47,415 $ 17,976 37.9 % % of total revenue 69.2 % 72.6 % Professional & engineering services revenue 29,101 17,935 11,166 62.3 % % of total revenue 30.8 % 27.4 % Total revenue $ 94,492 $ 65,350 $ 29,142 44.6 % 60 Imagery and Software Analytical Services Revenue Imagery and software analytical services revenue increased for the year ended December 31, 2023 as compared to the same period in 2022, driven by increased imagery and analytics orders from existing customers and several firm-fixed price subscription contracts with new domestic and international customers.
The following is our forecast for total RSU expense as of December 31, 2022, which, in addition to the amounts recognized in selling, general, and administrative expenses, includes the portion that will be capitalized or classified in imagery and software analytical service costs and professional and engineering service costs: 63 (in thousands) For the years ending December 31, 2023 $ 9,043 2024 4,384 2025 3,352 2026 1,200 $ 17,979 Research and Development Years Ended December 31, $ % 2022 2021 Change Change (dollars in thousands) Research and development $ 739 $ 112 $ 627 559.8 % Research and development expense increased for the year ended December 31, 2022 as compared to the same period in 2021.
The following is our forecast for total RSU expense as of December 31, 2023, which, in addition to the amounts recognized in selling, general, and administrative expenses, includes the portion that will be capitalized or classified in imagery and software analytical service costs and professional and engineering service costs: (in thousands) For the years ending December 31, 2024 8,571 2025 6,971 2026 4,731 2027 1,566 $ 21,838 Research and Development Years Ended December 31, $ % 2023 2022 Change Change (dollars in thousands) Research and development $ 643 $ 739 $ (96) (13.0) % Research and development expense decreased slightly for the year ended December 31, 2023 as compared to the same period in 2022. 62 Depreciation and Amortization Years Ended December 31, $ % 2023 2022 Change Change (dollars in thousands) Depreciation of satellites $ 37,270 $ 33,053 $ 4,217 12.8 % Depreciation of all other property and equipment 5,600 2,047 3,553 173.6 % Amortization 561 561 — — % Depreciation and amortization $ 43,431 $ 35,661 $ 7,770 21.8 % Depreciation expense from satellites increased for the year ended December 31, 2023 as compared to the same period in 2022, driven by an increase in the number of satellites in service.
During the year ended December 31, 2021, we recorded a gain on derivative liabilities primarily due to the change in our common stock price following the Merger. 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.
Income on equity method investments The fluctuations in earnings from our equity method investment is directly related to the operating performance of our joint venture LeoStella. Additionally, during 2023, we recognized a gain of $9.5 million from the sale of our investment in X-Bow.
Goodwill is tested annually for impairment as of October 1 st , or more frequently if events or circumstances indicate the carrying value may be impaired. A significant amount of judgement is involved in determining if an indicator of impairment has occurred.
Goodwill Impairment We assess goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment. Goodwill is tested annually for impairment as of October 1st, or more frequently if events or circumstances indicate the carrying value may be impaired.
The table below reconciles our Net loss to Adjusted EBITDA for the years ended December 31, 2022 and 2021: Years Ended December 31, 2022 2021 (in thousands) Net loss $ (74,172) $ (245,643) Interest income (1,116) — Interest expense 5,426 5,165 Depreciation and amortization 35,661 14,306 Loss on issuance of Bridge Notes, including debt issuance costs expensed for debt carried at fair value — 147,387 Stock-based compensation expense 20,025 42,571 Gain on derivatives (11,812) (23,885) Satellite impairment loss — 18,407 Proceeds from earn-out payment (2,000) — (Gain) loss from discontinued operations, net of income taxes (707) 1,650 Severance 1,196 — Income on equity method investment (2,087) (1,027) Forgiveness of non-trade receivables 106 — Contingent legal liability — 399 Transaction costs associated with derivative liabilities — 291 Gain on debt extinguishment — (4,059) Adjusted EBITDA $ (29,480) $ (44,438) Free Cash Flow We define free cash flow as cash flows used in, or provided by, operating activities—continuing operations plus cash flows used in, or provided by, operating activities—discontinued operations less purchase of property and equipment and satellite procurement work in process.
The table below reconciles our net loss to Adjusted EBITDA for the years ended December 31, 2023 and 2022: Years Ended December 31, 2023 2022 (in thousands) Net loss $ (53,859) $ (74,172) Interest income (2,063) (1,116) Interest expense 9,306 5,426 Income tax expense 673 — Depreciation and amortization 43,431 35,661 Stock-based compensation expense 10,862 20,025 Gain on derivatives (7,679) (11,812) Income on equity method investment (4,165) (2,087) Transaction costs associated with debt and equity financings 1,738 — Severance 590 1,196 Impairment losses 81 — Investment loss on short-term investments 55 — Proceeds from earn-out payment — (2,000) Gain from discontinued operations, net of income taxes — (707) Forgiveness of non-trade receivables — 106 Adjusted EBITDA $ (1,030) $ (29,480) Liquidity and Capital Resources As of December 31, 2023, our existing sources of liquidity included cash and cash equivalents and short-term investments.
We expect to continue to incur capital expenditures as we procure and launch satellites to increase image collection capacity, as well as investing in our Gen-3 satellites and our Spectra AI platform to significantly expand our product capabilities in the future.
We expect to continue to incur capital expenditures as we procure and launch Gen-3 satellites, as well as our BlackSky Spectra software platform to significantly expand our product capabilities in the future. 66 Short-Term Liquidity Requirements As of December 31, 2023, our current assets were $79.3 million, consisting primarily of cash and cash equivalents, short-term investments, and contract assets.
Cash Flow Analysis The following table provides a summary of cash flow data for the years ended December 31, 2022 and 2021: Years Ended December 31, $ 2022 2021 Change (in thousands) Net cash used in operating activities $ (44,456) $ (53,872) $ 9,416 Net cash used in investing activities (1) (81,579) (63,614) (17,965) Net cash (used in) provided by financing activities (5,053) 275,017 (280,070) Net (decrease) increase in cash, cash equivalents, and restricted cash (131,088) 157,531 (288,619) Cash, cash equivalents, and restricted cash – beginning of year 168,104 10,573 157,531 Cash, cash equivalents, and restricted cash – end of period (2) $ 37,016 $ 168,104 $ (131,088) (1) Includes purchase of $50.3 million of short-term investments not categorized as cash (2) $38.0 million of short-term investments are not classified as cash, cash equivalents, or restricted cash.
Years Ended December 31, $ 2023 2022 Change (in thousands) Net cash used in operating activities $ (17,421) $ (44,456) $ 27,035 Net cash used in investing activities (1) (15,211) (81,579) 66,368 Net cash provided by (used in) financing activities 29,050 (5,053) 34,103 Net decrease in cash, cash equivalents, and restricted cash (3,582) (131,088) 127,506 Cash, cash equivalents, and restricted cash – beginning of year 37,016 168,104 (131,088) Cash, cash equivalents, and restricted cash – end of period $ 33,434 $ 37,016 $ (3,582) (1) 2023 includes $43.7 million of capital expenditures partially offset by net proceeds of $19.0 million of short-term investments not categorized as cash, cash equivalents, or restricted cash Operating activities For the year ended December 31, 2023, net cash used in operating activities was $17.4 million.

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