References in this report (this "Quarterly Report") to "we," "us," "Osprey" or
the "Company" refer to Osprey Technology Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Osprey Sponsor II, LLC. The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Quarterly Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Quarterly
Report including, without limitation, statements in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding the Company's financial position, business strategy and the plans and
objectives of management for future operations, are forward-looking statements.
Words such as "expect," "believe," "anticipate," "intend," "estimate," "seek"
and variations and similar words and expressions are intended to identify such
forward-looking statements. Such forward-looking statements relate to future
events or future performance, but reflect management's current beliefs, based on
information currently available. A number of factors could cause actual events,
performance or results to differ materially from the events, performance and
results discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's Annual Report on Form 10-K/A filed with the
U.S. Securities and Exchange Commission (the "SEC"). The Company's securities
filings can be accessed on the EDGAR section of the SEC's website at
www.sec.gov. Except as expressly required by applicable securities law, the
Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
We are a blank check company formed under the laws of the State of Delaware on
June 15, 2018, for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other similar Business
Combination with one or more businesses. We intend to effectuate our Business
Combination using cash from the proceeds of the Initial Public Offering and the
sale of the Private Placement Warrants, our capital stock, debt or a combination
of cash, stock and debt.
The issuance of additional shares of our stock in a Business Combination:
• may significantly dilute the equity interest of investors;
• may subordinate the rights of holders of common stock if preferred stock
is issued with rights senior to those afforded our common stock;
• could cause a change of control if a substantial number of shares of our
Class A common stock are issued, which may affect, among other things,
our ability to use our net operating loss carry forwards, if any, and
could result in the resignation or removal of our present officers and
directors; and
• may adversely affect prevailing market prices for our Units, common stock
and/or warrants.
Similarly, if we issue debt securities or otherwise incur significant
indebtedness, it could result in:
• default and foreclosure on our assets if our operating revenues after a
Business Combination are insufficient to pay our debt obligations;
• acceleration of our obligations to repay the indebtedness even if we have
made all principal and interest payments when due if the debt security
contains covenants that required the maintenance of certain financial
ratios or reserves and we breach any such covenant without a waiver or
renegotiation of that covenant;
• our immediate payment of all principal and accrued interest, if any, if
the debt security is payable on demand;
• our inability to obtain additional financing, if necessary, if the debt
security contains covenants restricting our ability to obtain additional
financing while such security is outstanding;
• our inability to pay dividends on our common stock;
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• using a substantial portion of our cash flow to pay principal and
interest on our debt, which will reduce the funds available for dividends
on our common stock if declared, our ability to pay expenses, make
capital expenditures and acquisitions, and fund other general corporate
purposes;
• limitations on our flexibility in planning for and reacting to changes in
our business and in the industry in which we operate;
• increased vulnerability to adverse changes in general economic, industry
and competitive conditions and adverse changes in government regulation;
• limitations on our ability to borrow additional amounts for expenses,
capital expenditures, acquisitions, debt service requirements, and
execution of our strategy; and
• other disadvantages compared to our competitors who have less debt.
In March 2020, the COVID-19 outbreak was declared a National Public Health
Emergency that has adversely impacted global activity and contributed to
significant declines and volatility in financial markets. Management continues
to evaluate the impact of the COVID-19 pandemic and has concluded that while it
is reasonably possible that the virus could have a negative effect on the
Company's financial position, results of its operations and/or search for a
target company, the specific impact is not readily determinable as of the date
of these financial statements. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Nevertheless, the outbreak presents uncertainty and risk with respect to the
Company and its ability to successfully complete a Business Combination.
Recent Developments
On February 17, 2021, we entered into a Merger Agreement with Merger Sub and
BlackSky, which provides for, among other things, the merger of Merger Sub with
and into BlackSky, with BlackSky continuing as the surviving entity (the
"Merger" and, collectively with the other transactions contemplated by the
Merger Agreement, the "Transactions"). The Transactions set forth in the Merger
Agreement, including the Merger, will constitute a "Business Combination".
Pursuant to the Merger Agreement, the aggregate merger consideration payable to
equity holders of BlackSky at closing (the "Total Consideration") will be paid
in a number of shares of newly-issued Class A common stock of the Company,
valued at $10.00 per share (the "Company Common Stock"), calculated by dividing
(x) $925,000,000, plus (a) the aggregate exercise prices that would be paid to
BlackSky if all stock options and all warrants outstanding as of immediately
prior to the closing were exercised in full, minus (b) any unfunded amount under
BlackSky's bridge loan, minus (c) the total consideration payable to shares of
BlackSky's Class B common stock, which is equal to the product of (i) the total
number of shares of BlackSky's Class B common stock, par value $0.00001 per
share, issued and outstanding as of immediately prior to the effective time of
the Merger and (ii) an amount in cash equal to $0.00001 by (y) $10.00.
Effective as of the effective time of the Merger and by virtue of the Merger,
each option to purchase shares of BlackSky Class A Common Stock (each, a
"BlackSky Stock Option") that is outstanding and unexercised as of immediately
prior to the effective time of the Merger will be converted into an option to
acquire a number of shares of Company Class A Common Stock equal to the product
obtained by multiplying (x) the number of shares of BlackSky Common Stock
subject to the applicable BlackSky Stock Option by (y) the Class A Common
Exchange Ratio, and will be subject to the same terms and conditions as were
applicable to such BlackSky Stock Option (each an "Assumed Company Stock
Option"). For purposes of the Merger Agreement, the Class A Common Exchange
Ratio equals the quotient of (A) the residual Total Consideration after taking
into account the preferred series preference amounts, divided by $10.00, divided
by (B) the number of participating shares of BlackSky Common Stock on a fully
diluted basis. The exercise price per share of each Assumed Company Stock Option
will be equal to the quotient obtained by dividing (x) the exercise price per
share applicable to such BlackSky Stock Option by (y) the Class A Common
Exchange Ratio.
The Transactions will be consummated subject to the deliverables and provisions
as further described in the Merger Agreement.
PIPE Investment Subscription Agreements
On February 17, 2021, concurrently with the execution of the BlackSky merger
agreement, Osprey entered into Subscription Agreements (collectively, the
"Subscription Agreements") with certain third-party investors (the "PIPE
Investors") and certain inside investors (the "Inside PIPE Investors") pursuant
to which, and on the terms and subject to the conditions of which, the PIPE
Investors and Inside PIPE Investors have collectively subscribed for an
aggregate of 18,000,000 shares of Osprey Common Stock for $10.00 per share, for
an aggregate purchase price equal to $180,000,000 (the "PIPE Investment"). The
PIPE Investment will be consummated substantially concurrently with the closing
of the transactions contemplated by the BlackSky merger agreement, subject to
the terms and conditions contemplated by the Subscription Agreements. The
proceeds from the PIPE Investment are expected to be used to pay down certain
indebtedness of BlackSky Holdings at the closing of the Merger and for general
working capital purposes following the closing.
The Subscription Agreements entered into by the PIPE Investors provide for
certain registration rights for the PIPE Investors. In particular, in the case
of the PIPE Investors, Osprey is required to, no later than 45 calendar days
following the closing date of the Business Combination, submit to or file with
the SEC a registration statement registering the resale of such shares. Also in
the case of the PIPE Investors, Osprey is required to use its commercially
reasonable efforts to have the registration statement declared effective as soon
as practicable after the filing thereof, but no later than the earlier of
(a) the 90th calendar day following the filing date thereof if the SEC notifies
Osprey that it will "review" the registration statement and (b) the 10th
business day after the date Osprey is notified (orally or in writing, whichever
is earlier) by the SEC that the registration statement will not be "reviewed" or
will not be subject to further review. Osprey must use commercially reasonable
efforts to keep the registration statement effective until the earliest of:
(i) the date the PIPE Investors no longer hold any shares, (ii) the date all
registrable shares held by the PIPE Investors may be sold without restriction
under Rule 144 and (iii) two years from the date of effectiveness of the
registration statement. Pursuant to the terms of the BlackSky merger agreement
and the Subscription Agreements entered into by the Inside PIPE Investors, the
Inside PIPE Investors will enter into the Registration Rights Agreement (as
defined and described below), which will provide for certain registration rights
for the Inside PIPE Investors.
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Each Subscription Agreement will terminate upon the earliest to occur of (a) the
termination of the BlackSky merger agreement in accordance with its terms,
(b) the mutual written agreement of the parties to such Subscription Agreement
and BlackSky Holdings, and (c) the Termination Date.
Sponsor Support Agreement
On February 17, 2021, concurrently with the execution of the BlackSky merger
agreement the Sponsor, Osprey, BlackSky Holdings, and each of the other persons
set forth on the signature pages thereto entered into a Sponsor Support
Agreement (the "Sponsor Support Agreement"), pursuant to which the Sponsor,
solely in its capacity as a stockholder of Osprey, has agreed, among other
things, (a) to waive certain anti-dilution rights set forth in Section 4.3(b) of
Osprey's amended and restated certificate of incorporation that may result from
the transactions contemplated by the BlackSky merger agreement, (b) not to,
directly or indirectly, transfer any of their shares of its Class B common stock
and warrants of Osprey prior to the effective time of the Merger, (c) to vote in
favor of the adoption of the BlackSky merger agreement and the Transactions at a
meeting of Osprey's stockholders to be held to approve the proposed Transactions
and other related matters, (d) not to redeem or elect to cause Osprey to redeem
any of its shares of Class B common stock or warrants of Osprey in connection
with the transactions and (e) with respect to certain shares of Class B common
stock (and Class A shares issued upon conversion) until the seven-year
anniversary of the consummation of the transactions (subject to certain limited
exceptions), not to transfer such shares until Osprey Common Stock achieves a
trading price exceeding certain dollar thresholds set forth in the Sponsor
Support Agreement and (e) with respect to certain warrants, not exercise any
such warrants unless and until Osprey Common Stock reaches a trading price of
$20.00 per share, in each case, subject to the terms and conditions contemplated
by the Sponsor Support Agreement.
Stockholder Support Agreement
On February 17, 2021, Osprey also announced entry into a Stockholder Support
Agreement (the "Stockholder Support Agreement") by and among Osprey, Merger Sub,
BlackSky Holdings and certain stockholders of BlackSky Holdings named therein
(collectively the "Key Stockholders"), pursuant to which the Key Stockholders
have agreed to, among other things, vote in favor of the BlackSky merger
agreement and the transactions contemplated thereby, including agreeing to
execute a written consent constituting the requisite BlackSky Holdings
stockholder approval within five (5) business days of the Registration Statement
becoming effective, unless the Merger is no longer recommended by BlackSky
Holdings board of directors in accordance with the BlackSky merger agreement, in
which case the Key Stockholders have agreed to vote a number of shares not to
exceed 35% of the shares of BlackSky Holdings stock approving the BlackSky
merger agreement and the transactions contemplated thereby and are entitled, in
their sole discretion, to vote their remaining shares in any manner. The
Stockholder Support Agreement will terminate upon the earlier to occur of:
(a) the effective time of the Merger, (b) the date of the termination of the
BlackSky merger agreement in accordance with its terms, (c) the effective date
of a written agreement of Osprey, Merger sub, BlackSky Holdings and the Key
Stockholders terminating the Stockholder Support Agreement, and (d) the election
of the Key Stockholders, in their sole discretion, to terminate the Stockholder
Support Agreement following any amendment, waiver or other modification of any
term or provision of the BlackSky merger agreement without the prior written
consent with respect thereto of such stockholder that reduces or changes the
form of consideration payable to BlackSky Holdings stockholders pursuant to the
BlackSky merger agreement.
Registration Rights Agreement
The BlackSky merger agreement contemplates that, at the closing, Osprey, the
Sponsor, the Inside PIPE Investors and each of the additional parties named
therein will enter into an Amended and Restated Registration Rights Agreement
(the "Registration Rights Agreement"), pursuant to which Osprey will agree to
register for resale, pursuant to Rule 415 under the Securities Act, certain
shares of Osprey Common Stock and other equity securities of Osprey that are
held by the parties thereto from time to time.
The foregoing description of the BlackSky merger agreement and the related
documents has been included to provide investors with information regarding
their terms. They are not intended to provide any other factual information
about Osprey or its affiliates.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from inception to March 31, 2021 were organizational
activities, those necessary to prepare for the Initial Public Offering,
identifying a target for our Business Combination, and activities in connection
with the proposed acquisition of BlackSky. We do not expect to generate any
operating revenues until after the completion of our Business Combination. We
generate non-operatingincome in the form of interest income on marketable
securities held after the Initial Public Offering. We incur expenses as a result
of being a public company (for legal, financial reporting, accounting and
auditing compliance), as well as for due diligence expenses.
For the three months ended March 31, 2021, we had a net loss of $12,870,990,
which consists of interest income on marketable securities held in the Trust
Account of $47,155, an unrealized gain on marketable securities held in our
Trust Account of $4,987, and a change in the fair value of the warrant liability
of $10,721,500, partially offset by operating costs of $2,201,632.
For the three months ended March 31, 2020, we had net income of $6,442,454,
which consists of interest income on marketable securities held in the Trust
Account of $1,207,866, an unrealized gain on marketable securities held in our
Trust Account of $378,250, and a change in the fair value of the warrant
liability of $5,393,500, partially offset by operating costs of $258,326 and a
provision for income taxes of $278,836.
Liquidity and Capital Resources
On November 5, 2019, we consummated the Initial Public Offering of 27,500,000
Units at a price of $10.00 per Unit, generating gross proceeds of $275,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 7,500,000 Private Placement Warrants to our Sponsor at a price of
$1.00 per Private Placement Warrant, generating gross proceeds of $7,500,000.
On November 13, 2019, as a result of the underwriters' election to fully
exercise their over-allotment option, we consummated the sale of an additional
4,125,000 Units at $10.00 per Unit, and the sale of an additional 825,000
Private Placement Warrants, at a price of $1.00 per Private Placement Warrant,
generating total gross proceeds of $42,075,000.
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Following the Initial Public Offering, the exercise of the over-allotment option
in full and the sale of the Private Placement Warrants, a total of $316,250,000
was placed in the Trust Account. We incurred $18,047,876 in transaction costs,
including $6,325,000 of underwriting fees, $11,068,750 of deferred underwriting
fees, and $654,126 of other costs in connection with the Initial Public
Offering.
For the three months ended March 31, 2021, cash used in operating activities was
$268,358. Net loss of $12,870,990 was affected by interest earned on marketable
securities held in the Trust Account of $47,155, an unrealized gain on
marketable securities held in our Trust Account of $4,987 and a non-cash charge
for the change in fair value of warrant liabilities of $10,721,500. Changes in
operating assets and liabilities provided $1,933,274 of cash from operating
activities.
For the three months ended March 31, 2020, cash used in operating activities was
$342,023. Net income of $6,442,454 was affected by interest earned on marketable
securities held in the Trust Account of $1,207,866, an unrealized gain on
marketable securities held in our Trust Account of $378,250, a non-cash gain for
the change in fair value of warrant liabilities of $5,393,500 and a deferred
income tax provision of $80,793. Changes in operating assets and liabilities
provided $114,346 of cash from operating activities.
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As of March 31, 2021, we had marketable securities held in the Trust Account of
$318,053,820 (including approximately $1,804,000 of interest income and
unrealized gains) consisting of U.S. treasury bills with a maturity of 185 days
or less. Interest income on the balance in the Trust Account may be used by us
to pay taxes. Through March 31, 2021, we withdrew $40,050 of interest earned on
the Trust Account to pay for our tax obligations.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
taxes payable), to complete our Business Combination. To the extent that our
capital stock or debt is used, in whole or in part, as consideration to complete
our Business Combination, the remaining proceeds held in the Trust Account will
be used as working capital to finance the operations of the target business or
businesses, make other acquisitions and pursue our growth strategies.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, an affiliate of the
Sponsor, or our officers and directors may, but are not obligated to, loan us
funds as may be required. If we complete a Business Combination, we would repay
such loaned amounts. In the event that a Business Combination does not close, we
may use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from our Trust Account would be used for
such repayment. Up to $1,500,000 of such loans may be convertible into warrants
identical to the Private Placement Warrants, at a price of $1.00 per warrant at
the option of the lender.
As of March 31, 2021, we had cash of $171,208 held outside of the Trust Account
and working capital deficit of $3,779,605. Until the consummation of a Business
Combination, we will use the funds not held in the Trust Account primarily to
identify and evaluate target businesses, perform business due diligence on
prospective target businesses, travel to and from the offices, plants or similar
locations of prospective target businesses or their representatives or owners,
review corporate documents and material agreements of prospective target
businesses, and structure, negotiate and complete a Business Combination. Our
Sponsor, officers, directors or their affiliates are not under any obligation to
advance us funds, or to invest in us. Accordingly, we may not be able to obtain
additional financing. If we are unable to raise additional capital, we may be
required to take additional measures to conserve liquidity, which could include,
but not necessarily be limited to, curtailing operations, suspending the pursuit
of a potential transaction, and reducing overhead expenses. We cannot provide
any assurance that new financing will be available to us on commercially
acceptable terms, if at all. These conditions raise substantial doubt about our
ability to continue as a going concern.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of March 31, 2021. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay the Sponsor
a monthly fee of $10,000 for office space, utilities and secretarial and
administrative support. Upon completion of the Business Combination or our
liquidation, we will cease paying these monthly fees.
In addition, we have an agreement to pay the underwriters a deferred fee of
$11,068,750. The deferred fee will become payable to the representatives of the
underwriters from the amounts held in the Trust Account solely in the event that
we complete a business combination, subject to the terms of the underwriting
agreement..
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liability
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in Financial Accounting Standards Board
("FASB") Accounting Standards Codification ("ASC") 480, Distinguishing
Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC
815"). The assessment considers whether the warrants are freestanding financial
instruments pursuant to ASC 480, meet the definition of a liability pursuant to
ASC 480, and whether the warrants meet all of the requirements for equity
classification under ASC 815, including whether the warrants are indexed to our
own common stock, among other conditions for equity classification. This
assessment, which requires the use of professional judgment, is conducted at the
time of warrant issuance and as of each subsequent quarterly period end date
while the warrants are outstanding.
We account for the warrants issued in connection with our Initial Public
Offering in accordance with the guidance contained in ASC 815-40-15-7D under
which the warrants do not meet the criteria for equity treatment and must be
recorded as liabilities. Accordingly, we classify the warrants as liabilities at
their fair value and adjust the warrants to fair value at each reporting period.
This liability is subject to re-measurement ateach balance sheet date until
exercised, and any change in fair value is recognized in our statement of
operations.
Class A Common Stock Subject to Possible Redemption
We account for common stock subject to possible redemption in accordance with
the guidance in ASC 480 "Distinguishing Liabilities from Equity." Common stock
subject to mandatory redemption is classified as a liability instrument and is
measured at fair value. Conditionally redeemable common stock (including common
stock that features redemption rights that are either within the control of the
holder or subject to redemption upon the occurrence of uncertain events not
solely within the Company's control) is classified as temporary equity. At all
other times, common stock is classified as stockholders' equity. Our Class A
common stock features certain redemption rights that are considered to be
outside of our control and subject to occurrence of uncertain future events.
Accordingly, Class A common stock subject to possible redemption is presented at
redemption value as temporary equity, outside of the stockholders' equity
section of our condensed balance sheets.
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Net Income (Loss) Per Share
We apply the two-class method in calculating earnings per share. Net income
(loss) per share, basic and diluted for Class A common stock subject to possible
redemption is calculated by dividing the interest income earned on the Trust
Account, net of applicable taxes, if any, by the weighted average number of
shares of Class A common stock subject to possible redemption outstanding for
the period. Net income (loss) per share, basic and diluted for non-redeemable
common stock is calculated by dividing net loss less income attributable to
Class A common stock subject to possible redemption, by the weighted average
number of shares of non redeemable common stock outstanding for the period
presented.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in
Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06") to simplify accounting for
certain financial instruments. ASU 2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-convertedmethod for all convertible instruments.
ASU 2020-06 is effective January 1, 2022 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on
January 1, 2021. We are currently assessing the impact, if any, that ASU 2020-06
would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
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