BlackSky Technology Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of reasonably ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of December 31, 2023, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of December 31, 2023, our disclosure controls and procedures were effective at a reasonable assurance level. In designing and evaluating the disclosure controls and procedures, management recognized that controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company will be detected. Management’s Report on Internal Control Over Financial Reporting Our management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, and effected by the Company’s board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not detect or prevent misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. As of December 31, 2023, our management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on the assessment, management believes that we maintained effective internal control over financial reporting as of December 31, 2023, based on those criteria. Attestation Report of the Registered Public Accounting Firm Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting for as long as we are an “emerging growth company” pursuant to the provisions of the JOBS Act. Changes in Internal Control Over Financial Reporting 74 There was no change in our internal control over financial reporting, (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION During the three months ended December 31, 2023, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (each as defined in Item 408 of Regulation S-K). ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE We will provide information that is responsive to this Item 10 in our definitive proxy statement for our 2024 Annual Meeting of Stockholders or in an amendment to this Annual Report on Form 10-K not later than 120 days after December 31, 2023. Such information is incorporated into this Item 10 by reference. ITEM 11. EXECUTIVE COMPENSATION We will provide information that is responsive to this Item 11 in our definitive proxy statement for our 2024 Annual Meeting of Stockholders or in an amendment to this Annual Report on Form 10-K not later than 120 days after December 31, 2023. Such information is incorporated into this Item 11 by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS We will provide information that is responsive to this Item 12 in our definitive proxy statement for our 2024 Annual Meeting of Stockholders or in an amendment to this Annual Report on Form 10-K not later than 120 days after December 31, 2023. Such information is incorporated into this Item 12 by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE We will provide information that is responsive to this Item 13 in our definitive proxy statement for our 2024 Annual Meeting of Stockholders or in an amendment to this Annual Report on Form 10-K not later than 120 days after December 31, 2023. Such information is incorporated into this Item 13 by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Information about aggregate fees billed to us by our principal accountant, Deloitte & Touche LLP (PCAOB ID No. 34 ) will be presented in our definitive proxy statement for our 2024 Annual Meeting of Stockholders or in an amendment to this Annual Report on Form 10-K not later than 120 days after December 31, 2023. Such information is incorporated into this Item 14 by reference. 75 PART IV ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES 1. and 2. Financial Statements and Financial Statement Schedules The consolidated financial statements and financial statement schedules of BlackSky required by Part II, Item 8, are included in Part IV of this report. See Index to Consolidated Financial Statements and Financial Statement Schedules beginning on Page 81 . 3. Exhibits The documents listed below are incorporated by reference or are filed with this report, in each case as indicated therein. Exhibit No. Exhibit Description Form SEC File No. Exhibit No. Filing Date Filed or Furnished Herewith 2.1† Agreement and Plan of Merger, dated as of February 17, 2021, by and among Osprey Technology Acquisition Corp., Osprey Technology Merger Sub, Inc., and BlackSky Technology Inc. 424(b)(3) 333-256103 Annex A August 11, 2021 3.1 Amended and Restated Certificate of Incorporation of the Company 8-K 001-39113 3.1 September 15, 2021 3.2 Amended and Restated Bylaws of the Company 8-K 001-39113 3.2 September 15, 2021 4.1 Specimen Common Stock Certificate S-3 333-267889 4.1 October 14, 2022 4.2 Form of Indenture S-3 333-267889 4.3 October 14, 2022 4.3 Specimen Warrant Certificate S-1 333-234180 4.3 October 11, 2019 4.4 Warrant Agreement, dated October 31, 2019, between Continental Stock Transfer & Trust Company and Osprey Technology Acquisition Corp. 8-K 001-39113 4.1 November 5, 2019 4.5 Description of Securities 10-K 001-39113 4.5 March 23, 2023 4.6 F orm of Warrant 8-K 001-39113 4.1 March 9, 2023 10.1+ BlackSky Technology Inc. 2021 Equity Incentive Plan 424(b)(3) 333-256103 Annex E August 11, 2021 10.2+ BlackSky Technology Inc. 2021 Employee Stock Purchase Plan 424(b)(3) 333-256103 Annex F August 11, 2021 10.3+ BlackSky Technology Inc. Outside Director Compensation Policy 8-K 001-39113 10.13 September 15, 2021 10.4+ BlackSky Technology Inc. Form of Indemnification Agreement 8-K 001-39113 10.4 September 15, 2021 10.5 Right of First Offer Agreement, dated as of October 31, 2019, by and between Spaceflight Industries, Inc. and Intelsat Jackson Holdings, S.A. S-4 333-256103 10.10 May 13, 2021 10.6 Sponsor Support Agreement, dated as of February 17, 2021 by and among BlackSky Holdings, Inc., Osprey Sponsor II, LLC, and Osprey Technology Acquisition Corp. 8-K/A 001-39113 10.3 February 22, 2021 10.7 Form of Registration Rights Agreement 8-K 001-39113 10.5 February 22, 2021 10.8 Form of Subscription Agreement 8-K 001-39113 10.1 February 22, 2021 10.9+ Offer Letter from BlackSky Holdings Inc. to Brian O’Toole, dated August 18, 2021 8-K 001-39113 10.1 August 18, 2021 10.10+ Offer Letter from BlackSky Holdings Inc. to Henry Dubois, dated August 18, 2021 8-K 001-39113 10.3 August 18, 2021 10.11+ Amendment to Offer Letter from BlackSky Holdings Inc. to Henry Dubois, dated June 10, 2022 10-Q 001-39113 10.2 August 10, 2022 10.12+ Offer Letter from BlackSky Holdings Inc. to Chris Lin, dated August 18, 2021 8-K 001-39113 10.4 August 18, 2021 76 Exhibit No. Exhibit Description Form SEC File No. Exhibit No. Filing Date Filed or Furnished Herewith 10.13 Amended and Restated Loan and Security Agreement, dated October 31, 2019, by and between Intelsat Jackson Holdings SA, Seahawk SPV Investment LLC, Spaceflight Industries, Inc. and its subsidiaries. S-4/A 333-256103 10.17 June 25, 2021 10.14 Satellite Program Contract, dated March 12, 2018, by and between LeoStella LLC and BlackSky Global LLC S-4/A 333-256103 10.18 June 25, 2021 10.15 Amendment No. 1 to Satellite Program Contract, dated February 20, 2019, by and between LeoStella LLC and BlackSky Global LLC S-4/A 333-256103 10.19 June 25, 2021 10.16 Amendment No. 2 to Satellite Program Contract, dated May 27, 2020, by and between LeoStella LLC and BlackSky Global LLC S-4/A 333-256103 10.20 June 25, 2021 10.17 First Amendment, Consent and Joinder to Amended and Restated Loan and Security Agreement, dated as of September 9, 2021, by and among BlackSky Holdings, Inc. and the subsidiaries named therein, Intelsat Jackson Holdings SA and Seahawk SPV Investment LLC. 8-K 001-39113 10.5 September 15, 2021 10.18 Second Amendment to Amended and Restated Loan and Security Agreement, dated as of May 9, 2023 by and among BlackSky Technology Inc. and the subsidiaries named therein, Intelsat Jackson Holdings SA and Seahawk SPV Investment LLC 10-Q 001-39113 10.3 May 10, 2023 10.19 BlackSky HQ Lease Agreement, dated February 28, 2019, by and between Northridge Office Building LLC and Spaceflight Industries, Inc. S-1 333-260458 10.25 October 25, 2021 10.20 BlackSky HQ Lease Agreement, dated November 20, 2023, by and between 2411 Dulles Corner Metro Owner LLC and BlackSky Holdings, Inc. X 10.21+ BlackSky Technology Inc. Executive Change in Control and Severance Plan, adopted August 16, 2021, and form of participation agreement attached as appendix A. 8-K 001-39113 10.6 August 18, 2021 10.22+ Form of Stock Option Agreement under the BlackSky 2021 Equity Incentive Plan S-8 333-261778 4.4 December 20, 2021 10.23+ Form of Restricted Stock Unit Agreement under the BlackSky 2021 Equity Incentive Plan S-8 333-261778 4.5 December 20, 2021 10.24+ Form of Stock Appreciation Right Agreement under the BlackSky 2021 Equity Incentive Plan S-8 333-261778 4.7 December 20, 2021 10.25+ 2014 Equity Incentive Plan S-8 333-261778 4.8 December 20, 2021 10.26+ Spaceflight, Inc. Amended and Restated 2011 Equity Incentive Plan Assumed by Spaceflight Industries and forms of agreements thereunder S-8 333-261778 4.9 December 20, 2021 10.27+ Form of Restricted Stock Award Agreement S-8 333-261778 4.6 December 20, 2021 10.28+ Form of Restricted Stock Unit Agreement under the BlackSky 2014 Equity Incentive Plan S-8 333-261778 4.4 March 4, 2022 10.29+ 2022 Executive Incentive Compensation Plan 10-K 001-39113 10.34 March 31, 2022 10.30† NRO Contract, dated May 23, 2022, by and between the National Reconnaissance Office and BlackSky Technology Inc. 10-Q 001-39113 10.1 August 10, 2022 10.31 Open Market Sale Agreement, dated December 15, 2022, by and between BlackSky Technology Inc. and Jefferies LLC 8-K 001-39113 1.1 December 15, 2022 10.32 Form of Registration Rights Agreement, dated as of March 6, 2023 by and among the Company and the Investors 8-K 001-39113 10.2 March 9, 2023 10.33†** Production Work Order 003, dated November 13, 2023, by and between BlackSky Global LLC and LeoStella LLC X 77 Exhibit No. Exhibit Description Form SEC File No. Exhibit No. Filing Date Filed or Furnished Herewith 10.34†** Subordinated Loan and Security Agreement, dated November 3, 2023, by and between BlackSky Technology Inc. and the subsidiaries named therein and Rocket Lab USA, Inc. X 21.1 List of Subsidiaries X 23.1 Consent of Deloitte & Touche LLP, independent registered public accounting firm of BlackSky Technology Inc. X 24.1 Power of Attorney (included in signature pages hereto) X 31.1 Certification of the Company’s Chief Executive Officer, Brian O’Toole, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 31.2 Certification of the Company’s Chief Financial Officer, Henry Dubois, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 32.1* Certification of the Company’s Chief Executive Officer, Brian O’Toole, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 32.2* Certification of the Company’s Chief Financial Officer, Henry Dubois, pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. X 97.1 C ompensation Recovery Policy X 101.INS Inline XBRL Instance Document X 101.SCH Inline XBRL Taxonomy Extension Schema Document X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) X ________________ + Indicates management contract or compensatory plan. † Certain portions of this exhibit have been omitted in accordance with Regulation S-K Item 601. The Registrant agrees to furnish an unredacted copy of the exhibit to the SEC upon request. * The certifications attached as Exhibit 32.1 and 32.2 that accompany this Annual Report on Form 10-K are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing. ** Certain schedules to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any document so furnished. ITEM 16. FORM 10-K SUMMARY None. 78 ITEM 16A. SIGNATURES SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. March 19, 2024 BlackSky Technology Inc. By: /s/ Brian E. O’Toole Brian E. O'Toole Chief Executive Officer and Director (Principal Executive Officer) By: /s/ Henry Dubois Henry Dubois Chief Financial Officer (Principal Financial Officer) By: /s/ Tracy Ward Tracy Ward Senior Vice President and Controller (Principal Accounting Officer) 79 POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Brian O’Toole, Henry Dubois, and Tracy Ward, and each one of them, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such individual in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or the individual’s substitute, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons in the capacities and on the dates indicated on behalf of the registrant. Signature Title Date /s/ Brian E. O’Toole Chief Executive Officer, President and Director (Principal Executive Officer) March 19, 2024 Brian O’Toole /s/ Henry Dubois Chief Financial Officer (Principal Financial Officer) March 19, 2024 Henry Dubois /s/ Tracy Ward Senior Vice President and Controller (Principal Accounting Officer) March 19, 2024 Tracy Ward /s/ Magid Abraham Director March 19, 2024 Magid Abraham /s/ David DiDomenico Director March 19, 2024 David DiDomenico /s/ Susan Gordon Director March 19, 2024 Susan Gordon /s/ Timothy Harvey Director March 19, 2024 Timothy Harvey /s/ William Porteous Director March 19, 2024 William Porteous /s/ James Tolonen Director March 19, 2024 James Tolonen 80 Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm 82 Consolidated Balance Sheets 83 Consolidated Statements of Operations and Comprehensive Loss 84 Consolidated Statements of Changes in Stockholders' Equity 85 Consolidated Statements of Cash Flows 86 Notes to Consolidated Financial Statements 88 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of BlackSky Technology Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of BlackSky Technology Inc. (the "Company") as of December 31, 2023 and 2022 , the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022 , and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP McLean, VA March 19, 2024 We have served as the Company's auditor since 2015. 82 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BLACKSKY TECHNOLOGY INC. CONSOLIDATED BALANCE SHEETS (in thousands, except par value) December 31, December 31, 2023 2022 Assets Current assets: Cash and cash equivalents $ 32,815 $ 34,181 Restricted cash 619 2,835 Short-term investments 19,697 37,982 Accounts receivable, net of allowance of $ 151 and $ 0 , respectively 7,071 3,112 Prepaid expenses and other current assets 3,916 4,713 Contract assets 15,213 5,706 Total current assets 79,331 88,529 Property and equipment - net 67,116 71,584 Operating lease right of use assets - net 1,630 3,586 Goodwill 9,393 9,393 Investment in equity method investees — 5,285 Intangible assets - net 1,357 1,918 Satellite procurement work in process 55,976 50,954 Other assets 9,263 2,841 Total assets $ 224,066 $ 234,090 Liabilities and stockholders’ equity Current liabilities: Accounts payable and accrued liabilities $ 11,573 $ 14,368 Amounts payable to equity method investees 10,843 3,728 Contract liabilities - current 3,670 6,783 Other current liabilities 1,405 2,048 Total current liabilities 27,491 26,927 Operating lease liabilities 3,041 3,132 Derivative liabilities 15,149 5,113 Long-term debt 83,502 76,219 Other liabilities 1,724 825 Total liabilities 130,907 112,216 Commitments and contingencies (Note 22) Stockholders’ equity: Class A common stock, $ 0.0001 par value-authorized, 300,000 shares; issued, 145,232 and 121,938 shares; outstanding, 142,837 shares and 119,508 shares as of December 31, 2023 and 2022, respectively. 14 12 Additional paid-in capital 692,115 666,973 Accumulated deficit ( 598,970 ) ( 545,111 ) Total stockholders’ equity 93,159 121,874 Total liabilities and stockholders’ equity $ 224,066 $ 234,090 See notes to consolidated financial statements 83 BLACKSKY TECHNOLOGY INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except per share amounts) Years Ended December 31, 2023 2022 Revenue Imagery & software analytical services $ 65,391 $ 47,415 Professional & engineering services 29,101 17,935 Total revenue 94,492 65,350 Costs and expenses Imagery & software analytical service costs, excluding depreciation and amortization 13,793 14,462 Professional & engineering service costs, excluding depreciation and amortization 19,988 21,365 Selling, general and administrative 72,617 79,672 Research and development 643 739 Depreciation and amortization 43,431 35,661 Operating loss ( 55,980 ) ( 86,549 ) Gain on derivatives 7,679 11,812 Income on equity method investments 4,165 2,087 Interest income 2,063 1,116 Interest expense ( 9,306 ) ( 5,426 ) Other (expense) income, net ( 1,807 ) 2,081 Loss before income taxes ( 53,186 ) ( 74,879 ) Income tax expense ( 673 ) — Loss from continuing operations ( 53,859 ) ( 74,879 ) Discontinued operations: Gain from discontinued operations — 707 Income tax (expense) benefit — — Gain from discontinued operations, net of income taxes — 707 Net loss ( 53,859 ) ( 74,172 ) Other comprehensive income — — Total comprehensive loss $ ( 53,859 ) $ ( 74,172 ) Basic and diluted loss per share of common stock: Loss from continuing operations $ ( 0.40 ) $ ( 0.64 ) Gain from discontinued operations, net of income taxes — 0.01 Net loss per share of common stock $ ( 0.40 ) $ ( 0.63 ) See notes to consolidated financial statements 84 BLACKSKY TECHNOLOGY INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in thousands) Year Ended December 31, 2023 Common Stock Additional Paid-In Accumulated Total Stockholders' Shares Amount Capital Deficit Equity Balance as of January 1, 2023 119,508 $ 12 $ 666,973 $ ( 545,111 ) $ 121,874 Stock-based compensation — — 11,571 — 11,571 Issuance of common stock upon exercise of stock options 407 — 10 — 10 Issuance of common stock upon vesting of restricted stock awards 34 — — — — Issuance of common stock upon vesting of restricted stock units 4,029 — — — — Issuance of common stock, net of equity issuance costs 19,866 2 14,971 — 14,973 Withholding of stock units to satisfy tax withholding obligations upon the vesting of restricted stock units and exercise of stock options ( 1,007 ) — ( 1,410 ) — ( 1,410 ) Net loss — — — ( 53,859 ) ( 53,859 ) Balance as of December 31, 2023 142,837 $ 14 $ 692,115 $ ( 598,970 ) $ 93,159 Year Ended December 31, 2022 Common Stock Additional Paid-In Accumulated Total Stockholders' Shares Amount Capital Deficit Equity Balance as of January 1, 2022 114,452 $ 11 $ 650,518 $ ( 470,909 ) $ 179,620 Stock-based compensation — — 21,477 — 21,477 Issuance of common stock upon exercise of stock options 709 — 47 — 47 Issuance of common stock upon vesting of restricted stock awards 200 — — — — Issuance of common stock upon vesting of restricted stock units 6,728 1 — — 1 Withholding of stock units to satisfy tax withholding obligations upon the vesting of restricted stock units and exercise of stock options ( 2,566 ) — ( 5,069 ) — ( 5,069 ) Repurchase and retirement of common stock ( 15 ) — — ( 30 ) ( 30 ) Net loss — — — ( 74,172 ) ( 74,172 ) Balance as of December 31, 2022 119,508 $ 12 $ 666,973 $ ( 545,111 ) $ 121,874 See notes to consolidated financial statements 85 BLACKSKY TECHNOLOGY INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2023 2022 Cash flows from operating activities: Net loss $ ( 53,859 ) $ ( 74,172 ) Gain from discontinued operations, net of income taxes — 707 Loss from continuing operations ( 53,859 ) ( 74,879 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization expense 43,431 35,661 Transfer of satellite procurement work in process to engineering service costs 4,854 — Operating lease right of use assets amortization 883 1,640 Bad debt expense (recovery) 179 ( 22 ) Stock-based compensation expense 10,862 20,025 Income on equity method investment ( 4,165 ) ( 2,087 ) Loss on disposal of property and equipment 127 — Loss on impairment of assets 81 — Gain on derivatives ( 7,679 ) ( 11,812 ) Amortization of debt issuance costs and non-cash interest expense 7,967 1,805 Non-cash interest income ( 796 ) ( 656 ) Other, net — 106 Changes in operating assets and liabilities: Accounts receivable ( 4,137 ) ( 461 ) Contract assets - current and long-term ( 16,299 ) ( 5,996 ) Prepaid expenses and other current assets 1,118 1,413 Other assets 1,328 ( 12 ) Accounts payable and accrued liabilities 3,316 ( 74 ) Other current liabilities ( 1,041 ) ( 1,180 ) Contract liabilities - current and long-term ( 3,053 ) ( 4,942 ) Other liabilities ( 538 ) ( 2,985 ) Net cash used in operating activities ( 17,421 ) ( 44,456 ) Cash flows from investing activities: Purchase of property and equipment ( 15,274 ) ( 11,677 ) Satellite procurement work in process ( 28,441 ) ( 32,385 ) Purchases of short-term investments ( 40,078 ) ( 50,343 ) Proceeds from maturities of short-term investments 59,110 13,000 Proceeds from sale of equity method investment 9,450 — Proceeds from sale of property and equipment 22 — Distributions from equity method investment — 804 Cash flows used in investing activities - continuing operations ( 15,211 ) ( 80,601 ) Cash flows used in investing activities - discontinued operations — ( 978 ) Net cash used in investing activities ( 15,211 ) ( 81,579 ) Cash flows from financing activities: Proceeds from equity issuances, net of equity issuance costs 32,733 — Proceeds from options exercised 10 47 Withholding tax payments on vesting of restricted stock units ( 1,410 ) ( 5,069 ) Payments of transaction costs for debt modification ( 1,311 ) — Payments of transaction costs related to derivative liabilities ( 905 ) — Payments for deferred financing costs ( 67 ) — Payments for deferred offering costs — ( 31 ) Net cash provided by (used in) financing activities 29,050 ( 5,053 ) Net decrease in cash, cash equivalents, and restricted cash ( 3,582 ) ( 131,088 ) Cash, cash equivalents, and restricted cash – beginning of year 37,016 168,104 Cash, cash equivalents, and restricted cash – end of year $ 33,434 $ 37,016 See notes to consolidated financial statements 86 The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows: December 31, 2023 2022 Cash and cash equivalents $ 32,815 $ 34,181 Restricted cash 619 2,835 Total cash, cash equivalents, and restricted cash $ 33,434 $ 37,016 Years Ended December 31, 2023 2022 (in thousands) Supplemental disclosures of cash flow information: Cash paid for interest $ 989 $ 5 Cash paid for income taxes 460 — Supplemental disclosures of non-cash financing and investing information: Property and equipment additions accrued but not yet paid $ 10,420 $ 6,455 Increase of debt principal for paid-in-kind interest 7,446 3,006 Transfer of satellite procurement work in process to engineering service costs 4,854 — Accretion of short-term investments' discounts and premiums 777 640 Capitalized stock-based compensation 709 1,470 Capitalized interest for property and equipment placed into service 220 220 Credits from LeoStella applied to satellite procurement costs 125 — Satellite procurement costs included in settlement with LeoStella 36 — Equity issuance costs accrued but not yet paid 13 491 Deferred financing costs accrued but not yet paid 4 — Repurchase and retirement of common stock — 30 See notes to consolidated financial statements 87 BLACKSKY TECHNOLOGY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023 1. Organization and Business BlackSky Technology Inc. (“BlackSky” or the “Company”), headquartered in Herndon, Virginia, is a space-based intelligence company that delivers real-time imagery, analytics and high-frequency monitoring. The Company owns and operates an advanced purpose-built commercial, real-time intelligence system that combines the power of the BlackSky Spectra tasking and analytics software platform and the Company's proprietary high-resolution low earth orbit (“LEO”) small satellite constellation. The constellation is optimized to cost-efficiently capture imagery at high revisit rates where and when customers need it. The BlackSky Spectra software platform processes millions of observations a day by integrating data from the Company's proprietary satellite constellation and from other third-party sensors such as synthetic aperture radar and radio frequency satellites, millions of GPS-enabled terrestrial data sources and Internet of Things (“IoT”) connected devices. Blacksky Spectra applies advanced, proprietary artificial intelligence ("AI") and machine learning (“ML”) techniques to process, analyze, and transform these raw feeds into actionable intelligence via alerts, information, and insights. Customers can access Blacksky Spectra's data and analytics through easy-to-use web services or through platform application programming interfaces. BlackSky has two primary operating subsidiaries, BlackSky Global LLC and BlackSky Geospatial Solutions, Inc. The Company also owns fifty percent of LeoStella LLC (“LeoStella”), its joint venture with Thales Alenia Space US Investment LLC (“Thales”). LeoStella is a vertically-integrated small satellite design and manufacturer based in Tukwila, Washington, from which the Company procures satellites to operate its business. The Company accounts for LeoStella as an equity method investment. The Company's equity issuances during the year ended December 31, 2023 included a private placement and an at-the-market (“ATM”) offering. In March 2023, the Company completed the private placement of 16.4 million shares of the Company’s Class A common stock and an equal number of corresponding warrants, for a purchase price of $ 1.79 per share and associated warrant. The Company received $ 29.4 million in gross proceeds from the private placement. The Company also sold 3.5 million common shares in its ATM offering, at an average purchase price per share of $ 1.45 , resulting in gross proceeds of $ 5.0 million. The transaction costs for these equity issuances consisted of legal fees, accounting fees, placement agent fees, and other third-party costs directly related to the equity issuances. During the year ended December 31, 2023, $ 1.8 million of transaction costs that had been incurred were recorded as a reduction to additional paid-in capital in the consolidated statements of changes in stockholders’ equity and consolidated balance sheets, and as a reduction to the proceeds from the transaction in the consolidated statements of cash flows. On May 9, 2023, BlackSky and its subsidiaries entered into the Second Amendment (the “Amendment”) to its Amended and Restated Loan and Security Agreement with Intelsat Jackson Holdings SA (“Intelsat”) and Seahawk SPV Investment LLC (“Seahawk”), dated October 31, 2019 and previously amended on September 9, 2021. The Amendment amended the secured loan facility to, among other things, extend the maturity date of the loan, roll the cash interest payment due on May 1, 2023 into the outstanding principal to be paid on the maturity date, and increase the interest rate. See Note 13 for more information regarding the Amendment. 88 2. Basis of Presentation and Summary of Significant Accounting Policies Basis of Preparation The Company has prepared its consolidated financial statements in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) and the instructions to Form 10-K and Article 8 of Regulation S-X of the Securities and Exchange Commission (the "SEC"). 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. All intercompany transactions and balances have been eliminated upon consolidation. The Company’s consolidated financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities, including derivative financial instruments, which are stated at fair value. Unless otherwise indicated, amounts presented in the Notes pertain to the Company’s continuing operations. Emerging Growth Company The Company is an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act permits companies with EGC status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. The Company has elected to use this extended transition period to enable it to defer the adoption of new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided for by the JOBS Act. As a result, the Company’s financial statements may not be comparable to companies that 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. 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. Use of Estimates The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingencies at the reporting date, and the reported amounts of revenue and expenses during the reporting period. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Actual results could materially differ from these estimates. Significant estimates made by the Company include, but are not limited to, revenue and associated cost recognition, the collectability of accounts receivable, the recoverability and useful lives of property and equipment, the valuation of equity warrants and warrant liabilities, fair value estimates, the recoverability of goodwill and intangible assets, the provision for income taxes, the incremental borrowing rate to measure the operating lease right of use assets, and stock-based compensation. 89 Segment Information The Company’s Chief Operating Decision Maker (as defined under GAAP), who is the Company’s Chief Executive Officer, has determined the allocation of resources and assessed performance based upon the consolidated results of the Company. Accordingly, the Company is currently deemed to be comprised of only one operating segment and one reportable segment. This segment, which comprises the continuing operations of the Company’s single operating and reportable segment, provides geospatial intelligence, imagery and related data analytic products and services, and mission systems that include the development, integration, and operation of satellite and ground systems to government and commercial customers. Cash and Cash Equivalents Cash and cash equivalents are comprised of cash in banks and highly liquid investments with original maturities of three months or less. Restricted Cash The Company classifies cash as restricted when the cash is unavailable for withdrawal or usage for general operations. Restricted cash represents certificates of deposits held by a bank as a compensating balance for letters of credit that facilitate certain contracts with customers and cash collateral for leasing arrangements. Accounts Receivable - net Accounts receivable are customer obligations due to the Company under normal trade terms. 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. The Company reserves for any accounts receivable balances that are determined to be uncollectible in the allowance for doubtful accounts. After all attempts to collect an accounts receivable balance have failed, the accounts receivable balance is written off against the allowance for doubtful accounts. 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. Other current assets consist primarily of non-trade receivables and short-term deposits. Investments The Company invests in short-term investments, which generally consist of A-1, or higher, rated corporate debt and governmental securities. The investments are classified as held-to-maturity and have a stated maturity date of one year or less from the balance sheet date. Any investments with original maturities less than three months are considered cash equivalents. 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. 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. Depreciation expense is recognized in the consolidated statements of operations and comprehensive loss on a straight-line basis over the estimated useful life of the related asset to its residual value. 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. Labor costs incurred prior to and after the pre-acquisition and construction stages are charged to expense. Once the satellite has reached orbit and makes contact with the Company's network, the Company commences depreciation. The designated useful life of the Company's satellites is estimated to be three years , and depreciation is recognized using the straight-line method. Subsequent to launch, the Company's satellites must meet certain performance and operational criteria to be deemed commercially viable. If the criteria are not met, the Company assesses the satellite for impairment. The Company capitalizes internal and external costs incurred to develop and implement internal-use software, which consist primarily of costs related to design, coding, and testing. Internal costs include salaries and allocations of fringe and stock-based compensation. When the software is ready for its intended use, capitalization ceases and such costs are amortized on a straight-line basis over the estimated life to either depreciation or cost of sales depending on the nature of the software. Costs incurred prior to and after the application development stage are charged to expense. We regularly review our capitalized software projects for impairment. Leases The Company leases office space under various non-cancellable operating leases with varying lease expiration dates through 2033. Several leases contain renewal options and termination options that were not reasonably certain to be exercised upon inception of the lease and are not included in the lease expiration dates. We determine whether a contract is or contains a lease and whether the lease should be classified as an operating or finance lease at contract inception. The Company determines if an arrangement is a lease at inception of the contract. Operating leases are included in operating lease right-of-use ("ROU") assets, current portion of operating lease liabilities, and long-term operating lease liabilities in the consolidated balance sheets. ROU assets represent the Company’s right to use underlying assets for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses the implicit rate when readily determinable. For leases where the rate is not determinable, the Company determines the incremental borrowing rate. 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 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. For these lease incentives, the Company uses the date of initial possession as the commencement date, which is generally when the Company is given the right of access to the space and begins to make improvements in preparation for intended use. Many of the Company’s lease arrangements contain multiple lease components, such as fixed rent payments and non-lease components, such as common-area maintenance ("CAM") costs. The Company elected not to separate the lease and non-lease components for new and modified leases executed after the adoption date. 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. Goodwill, Intangible Assets - net, and Other Long-Lived Assets Goodwill Goodwill represents the excess of purchase price over the fair value of the identifiable assets acquired less the liabilities assumed in the acquisition of a business. Goodwill is tested annually for impairment at October 1, or more frequently if events or circumstances indicate that the carrying value of goodwill may be impaired. Goodwill is tested for impairment at the reporting unit level by first taking a qualitative approach to determine whether it is more likely than not that a reporting unit's fair value is less than its carrying value. 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. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. In testing for goodwill impairment, the Company may utilize a mix of income and market approaches that include the use of comparable multiples of publicly traded companies whose services are comparable to ours. The Company continuously evaluates whether indicators of impairment exist to determine whether it is necessary to perform a quantitative goodwill impairment test. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include (a) a significant decline in the Company's common stock value; (b) a significant decline in the Company's expected future cash flows; (c) a significant adverse change in legal factors or in the business climate; (d) unanticipated competition; (e) the testing for recoverability of a significant asset group within a reporting unit; or (f) slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and could have a material impact on the consolidated financial statements. Long-Lived Assets and Finite-Lived Intangible Assets The Company reviews long-lived assets, including finite-lived intangible assets, property and equipment, satellite procurement work in process and other long-term assets, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. Significant judgments in this area involve determining whether a triggering event has occurred and determining the future cash flows for assets involved. In conducting this analysis, the Company compares the undiscounted cash flows expected to be generated from the long-lived assets (or asset group) to the related net book values. 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. Intangible assets subject to amortization include customer backlog and relationships, distribution agreements, and technology. Such intangible assets, excluding customer-related intangibles, are amortized on a straight-line basis over their estimated useful lives. Customer-related intangible assets are amortized on either a straight-line or accelerated basis, depending upon the pattern in which the economic benefits of the intangible asset are utilized. 92 The estimated useful lives of the Company's finite-lived intangible assets are as follows: Estimated useful lives (years) Distribution agreements 2 Customer backlog and relationships 1 - 10 Technology 3 - 5 Equity Method Investments Investments where the Company has the ability to exercise significant influence, but not control, are accounted for under the equity method of accounting and are included in investment in equity method investees on the Company's consolidated balance sheets. Significant influence typically exists if the Company has a 20% to 50% ownership voting interest in the investee or retains a voting seat on the investee's board of directors. In evaluating whether the Company has significant influence, the Company considers the nature of its ownership interest in the investee, as well as other factors that may give the Company the ability to exercise significant influence over the investee's operating and capital financial policies. Under this method of accounting, the Company's share of the net earnings or losses of the investee are included in the Company's consolidated statements of operations and comprehensive loss. In November 2023, the Company sold its equity method investment in X-Bow Launch Systems Inc. ("X-Bow"), a space technology company specializing in additive manufacturing of solid rocket motors, and received $ 9.5 million from the sale of the investment. The $ 9.5 million gain on the sale of X-Bow was recognized as income on equity method investments in the consolidated statements of operations and comprehensive loss. As of December 31, 2023, the Company accounts for its LeoStella joint venture as its only equity method investment. The investment in LeoStella is not significant to the financial statements. Intra-entity profits arising from the sale of assets from the equity method investments to the Company are eliminated and deferred if those assets are still held by the Company at the end of the reporting period. The intra-entity profits will be recognized as the assets are consumed. As of December 31, 2023 and 2022, the Company had differences between the carrying value of its equity method investment and the underlying equity in the net assets of the investee of $ 1.2 million and $ 2.6 million, respectively. Equity method investments are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period. 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. 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. 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. The Company periodically analyzes currently available information relating to these claims, assesses the probability of loss, and provides a range of possible outcomes when it believes that sufficient and appropriate information is available. The Company accrues a liability for those contingencies where the occurrence of a loss is probable and the amount can be reasonably estimated. 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. We do not accrue a liability when the likelihood that the liability has been incurred is believed to be probable but the amount cannot be reasonably estimated or when the likelihood that a liability has been incurred is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is reasonably possible and the impact could potentially be material, we disclose the nature of the contingency and, where feasible, an estimate of the possible loss or range of loss. 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. The debt discount was amortized to interest expense using the effective interest method over the life of the related debt. Short-term and long-term debt are presented net of the unamortized debt issuance costs and debt discount in the consolidated balance sheets. Fair Value of Financial Instruments The Company accounts for certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The process for analyzing the fair value measurement of certain financial instruments on a recurring, or non-recurring, basis includes significant judgment and estimates of inputs including, but not limited to, share price, volatility, discount for lack of marketability, application of an appropriate discount rate, and probability of liquidating events. The Company utilizes the market valuation methodology and specific option pricing methodology, such as the Monte Carlo simulation, method to value the more complex financial instruments and the Black-Scholes option-pricing model to value standard common stock warrants and common stock options. The framework for measuring fair value specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows: Level 1 Inputs. Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. Level 2 Inputs. Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. Level 3 Inputs. Inputs are unobservable inputs which reflect the Company’s own assumptions on what assumptions market participants would use in pricing the asset or liability based on the best available information. Revenue Recognition The Company generates revenue from the sale of imagery and software analytical services and professional and engineering services. Imagery and software analytical services revenue, which is mostly from contracts from government agencies, includes imagery, data, software, and analytics. This revenue is primarily recognized from services rendered under non-cancellable subscription order agreements or, in limited circumstances, variable not-to-exceed purchase orders. 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. 94 In accordance with Accounting Standards Update No. 2014-09, “ Revenue from Contracts with Customers (Topic 606) ” (“ASC 606”), the Company uses the five-step model of identifying the contract with a customer, identifying the performance obligations contained in a contract, determining the transaction price, allocating the transaction price, and determining when performance obligations are satisfied, which can require the application of significant judgment, as further discussed below. Revenue is measured at the fair value of consideration received or receivable and net of discounts. The Company applies a policy election to exclude transaction taxes collected from customer sales when the tax is both imposed on and concurrent with a specific revenue-producing transaction. The Company estimates any variable consideration, and whether the transaction price is constrained, upon execution of each contract. The Company did not have any active contracts with significant variable consideration as of December 31, 2023. 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. 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. Imagery revenue is recognized ratably over the subscription period based on the promise to continuously provide contractual satellite capacity for tasked imagery or analytics at the discretion of the customer. Data, Software, and Analytics The Company leverages proprietary AI and ML algorithms to analyze data coming from both the Company’s proprietary sensor network and third-party space and terrestrial sources to provide hard-to-get data, insights, and analytics for customers. The Company continues to integrate and enhance its offerings by performing contract development, while retaining the intellectual property rights. The Company also 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 . 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. Analogous with the recognition of revenue for imagery, software analytical services revenue is recognized ratably over the subscription period. 95 Professional and Engineering Services Revenue The Company performs various professional services, that are highly-interrelated, including providing technology enabled professional service solutions to support customer-specific software development requests, integration, testing, and training. The Company also provides engineering services, which include, developing and delivering advanced satellite and payload systems for a limited number of customers that leverage the Company’s capabilities in mission systems engineering and operations, ground station operations, and software and systems development. These promises, based on the context of the contract, are capable of being distinct performance obligations. 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. Significant judgment is used to estimate total costs at completion on a contract by contract basis including, but not limited to, labor productivity, program schedule, technical risk analysis, complexity, scope of the work to be performed and other identified risks. Due to the continuous nature of the work, as well as when a change in circumstances warrants a modification, the EAC is reviewed and may result in cumulative changes to the contract profit. We recognize changes in estimated contract sales or costs and the resulting changes in contract profit on a cumulative basis in the period in which the change is identified. If at any time, the estimate of contract profitability indicates a probable anticipated loss on the contract, we recognize the total loss as and when known. The following table presents the effect of aggregate net EAC adjustments on our professional and engineering services contracts: Years Ended December 31, 2023 2022 (1) (in thousands) Revenue $ ( 1,477 ) $ ( 2,316 ) Basic and diluted net loss per share $ ( 0.01 ) $ ( 0.02 ) (1) For the year ended December 31, 2022, the amounts represent the effect of aggregate net EAC adjustments on two professional and engineering service contracts For contracts structured as cost-plus-fixed-fee or on a time and materials basis, the Company generally recognizes revenue based on the right-to-invoice when practically expedient, as the Company is contractually able to invoice the customer based on the control transferred to the customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date. Imagery and Software Analytical Service and Professional and Engineering Service Costs Imagery and software analytical service costs primarily include internal labor to support the ground station network and space operations, third-party data and imagery, and cloud computing and hosting services. The Company recognizes 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. For those employees who provide these services to support customer-based programs, the stock-based compensation expense is classified under imagery and software analytical services costs. 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 addition, we also recognize internal labor costs and external subcontract labor costs for our customer-centric software service solutions. We recognize stock-based compensation expense for those employees who provide professional and engineering services support to customers, under professional and engineering service costs, excluding depreciation and amortization. 96 Research and Development Costs The Company incurs research and development costs, which are expensed as incurred, for data science modeling and algorithm development related to its geospatial analytical platform. In addition, the Company recognizes costs incurred before the technological feasibility stage for internal projects, such as aerospace and other satellite developments, as research and development costs. 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, 2023 and 2022, advertising costs were $ 1.5 million and $ 1.3 million, respectively. 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. Under this method, deferred tax assets and liabilities are determined based on differences between the consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enacted date. The Company measures deferred tax assets based on the amount that the Company believes is more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including reversals of existing taxable temporary differences, tax-planning strategies, and historical results of recent operations. In evaluating the objective evidence that historical results provide, the Company considers three trailing years of cumulative operating income or loss. Valuation allowances are provided, if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. 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. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company's income tax expense or benefit, liability and/or receivable, deferred tax assets and liabilities, and liabilities for uncertain tax benefits reflect management’s best assessment of estimated current and future taxes to be paid or received. Sponsor Shares On September 9, 2021, BlackSky's predecessor company, Osprey Technology Acquisition Corp. (“Osprey”), completed its merger (the "Merger") with Osprey Technology Merger Sub, Inc., a wholly owned subsidiary of Osprey, and BlackSky Holdings, Inc. Osprey pre-Merger Class B common shares were exchanged for shares of the Company’s Class A common stock (the "Sponsor Shares") upon completion of the Merger. 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. The Sponsor Shares are adjusted to fair value at each reporting period and the change in fair value is recognized in gain on derivatives in the Company’s consolidated statements of operations and comprehensive loss. 97 Stock-Based Compensation Restricted Stock Awards and Restricted Stock Units The Company has granted restricted stock awards ("RSAs") and grants restricted stock units ("RSUs") to certain employees, for which the grant date fair value is equal to the fair value of the Class A common stock on the date of grant. 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. Subsequent to the Merger, the Company uses the New York Stock Exchange (“NYSE”) trading price as the fair value of the Class A common stock for valuation purposes. For all awards for which vesting is only subject to a service condition, including those subject to graded vesting, the Company has elected to use the straight-line method to recognize the fair value as compensation cost over the requisite service period. Certain of the Company’s outstanding RSUs had performance vesting conditions that were triggered upon the consummation of the Merger. Therefore, since the performance conditions attributable to these RSUs had been met, the Company commenced recording the associated compensation expense, inclusive of a catch-up amount for the service period between their grant date and satisfaction of the performance condition, as of the closing of the Merger. The fair value of the RSUs that include a performance condition is recognized as compensation expense over the requisite service period using the accelerated attribution method, which accounts for RSUs with discrete vesting dates as if they were a separate award. Expense related to stock-based payments is classified in the consolidated statements of operations and comprehensive loss based upon the classification of each employees’ cash compensation. Stock Options The Company uses the Black-Scholes option pricing model to value all options, including options under the 2021 Employee Stock Purchase Plan ("ESPP"), and the straight-line method to recognize the fair value as compensation cost over the requisite service period. The fair value of each option granted was estimated as of the date of grant. The Company granted options in the year ended December 31, 2023. The Company uses the following inputs when applying the Black-Scholes option pricing model: Expected Dividend Yield . The Black-Scholes valuation model requires an expected dividend yield as an input. The dividend yield is based on historical experience and expected future changes. The Company has not historically paid and currently has no plans to pay dividends on its Class A common stock. Expected Volatility . The Company does not have sufficient historical share price history; therefore, the expected volatility was estimated based upon the historical share price volatility of guideline comparable companies. Risk-free Interest Rate . The yield on actively traded non-inflation indexed U.S. Treasury notes was used to extrapolate an average risk-free interest rate based on the expected term of the underlying grants. Expected Term . 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. 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 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. 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 Company's Class A common stock for valuation purposes. Legacy BlackSky historically adjusted the exercise price of certain outstanding stock options. For each award with an adjusted exercise price, Legacy BlackSky calculated the incremental fair value, which was the 98 excess of the fair value of the modified award over the fair value of the original award immediately before the modification. The incremental fair value was recognized as stock-based compensation expense immediately to the extent that the modified stock option already 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. Warrant Liabilities In October 2019, Osprey, BlackSky's predecessor company and special purpose acquisition company, issued 15.8 million public warrants and 8.3 million Private Placement Warrants in connection with its public offering. In March 2023, the Company issued 16.4 million Private Placement Warrants in connection with a private placement of shares of Class A common stock and accompanying warrants (see Note 14 and Note 16). The Company accounts for its warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, “ Distinguishing Liabilities from Equity ” (“ASC 480”) and ASC 815, “ Derivatives and Hedging ” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments that would require classification as a liability under ASC 480, as well as whether the warrants qualify for equity classification or require liability classification after consideration of the guidance and criteria outlined in ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions that impact classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all of the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance. The Company accounted for the warrants issued in October 2019 and March 2023 in accordance with the guidance contained in ASC 815-40-55-2 as liabilities at their fair value. As of December 31, 2023, the Company’s consolidated balance sheets included liability classified warrants, reported as derivative liabilities. The fair value of the public warrants was estimated as of December 31, 2023 using the public warrants’ quoted market price. The October 2019 and March 2023 Private Placement Warrants were valued using a Black-Scholes option pricing model for initial and subsequent measurements. The liabilities associated with the public warrants and the Private Placement Warrants are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in gain on derivatives in the Company’s consolidated statements of operations and comprehensive loss. Transaction Costs Transaction costs consist of legal fees, accounting fees, placement agent fees, commissions, and other third-party costs related directly to equity issuances and debt restructuring. Transaction costs incurred for equity issuances are allocated to the components of the transaction based on their relative fair market value, including common equity and equity warrants classified as derivatives and, as such, based on the Company's allocation, are either expensed in the consolidated statements of operations and comprehensive loss or recorded as a reduction to additional paid-in capital in the consolidated statements of changes in stockholders’ equity and consolidated balance sheets. The Company incurred lender fees and other incremental third-party costs associated with its debt Amendment, as described in Note 13. Lender fees were capitalized and included in long-term debt in the consolidated balance sheets. Third-party costs associated with the debt modification were expensed in the consolidated statements of operations and comprehensive loss. 99 Deferred Offering Costs Offering costs consist of legal fees, accounting fees, underwriting fees, and other third-party costs that are directly related to the Company’s future equity offering(s) and will be charged to additional paid in capital upon the completion of the applicable future transactions. 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. Deferred Financing Costs Financing costs consist of legal fees, accounting fees, and other third-party costs that are directly related to the Company’s future financing transactions and will be assigned to the cost of financing upon the completion of the applicable future transaction(s). During the year ended December 31, 2023, the Company incurred financing costs of $ 0.1 million, which are included in other assets in the Company's consolidated balance sheets as of December 31, 2023; there were no deferred financing costs capitalized as of December 31, 2022. 3. Accounting Standards Updates (“ASU”) Accounting Standards Recently Issued But Not Yet Adopted On November 27, 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. Among other new disclosure requirements, ASU 2023-07 requires companies to disclose significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"). ASU 2023-07 will be effective for annual periods beginning on January 1, 2024 and interim periods beginning on January 1, 2025. ASU 2023-07 must be applied retrospectively to all prior periods presented in the financial statements. The Company is assessing the effect of this update on our consolidated financial statements and related disclosures. On December 14, 2023, the FASB issued ASU No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires companies to disclose additional information about income taxes paid. ASU 2023-09 will be effective for annual periods beginning January 1, 2025 and will be applied on a prospective basis with the option to apply the standard retrospectively. The Company is assessing the effect of this update on our consolidated financial statements and related disclosures. Other accounting standards updates adopted and/or issued, but not effective until after December 31, 2023, are not expected to materially impact the Company. 4. Revenue Disaggregation of Revenue The Company earns revenue through the sale of imagery and software analytical services and professional and engineering services. The Company’s management primarily disaggregates revenue as follows: (i) imagery; (ii) data, software and analytics; (iii) professional services; and (iv) engineering services. This disaggregation allows the Company to evaluate market trends in certain imagery and software analytical services and professional and engineering services. 100 The following table disaggregates revenue by type for the years ended December 31, 2023 and 2022: Years Ended December 31, 2023 2022 (in thousands) Imagery $ 54,630 $ 34,242 Data, software, and analytics 10,761 13,173 Professional services 16,824 8,563 Engineering services 12,277 9,372 Total revenue $ 94,492 $ 65,350 The approximate revenue based on geographic location of end customers is as follows for the years ended December 31, 2023 and 2022: Years Ended December 31, 2023 2022 (in thousands) North America $ 60,023 $ 54,052 Middle East 8,385 3,459 Asia Pacific 25,058 6,246 Other 1,026 1,593 Total revenue $ 94,492 $ 65,350 Revenue from categories of end customers for the years ended December 31, 2023 and 2022 is as follows: Years Ended December 31, 2023 2022 (in thousands) U.S. federal government and agencies $ 58,445 $ 53,186 International governments 34,580 11,375 Commercial and other 1,467 789 Total revenue $ 94,492 $ 65,350 As of December 31, 2023 and 2022, accounts receivable consisted of the following: December 31, December 31, 2023 2022 (in thousands) U.S. federal government and agencies $ 5,994 $ 2,540 International governments 895 261 Commercial and other 333 311 Allowance for doubtful accounts ( 151 ) — Total accounts receivable $ 7,071 $ 3,112 Backlog Backlog represents the future sales the Company expects to recognize on firm orders it receives and is equivalent to the Company’s remaining performance obligations at the end of each period. 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. The Company expects to recognize revenue relating to its backlog, of which a portion is recorded in deferred revenue in the consolidated balance sheets, of $ 65.1 million, $ 34.4 million, and $ 162.2 million in fiscal year 2024, fiscal year 2025, and thereafter, respectively. 5. Contract Assets and Liabilities The components of contract assets and contract liabilities consisted of the following: December 31, December 31, 2023 2022 (in thousands) Contract assets - current: Unbilled revenue $ 15,213 $ 5,706 Total contract assets - current $ 15,213 $ 5,706 Contract assets - long-term: Unbilled revenue - long-term $ 8,150 $ 1,287 Contract assets - long-term 610 681 Total contract assets - long-term (1) $ 8,760 $ 1,968 Contract liabilities - current: Deferred revenue - current $ 3,670 $ 6,783 Total contract liabilities - current $ 3,670 $ 6,783 Contract liabilities - long-term: Other contract liabilities - long-term $ 169 $ 109 Total contract liabilities - long-term $ 169 $ 109 (1) Total contract assets - long term is included in other assets in the consolidated balance sheets. Contract liabilities include payments received and billings made in advance of the satisfaction of performance obligations under the contract and are realized when the associated revenue is recognized under the contract. Contract assets include (i) unbilled revenue, which is the amount of revenue recognized in excess of the amount billed to customers, where the rights to payment are not just subject to the passage of time; and (ii) costs incurred incremental to the contract and to fulfill contract obligations. Other contract assets and other contract liabilities primarily relate to contract commissions on customer contracts. 102 Changes in short-term and long-term contract assets and contract liabilities for the year ended December 31, 2023 were as follows: Contract Assets Contract Liabilities (in thousands) Balance as of January 1, 2023 $ 7,674 $ 6,892 Billings or revenue recognized that was included in the beginning balance ( 3,063 ) ( 6,191 ) Changes in contract assets or contract liabilities, net of reclassification to receivables 18,854 2,512 Cumulative catch-up adjustment arising from changes in estimates to complete 595 225 Cumulative catch-up adjustment arising from contract modifications ( 16 ) 341 Changes in costs to fulfill and amortization of commission costs ( 71 ) — Changes in contract commission costs — 60 Balance as of December 31, 2023 $ 23,973 $ 3,839 6. Discontinued Operations On June 12, 2020, the Company completed the sale of 100 % of its equity interests in Spaceflight to M&Y Space. Under a transition services agreement that ended in March 2022, the Company provided post-closing transition services to Spaceflight, including, but not limited to, the sublease of the Company’s office facility in Seattle, Washington and common area maintenance fees related to the sublease. Settlement Arrangement for the Sale of 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. On October 21, 2022, 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, the existing contingent liability was reduced by $ 0.7 million, which was recorded as a gain from discontinued operations in the year ended December 31, 2022. 7. Property and Equipment - net The following summarizes property and equipment - net as of: December 31, December 31, 2023 2022 (in thousands) Satellites $ 125,124 $ 116,219 Software 20,384 8,503 Software development in process 2,673 2,942 Computer equipment 1,642 1,996 Office furniture and fixtures 4,039 674 Other equipment 811 631 Site equipment 2,557 2,558 Total 157,230 133,523 Less: accumulated depreciation ( 90,114 ) ( 61,939 ) Property and equipment — net $ 67,116 $ 71,584 103 Depreciation of property and equipment was $ 42.9 million and $ 35.1 million for the years ended December 31, 2023 and 2022, respectively. The Company recognized impairment losses of $ 121 thousand of capitalized software and leasehold improvements, resulting in a net impairment loss of $ 81 thousand. As of December 31, 2023 and 2022, the Company's primary long-lived assets, including satellites in service, are owned and operated by United States entities and are classified within the United States geographic region. 8. Goodwill and Intangible Assets Goodwill The Company performed an annual qualitative goodwill assessment of the goodwill held related to the BlackSky reporting unit as of October 1, 2023. The Company determined that no triggering events occurred that would require the Company to quantitatively test goodwill for impairment during the year ended December 31, 2023. 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. To the extent this reporting unit realizes actual operating results in the future below forecasted results, or realizes decreases in forecasted results as compared to previous forecasts or, in the event the estimated fair value of the reporting unit decreases (as a result, among other things, of changes in market capitalization, including further declines in the stock price), the Company may incur goodwill impairment charges in the future. 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. 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. 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. Accounts Payable and Accrued Liabilities The components of accounts payable and accrued liabilities were as follows: December 31, December 31, 2023 2022 (in thousands) Accounts payable $ 2,318 $ 2,421 Accrued payroll 5,828 6,127 Accrued professional services, legal, and other general and administrative 1,107 3,040 Accrued cost of goods sold and other expenses 2,320 2,780 Total accounts payable and accrued liabilities $ 11,573 $ 14,368 10. Other Current Liabilities The components of other current liabilities were as follows: December 31, December 31, 2023 2022 (in thousands) Other current liabilities $ 244 $ 256 Accrued interest 344 1,176 Operating lease right-of-use liabilities 621 530 Estimated non-income tax liability 196 86 Total other current liabilities $ 1,405 $ 2,048 11. Employee Benefit Plan The Company has a 401(k) savings plan. Eligible employees may voluntarily contribute a percentage of their compensation to their 401(k) plan account. The Company provides a 401(k) employer match of 50 % of the first 6 % of the employee’s contribution of eligible compensation. 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 Company's provision for income taxes from continuing operations for the years ended December 31, 2023 and 2022 is as follows: Years Ended December 31, 2023 2022 (in thousands) Current: Federal $ — $ — State 569 — Foreign 104 — Total current $ 673 $ — Deferred: Federal — — State — — Total deferred $ — $ — Total provision for income taxes $ 673 $ — 105 The Company’s primary operations are domestically located and the Company is subject to tax in one foreign jurisdiction. The provision for income taxes differed from the amount computed by applying the federal statutory income tax rate of 21% to loss before income taxes due to the following items for the years ended December 31, 2023 and 2022: Years Ended December 31, 2023 2022 (in thousands) Tax benefit at federal statutory rate $ ( 11,169 ) $ ( 15,725 ) Non-deductible compensation 2,342 ( 1,092 ) State tax, net of federal benefit ( 9,393 ) ( 3,227 ) Valuation allowance 17,251 18,834 Shortfall of stock compensation deduction 2,666 3,190 Non-taxable warrants ( 1,613 ) ( 2,481 ) Other 589 501 Income tax expense $ 673 $ — The deferred income tax expense as of December 31, 2023 and 2022 was $ 0 . The tax benefits associated with losses generated by the consolidated group have been reduced by a full valuation allowance as the Company does not believe it is more-likely-than-not that the losses will be utilized. 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. 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. Tax Effected Expiration (in thousands) Federal net operating loss (“NOL”) carryforward $ 8,313 2033-2037 Federal NOL carryforward 49,512 Indefinite Federal capital loss carryforward 4,004 2025 State NOL carryforwards 10,548 2034-2043 At December 31, 2023 and 2022 the Company had $ 275.4 million and $ 252.8 million of NOL carryforwards for U.S. federal tax purposes, respectively. 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. 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 2015-2022 remain open for examination. 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 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. Debt and Other Financing The carrying value of the Company’s outstanding debt consisted of the following amounts: December 31, December 31, 2023 2022 (in thousands) Non-current portion of long-term debt $ 84,578 $ 77,132 Unamortized debt issuance cost ( 1,077 ) ( 913 ) Outstanding balance $ 83,502 $ 76,219 107 The outstanding debt was solely comprised of loans from related parties with effective interest rates of 12.23 % to 12.57 % and a maturity date of October 31, 2026. On May 9, 2023, BlackSky and its subsidiaries entered into an Amendment to its Amended and Restated Loan and Security Agreement with Intelsat and Seahawk, dated October 31, 2019 and previously amended on September 9, 2021. The Amendment amended the secured loan facility to, among other things: (i) extend the maturity date of the loan from October 31, 2024 to October 31, 2026, (ii) roll the cash interest payment due on May 1, 2023 into the outstanding principal to be paid on the maturity date, (iii) increase the interest rate on the loan as of the Amendment date from 9 % to 12 %, of which (x) 9.6 % will be paid in kind as principal due on the maturity date, with the remainder paid as cash interest on a semi-annual basis, until May 1, 2025 and (y) after May 1, 2025, up to 4 % can be paid in kind as principal due on the maturity date, with the remainder to be paid as cash interest on a semi-annual basis, and (iv) add certain financial covenants. This facility is secured by substantially all of the Company’s assets, is guaranteed by the Company’s subsidiaries, and contains customary covenants and events of default. The Amendment was accounted for as a debt modification and related transaction costs of 1.3 million were recorded during the year ended December 31, 2023. Under the Company’s loan agreements, minimum required maturities are as follows: For the years ending December 31, (in thousands) 2024 $ — 2025 — 2026 84,578 Total outstanding $ 84,578 Fair Value of Debt The estimated fair value of the Company’s outstanding long-term debt was 78.7 million and $ 73.2 million as of December 31, 2023 and 2022, respectively, which is different than the historical cost of the long-term debt as reflected in the Company’s consolidated balance sheets. 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 part of the Amendment, the Company is required to maintain a minimum cash and cash equivalents balance of not less than $ 10.0 million, measured quarterly as of the last day of each fiscal quarter. In addition, the Company is required to maintain Adjusted EBITDA, measured quarterly as of the last day of each fiscal quarter, of not less than: • $ 5.0 million for the trailing four quarter period ending as of December 31, 2024 through September 30, 2025 and • $ 10.0 million for the trailing four quarter period ending as of December 31, 2025 and as of the end of each fiscal quarter thereafter. As of December 31, 2023, all debt instruments contained customary covenants and events of default. The Company was in compliance with all covenants as of December 31, 2023. 14. Equity Warrants Classified as Derivative Liabilities Warrant Issuances In March 2023, the Company completed the closing of a private placement whereby the Company issued warrants to purchase up to 16.4 million shares of Class A common stock. 108 The purchase price of each share and associated warrant was $ 1.79 . Including the issuance of Company’s Class A common stock (see Note 16), the aggregate gross proceeds to the Company from the private placement were $ 29.4 million, before deducting the placement agent fees and other offering expenses payable by the Company. The Company uses the net proceeds from the private placement for general corporate purposes, including working capital. The warrants have an exercise price of $ 2.20 per share of Class A common stock, and are exercisable until September 8, 2028. 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 Company incurred transaction costs which consisted of legal fees, accounting fees, placement agent fees, and other third-party costs directly related to the March 2023 private placement. The transaction costs of $ 0.9 million related to the 2023 Private Placement Warrants were included in other (expense) income, net in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023. The Company also has approximately 24.1 million additional outstanding warrants, including 15.8 million public warrants and 8.3 million Private Placement Warrants, issued by Osprey, the Company's predecessor company, in 2019 in connection with its initial public offering as a special purpose acquisition company. The 2019 warrants are each exercisable for one share of the Company's Class A common stock. 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. 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. 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. These warrants are equity classified and are included in additional paid-in capital in the Company’s consolidated balance sheets. 109 15. Other (Expense) Income Years Ended December 31, 2023 2022 (in thousands) Transaction costs associated with debt and equity financings $ ( 1,738 ) $ — Proceeds from earn-out payment — 2,000 Other ( 69 ) 81 $ ( 1,807 ) $ 2,081 16. Stockholders’ Equity Class A Common Stock As of December 31, 2023, the Company was authorized to issue 300.0 million shares of Class A common stock and 100.0 million shares of preferred stock. Issued and outstanding stock as of December 31, 2023 consisted of 145.2 million and 142.8 million shares of Class A common stock, respectively. The par value of each share of the Class A common stock is $ 0.0001 per share. 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. 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. 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. The Sponsor Shares have the following provisions: Terms Contractual Life Seven years from the closing date of the Merger Release Provision Exactly half of the Sponsor Shares have a release provision ("Release") at such time that the volume weighted average price ("VWAP") is equal to, or greater than, $ 15.00 per share for ten of any twenty consecutive trading days. The remaining Sponsor Shares Release at such time that the VWAP is equal to, or greater than, $ 17.50 per share for ten of any twenty consecutive trading days. There is an additional provision for acceleration of the Release upon a defined change in control. Forfeiture Provision If, within the seven year period, the Sponsor Shares have not met the Release provisions, the Sponsor Shares will automatically forfeit and be cancelled. Private Placement In March 2023, the Company completed a private placement of 16.4 million shares of the Company’s Class A common stock and an equal number of corresponding warrants, for a purchase price of $ 1.79 per share and associated warrant. The Company received $ 29.4 million in gross proceeds from the private placement. The Company sold 3.5 million common shares in its ATM offering during the years ended December 31, 2023, at an average purchase price per share of $ 1.45 , resulting in gross proceeds of $ 5.0 million. The transaction costs for these equity issuances consisted of legal fees, accounting fees, placement agent fees, and other third-party costs related directly to the equity issuances. During the year ended December 31, 2023, $ 1.8 million of transaction costs that had been incurred were recorded as a reduction to additional paid-in capital in the consolidated statements of changes in stockholders’ equity and consolidated balance sheets, and as a reduction to the proceeds from the transaction in the consolidated statements of cash flows. 17. 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. 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. 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. 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. 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. As of December 31, 2023, the Company had 2 thousand and 945 thousand options outstanding, respectively, under the 2011 and 2014 Plans. In connection with the Merger, the Company adopted its 2021 Equity Incentive Plan (the "2021 Plan", together with the Prior Plans, collectively the “Plans”) under which it has granted equity awards following the Merger and the Company adopted its ESPP under which eligible employees began participating in December 2023. The stock-based compensation expense attributable to continuing operations is included in the consolidated statements of operations and comprehensive loss as indicated in the table below: Years Ended December 31, 2023 2022 (in thousands) Imagery & software analytical service costs, excluding depreciation and amortization $ 242 $ 553 Professional & engineering service costs, excluding depreciation and amortization 502 1,341 Selling, general and administrative 10,118 18,131 Total stock-based compensation expense $ 10,862 $ 20,025 The Company recorded stock-based compensation related to capitalized internal labor for software development activities of $ 0.7 million and $ 1.5 million during the years ended December 31, 2023 and 2022, respectively. 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”). The exercise price per share of each Assumed Company Stock Option was equal to the quotient obtained by dividing the exercise price per share applicable to such Legacy BlackSky stock option by the common stock exchange ratio. The Black-Scholes option pricing model is used to determine the fair value of options granted. The Company utilized assumptions concerning expected term, a risk-free interest rate, and expected volatility to determine such values. 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. For each award with an adjusted exercise price, Legacy BlackSky calculated the incremental fair value, which was the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. The incremental fair value was recognized as stock-based compensation expense immediately to the extent that the modified stock option already 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. A summary of the Company’s stock option activity under the Plans during the year ended December 31, 2023 is presented below: Options Weighted-Average Exercise Price Weighted Average Contractual Term Aggregate Intrinsic Value (in thousands) (in years) (in thousands) Outstanding - January 1, 2023 8,641 $ 3.10 Granted 2,075 1.27 Exercised ( 407 ) 0.02 Forfeited ( 1,726 ) 4.62 Expired ( 243 ) 2.06 Outstanding - December 31, 2023 8,340 2.51 8.20 $ 1,364 Exercisable - December 31, 2023 3,027 2.77 7.50 1,083 For options exercised, intrinsic value is calculated as the difference between the estimated fair value on the date of exercise and the exercise price. 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. The total fair value of options vested during the years ended December 31, 2023 and 2022 was $ 2.0 million and $ 1.2 million, respectively. 113 As of December 31, 2023, there was $ 4.4 million of total unrecognized stock-based compensation expense, which is expected to be recognized over a weighted-average period of 2.5 years. Restricted Stock Awards During the year ended December 31, 2020, the Company granted RSAs, which vest based upon the individual award agreements and generally vest over a three to four-year period. These shares are deemed issued as of the date of grant, but not outstanding until they vest. The Company intends to settle the RSAs in stock, and the Company has the shares available to do so. 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. 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. The general vesting provisions are that 25 % will vest on the one -year anniversary of the vesting commencement date and 75 % will vest ratably over twelve consecutive quarters on specified quarterly vesting dates, with the first of such quarterly vesting dates occurring at least three months after the vesting of the initial 25 % of the RSUs. A summary of the Company’s nonvested RSU activity during the year ended December 31, 2023 is presented below: Restricted Stock Units Weighted-Average Grant-Date Fair Value (in thousands) Nonvested - January 1, 2023 7,854 $ 4.08 Granted 14,360 1.27 Vested ( 4,029 ) 4.53 Canceled ( 2,053 ) 2.28 Nonvested - December 31, 2023 16,132 1.69 During the year ended December 31, 2023, 1.0 million of the vested RSUs were withheld to satisfy payroll tax withholding obligations, which was recorded to additional paid-in capital totaling $ 1.4 million. Unrecognized compensation costs related to nonvested RSUs totaled $ 21.8 million as of December 31, 2023, which is expected to be recognized over a weighted-average period of 2.9 years. 114 Employee Stock Purchase Plan Beginning in December 2023, the Company's eligible employees were able to begin participating in the Company's ESPP. The ESPP allows eligible participants to contribute up to 15 % of their eligible compensation towards the purchase of Class A common stock at a discounted price, subject to certain limitations,. The purchase price of the shares on each purchase date is equal to 85 % of the lower of the fair market value of Class A common stock on the first and last trading days of each offering period. The offerings under the ESPP are currently designed to be intended to qualify under Section 423 of the Internal Revenue Code. The Company estimates the fair value of each purchase right under the ESPP on the date of grant using the Black-Scholes valuation model and uses the straight-line attribution approach to record the expense over the six-month offering period. The maximum number of shares that may be issued under the ESPP is 3,000,700 plus any shares added to the ESPP under the automatic annual increase at the beginning of each fiscal year. 19. 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. Related Party Transactions A summary of the Company’s related party transactions during the years ended December 31, 2023 and 2022 is presented below: Amount Due to Related Party as of Total Payments in the Years Ended December 31, December 31, December 31, Nature of Relationship 2023 2022 2023 2022 Name Description of the Transactions (in thousands) LeoStella Joint Venture with Thales Alenia Space The Company owns 50% of LeoStella, its joint venture with Thales. The Company contracts with LeoStella for the design, development and manufacture of satellites to operate its business. $ 23,910 $ 28,042 $ 10,843 $ 3,728 X-Bow Equity Method Investee The Company had a less than 20 % investment in X-Bow and held one Board seat through November 2023 when it sold its investment. — 900 — — Ursa Space Systems Strategic Partner The chairman of the Company’s board of directors, Will Porteous, is also an investor and member of the board of directors of Ursa Space Systems. The Company has a non-cancelable operational commitment with Ursa Space Systems. 458 583 42 — Thales Alenia Space Shareholder and Parent of Wholly-owned Subsidiary, Seahawk (Debt Issuer) Design, development and manufacture of telescopes. 8,092 11,388 750 693 Seahawk Debt Issuer and subsidiary of Thales Alenia Space In 2019, the Company raised and converted $ 18.4 million from prior debt into new, outstanding debt and issued 13.5 million warrants to purchase Legacy BlackSky common stock. 375 — 22,793 20,787 Intelsat Debt Issuer In 2019, the Company entered into a term loan facility for $ 50.0 million and issued 20.2 million warrants to purchase Legacy BlackSky common stock. 1,042 — 61,785 56,345 The Company recorded revenue from related parties of $ 11.5 million and $ 0 for the years ended December 31, 2023 and 2022, respectively. Accounts receivable from related parties was $ 0 as of December 31, 2023 and 2022. On May 9, 2023, BlackSky and its subsidiaries entered into an Amendment to its Amended and Restated Loan and Security Agreement with Intelsat and Seahawk, dated October 31, 2019 and previously amended on September 9, 2021. The Company incurred $ 0.4 million of offering costs to related parties in relation to the Amendment. See Note 13 for information regarding the Amendment. Interest on the term loan facility is accrued and is due semi-annually. The Company made interest payments of $ 1.0 million and $ 0 during the years ended December 31, 2023 and 2022, respectively. As of 116 December 31, 2023, the Company had interest due to related parties of $ 1.7 million, of which $ 0.3 million is to be paid as cash interest on a semi-annual basis and was included in other current liabilities and $ 1.4 million is paid in kind as principal due on the maturity date and was included in other liabilities. As of December 31, 2022, the Company had interest due to related parties of $ 1.2 million that was included in other current liabilities. 21. 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. There were no transfers into or out of any of the levels of the fair value hierarchy during the years ended December 31, 2023 or 2022. Changes in the fair value of the Level 3 liabilities during the year ended December 31, 2022 of $ 5.2 million included the Sponsor Shares and the October 2019 Private Placement Warrants. The following is a summary of changes in the fair value of the Level 3 liabilities during the year ended December 31, 2023: 117 Sponsor Shares Private Placement Warrants - Issued October 2019 Private Placement Warrants - Issued March 2023 (in thousands) Balance as of January 1, 2023 $ 1,684 $ 1,332 $ — Liability recorded at fair value — — 17,716 Gain from changes in fair value ( 380 ) ( 749 ) ( 5,249 ) Balance as of December 31, 2023 $ 1,304 $ 583 $ 12,467 22. Commitments and Contingencies Leases The Company leases office space under various non-cancellable operating leases with varying lease expiration dates through 2033. Future minimum lease payments under non-cancellable office leases as of December 31, 2023 are as follows: (in thousands) For the years ending December 31, 2024 $ 976 2025 560 2026 566 2027 546 2028 519 Thereafter 3,315 Total lease payments 6,482 Less: imputed interest ( 2,820 ) Present value of lease liabilities $ 3,662 As of December 31, 2023, the Company has approximately $ 7.3 million of commitments for an office space lease that has not yet commenced. 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. 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. 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. Regardless of outcome, litigation and other legal proceedings can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. Other Commitments During the year ended December 31, 2023, the Company entered into a commitment for non-refundable multi-launch and integration services. The Company also entered into a commercial agreement with financing terms for multiple launches providing for $ 3.0 million to be paid upfront, and for $ 27.0 million, of which a portion will be drawn down equally per launch and will be repaid quarterly on a pro-rata basis across a three-year period after each successful launch milestone. Payments will accrue interest at 12.6 % per annum. The Company may prepay at any time until the maturity date without premium or penalty. As of December 31, 2023, the minimum commitment associated with the agreement was $ 8.4 million. Under certain circumstances, a default interest rate will apply on all outstanding and payable obligations during the existence of an event of default under the Loan Agreement at 18.9 % per annum above the applicable interest rate. We have operational commitments for the next several years that contain termination for convenience options, subject to applicable termination fees. For example, we have work orders to manufacture our Gen-3 satellites at LeoStella, our satellite manufacturing joint venture. Our work orders with LeoStella and other manufacturing partners all contain termination for convenience options that allow us to manage the satellite production process from design through manufacturing. In addition to the above, the Company entered into various operational commitments for the next several years totaling $ 6.6 million as of December 31, 2023. 23. Concentrations, Risks, and Uncertainties The Company has a concentration of contractual revenue arrangements with the U.S. federal government and agencies as well as with commercial customers. The Company had the following customers whose revenue and accounts receivable balances individually represented 10% or more of the Company’s total revenue and/or accounts receivable: Revenue Accounts Receivable Years Ended December 31, As of December 31, 2023 2022 2023 2022 (in thousands) U.S. federal government and agencies 62 % 81 % 83 % 82 % Customer B 14 % * * * Customer C 12 % * * * * Revenue and/or accounts receivable from these customers were less than 10% of total revenue and/or accounts receivable during the year. The Company generally extends credit on account, without collateral. Outstanding accounts receivable balances are evaluated by management, and accounts are reserved when it is determined collection is not probable. As of 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. Subsequent Events The Company evaluated subsequent events through March 19, 2024 and determined that there have been no events that have occurred that would require adjustments to our disclosures or the consolidated financial statements. 120