Commitment and Contingencies
|9 Months Ended|
Sep. 30, 2021
|Commitments and Contingencies Disclosure [Abstract]|
|Commitments and Contingencies||21. Commitments and Contingencies
In the normal course of business, the Company may become involved in various legal proceedings which, by their nature, may be inherently unpredictable and which could have a material effect in the unaudited condensed consolidated financial statements, taken as a whole.
Prior to the Merger closing and related SEC filings, Osprey received six demands from putative Osprey stockholders (together, the “Demands”) and had a derivative lawsuit filed against it in the Supreme Court of the State of New York by a purported Osprey stockholder: Luster v. Osprey Technology Acquisition Corp., et al., Index No. 653633/2021 (Sup. Ct. N.Y. Cnty.). In addition, the Osprey board of directors also received six demands from putative stockholders of Osprey (together, the “Demands”). Prior to closing, Osprey reached agreements with Luster and the six putative stockholders that Osprey’s supplement disclosures and a modification to the authorized share count fairly resolved their claims. Osprey did not reach agreements with these stockholders on attorneys’ fees and BlackSky inherited this task post-closing.
The Company evaluated the specific facts and circumstances including, but not limited to, any historical outcomes for industry-specific complaints with respect to mergers and anticipated negotiations. As a result, the Company has deemed an unfavorable outcome to be probable and has estimated an expense of $0.7 million, which was recorded in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive loss.
As of September 30, 2021, with the exception of the items above, the Company was not aware of any additional pending, or threatened, governmental actions or legal proceedings to which the Company is, or will be, a party that, if successful, would result in a material impact to its business or financial condition or results of operations.
The Company analyzed its unique facts and circumstances related to potential obligations in a certain state jurisdiction, including the delivery nature of its prior year intercompany services, payroll and other benefits-related services, current shared services between the parent and subsidiaries, and changing state laws and interpretations of those laws, and has determined that the Company may have an indirect tax obligation.
The Company has continued correspondence with the applicable authorities in an effort toward identifying a taxpayer-favorable resolution of the potential liabilities. The Company has recognized a liability including interest and penalties based on its best estimate as of September 30, 2021.
The following table summarizes the estimated indirect tax liability activity during the nine months ended September 30, 2021:
The Company continues to analyze the additional obligations it may have, if any, and it will adjust the liability accordingly.
The Company has commitments for multi-launch and integration services with launch services providers. As of September 30, 2021, the Company has commitments for 5 launches to include up to 10 satellites at estimated launch dates totaling an amount of $16.1 million with options for additional launches. The terms of the arrangements also allow for the Company to remanifest the satellites if significant delays in excess of 365 days or other inexcusable delays occur with the provider. Subsequent to remanifest efforts four months after the 365 days, the Company can request a refund of all recoverable costs. The launch service provider invoices based on the later of closing the Merger or time-based milestone payments from estimated launch dates. Payment terms are 15 days from invoice date.
As of September 30, 2021, the Company has a remaining commitment of $9.4 million on its satellite purchase contract with LeoStella. In addition, the Company entered into a non-refundable commitment to acquire additional satellite components from LeoStella for $2.2 million. The delivery schedule for the components are not specified and subject to certain engineering milestones. Payment terms are 15 days from invoice date.
The entire disclosure for commitments and contingencies.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef