-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DBOywPKzLnvFLcg1Lef6guaLEN7HE8cyRiXpWaVB8RtVjMRy51hM0xD6E2AajLlr dH+Att2YCMKkLFqJ7klGjw== 0000899243-01-501273.txt : 20010816 0000899243-01-501273.hdr.sgml : 20010816 ACCESSION NUMBER: 0000899243-01-501273 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EARTHWATCH INC CENTRAL INDEX KEY: 0001014852 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 311420852 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-39202 FILM NUMBER: 1714198 BUSINESS ADDRESS: STREET 1: 1900 PIKE ROAD CITY: LONGMONT STATE: CO ZIP: 80501 BUSINESS PHONE: 3036823800 MAIL ADDRESS: STREET 1: 1900 PIKE ROAD CITY: LONGEMONT STATE: CO ZIP: 80501 10-Q 1 d10q.txt FOR PERIOD ENDED JUNE 30, 2001 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 Commission file number 333-39202 EarthWatch Incorporated (Exact Name of Registrant as Specified in Its Charter) Delaware 31-1420852 (State or other jurisdiction of (I.R.S. Employer Identification Incorporation or organization) Number) EarthWatch Incorporated 1900 Pike Road Longmont, Colorado 80501 (Address of principal executive offices, including zip code) (303) 682-3800 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] The registrant had 260,088 shares of common stock outstanding as of June 30, 2001. ================================================================================ Table of Contents
PART I. FINANCIAL INFORMATION Item 1.Financial Statements. Consolidated Balance Sheet. 1 Consolidated Statement of Operations. 2 Consolidated Statement of Cash Flows. 3 Consolidated Statement of Stockholders' Equity (Deficit). 4 Notes to Consolidated Financial Statements. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk. 10 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds. 11 Item 4. Submission of Matters to a Vote of Security Holders. 11 Item 6. Exhibits and Reports on Form 8-K. 12 Signatures 14 - -------------------------------------------------------------------------------------------
Reference is made in this document to Digital Globe(R) and Your Planet Online (R), which are registered trademarks owned by the Company, and Second on Orbit(TM) , which is a trademark of the Company. EarthWatch Incorporated (A Development Stage Company)
Consolidated Balance Sheet - ------------------------------------------------------------------------------------------------------------------------------------ December 31, June 30, 2000 2001 ------------------- -------------------- ASSETS (unaudited) Current assets: Cash and cash equivalents $ 5,725,779 $ 45,910,626 Accounts receivable 251,408 549,092 Insurance proceeds receivable - restricted 265,000,000 -- Investment securities -- -- Investment securities - restricted 6,295,382 92,416 Other current assets 398,101 505,131 ------------- ------------- Total current assets 277,670,670 47,057,265 ------------- ------------- Property, plant, and equipment: Construction in progress 89,716,474 141,061,210 Computer equipment and software 15,365,444 15,448,871 Machinery and equipment 5,770,640 5,770,641 Furniture and fixtures 1,281,911 1,281,474 ------------- ------------- Total property, plant, and equipment 112,134,469 163,562,196 Accumulated depreciation and amortization (15,419,714) (16,748,881) ------------- ------------- Net property, plant, and equipment 96,714,755 146,813,315 ------------- ------------- Debt issuance costs, net 4,682,127 11,455,706 Other assets 310,664 281,591 ------------- ------------- TOTAL ASSETS $ 379,378,216 $ 205,607,877 ============= ============= LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 11,289,385 $ 676,094 Accounts payable to related parties 982,232 51,618 Accrued expenses 3,988,060 4,140,317 Current portion of long-term debt, net 195,484,650 1,730,000 ------------- ------------- Total current liabilities 211,744,327 6,598,029 Long-term debt, net -- 56,274,489 ------------- ------------- Total liabilities 211,744,327 62,872,518 ------------- ------------- Contingencies Mandatorily redeemable preferred stock due 2009: 7% Cumulative convertible - Series A; $.001 par value; 10,000,000 and 12,000,000 shares authorized and 8,051,273 and 8,335,533 shares issued and outstanding as of December 31, 2000 and June 30, 2001, respectively; aggregate liquidation preference of $29,174,366 as of June 30, 2001 27,473,699 28,511,021 7% Cumulative convertible - Series B; $.001 par value; 10,000,000 and 12,000,000 shares authorized and 8,051,273 and 8,335,533 shares issued and outstanding as of December 31, 2000 and June 30, 2001, respectively; aggregate liquidation preference of $29,174,366 as of June 30, 2001 27,473,699 28,511,021 8.5% Cumulative convertible - Series C; $.001 par value; 25,000,000 and 50,000,000 shares authorized and 25,000,000 and 37,885,823 issued and outstanding as of December 31, 2000 and June 30, 2001, respectively; aggregate liquidation preference of $132,600,381 as of June 30, 2001 86,298,993 96,682,700 ------------- ------------- Total mandatorily redeemable preferred stock 141,246,391 153,704,742 ------------- ------------- Stockholders' equity (deficit): Common stock; $.001 par value; 100,000,000 and 150,000,000 shares authorized and 195,420 and 260,088 shares issued and outstanding as of December 31, 2000 and June 30, 2001, respectively 195 260 Additional paid-in capital 61,824,829 58,781,242 Deferred stock compensation (534,600) (450,708) Deficit accumulated during the development stage (34,902,926) (69,300,177) ------------- ------------- Total stockholders' equity (deficit) 26,387,498 (10,969,383) ------------- ------------- TOTAL LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY (DEFICIT) $ 379,378,216 $ 205,607,877 ============= =============
The accompanying notes are an integral part of these consolidated financial statements. 1 EarthWatch Incorporated (A Development Stage Company) Consolidated Statement of Operations (unaudited) - --------------------------------------------------------------------------------
Three Months Ended June 30, ---------------------------------- 2000 2001 ----------------- -------------- Revenue $ 385,153 $ 1,333,814 Cost of goods sold 210,056 935,151 -------------- -------------- Gross profit 175,097 398,663 -------------- -------------- Expenses: Selling, general, and administrative 3,403,891 3,253,493 Research and development 3,612,546 2,130,571 Loss from impairment of fixed assets, net of insurance recoveries - - Gain from arbitration settlement - - -------------- -------------- Total expenses 7,016,437 5,384,064 -------------- -------------- Loss from operations (6,841,340) (4,985,401) Interest expense (1,445,540) - Interest income 1,204,231 831,805 -------------- -------------- Loss before provision for income taxes (7,082,649) (4,153,596) Provision for income taxes - - -------------- -------------- Loss before extraordinary loss on early extinguishment of debt (7,082,649) (4,153,596) Extraordinary loss on early extinguishment of debt - (23,038,365) -------------- -------------- Net loss (7,082,649) (27,191,961) Mandatorily redeemable preferred stock dividends and accretion (2,764,608) (131,930) -------------- -------------- Net loss attributable to common stockholders $ (9,847,257) $ (27,323,891) ============== ============== Period from Six Months Ended June 30, January 1, 1995 --------------------------------- (Inception) to June 30, 2000 2001 2001 -------------------- ----------------- ------------------ Revenue $ 2,404,401 $ 5,151,558 $ 21,539,049 Cost of goods sold 1,553,591 3,905,201 17,045,440 ----------------- -------------- ---------------- Gross profit 850,810 1,246,357 4,493,609 ----------------- -------------- ---------------- Expenses: Selling, general, and administrative 6,419,633 6,047,859 56,128,374 Research and development 5,992,170 4,289,028 76,224,810 Loss from impairment of fixed assets, net of insurance recoveries - - (81,489,890) Gain from arbitration settlement - - (1,514,776) ----------------- -------------- ---------------- Total expenses 12,411,803 10,336,887 49,348,518 ----------------- -------------- ---------------- Loss from operations (11,560,993) (9,090,530) (44,854,909) Interest expense (3,429,930) (4,726,377) (16,215,287) Interest income 2,536,628 2,458,021 17,808,384 ----------------- -------------- ---------------- Loss before provision for income taxes (12,454,295) (11,358,886) (43,261,812) Provision for income taxes - - (3,000,000) ----------------- -------------- ---------------- Loss before extraordinary loss on early extinguishment of debt (12,454,295) (11,358,886) (46,261,812) Extraordinary loss on early extinguishment of debt, net of deferred tax benefit - (23,038,365) (23,038,365) ----------------- -------------- ---------------- Net loss (12,454,295) (34,397,251) (69,300,177) Mandatorily redeemable preferred stock dividends and accretion (5,573,867) (3,059,685) (21,018,280) ----------------- -------------- ---------------- Net loss attributable to common stockholders $ (18,028,162) $ (37,456,936) $ (90,318,457) ================= ============== ================
The accompanying notes are an integral part of these consolidated financial statements. 2 EarthWatch Incorporated (A Development Stage Company)
Consolidated Statement of Cash Flows (unaudited) - ----------------------------------------------------------------------------------------------------------------------------------- Period from January 1, 1995 Six Months Ended June 30, (Inception) to ------------------------------------- June 30, 2000 2001 2001 ----------------- ------------------ ---------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (12,454,295) $ (34,397,251) $ (69,300,177) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation expense 1,851,398 1,329,176 18,330,921 Non-cash interest expense 3,427,791 4,725,976 14,823,356 Non-cash extraordinary loss on early extinquishment of debt -- 3,148,098 3,148,098 Non-cash loss from disposals and impairments of property plant, and equipment, net of insurance recoveries (125) -- (79,886,959) Non-cash stock compensation -- 83,892 1,005,292 Changes in assets and liabilities: Accounts receivable, net 458,199 (297,684) 450,033 Other assets 778,333 (77,956) (564,347) Accounts payable (4,792,215) (10,613,291) 163,485 Accounts payable - related parties 1,717,389 (930,614) 51,618 Accrued interest payable - related parties -- (38,279,332) (38,279,332) Accrued expenses (574,632) 153,399 2,014,669 ------------- ------------- ------------- Net cash provided (used) by operating activities (9,588,157) (75,155,587) (148,043,343) ------------- ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investment securities -- (236,760,935) (281,909,267) Proceeds from maturities of investment securities 2,393,720 242,963,901 281,658,757 Proceeds from sales of property, plant, and equipment 125 -- 4,216,978 Insurance proceeds from loss of satellites -- 265,000,000 294,000,000 Constuction in progress additions (26,322,182) (39,621,131) (305,475,085) Other property, plant, and equipment additions (2,980,610) (82,991) (15,644,459) ------------- ------------- ------------- Net cash used by investing activities (26,908,947) 231,498,844 (23,153,076) ------------- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from (payments related to) issuance of long-term notes, net -- (1,462,635) 144,255,739 Proceeds from issuance of preferred and common stock, net 43,545 16,165 191,188,499 Cash acquired in merger -- -- 916,457 Principal payments on debt (49,397) (114,711,940) (119,253,650) ------------- ------------- ------------- Net cash provided (used) by financing activities (5,852) (116,158,410) 217,107,045 ------------- ------------- ------------- Net increase (decrease) in cash and cash equivalents (36,502,956) 40,184,847 45,910,626 Cash and cash equivalents, beginning of period 82,193,314 5,725,779 -- ------------- ------------- ------------- Cash and cash equivalents, end of period $ 45,690,358 $ 45,910,626 $ 45,910,626 ============= ============= ============= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid $ 9,640 $ 38,280,134 $ 50,951,795 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Assets acquired pursuant to capital-lease and financing obligations $ -- $ 5,721,429 $ 10,321,364 Net book value of assets acquired in merger -- -- 4,290,496 Liabilities assumed in merger -- -- 3,738,588 Stockholder advances converted to equity -- -- 1,030,000 Property in-kind contributed by stockholder -- -- 7,521,028 Non-cash interest capitalized in construction in progress 11,128,993 6,002,176 53,542,112 Issuance of mandatorily redeemable preferred stock 5,411,205 11,303,328 62,009,594
The accompanying is an integral part of these consolidated financial statements. 3 EarthWatch Incorporated (A Development Stage Company) Consolidated Statement of Stockholders' Equity (Deficit) - --------------------------------------------------------------------------------
Convertible Convertible Series A Series B Preferred Stock Preferred Stock ----------------------------- ---------------------------- Shares Amount Shares Amount ------------ ----------- ----------- ------------- Balance at January 1, 1995 (inception) -- $ -- -- $ -- Issuance of stock in exchange for future cash contributions and contributions of property in-kind 8,000,000 14,400,000 -- -- Contribution of net assets in merger 5,362,285 551,908 -- -- Issuance of common stock for services and for stock options exercised -- -- -- -- Issuance of preferred stock 5,475,001 21,712,635 189,040 1,890,400 Property in-kind, conversion of debt, and cash contributions from stockholder -- -- -- -- Net and comprehensive income (loss) -- -- -- -- ------------ ------------- ------------- ------------- Balance at December 31, 1995 18,837,286 36,664,543 189,040 1,890,400 Restatement of capital stock and additional paid-in capital for reincorporation as of January 1, 1996 -- (36,645,706) -- (1,890,211) Issuance of stock in exchange for property in-kind and other, net 513,124 513 22,260 22 Issuance of preferred stock -- -- 100,000 100 Property in-kind contributed by stockholder -- -- -- -- Net and comprehensive income (loss) -- -- -- -- ------------ ------------- ------------- ------------- Balance at December 31, 1996 19,350,410 19,350 311,300 311 Issuance of common stock -- -- -- -- Issuance of common stock for services and for stock options exercised -- -- -- -- Issuance of preferred stock -- -- -- -- Other -- -- -- -- Net and comprehensive income (loss) -- -- -- -- ------------ ------------- ------------- ------------- Balance at December 31, 1997 19,350,410 19,350 311,300 311 Issuance of preferred and common stock for stock options exercised 17,916 18 -- -- Net and comprehensive income (loss) -- -- -- -- ------------ ------------- ------------- ------------- Balance at December 31, 1998 19,368,326 19,368 311,300 311 Issuance of preferred and common stock for stock options exercised -- -- -- -- Issuance of common stock for warrants exercised -- -- -- -- Surrender and cancellation of shares from Ball Technologies Holdings Corp. (2,761,983) (2,762) -- -- Reclassification of preferred and common stock into Series C 8.5% Cumulative Convertible Redeemable Preferred Stock Due 2009 in connection with the recapitalization (16,606,343) (16,606) (311,300) (311) Issuance of preferred and common stock in connection with the recapitalization -- -- -- -- Mandatorily redeemable preferred stock dividends and accretion -- -- -- -- Net and comprehensive income (loss) -- -- -- -- ------------ ------------- ------------- ------------- Balance at December 31, 1999 -- -- -- -- Issuance of preferred and common stock for stock options exercised -- -- -- -- Deferred stock compensation -- -- -- -- Amortization of deferred stock compensation -- -- -- -- Mandatorily redeemable preferred stock dividends and accretion -- -- -- -- Net and comprehensive income (loss) -- -- -- -- ------------ ------------- ------------- ------------- Balance at December 31, 2000 -- -- -- -- Issuance of preferred and common stock for stock options exercised (unaudited) -- -- -- -- Amortization of deferred stock compensation (unaudited) -- -- -- -- Mandatorily redeemable preferred stock dividends and accretion (unaudited) -- -- -- -- Net and comprehensive income (loss) (unaudited) -- -- -- -- ------------ ------------- ------------- ------------- Balance at June 30, 2001 (unaudited) -- $ -- -- $ -- ============ ============= ============= ============= Convertible Senior Convertible Series C Series D Preferred Stock Preferred Stock ------------------------------ -------------------------------- Shares Amount Shares Amount ------------ -------------- -------------- -------------- Balance at January 1, 1995 (inception) -- $ -- -- $ -- Issuance of stock in exchange for future cash contributions and contributions of property in-kind -- -- -- -- Contribution of net assets in merger -- -- -- -- Issuance of common stock for services and for stock options exercised -- -- -- -- Issuance of preferred stock -- -- -- -- Property in-kind, conversion of debt, and cash contributions from stockholder -- -- -- -- Net and comprehensive income (loss) -- -- -- -- ------------ ------------- ------------- -------------- Balance at December 31, 1995 -- -- -- -- Restatement of capital stock and additional paid-in capital for reincorporation as of January 1, 1996 -- -- -- -- Issuance of stock in exchange for property in-kind and other, net -- -- -- -- Issuance of preferred stock 7,000,000 7,000 400,000 400 Property in-kind contributed by stockholder -- -- -- -- Net and comprehensive income (loss) -- -- -- -- ------------ ------------- ------------- -------------- Balance at December 31, 1996 7,000,000 7,000 400,000 400 Issuance of common stock -- -- -- -- Issuance of common stock for services and for stock options exercised -- -- -- -- Issuance of preferred stock -- -- 600,000 600 Other -- -- -- -- Net and comprehensive income (loss) -- -- -- -- ------------ ------------- ------------- -------------- Balance at December 31, 1997 7,000,000 7,000 1,000,000 1,000 Issuance of preferred and common stock for stock options exercised -- -- -- -- Net and comprehensive income (loss) -- -- -- -- ------------ ------------- ------------- -------------- Balance at December 31, 1998 7,000,000 7,000 1,000,000 1,000 Issuance of preferred and common stock for stock options exercised -- -- -- -- Issuance of common stock for warrants exercised -- -- -- -- Surrender and cancellation of shares from Ball Technologies Holdings Corp. -- -- -- -- Reclassification of preferred and common stock into Series C 8.5% Cumulative Convertible Redeemable Preferred Stock Due 2009 in connection with the recapitalization (7,000,000) (7,000) (1,000,000) (1,000) Issuance of preferred and common stock in connection with the recapitalization -- -- -- -- Mandatorily redeemable preferred stock dividends and accretion -- -- -- -- Net and comprehensive income (loss) -- -- -- -- ------------ ------------- ------------- -------------- Balance at December 31, 1999 -- -- -- -- Issuance of preferred and common stock for stock options exercised -- -- -- -- Deferred stock compensation -- -- -- -- Amortization of deferred stock compensation -- -- -- -- Mandatorily redeemable preferred stock dividends and accretion -- -- -- -- Net and comprehensive income (loss) -- -- -- -- ------------ ------------- ------------- -------------- Balance at December 31, 2000 -- -- -- -- Issuance of preferred and common stock for stock options exercised (unaudited) -- -- -- -- Amortization of deferred stock compensation (unaudited) -- -- -- -- Mandatorily redeemable preferred stock dividends and accretion (unaudited) -- -- -- -- Net and comprehensive income (loss) (unaudited) -- -- -- -- ------------ ------------- ------------- -------------- Balance at June 30, 2001 (unaudited) -- $ -- -- $ -- ============ ============= ============= ============== Common Stock Additional ------------------------------ Paid-in Shares Amount Capital Other -------------- ------------ ------------- ----------- Balance at January 1, 1995 (inception) -- $ -- $ -- $ -- Issuance of stock in exchange for future cash contributions and contributions of property in-kind 1 -- -- (14,400,000) Contribution of net assets in merger -- -- -- -- Issuance of common stock for services and for stock options exercised 79,500 63,600 -- -- Issuance of preferred stock -- -- -- -- Property in-kind, conversion of debt, and cash contributions from stockholder -- -- -- 13,381,523 Net and comprehensive income (loss) -- -- -- -- -------------- ------------- ------------- ------------- Balance at December 31, 1995 79,501 63,600 -- (1,018,477) Restatement of capital stock and additional paid-in capital for reincorporation as of January 1, 1996 -- (63,521) 38,599,438 -- Issuance of stock in exchange for property in-kind and other, net -- -- 2,288,561 -- Issuance of preferred stock -- -- 69,833,305 -- Property in-kind contributed by stockholder -- -- (25,944) 1,018,477 Net and comprehensive income (loss) -- -- -- -- -------------- ------------- ------------- ------------- Balance at December 31, 1996 79,501 79 110,695,360 -- Issuance of common stock -- -- 1,229,240 -- Issuance of common stock for services and for stock options exercised 69,416 70 55,463 -- Issuance of preferred stock -- -- 5,999,400 -- Other -- -- (4,773) -- Net and comprehensive income (loss) -- -- -- -- -------------- ------------- ------------- ------------- Balance at December 31, 1997 148,917 149 117,974,690 -- Issuance of preferred and common stock for stock options exercised 54,631 55 50,799 -- Net and comprehensive income (loss) -- -- -- -- -------------- ------------- ------------- ------------- Balance at December 31, 1998 203,548 204 118,025,489 -- Issuance of preferred and common stock for stock options exercised 1,000 1 799 -- Issuance of common stock for warrants exercised 1,556,000 1,556 14,004 -- Surrender and cancellation of shares from Ball Technologies Holdings Corp. -- -- 2,762 -- Reclassification of preferred and common stock into Series C 8.5% Cumulative Convertible Redeemable Preferred Stock Due 2009 in connection with the recapitalization (1,760,548) (1,761) (39,765,364) -- Issuance of preferred and common stock in connection with the recapitalization 1 -- -- -- Mandatorily redeemable preferred stock dividends and accretion -- -- (6,690,537) -- Net and comprehensive income (loss) -- -- -- -- -------------- ------------- ------------- ------------- Balance at December 31, 1999 1 -- 71,587,153 -- Issuance of preferred and common stock for stock options exercised 195,419 195 49,734 -- Deferred stock compensation -- -- 1,456,000 (1,456,000) Amortization of deferred stock compensation -- -- -- 921,400 Mandatorily redeemable preferred stock dividends and accretion -- -- (11,268,058) -- Net and comprehensive income (loss) -- -- -- -- -------------- ------------- ------------- ------------- Balance at December 31, 2000 195,420 195 61,824,829 (534,600) Issuance of preferred and common stock for stock options exercised (unaudited) 64,668 65 16,098 -- Amortization of deferred stock compensation (unaudited) -- -- -- 83,892 Mandatorily redeemable preferred stock dividends and accretion (unaudited) -- -- (3,059,685) -- Net and comprehensive income (loss) (unaudited) -- -- -- -- -------------- ------------- ------------- ------------- Balance at June 30, 2001 (unaudited) 260,088 $ 260 $ 58,781,242 $ (450,708) ============== ============= ============= ============= Accumulated Deficit Accumulated Other During the Total Comprehensive Development Stockholders' Income (Loss) Stage Equity (Deficit) -------------- ------------------ ---------------- Balance at January 1, 1995 (inception) $ -- $ -- $ -- Issuance of stock in exchange for future cash contributions and contributions of property in-kind -- -- -- Contribution of net assets in merger -- -- 551,908 Issuance of common stock for services and for stock options exercised -- -- 63,600 Issuance of preferred stock -- -- 23,603,035 Property in-kind, conversion of debt, and cash contributions from stockholder -- -- 13,381,523 Net and comprehensive income (loss) -- (3,909,208) (3,909,208) ------------- ------------- -------------- Balance at December 31, 1995 -- (3,909,208) 33,690,858 Restatement of capital stock and additional paid-in capital for reincorporation as of January 1, 1996 -- -- -- Issuance of stock in exchange for property in-kind and other, net -- -- 2,289,096 Issuance of preferred stock -- -- 69,840,805 Property in-kind contributed by stockholder -- -- 992,533 Net and comprehensive income (loss) -- (23,706,344) (23,706,344) ------------- ------------- ------------- Balance at December 31, 1996 -- (27,615,552) 83,106,948 Issuance of common stock -- -- 1,229,240 Issuance of common stock for services and for stock options exercised -- -- 55,533 Issuance of preferred stock -- -- 6,000,000 Other -- -- (4,773) Net and comprehensive income (loss) 80,400 (50,730,985) (50,650,585) ------------- ------------- ------------- Balance at December 31, 1997 80,400 (78,346,537) 39,736,363 Issuance of preferred and common stock for stock options exercised -- -- 50,872 Net and comprehensive income (loss) (36,971) (12,919,555) (12,956,526) ------------- ------------- ------------- Balance at December 31, 1998 43,429 (91,266,092) 26,830,709 Issuance of preferred and common stock for stock options exercised -- -- 800 Issuance of common stock for warrants exercised -- -- 15,560 Surrender and cancellation of shares from Ball Technologies Holdings Corp. -- -- -- Reclassification of preferred and common stock into Series C 8.5% Cumulative Convertible Redeemable Preferred Stock Due 2009 in connection with the recapitalization -- -- (39,792,042) Issuance of preferred and common stock in connection with the recapitalization -- -- -- Mandatorily redeemable preferred stock dividends and accretion -- -- (6,690,537) Net and comprehensive income (loss) (159,382) (20,318,766) (20,478,148) ------------- ------------- ------------- Balance at December 31, 1999 (115,953) (111,584,858) (40,113,658) Issuance of preferred and common stock for stock options exercised -- -- 49,929 Deferred stock compensation -- -- -- Amortization of deferred stock compensation -- -- 921,400 Mandatorily redeemable preferred stock dividends and accretion -- -- (11,268,058) Net and comprehensive income (loss) 115,953 76,681,932 76,797,885 ------------- ------------- ------------- Balance at December 31, 2000 -- (34,902,926) 26,387,498 Issuance of preferred and common stock for stock options exercised (unaudited) -- -- 16,163 Amortization of deferred stock compensation (unaudited) -- -- 83,892 Mandatorily redeemable preferred stock dividends and accretion (unaudited) -- -- (3,059,685) Net and comprehensive income (loss) (unaudited) -- (34,397,251) (34,397,251) ------------- ------------- ------------- Balance at June 30, 2001 (unaudited) $ -- $ (69,300,177) $ (10,969,383) ============= ============= =============
The accompanying notes are an integral part of these consolidated financial statements. EarthWatch Incorporated (A Development Stage Company) Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- 1. Basis of Presentation The consolidated financial statements have been prepared by EarthWatch Incorporated and its subsidiaries without an audit, except for the December 31, 2000 balance sheet, which has been derived from audited financial statements. The statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and reflect all adjustments, consisting of only normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the consolidated financial statements. We suggest that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto filed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2000. The results of operations for the three and six months ended June 30, 2001 are not necessarily indicative of the results to be expected for the full year ending December 31, 2001. New Accounting Pronouncements Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," SFAS No. 142, "Goodwill and Other Intangible Assets," and SFAS No. 143, "Accounting for Asset Retirement Obligations," were issued in July 2001. The adoption of these standards has not had a material impact on our consolidated financial position or results of operations. 2. Construction in Progress Construction in progress consists primarily of satellite construction and launch costs, ground station construction costs, and third-party developed software. Construction in progress consisted of the following:
December 31, 2000 June 30, 2001 ----------------- ------------- (unaudited) QuickBird 2 satellite $55,952,495 $104,774,889 Digital Globe software 26,570,191 28,274,900 Ground station equipment 7,193,788 8,011,421 ----------- ------------ $89,716,474 $141,061,210 =========== ============
3. Debt On February 28, 2001, as required by the indentures governing our 12 1/2% Senior Notes due 2005 and our 13% Senior Discount Notes due 2007, respectively, we offered to purchase all of our outstanding notes at their accreted values per their respective indentures on the date of purchase, using the insurance proceeds relating to the loss of our QuickBird 1 satellite in November 2000. The offer expired on April 2, 2001, and we repurchased $127.4 million in principal amount at maturity of outstanding 13% notes and all outstanding 12 1/2% notes on April 3, 2001, resulting in an extraordinary loss on early extinguishment of debt of approximately $23.0 million. The extraordinary loss on early extinguishment of debt was the result of the write-off of unamortized debt discount and deferred financing costs associated with the redeemed notes. The combined repurchase price totaled $172.9 million. In connection with the offer, we entered into a Recapitalization Agreement and Consent dated as of April 2, 2001 (the "Recapitalization Agreement") with certain holders of our 13% notes. Pursuant to the Recapitalization Agreement, these noteholders agreed to refrain from tendering their notes in the offer, thus allowing us to have the use of the funds that would otherwise be used to repurchase their notes. Pursuant to the Recapitalization Agreement, we also: . granted registration rights to certain holders of notes and Series C preferred stock; . pledged government securities to secure certain repurchase rights of the noteholders; 5 EarthWatch Incorporated (A Development Stage Company) Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- . obtained the consent of the holders of notes and amended the indenture governing the notes in certain respects; . amended our certificate of incorporation to, among other things, (a) require that we purchase, at each holder's option, that holder's shares of our Series A and B preferred stock, if an insurable event occurs under the QuickBird 2 insurance policy, (b) increase the number of authorized shares of our common stock and each series of our preferred stock, and (c) extend the time period by one year during which holders of our preferred stock may convert their shares into shares of our common stock; . issued 10,843,297 additional shares of our Series C preferred stock to the holders of the notes that signed the Recapitalization Agreement and their assignees; . purchased launch and in-orbit insurance for our QuickBird 2 satellite; and . pledged the QuickBird 2 insurance in favor of The Bank of New York, as collateral agent for (a) the holders of notes and for Ball Aerospace, and (b) the holders of our Series A preferred stock and Series B preferred stock. We have incurred transaction costs associated with the Recapitalization Agreement of approximately $1.2 million, of which $1.0 million was paid to Morgan Stanley. In April 2001, we obtained a $9.0 million borrowing facility with Ball Aerospace, one of our stockholders, which we are using to fund the completion of QuickBird 2. This vendor financing facility accrues interest at an annual rate of 11%, which will become payable seven months following the launch of QuickBird 2. Beginning with the eighth month and ending with the eighteenth month following the launch of QuickBird 2, principal, in equal monthly amounts, and interest are payable in cash each month. In conjunction with this arrangement, we issued to Ball Aerospace 903,608 shares of Series C preferred stock in June 2001. Based on our current operating plan, we believe that existing capital resources will meet our anticipated cash needs through fiscal 2002. If we face any launch delays, if our satellite system takes longer than expected to become operational, if technical or regulatory developments require that we modify the design of our satellite system, if we are unable to achieve our revenue targets, or if we incur other additional unforeseen costs, we may require additional capital. We do not have a revolving credit facility or other source of readily available capital. Therefore, any shortfall in funds available for our operations or to service our debt would cause us serious liquidity problems. In such case, we would need to seek additional financing which we may not be able to obtain on commercially reasonable terms or at all. Failure to obtain such additional financing may result in a material adverse effect on our business and would significantly increase risk of our ability to continue as a going concern. The book value of our debt, net of unamortized deferred financing costs and debt discounts, approximates its fair value at June 30, 2001.
Our debt is comprised of the following at: December 31, June 30, 2000 2001 ------------- ----------- (unaudited) 13% Senior Discount Notes, net of unamortized discount of $64,852,862 and $10,178,743, respectively, effective rate of 18.0% $ 134,147,138 $52,896,232 12 1/2% Senior Notes, net of unamortized discount of $10,731,089 and zero, respectively 61,268,911 -- 11% Vendor financing facility, net of unamortized discount of zero and $709,880 , respectively, effective rate of 17.5% -- 5,078,914 Capital-lease obligations 68,601 29,343 ------------- ----------- 195,484,650 58,004,489 Less: current portion (195,484,650) (1,730,000) ------------- ----------- $ -- $56,274,489 ============= ===========
6 EarthWatch Incorporated (A Development Stage Company) Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- 4. Commitments Effective March 2001, we entered into a launch services agreement for our QuickBird 2 satellite. This agreement increases our remaining noncancelable contract commitments as of June 30, 2001 to $37.8 million. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The following discussion should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Some of the statements in this Quarterly Report on Form 10-Q constitute forward-looking statements. These statements involve known and unknown risks, uncertainties, and other factors that may cause our or our industry's results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. These factors include, among others, those listed under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Quarterly Report on Form 10-Q and in the other documents we file with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2000. In some cases, you can identify forward-looking statements by terminology, such as "may," "will," "should," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of these terms or comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance, or achievements. Our actual results and the timing of certain events could differ materially from those anticipated in the forward-looking statements. Results of Operations Three months ended June 30, 2000 compared to three months ended June 30, 2001 Revenue. Our revenue has been generated primarily from the processing and sale of geographic imagery purchased from third-party suppliers. These sources of revenue increased from $385,000 for the three-month period ended June 30, 2000 to $1.3 million for the three-month period ended June 30, 2001, due to increased quantities of images sold. Revenue from the sale of third-party imagery decreased for the remainder of fiscal 2000 due to diversion of resources in anticipation of the launch of QuickBird 1. A similar decrease is not expected in fiscal 2001. Cost of Goods Sold. Our cost of goods sold includes third party geographic imagery sold under contract. As a result of our increased revenue, our cost of goods sold consequently increased from $210,000 for the three-month period ended June 30, 2000 to $935,000 for the three-month period ended June 30, 2001. Costs for both periods were primarily the direct costs associated with obtaining third-party geographic imagery for resale. Selling, General, and Administrative Expenses. Selling, general, and administrative expenses were $3.4 million for the three-month period ended June 30, 2000 and $3.3 million for the three-month period ended June 30, 2001. We expect these costs to increase in the future as we increase staff levels and implement new procedures in preparation for full-scale operations and market entry of our products and services. Research and Development. Our research and development costs were $3.6 million for the three-month period ended June 30, 2000 and $2.1 million for the three- month period ended June 30, 2001. These expenses decreased due to staff reductions and reduced operating activities following the loss of QuickBird 1. We expect these costs to increase following the launch of QuickBird 2. Interest Expense. Interest expense decreased from $1.4 million for the three- month period ended June 30, 2000 to zero for the three-month period ended June 30, 2001. This decrease was the result of lower average debt balances outstanding during the three-month period ended June 30, 2001 resulting in the capitalization of all interest incurred during the period as part of the cost of our QuickBird 2 satellite. Interest Income. Interest income decreased from $1.2 million for the three- month period ended June 30, 2000 to $832,000 for the three-month period ended June 30, 2001. Higher average investment balances outstanding during the three- month period ended June 30, 2001 was offset by slightly lower rates of return on investments. Net Loss. We had net losses of $7.1 million for the three-month period ended June 30, 2000 and $27.2 million for the three-month period ended June 30, 2001. This increase in net loss was primarily the result of the extraordinary 8 loss on early extinguishment of debt incurred in April 2001, as discussed in Note 3 to our consolidated financial statements. Six months ended June 30, 2000 compared to six months ended June 30, 2001 Revenue. Our revenue has been generated primarily from the processing and sale of geographic imagery purchased from third-party suppliers. These sources of revenue increased from $2.4 million for the six-month period ended June 30, 2000 to $5.2 million for the six-month period ended June 30, 2001, due to increased quantities of images sold. Revenue from the sale of third-party imagery decreased for the remainder of fiscal 2000 due to diversion of resources in anticipation of the launch of QuickBird 1. A similar decrease is not expected in fiscal 2001. Cost of Goods Sold. Our cost of goods sold includes third party geographic imagery sold under contract. As a result of our increased revenue, our cost of goods sold consequently increased from $1.6 million for the six-month period ended June 30, 2000 to $3.9 million for the six-month period ended June 30, 2001. Costs for both periods were primarily the direct costs associated with obtaining third-party geographic imagery for resale. Selling, General, and Administrative Expenses. Selling, general, and administrative expenses were $6.4 million for the six-month period ended June 30, 2000 and $6.0 million for the six-month period ended June 30, 2001. We expect these costs to increase in the future as we increase staff levels and implement new procedures in preparation for full-scale operations and market entry of our products and services. Research and Development. Our research and development costs were $6.0 million for the six-month period ended June 30, 2000 and $4.3 million for the six-month period ended June 30, 2001. These expenses decreased due to staff reductions and reduced operating activities following the loss of QuickBird 1. We expect these costs to increase following the launch of QuickBird 2. Interest Expense. Interest expense increased from $3.4 million for the six-month period ended June 30, 2000 to $4.7 million for the six-month period ended June 30, 2001. This increase was the result of lower capitalization of interest due to the completion of QuickBird 1 in 2000. Interest Income. Interest income for each of the six-month periods ended June 30, 2000 and 2001 was $2.5 million. Higher average investment balances outstanding during the six-month period ended June 30, 2001 were offset by slightly lower rates of return on investments. Net Loss. We had net losses of $12.5 million for the six-month period ended June 30, 2000 and $34.4 million for the six-month period ended June 30, 2001. This increase in net loss was primarily the result of the extraordinary loss on early extinguishment of debt incurred in April 2001, as discussed in Note 3 to our consolidated financial statements. Liquidity and Capital Resources On February 28, 2001, as required by the indentures governing our 12 1/2% Senior Notes due 2005 and our 13% Senior Discount Notes due 2007, respectively, we offered to purchase all of our outstanding notes at their accreted values per their respective indentures on the date of purchase, using the insurance proceeds relating to the loss of our QuickBird 1 satellite in November 2000. The offer expired on April 2, 2001, and we repurchased $127.4 million in principal amount at maturity of outstanding 13% notes and all outstanding 12 1/2% notes on April 3, 2001, resulting in an extraordinary loss on early extinguishment of debt of approximately $23.0 million. The combined repurchase price totaled $172.9 million. In connection with the offer, we entered into a Recapitalization Agreement and Consent dated as of April 2, 2001 (the "Recapitalization Agreement") with certain holders of our 13% notes. Pursuant to the Recapitalization Agreement, these noteholders agreed to refrain from tendering their notes in the offer, thus allowing us to have the use of the funds that would otherwise be used to repurchase their notes. Pursuant to the Recapitalization Agreement, we also: 9 . granted registration rights to certain holders of notes and Series C preferred stock; . pledged government securities to secure certain repurchase rights of the noteholders; . obtained the consent of the holders of notes and amended the indenture governing the notes in certain respects; . amended our certificate of incorporation to, among other things, (a) require that we purchase, at each holder's option, that holder's shares of our Series A and B preferred stock, if an insurable event occurs under the QuickBird 2 insurance policy, (b) increase the number of authorized shares of our common stock and each series of our preferred stock, and (c) extend the time period by one year during which holders of our preferred stock may convert their shares into shares of our common stock; . issued 10,843,297 additional shares of our Series C preferred stock to the holders of the notes that signed the Recapitalization Agreement and their assignees; . purchased launch and in-orbit insurance for our QuickBird 2 satellite; and . pledged the QuickBird 2 insurance in favor of The Bank of New York, as collateral agent for (a) the holders of notes and for Ball Aerospace, and (b) the holders of our Series A preferred stock and Series B preferred stock. We have incurred transaction costs associated with the Recapitalization Agreement of approximately $1.2 million, of which $1.0 million was paid to Morgan Stanley. In April 2001, we obtained a $9.0 million borrowing facility with Ball Aerospace, one of our stockholders, which we are using to fund the completion of QuickBird 2. This vendor financing facility accrues interest at an annual rate of 11%, which will become payable seven months following the launch of QuickBird 2. Beginning with the eighth month and ending with the eighteenth month following the launch of QuickBird 2, principal, in equal monthly amounts, and interest are payable in cash each month. In conjunction with this arrangement, we issued to Ball Aerospace 903,608 shares of Series C preferred stock in June 2001. As of June 30, 2001, we have drawn approximately $5.7 million under this facility. Net cash used by operating activities increased from $9.6 million for the six-month period ended June 30, 2000 to $75.2 million for the six-month period ended June 30, 2001. This increase was primarily the result of the payment of accrued interest and the extraordinary loss incurred in conjunction with the redemption of notes in 2001 and the reduction in accounts payable that had built up prior to the receipt of the QuickBird 1 insurance proceeds. Based on our current operating plan, we believe that existing capital resources will meet our anticipated cash needs through fiscal 2002. If we face any launch delays, if our satellite system takes longer than expected to become operational, if technical or regulatory developments require that we modify the design of our satellite system, if we are unable to achieve our revenue targets, or if we incur other additional unforeseen costs, we may require additional capital. We do not have a revolving credit facility or other source of readily available capital. Therefore, any shortfall in funds available for our operations or to service our debt would cause us serious liquidity problems. In such case, we would need to seek additional financing which we may not be able to obtain on commercially reasonable terms or at all. Failure to obtain such additional financing may result in a material adverse effect on our business and would significantly increase risk of our ability to continue as a going concern. Item 3. Quantitative and Qualitative Disclosures About Market Risk. We invest our cash and cash equivalents and restricted investments in short-term, U.S. dollar interest-bearing, investment grade securities with maturities less than 90 days. As of June 30, 2001, the interest rates on these investments have not fluctuated more than one percentage point since they were purchased. We do not currently hold any derivative instruments and do not engage in hedging activities. Also, we currently do not hold any variable interest rate debt or lines of credit, and currently do not generally enter into any transactions denominated in a foreign currency. Therefore, our exposure to interest rate and foreign exchange fluctuations is minimal. 10 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds. During the three months ended June 30, 2001, we granted stock options to purchase 85,524 shares of our common stock with a price of $0.25 per share to our employees, consultants, directors, and other service providers under our 1999 Equity Incentive Plan. During the period covered by this report, we also issued and sold an aggregate of 44,650 shares of our common stock for $0.25 per share to employees, consultants, directors, and other service providers under direct issuances and exercises of stock options under our 1999 Equity Incentive Plan and 1995 Stock Option/Stock Issuance Plan. These securities were not registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon the exemption provided by Section 4(2) of the Securities Act and/or Rule 701 promulgated thereunder for transactions by an issuer not involving a public offering. In April 2001, pursuant to the Recapitalization Agreement, we entered into the First Supplemental Indenture to the Indenture, which governs our 13% notes and required us, among other things, to (i) obtain launch and in-orbit operations insurance in respect of our anticipated QuickBird 2 satellite and (ii) within 30 days of receipt by the collateral trustee of any proceeds under the QuickBird 2 insurance policy, to make an offer to repurchase the 13% notes at their accreted value on the date of repurchase and to consummate such offer to repurchase no later than 60 days after the commencement of the offer. In June 2001, we issued 10,843,297 shares of Series C preferred stock pursuant to the Recapitalization Agreement to holders of notes in partial consideration for those holders refraining from tendering their notes in our previous tender offer. Each of the purchasers in this transaction were accredited investors. Accordingly, we relied on the exemptions from registration provided by Regulation D promulgated under the Securities Act or Section 4(2) of the Securities Act to effect this transaction. Morgan Stanley served as our financial advisor in connection with these and related transactions and received $1 million in connection with its advisory role. In June 2001, we issued 903,608 shares of Series C preferred stock to Ball Aerospace, an accredited investor, in connection with its provision of vendor financing. We relied on the exemption from registration provided by Regulation D promulgated under the Securities Act or Section 4(2) of the Securities Act to effect this transaction. Appropriate legends are affixed to the stock certificates issued in the transactions listed above. Similar legends were imposed in connection with any subsequent sales of any such securities. Each of the purchasers that are our employees or directors had access to information through their employment by us. Each purchaser was given the opportunity to ask questions of and request information from EarthWatch. Each investor represented and acknowledged to EarthWatch in writing that it had this opportunity. Some of the purchasers asked questions and requested information. EarthWatch complied with all requests that it deemed reasonable. Item 4. Submission of Matters to a Vote of Security Holders. (a) In May and June 2001, our stockholders acted by written consent in lieu of a special meeting. (b) The matters voted upon pursuant to the written consents did not include the election of directors. (c) The matters voted upon pursuant to the written consents are as follows: (1) Removal of Alexander S. Lushtak as a director of EarthWatch ----------------------------------------------------------- Incorporated. In May 2001, our stockholders acted by written consent to remove - ------------ Mr. Lushtak as a director of our company and to leave his seat vacant until the next annual meeting of stockholders or until his successor is elected and qualified. Number of Votes by Shares as to Which Number of Votes by Shares as to Which ------------------------------------- ------------------------------------- Consents Were Provided Consents Were Not Provided ---------------------- --------------------------- 38,102,559 22,679,827 __________ __________ 11 Based upon the consents received, Mr. Lushtak was removed as a director and his seat was left vacant. (2) Amendments to Certificate of Incorporation. In May and June 2001, ------------------------------------------ we solicited our stockholders' consent to certain amendments to our certificate of incorporation. These amendments, among other things, (a) require that we purchase, at each holder's option, that holder's shares of our Series A and B preferred stock, if an insurable event occurs under the QuickBird 2 insurance policy, (b) increase the number of authorized shares of our common stock and each series of our preferred stock, and (c) extend the time period by one year during which holders of our preferred stock may convert their shares into shares of our common stock. Number of Votes by Shares as to Which Number of Votes by Shares as to Which ------------------------------------- ------------------------------------- Consents Were Provided Consents Were Not Provided ---------------------- --------------------------- 49,486,652 10,981,908 __________ ____________ Based upon the consents received, the amendments were approved. (3) Ratification of Prior Actions. In May and June 2001, we solicited ----------------------------- our stockholders' consent to ratify actions taken previously at meetings of stockholders. Number of Votes by Shares as to Which Number of Votes by Shares as to Which ------------------------------------- ------------------------------------- Consents Were Provided Consents Were Not Provided ---------------------- --------------------------- 48,835,135 11,633,425 __________ ____________ Based upon the consents received, the prior actions were ratified. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description ----------- ----------- 2.2* Recapitalization Agreement and Consent dated as of April 2, 2001 by and among EarthWatch Incorporated, Morgan Stanley & Co. Incorporated, Post Balanced Fund, Post High Yield LP, Post Total Return Fund, Opportunity Fund, Dickstein & Co., L.P., Dickstein International Limited, Hitachi Software Engineering Co., Ltd., Sun America High Income Fund and Sun America Series Trust High Yield Portfolio. 3.3** Certificate of Amendment to Amended and Restated Certificate of Incorporation. 4.10* Notes Registration Rights Agreement dated as of April 3, 2001 by and among EarthWatch Incorporated, The Bank of New York and Morgan Stanley & Co. Incorporated. 4.11* Series C Preferred Registration Rights Agreement dated as of April 3, 2001 by and among EarthWatch Incorporated, Morgan Stanley & Co. Incorporated, Post Balanced Fund, Post High Yield LP, Post Total Return Fund, Opportunity Fund, Dickstein & Co., L.P., Dickstein International Limited, Sun America High Income Fund, Sun America Series Trust High Yield Portfolio, Hitachi Software Engineering Co., Ltd. and Ball Technologies Holdings Corp. 4.12* Pledge Agreement dated as of April 3, 2001 by and among EarthWatch Incorporated, The Bank of New York, as trustee, and The Bank of New 12 York, as securities intermediary. 4.13* First Supplemental Indenture to the Indenture dated as of April 16, 2001 by and between EarthWatch Incorporated and The Bank of New York, as trustee. 4.14** Senior Collateral Pledge and Security Agreement, dated as of June 15, 2001, between EarthWatch Incorporated and The Bank of New York, as collateral agent. 4.15** Junior Collateral Pledge and Security Agreement, dated as of June 15, 2001, between EarthWatch Incorporated and The Bank of New York, as collateral agent. * Incorporated by reference to the exhibits with the corresponding exhibit numbers in our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 25, 2001. ** Incorporated by reference to the exhibits with the corresponding exhibit numbers in our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 20, 2001. (b) Reports on Form 8-K Reports on Form 8-K were filed on April 25, 2001 and June 20, 2001 to report the closure of our tender offer and the completion of our pending transactions under the Recapitalization Agreement, respectively. 13 SIGNATURES Pursuant to the requirements 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, in the City of Longmont, State of Colorado. EARTHWATCH INCORPORATED (Registrant) Date: August 14, 2001 By: /s/ Henry E. Dubois --------------------- ------------------------------------ Henry E. Dubois Chief Financial Officer, Chief Operating Officer, Executive Vice President (Principal Financial and Accounting Officer) 14 -----END PRIVACY-ENHANCED MESSAGE-----