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Item 9A. Controls and Procedures

2022-08-29 compared with 2021-09-17 · 116 added, 71 removed, 71 unchanged (72% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Annual Report on Form 10-K.

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2021.

Our management, with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K.

In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance, not absolute assurance, of achieving the desired control objectives, and is required to apply judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on this evaluation, our CEO and our CFO concluded that our disclosure controls and procedures were effective as of June 30, 2022, were designed and functioned effectively to provide reasonable assurance that the information required to be disclosed in our reports filed under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

This Annual Report on Form 10-K does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of the Company’s independent registered public accounting firm due to a transition period established by the rules of SEC for newly public companies.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) for the Company.

In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, management has conducted an assessment, including testing, of the Company’s internal control over financial reporting as of June 30, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Internal control over financial reporting refers to the process, designed under the supervision and with the participation of management, including our CEO and our CFO, and effected by the Company’s Board of Directors, to provide reasonable, but not absolute, assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2022.

Based on that assessment, management has concluded that the Company’s internal control over financial reporting was effective as of June 30, 2022 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP.

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Deloitte & Touche LLP, an independent registered public accounting firm,, has audited the effectiveness of the Company’s internal control over financial reporting as of June 30, 2022, and its report in included below.

Changes in Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of fiscal 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting, except as described below.

Material Weakness Remediation

As previously reported, in connection with the audit of our financial statements for the fiscal year ended June 30, 2020, we identified certain control deficiencies in the design and implementation of our internal control over financial reporting that in the aggregate constituted a material weakness.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

Our evaluation was based on the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control — Integrated Framework (2013).

The material weakness related to our general information technology controls, including design and implementation of access and change management controls.

This material weakness meant that it was possible that our business process controls that depend on the affected information technology systems, or that depend on data or financial reports generated from the affected information technology systems, could have been adversely affected.

During fiscal year 2021, the Company implemented measures designed to remediate the control deficiencies contributing to the material weakness.

These remediation actions included:

(i) establishing an internal team to support the Company’s entire control environment and its ongoing internal controls development and monitoring;

(ii) educating control owners concerning the principles and requirements of each control, with a focus on those related to user access and change management over IT systems impacting financial reporting;

(iii) engaging a third-party to perform general ledger provisioning and de-provisioning and assisting in determining user access

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(iv) performing a segregation of duties assessment and redesigning and implementing roles in the information technology systems impacted;

(v) developing a formal process and controls around user access reviews, including the procedures, frequency and evidence required;

(vi) designing and implementing controls and reviews related to change management;

and (vii) implementing new monitoring controls to help mitigate the risk that general information technology controls do not operate effectively.

As a result of these efforts, the Company determined that the material weakness had been remediated as of June 30, 2021.

Inherent Limitation on the Effectiveness of Internal Control

The effectiveness of any system of internal control over financial reporting is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely.

Accordingly, any system of internal control over financial reporting, no matter how well designed and operated, can only provide reasonable, not absolute assurance that its objectives will be met.

In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Affirm Holdings, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Affirm Holdings, Inc.

and subsidiaries (the “Company”) as of June 30, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the related consolidated financial statements as of and for the year ended June 30, 2022, of the Company and our report dated August 29, 2022, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the 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 audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

/s/ Deloitte & Touche LLP

San Francisco, California

August 29, 2022

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OTHER INFORMATION

1 unchanged sentence

Not applicable.

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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended June 30, 2021.

Our board of directors has adopted a Code of Conduct applicable to all officers, directors and employees, including our principal executive, principal financial and principal accounting officers, which is available on our website (investors.affirm.com) under "Corporate Governance." We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our Code of Conduct granted to executive officers and directors by posting such information on the website address and location specified above within four business days following the date of the amendment or waiver.

The information required by this item is incorporated by reference to the sections titled “Board of Directors and Corporate Governance”, “Executive Officers” and “Other Matters” of our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended June 30, 2022.

Our board of directors has adopted a Code of Ethics and Business Conduct applicable to all officers, directors and employees, including our principal executive, principal financial and principal accounting officers, which is available on our website (investors.affirm.com) under “Corporate Governance.” We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our Code of Conduct granted to executive officers and directors by posting such information on the website address and location specified above within four business days following the date of the amendment or waiver.

EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the section titled “Executive Compensation” of our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended June 30, 2022.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated by reference to the sections titled “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management” of our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended June 30, 2022.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated by reference to the sections titled “Board of Directors and Corporate Governance” and “Certain Relationships and Related-Party Transactions” and our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended June 30, 2022.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

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The information required by this item is incorporated by reference to the section titled “Proposal No.

Ratification of Appointment of Independent Registered Public Accounting Firm” of our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended June 30, 2022.

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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

7 unchanged sentences

Filed Herewith

3.1 Amended and Restated Certificate of Incorporation

8-K 001-39888 3.1 January 15, 2021

3.2 Amended and Restated Bylaws

8-K 001-39888 3.2 September 8, 2021

4.1 Description of Capital Stock

10.1 Amended and Restated Amendment No.

2 to Customer Installment Program Agreement , dated as of July 27, 2021, by and between Shopify Inc.

and Affirm, Inc.

10.2 Separation Agreement, dated as of May 10, 2021, by and between the Company and Sharda Caro del Castillo

10-K 001-39888 4.1 September 17, 2021

4.2 Warrant to Purchase Class A Common Stock of Affirm Holdings, Inc., by and between Affirm Holdings, Inc.

and Amazon.com Services LLC, dated as of November 10, 2021*

8-K 001-39888 4.1 November 10, 2021

4.3 Warrant to Purchase Class A Common Stock of Affirm Holdings, Inc., by and between Affirm Holdings, Inc.

and Amazon.com Services LLC, dated as of November 10, 2021*

8-K 001-39888 4.2 November 10, 2021

4.4 Indenture, dated November 23, 2021, between Affirm Holdings, Inc.

and Wilmington Trust, National Association, as trustee

8-K 001-39888 4.1 November 23, 2021

4.5 Form of 0% Convertible Senior Note due 2026 (included in Exhibit 4.4)

8-K 001-39888 4.2 November 23, 2021

Transition Agreement, dated as of May 31 , 2022, by and between the Company and Silvija Martincevic

10.2 Form of Indemnification Agreement between the Company and its directors and officers

S-1 333-250184 10.1 November 18, 2020

10.4 Revolving Credit Agreement, dated as of January 19, 2021, among Affirm, Inc., Affirm Holdings, Inc., certain lenders identified therein, and Morgan Stanley Senior Funding, Inc.

8-K 001-39888 10.1 January 25, 2021

10.5 First Amendment to Revolving Credit Agreement dated as of April 6, 2021, among Affirm, Inc., Affirm Holdings, Inc., certain lenders identified therein, and Morgan Stanley Senior Funding, Inc.

10-Q 001-39888 10.2 May 17, 2021

10.3 Revolving Credit Agreement, dated as of February 4, 2022, among Affirm, Inc., Affirm Holdings, Inc., certain lenders identified therein, and Barclays Bank PLC

8-K 001-39888 10.1 February 10, 2022

10.4 Second Amended and Restated Loan Program Agreement, dated as of November 1, 2020, by and between Affirm, Inc.

and Cross River Bank

S-1/A 333-250184 10.4 December 22, 2020

10.5 Second Amended and Restated Loan Sale Agreement, dated as of November 1, 2020, by and between Affirm, Inc.

and Cross River Bank

S-1/A 333-250184 10.5 November 20, 2020

10.6 Customer Installment Program Agreement, dated as of July 16, 2020, by and between Shopify Inc.

and Affirm, Inc.

S-1/A 333-250184 10.7 November 20, 2020

10.7 Amendment No.

2 unchanged sentences

10-Q 001-39888 10.3 May 17, 2021

10.8 Amended and Restated Amendment No.

2 to Customer Installment Program Agreement, dated as of July 27, 2021, by and between Shopify Inc.

and Affirm, Inc.

10-K 001-39888 10.1 September 17, 2021

10.9 Amendment No.

3 to Customer Installment Program Agreement, dated as of May 6, 2022, by and between Shopify Inc.

and Affirm, Inc.*

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10.10 Amended and Restated Installment Financing Services Agreement, dated as of November 10, 2021 , by and among Affirm Holdings, Inc., Amazon.com Services LLC and Amazon Payments, Inc.

8-K 001-39888 10.1 November 10, 2021

10.11 Transaction Agreement, dated as of November 10, 2021 , by and between Affirm Holdings, Inc.

and Amazon.com Services LLC *

8-K 001-39888 10.2 November 10, 2021

10.12+ Amended and Restated 2012 Stock Plan

10-K 001-39888 10.7 September 17, 2021

10.13+ Form of Stock Option Agreement pursuant to the Affirm Holdings, Inc.

Amended and Restated 2012 Stock Plan

10-Q 001-39888 10.4 February 14, 2022

10.14+ Form of RSU Agreement pursuant to the Affirm Holdings, Inc.

Amended and Restated 2012 Stock Plan

10-Q 001-39888 10.5 February 14, 2022

10.15+ 2020 Employee Stock Purchase Plan

S-1/A 333-250184 10.3 November 20, 2020

10.9 Second Amended and Restated Loan Program Agreement, dated as of November 1, 2020, by and between Affirm, Inc.

and Cross River Bank

S-1/A 333-250184 10.4 December 22, 2020

10.10 Second Amended and Restated Loan Sale Agreement, dated as of November 1, 2020, by and between Affirm, Inc.

and Cross River Bank

S-1/A 333-250184 10.5 November 20, 2020

10.16+ Cash Incentive Plan

10-Q 001-39888 10.4 May 17, 2021

16.1 Letter Regarding Change in Accountants

S-1/A 333-250184 16.1 November 18, 2020

10.17+ Officer Severance Plan

21.1 Subsidiaries of the Company

23.1 Consent of Ernst & Young LLP, independent registered public accountants

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23.1 Consent of Deloitte & Touche LLP, independent registered public accountants

18 unchanged sentences

and (ii) the omitted information would likely cause competitive harm to the Company if publicly disclosed.

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FORM 10-K SUMMARY

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AFFIRM HOLDINGS, INC.

September 17, 2021

August 29, 2022

/s/ Max Levchin

4 unchanged sentences

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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Name Title Date

/s/ Max Levchin Chairman of the Board of Directors and Chief Executive Officer September 17, 2021

/s/ Max Levchin Chairman of the Board of Directors and Chief Executive Officer August 29, 2022

Max Levchin (principal executive officer)

/s/ Michael Linford Chief Financial Officer September 17, 2021

/s/ Michael Linford Chief Financial Officer August 29, 2022

Michael Linford (principal financial officer)

/s/ Siphelele Jiyane VP, Controller September 17, 2021

/s/ Siphelele Jiyane VP, Controller August 29, 2022

Siphelele Jiyane (principal accounting officer)

/s/ Jeremy Liew Director September 17, 2021

/s/ Libor Michalek Director September 17, 2021

/s/ Jeremy Liew Director August 29, 2022

/s/ Libor Michalek Director August 29, 2022

Libor Michalek

Ming Director September 17, 2021

/s/ Jeremy G.

Philips Director September 17, 2021

Ming Director August 29, 2022

/s/ Christa S.

Quarles Director September 17, 2021

/s/ Keith Rabois Director September 17, 2021

Quarles Director August 29, 2022

/s/ Keith Rabois Director August 29, 2022

/s/ Jacqueline D.

Reses Director September 17, 2021

Reses Director August 29, 2022

Jacqueline D.

White Director September 17, 2021

White Director August 29, 2022

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures