Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under 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 such evaluation, our management has concluded our disclosure controls and procedures were not effective at a reasonable assurance level as of December 31, 2023, due to the material weaknesses in internal control over financial reporting described in Management’s Report on Internal Control Over Financial Reporting below.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Under the supervision of and with the participation of our principal executive officer and principal financial officer, our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria established in “Internal Control - Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that assessment, our management has concluded that our internal control over financial reporting as of December 31, 2023 was not effective due to the material weaknesses identified below. The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by Ernst & Young, LLP, an independent registered public accounting firm, as stated in their report which is included in Item 8 of this Annual Report on Form 10-K.
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 the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
In the period ended March 31, 2023, management identified a material weakness related to the accounting for our acquisition of Power Finance (the “Business Combination Material Weakness”), including a lack of sufficient precision in the performance of reviews supporting the purchase price allocation accounting, and a lack of timely oversight over third-party specialists and the reports they produced to support the accounting for the Power Finance acquisition. The material weakness resulted in an error related to the allocation of merger consideration between purchase consideration and post-combination expense that was not detected on a timely basis. The error was corrected by management in the Condensed Consolidated Financial Statements as of and for the three months ended March 31, 2023.
For the period ended December 31, 2023, management identified a material weakness related to information technology general controls (“ITGCs”) (the “ITGC Material Weakness” and together with the Business Combination Material Weakness, the “2023 Material Weaknesses”) in user access over certain information technology (“IT”) systems that support the Company’s revenue and related financial reporting processes. As a result, the related process-level IT dependent manual controls, certain change management controls, and automated application controls for certain key IT systems were also deemed ineffective for the period ended December 31, 2023.
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The 2023 Material Weaknesses did not result in any material misstatements in our Consolidated Financial Statements included in this Annual Report on Form 10-K. Our management concluded that the Consolidated Financial Statements included in this Annual Report on Form 10-K, present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States.
Management’s Plan to Remediate the Material Weaknesses
Our management is committed to maintaining a strong internal control environment. As it relates to the Business Combination Material Weakness, we have and will continue to take actions to enhance the design of our business combination controls with the level of precision required to operate them in an effective manner. We will continue to enhance our management review control activities, including the review of inputs, assumptions and reports produced by third-party specialists supporting the purchase price allocation accounting and the application of technical accounting principles.
To remediate the ITGC Material Weakness, we are enhancing the design of our ITGCs over the IT systems that support the Company’s revenue and related financial reporting processes, including, (i) developing and implementing additional training and awareness addressing ITGCs and policies, including educating control owners concerning the principles and requirements of each control, with a focus on user access; (ii) increasing the extent of oversight and verification checks included in operation of user access controls and processes; (iii) deploying additional tools to support administration of user access; and (iv) enhancing quarterly management reporting on the remediation measures to the audit committee of the board of directors. Although we intend to complete the remediation process as promptly as possible, we will not be able to fully remediate the ITGC Material Weakness until these steps have been completed and the controls are operating effectively.
Changes in Internal Control Over Financial Reporting
Except for the identification of the 2023 Material Weaknesses and related remediation efforts to date, there have been no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) during the fourth quarter of fiscal 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
The effectiveness of any 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.
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Item 9B. Other Information
During our last fiscal quarter, on December 12, 2023, Martha Cummings , a member of our board of directors , adopted a “ Rule 10b5-1 trading arrangement ” as defined in Regulation S-K Item 408 providing for the sale from time to time of an aggregate of up to 340,241 shares of our Class A Common Stock. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until April 8, 2025 , or earlier if all transactions under the trading arrangement are completed, but in no case earlier than one year or later than two years from December 12, 2023.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III
Item 10. Directors, Executive Officers, and Corporate Governance
The information required by this item is incorporated by reference to the definitive Proxy Statement for the 2024 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days of our fiscal year ended December 31, 2023.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to the definitive Proxy Statement for the 2024 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days of our fiscal year ended December 31, 2023.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to the definitive Proxy Statement for the 2024 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days of our fiscal year ended December 31, 2023.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to the definitive Proxy Statement for the 2024 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days of our fiscal year ended December 31, 2023.
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference to the definitive Proxy Statement for the 2024 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days of our fiscal year ended December 31, 2023.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this Annual Report on Form 10-K:
1. Consolidated Financial Statements
See Index to Consolidated Financial Statements at Part II, Item 8 herein.
2. Financial Statement Schedules
All schedules have been omitted because they are not required, not applicable, or not present in amounts sufficient to require submission of the schedule.
3. Exhibits
Incorporated by Reference
Exhibit Number Description Form File No. Exhibit Number Filing Date
3.1 Amended and Restated Certificate of Incorporation of the Registrant.
S-1/A
333-256154
3.2
May 24, 2021
3.2 Amended and Restated Bylaws of the Registrant .
S-1/A
333-256154
3.4 May 24, 2021
4.1 Form of Class A common stock certificate of the Registrant.
S-1
333-256154
4.1
May 14, 2021
4.2 Amended and Restated Investors Rights Agreement, dated May 27, 2020, by and among the Registrant and certain of its stockholders.
S-1
333-256154
4.2 May 14, 2021
4.3 Warrant to Purchase Stock issued to Comerica Ventures Incorporated by the Registrant, dated October 11, 2013.
S-1
333-256154
4.3 May 14, 2021
4.4 Warrant to Purchase Stock issued to Comerica Ventures Incorporated by the Registrant, dated October 11, 2013 .
S-1
333-256154
4.4 May 14, 2021
4.5† Warrant to Purchase Common Stock issued to Uber Technologies, Inc. by the Registrant, dated September 15, 2020, as amended on January 7, 2021.
S-1/A
333-256154
4.7 May 24, 2021
4.6† Warrant to Purchase Common Stock issued to Square, Inc. by the Registrant, dated March 13, 2021.
S-1
333-256154
4.8 May 14, 2021
4.7† Warrant to Purchase Common Stock issued to Ramp Business Corporation by the Registrant, dated March 31, 2021.
S-1/A
333-256154
4.9 May 24, 2021
4.8 Description of the Registrant’s Securities.
10-K 001-40465 4.8 March 11, 2022
10.1 #
Form of Amended and Restated Indemnification Agreement between the Registrant and each of its directors and executive officers.
10-K
001-40465
10.1
February 28, 2023
10.2 #
Amended and Restated 2011 Equity Incentive Plan, as amended, and forms of agreements thereunder.
S-1/A
333-256154
10.2 May 14, 2021
10.3 #
2021 Stock Option and Incentive Plan, and forms of agreements thereunder.
S-1/A
333-256154
10.3 June 1, 2021
10.4 #
2021 Employee Stock Purchase Plan.
S-1/A
333-256154
10.4 June 1, 2021
10.5 #
Senior Executive Cash Incentive Bonus Plan.
S-1/A
333-256154
10.5 May 24, 2021
10.6 #
Executive Severance Plan.
S-1/A
333-256154
10.6 May 24, 2021
10.7 #
Amended Non-Employee Director Compensation Policy.
10-Q
001-40465
10.1
May 9, 2023
10.8 #
Form of Director Offer Letter.
S-1
333-256154
10.12 May 14, 2021
10.9 #*
Offer Letters between the Registrant and Simon Khalaf dated May 25, 2022 and January 26, 2023.
10-K
001-40465
10.9
February 28, 2023
10.10 #
Offer Letter between the Registrant and Jason Gardner dated June 6, 2011.
S-1 333-256154
10.8 May 14, 2021
10.11 #
Offer Letter between the Registrant and Mike Milotich dated February 3, 2022.
10-K 001-40465
10.16 March 11, 2022
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10.12 #
Offer Letter between the Registrant and Randy Kern dated May 20, 2021.
10-K
001-40465
10.12
February 28, 2023
10.13*
Lease Agreement by and between the Registrant and MACH II 180 LLC, dated on or about March 1, 2016, as amended on November 8, 2017 , March 14, 2019 , and November 7, 2019 .
10.14†
Master Services Agreement by and between the Registrant and Square, Inc., dated April 19, 2016, as amended on September 1, 2016, October 18, 2016, December 24, 2016, June 30, 2017, August 2, 2017, October 1, 2017, April 1, 2018, June 6, 2019, September 20, 2019, February 7, 2020, November 18, 2020, November 18, 2020, March 13, 2021, May 21, 2021, January 27, 2022 , and March 1, 2023 .
10-Q
001-40465 10.4
May 9, 2023
10.15†*
Amendment No. 19 to the Master Services Agreement by and between the Registrant and Square, Inc. dated November 3, 2023.
10.16
A mendment No. 1 8 to the Master Services Agreement by and between the Registrant and Square, Inc. dated September 26 , 2023 .
10-Q
001-40465 10.1
November 8, 2023
10.17†
A mendment No. 17 to the Master Services Agreement by and between the Registrant and Square Inc. dated August 4 , 2023.
8-K/A
001-40465 10.1
August 11, 2023
10.18†
Amended and Restated Prepaid Card Program Manager Agreement by and between the Registrant and Sutton Bank, dated April 1, 2016, as amended on December 31, 2017, September 1, 2018, August 1, 2020, July 1, 2021 , and January 23 , 2023 .
10-Q
001-40465 10.1
August 8, 2023
21.1* Subsidiaries of the Registrant.
23.1* Consent of Ernst & Young LLP, independent registered public accounting firm.
24.1* Power of Attorney (incorporate by reference to the signature page to this Annual Report on Form 10-K)
31.1* Certification of the Principal Executive Officer, pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification of the Principal Financial Officer, pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1** Certification of the Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2** Certification of the Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97.1*
C ompe nsation Recovery Policy .
99.1*
Standstill and Release Agreement.
101.INS *
Inline XBRL Instance Document.
101.SCH *
Inline XBRL Taxonomy Extension Schema Document.
101.CAL *
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF *
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB *
Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE *
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 *
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
† Certain confidential information contained in this exhibit has been omitted because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
# Indicates management contract or compensatory plan, contract or agreement.
* Filed herewith.
** Furnished herewith. The certifications attached as Exhibits 32.1 and 32.2 that accompany this Annual Report on Form 10-K are deemed furnished and not filed with the SEC and are not to be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, 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.
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Item 16. Form 10-K Summary
Not applicable.
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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.
MARQETA, INC.
Date: February 28, 2024
By: /s/ Simon Khalaf
Name: Simon Khalaf
Title: Chief Executive Officer (Principal Executive Officer)
Date: February 28, 2024
By: /s/ Michael (Mike) Milotich
Name: Michael (Mike) Milotich
Title: Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Simon Khalaf, Michael Milotich, and Crystal Sumner, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any 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, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Simon Khalaf Chief Executive Officer and Director February 28, 2024
Simon Khalaf (Principal Executive Officer)
/s/ Michael (Mike) Milotich Chief Financial Officer February 28, 2024
Michael (Mike) Milotich (Principal Financial and Accounting Officer)
/s/ Jason Gardner Director February 28, 2024
Jason Gardner
/s/ Martha Cummings Director February 28, 2024
Martha Cummings
/s/ Gerri Elliott Director February 28, 2024
Gerri Elliott
/s/ Helen Riley Director February 28, 2024
Helen Riley
/s/ Arnon Dinur Director February 28, 2024
Arnon Dinur
/s/ Judson Linville Director February 28, 2024
Judson Linville
/s/ Kiran Prasad Director February 28, 2024
Kiran Prasad
/s/ Godfrey Sullivan Director February 28, 2024
Godfrey Sullivan
/s/ Najuma Atkinson
Director February 28, 2024
Najuma Atkinson
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