Spire Global, Inc. 10-K/A

Item 7A. Quantitative and Qualitative Disclosures About Market Risk Foreign currency exchange risk Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, British Pound Sterling, Singapore Dollar, and Canadian Dollar and may be adversely affected in the future due to changes in foreign currency exchange rates. We continue to experience foreign currency fluctuations primarily due to the periodic re-measurement of our foreign currency monetary account balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. Changes in exchange rates may negatively affect our revenue and other operating results as expressed in U.S. dollars. We do not currently engage in foreign exchange hedging contracts. As we continue to expand our international presence, we will assess options for mitigating foreign exchange risk. We have experienced and will continue to experience fluctuations in our net loss as a result of gains or losses related to revaluing certain asset and current liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. For our fiscal years 2021 and 2020, we had a loss of $1.9 million and $0.1 million, respectively. A hypothetical 10% strengthening or weakening of the U.S. dollar relative to the currencies in which our revenue and expenses are denominated would have resulted in an increase or decrease, respectively, in our reported fiscal year 2021 pre-tax loss of approximately $1.8 million. Interest rate sensitivity We had cash and cash equivalents totaling $109.3 million as of December 31, 2021. This amount was held primarily in demand deposit accounts. The cash and cash equivalents are held for working capital purposes or strategic investment purposes. We do not enter into investments for trading or speculative purposes. As of December 31, 2021, the FP Term Loan had a fixed rate of 9.0% with no exposure to interest rate fluctuations. The SIF loan is interest free. Item 8. Financi al Statements and Supplemental Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 68 Consolidated Balance Sheets as of December 31, 2021 and 2020 69 Consolidated Statements of Operations for the years ended December 31, 2021 and 2020 70 Consolidated Statements of Comprehensive Loss for the years ended December 31, 2021 and 2020 71 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2021 and 2020 72 Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020 73 Notes to Consolidated Financial Statements 74 67 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Spire Global, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Spire Global, Inc. and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive loss, of changes in stockholders’ equity (deficit) and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Restatement of Previously Issued Financial Statements As discussed in Note 2 to the consolidated financial statements, the Company has restated its 2021 financial statements to correct an error. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP San Francisco, California March 30, 2022, except for the effects of the restatement discussed in Note 2 to the consolidated financial statements, as to which the date is November 7, 2022 We have served as the Company’s auditor since 2019. 68 Spire Global, Inc. Consolidated Balance Sheets (In thousands, except share and per share amounts) December 31, 2021 2020 (Restated) Assets Current assets Cash and cash equivalents $ 109,256 $ 15,571 Accounts receivable, net (including allowance of $ 339 and $ 174 as of December 31, 2021 and 2020, respectively) 10,163 3,738 Contract assets 2,084 853 Other current assets 10,071 2,112 Total current assets 131,574 22,274 Property and equipment, net 48,704 20,458 Goodwill 53,627 — Customer relationships 24,388 — Other intangible assets 19,765 751 Other long-term assets, including restricted cash 12,136 939 Total assets $ 290,194 $ 44,422 Liabilities and Stockholders’ Equity (Deficit) Current liabilities Accounts payable $ 5,824 $ 1,775 Accrued wages and benefits 5,646 1,590 Contract liabilities, current portion 8,627 8,110 Other accrued expenses 4,823 1,813 Total current liabilities 24,920 13,288 Long-term debt 51,124 26,645 Contingent earnout liability 10,026 — Convertible notes payable, net (including related parties of $ 0 and $ 7,498 as of December 31, 2021 and 2020, respectively) — 48,631 Deferred income tax liabilities 835 338 Warrant liability 11,482 4,007 Other long-term liabilities 1,600 249 Total liabilities 99,987 93,158 Commitments and contingencies (Note 11) Stockholders’ equity (deficit) Series A preferred stock, $ 0.0001 par value, none authorized, issued and outstanding at December 31, 2021 and 12,671,911 shares authorized, 21,615,723 shares issued and outstanding at December 31, 2020 (liquidation value of $ 52,809 at December 31, 2020) — 52,809 Series B preferred stock, $ 0.0001 par value, none authorized, issued and outstanding at December 31, 2021 and 4,869,754 shares authorized, 8,306,818 shares issued and outstanding at December 31, 2020 (liquidation value of $ 35,228 at December 31, 2020) — 35,228 Series C preferred stock, $ 0.0001 par value, none authorized, issued and outstanding at December 31, 2021 and 9,126,525 shares authorized, 12,804,176 shares issued and outstanding at December 31, 2020 (liquidation value of $ 65,222 at December 31, 2020) — 65,222 Common stock, $ 0.0001 par value, 1,000,000,000 Class A and 15,000,000 Class B shares authorized, 139,096,000 Class A and 12,058,614 Class B shares issued and outstanding at December 31, 2021; 55,000,000 shares authorized, 17,664,015 Class A shares issued and outstanding at December 31, 2020 15 2 Additional paid-in capital 438,696 10,131 Accumulated other comprehensive income (loss) 732 ( 982 ) Accumulated deficit ( 249,236 ) ( 211,146 ) Total stockholders’ equity (deficit) 190,207 ( 48,736 ) Total liabilities and stockholders’ equity (deficit) $ 290,194 $ 44,422 The accompanying notes are an integral part of these consolidated financial statements. 69 Spire Global, Inc. Consolidated Statements of Operations (In thousands, except share and per share amounts) Year Ended December 31, 2021 2020 (Restated) Revenue $ 43,375 $ 28,490 Cost of revenue 18,720 10,285 Gross profit 24,655 18,205 Operating expenses Research and development 31,615 20,751 Sales and marketing 20,387 10,279 General and administrative 40,479 12,520 Loss on satellite deorbit and launch failure — 666 Total operating expenses 92,481 44,216 Loss from operations ( 67,826 ) ( 26,011 ) Other income (expense) Interest income 23 54 Interest expense ( 11,417 ) ( 6,773 ) Change in fair value of contingent earnout liability 48,248 — Change in fair value of warrant liabilities ( 1,600 ) ( 198 ) Other (expense) income, net ( 5,021 ) 824 Total other income (expense), net 30,233 ( 6,093 ) Loss before income taxes ( 37,593 ) ( 32,104 ) Income tax provision 497 400 Net loss $ ( 38,090 ) $ ( 32,504 ) Basic and diluted net loss per share $ ( 0.61 ) $ ( 1.85 ) Weighted-average shares used in computing basic and diluted net loss per share 62,137,434 17,610,405 The accompanying notes are an integral part of these consolidated financial statements. 70 Spire Global, Inc. Consolidated Statements of Comprehensive Loss (In thousands) Year Ended December 31, 2021 2020 (Restated) Net loss $ ( 38,090 ) $ ( 32,504 ) Other comprehensive loss: Foreign currency translation adjustments 1,714 ( 354 ) Comprehensive loss $ ( 36,376 ) $ ( 32,858 ) The accompanying notes are an integral part of these consolidated financial statements. 71 Spire Global, Inc. Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (In thousands, except share amounts) Series A Preferred Stock Series B Preferred Stock Series C Preferred Stock Common Stock Additional Paid Accumulated Other Comprehensive Income Accumulated Total Stockholders' Equity Shares (1) Amount Shares (1) Amount Shares (1) Amount Shares (1) Amount Capital (Loss) Deficit (Deficit) Balance, January 1, 2020 21,615,723 $ 52,809 8,306,818 $ 35,228 12,804,176 $ 65,222 17,602,594 $ 2 $ 7,354 $ ( 628 ) $ ( 178,642 ) $ ( 18,655 ) Exercise of stock options — — — — — — 61,421 — 75 — — 75 Stock compensation expense — — — — — — — — 2,160 — — 2,160 Issuance of stock warrants 542 542 Net loss — — — — — — — — — ( 32,504 ) ( 32,504 ) Foreign currency translation adjustments — — — — — — — — — ( 354 ) — ( 354 ) Balance, December 31, 2020 21,615,723 $ 52,809 8,306,818 $ 35,228 12,804,176 $ 65,222 17,664,015 $ 2 $ 10,131 $ ( 982 ) $ ( 211,146 ) $ ( 48,736 ) Exercise of stock options — — — — — — 923,200 — 1,289 — — 1,289 Stock compensation expense — — — — — — — — 11,634 — — 11,634 Issuance of common stock relating to the acquisition 5,230,167 1 19,361 — — 19,362 Issuance of shares to FP Lenders (Note 8) — — — — — — 2,468,492 — 22,868 — — 22,868 Exercise of Series C preferred warrants — — — — 146,919 891 — — — — — 891 Conversion of warrants to common stock — — — — — — 672,355 308 — — 308 Conversion of Series A preferred stock to common stock upon the reverse recapitalization ( 21,615,723 ) ( 52,809 ) — — — — 21,615,723 2 52,807 — — — Conversion of Series B preferred stock to common stock upon the reverse recapitalization ( 8,306,818 ) ( 35,228 ) 8,306,818 1 35,227 — — — Conversion of Series C preferred stock to common stock upon the reverse recapitalization — — — — ( 12,951,095 ) ( 66,113 ) 12,951,095 1 66,112 — — — Conversion of convertible notes to common stock upon the reverse recapitalization — — — — — — 37,034,620 4 70,929 — — 70,933 Issuance of common stock upon the reverse recapitalization and PIPE financing, net of merger costs (2) — — — — — — 44,288,129 4 206,304 — — 206,308 Contingent earnout liability upon closing of the merger (Restated) — — — — — — ( 58,274 ) — — ( 58,274 ) Net loss (Restated) — — — — — — — — — — ( 38,090 ) ( 38,090 ) Foreign currency translation adjustments — — — — — — — — — 1,714 — 1,714 Balance, December 31, 2021 (Restated) — $ — — $ — — $ — 151,154,614 $ 15 $ 438,696 $ 732 $ ( 249,236 ) $ 190,207 (1) The shares of the Company’s common and convertible preferred stock, prior to the Merger (as defined in Note 1) have been retroactively restated to reflect the exchange ratio of approximately 1.7058 established in the Merger as described in Note 3. (2) Included in the share number is 12,058,614 shares of Class B common stock. The accompanying notes are an integral part of these consolidated financial statements. Spire Global, Inc. Consolidated Statements of Cash Flows (In thousands) Year Ended December 31, 2021 2020 (Restated) Cash flows from operating activities Net loss $ ( 38,090 ) $ ( 32,504 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 8,509 5,546 Loss on disposal of property and equipment — 705 Loss on impairment of intangible assets 91 — Stock-based compensation 11,634 2,160 Accretion on carrying value of convertible notes 2,103 4,490 Amortization of debt issuance costs 3,876 338 Change in fair value of warrant liability 1,600 198 Change in fair value of contingent earnout liability ( 48,248 ) — Deferred income tax liabilities 497 133 Loss on extinguishment of debt 2,277 171 Changes in operating assets and liabilities: Accounts receivable, net ( 5,010 ) ( 429 ) Contract assets ( 1 ) ( 1,057 ) Other current assets ( 6,565 ) 400 Other long-term assets 13 ( 152 ) Accounts payable 2,291 1,106 Accrued wages and benefits 1,751 987 Contract liabilities 161 3,159 Other accrued expenses 2,917 493 Other long-term liabilities 2,208 ( 517 ) Net cash used in operating activities ( 57,986 ) ( 14,773 ) Cash flows from investing activities Purchase of property and equipment ( 15,421 ) ( 10,314 ) Investment in intangible assets ( 166 ) ( 101 ) Payments made in connection with business acquisition, net ( 103,892 ) — Net cash used in investing activities ( 119,479 ) ( 10,415 ) Cash flows from financing activities Proceeds from reverse recapitalization and PIPE financing 264,823 — Payments of transaction costs related to reverse recapitalization ( 31,806 ) — Proceeds from long-term debt 70,515 30,937 Proceeds from issuance of convertible notes payable 20,000 550 Payments on redemption of long-term debt ( 29,628 ) ( 14,130 ) Payments on redemption of warrants ( 19,942 ) — Payments of debt issuance costs ( 4,717 ) ( 808 ) Proceeds from exercise of stock options 1,289 75 Net cash provided by financing activities 270,534 16,624 Effect of foreign currency translation on cash, cash equivalent and restricted cash 590 19 Net increase (decrease) in cash, cash equivalents and restricted cash 93,659 ( 8,545 ) Cash, cash equivalents and restricted cash Beginning of year 15,986 24,531 End of year $ 109,645 $ 15,986 Supplemental disclosure of cash flow information Cash paid for interest $ 3,130 $ 1,501 Noncash Investing and financing activities Conversion of Series A, B and C preferred stock into common stock upon the reverse recapitalization $ 154,150 $ — Contingent earnout liability recognized upon the closing of the reverse recapitalization $ 58,274 $ — Conversion of convertible notes to common stock upon the reverse recapitalization $ 70,933 $ — Public and private warrants acquired as part of the Merger $ 26,707 $ — Issuance of shares to FP Credit Partners, L.P. ("FP") (Note 8) $ 22,868 $ — Issuance of shares in the acquisition $ 19,361 $ — Exercise of Series C preferred stock warrants $ 891 $ — Property and equipment purchased but not yet paid $ 687 $ 18 Issuance of stock warrants with long-term debt $ 308 $ 4,154 The accompanying notes are an integral part of these consolidated financial statements. Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) 1. Nature of Business Spire Global, Inc. (“Spire” or the “Company”), founded in August 2012, is a global provider of space-based data and analytics that offers its customers unique datasets and insights about earth from the ultimate vantage point. The Company collects this space-based data through its proprietary constellation of multi-purpose nanosatellites. By designing, manufacturing, integrating and operating its own satellites and ground stations, the Company has unique end-to-end control and ownership over its entire system. The Company offers the following three Data Solutions to customers: Maritime, Aviation and Weather. As a fourth solution, the Company is providing “space-as-a-service” through its Space Services solution. The Company is comprised of Spire Global, Inc. (United States or U.S.) and its wholly owned subsidiaries Spire Global UK Limited (United Kingdom or U.K.), Spire Global Luxembourg S.a.r.l. (Luxembourg), Spire Global Singapore Pte. Ltd. (Singapore) and Spire Global Canada Acquisition Corp. (Canada). Spire Global Canada Acquisition Corp. is the sole owner of exactEarth Ltd. (Canada), which in turn is the sole owner of exactEarth Europe Ltd. (England and Wales). The Company currently operates offices in seven locations: San Francisco, Boulder, Washington D.C. (U.S.), Glasgow (U.K.), Luxembourg, Cambridge, Ontario, and Singapore. On August 16, 2021 (the “Closing Date”), Spire Global Subsidiary, Inc. (formerly known as Spire Global, Inc.) (“Old Spire”) closed its previously announced merger with NavSight Holdings, Inc. (“NavSight”), a special purpose acquisition company, pursuant to the terms of the Business Combination Agreement, dated as of February 28, 2021, by and among Spire, NavSight, NavSight Merger Sub, Inc., a wholly owned subsidiary of NavSight (“NavSight Merger Sub”), and Peter Platzer, Theresa Condor, Jeroen Cappaert, and Joel Spark (collectively, the “Old Spire Founders,” and such agreement, the “Merger Agreement”). As a result, NavSight Merger Sub merged with and into Old Spire, the separate corporate existence of NavSight Merger Sub ceased, and Old Spire continued as the surviving corporation and a wholly owned subsidiary of NavSight (the “Merger”). NavSight then changed its name to Spire Global, Inc. (together with its consolidated subsidiary, “New Spire” or “Spire”) and Old Spire changed its name to Spire Global Subsidiary, Inc. Please refer to Note 3 “Reverse Recapitalization” for further details of the Merger. In November 2021, the Company acquired exactEarth, a leading provider of global maritime vessel data for ship tracking and maritime situational awareness solutions in Canada for a combination of cash and Spire stock. Please refer to Note 4 "Business Acquisition" for further details of the acquisition. 2. Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and regulations of the U.S. Securities and Exchange commission. The Company’s consolidated financial statements include the accounts of Spire Global, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements for the year ended December 31, 2021 include the accounts of Spire Global, Inc. (i.e. former NavSight) and its wholly-owned subsidiary, Old Spire, following the Reverse Recapitalization as further discussed in Note 3 “Reverse Recapitalization.” For periods prior to the Merger, the reported share and per share amounts have been retroactively converted by applying the Exchange Ratio with the exception of authorized shares. Issued and outstanding shares and warrants as disclosed herein have been adjusted reflecting the Exchange Ratio. All other accompanying financial statements as of December 31, 2020 include only the accounts of Old Spire. Restatement of Audited Consolidated Financial Statements Restatement of Previously Issued Financial Statements Subsequent to the filing of the Original Form 10-K, the Company discovered that an incorrect number had been used in the calculation of the fair value of the contingent earnout liability. As a result, the Company's contingent earnout liability was overstated as of December 31, 2021. For the fiscal year ended December 31, 2021 the gain recorded on the change in fair value of contingent earnout liability and total other income (expense), net were each overstated, while loss before income taxes, net loss and basic and diluted net loss per share were each understated. As a result of the error, the Company’s previously issued audited consolidated financial statements as of and for the fiscal year ended December 31, 2021 were materially misstated and are being restated in this Form 10-K/A. The following tables reflect the impact of the restatement to the specific line items presented in the Company’s previously reported consolidated financial statements as of and for the fiscal year ended December 31, 2021: 74 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) As Previously Reported Adjustments As Restated Consolidated Balance Sheet: December 31, 2021 Contingent earnout liability $ 11,369 $ ( 1,343 ) $ 10,026 Total liabilities $ 101,330 $ ( 1,343 ) $ 99,987 Additional paid-in capital $ 418,575 $ 20,121 $ 438,696 Accumulated deficit $ ( 230,458 ) $ ( 18,778 ) $ ( 249,236 ) Total stockholders’ equity (deficit) $ 188,864 $ 1,343 $ 190,207 Total liabilities and stockholders' equity (deficit) $ 290,194 $ - $ 290,194 Consolidated Statements of Operations: Fiscal Year Ended December 31, 2021 Change in fair value of contingent earnout liability $ 67,026 $ ( 18,778 ) $ 48,248 Total other income (expense), net $ 49,011 $ ( 18,778 ) $ 30,233 Loss before income taxes $ ( 18,815 ) $ ( 18,778 ) $ ( 37,593 ) Net loss $ ( 19,312 ) $ ( 18,778 ) $ ( 38,090 ) Basic and diluted net loss per share $ ( 0.31 ) $ ( 0.30 ) $ ( 0.61 ) Consolidated Statements of Comprehensive Loss: Fiscal Year Ended December 31, 2021 Net loss $ ( 19,312 ) $ ( 18,778 ) $ ( 38,090 ) Comprehensive loss $ ( 17,598 ) $ ( 18,778 ) $ ( 36,376 ) Consolidated Statements of Changes in Stockholders' Equity (Deficit): Fiscal Year Ended December 31, 2021 Contingent earnout liability upon closing of the merger $ ( 78,395 ) $ 20,121 $ ( 58,274 ) Additional paid-in capital $ 418,575 $ 20,121 $ 438,696 Accumulated deficit $ ( 230,458 ) $ ( 18,778 ) $ ( 249,236 ) Total stockholders’ equity (deficit) $ 188,864 $ 1,343 $ 190,207 Consolidated Statements of Cash Flows: Fiscal Year Ended December 31, 2021 Net loss $ ( 19,312 ) $ ( 18,778 ) $ ( 38,090 ) Change in fair value of contingent earnout liability $ ( 67,026 ) $ 18,778 $ ( 48,248 ) Net cash used in operating activities $ ( 57,986 ) $ - $ ( 57,986 ) Noncash Investment and financing activities Contingent earnout liability recognized upon the closing of the reverse recapitalization $ 78,395 $ ( 20,121 ) $ 58,274 There was no impact on cash flows from investing or financing activities. The accompanying applicable Notes have been restated to correct for these errors. 75 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) Liquidity Risks and Uncertainties Since inception, the Company has been engaged in developing its product offerings, raising capital, and recruiting personnel. The Company’s operating plan may change as a result of many factors currently unknown and there can be no assurance that the current operating plan will be achieved in the time frame anticipated by the Company, and it may need to seek additional funds sooner than planned. If adequate funds are not available to the Company on a timely basis, it may be required to delay, limit, reduce, or terminate certain commercial efforts, or pursue merger or acquisition strategies, all of which could adversely affect the holdings or the rights of the Company’s stockholders. The Company has a history of operating losses and negative cash flows from operations since inception. During the year ended December 31, 2021, net loss was $ 38,090 and cash used in operations was $ 57,986 . In August 2021, the Company received net proceeds of approximately $ 236,632 from Private Investment in Public Equity (“PIPE”) investors (the “PIPE Investors”) and the Merger. The Company held cash and cash equivalents of $ 109,256 , excluding restricted cash, at December 31, 2021. The Company believes that it will have sufficient working capital to operate for a period of one year from the issuance of the 2021 consolidated financial statements based on the borrowings under the FP Term Loan Agreement (as defined in Note 8) and the funds raised associated with the closing of the Merger (the “Closing”) (Note 3). The Company’s assessment of the period of time through which its financial resources will be adequate to support its operations is a forward-looking statement and involves risks and uncertainties. The Company’s actual results could vary as a result of many factors, including its growth rate, subscription renewal activity, the timing and extent of spending to support its infrastructure and research and development efforts and the expansion of sales and marketing activities. The Company may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. The Company has based its estimates on assumptions that may prove to be wrong, and it could use its available capital resources sooner than it currently expects. The Company may be required to seek additional equity or debt financing. Future liquidity and cash requirements will depend on numerous factors, including market penetration, the introduction of new products, and potential acquisitions of related businesses or technology. In the event that additional financing is required from outside sources, the Company may not be able to raise it on acceptable terms or at all. If the Company is unable to raise additional capital when desired, or if it cannot expand its operations or otherwise capitalize on its business opportunities because it lacks sufficient capital, its business, results of operations, and financial condition would be adversely affected. COVID-19 Impact In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which continues to spread throughout the United States and the world and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. While the Company is unable to accurately predict the full impact that the COVID-19 pandemic will have on its results of operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic or any resurgences of the pandemic locally or globally, the Company’s compliance with these measures has impacted its day-to-day operations and could continue to disrupt its business and operations, as well as that of certain of the Company’s customers whose industries are more severely impacted by these measures, for an indefinite period of time. During the fiscal year ending December 31, 2021, the Company has experienced adverse changes in customer buying behavior that began in March 2020 as a result of the impact of the COVID-19 pandemic, including decreased customer engagement, delayed sales cycles, and deterioration in near-term demand. In 2021, the Delta and the Omicron variants of COVID-19 have become the dominant strains in numerous countries around the world, including the United States, and is believed to be more contagious than other previously identified COVID-19 strains. Despite these headwinds, the Company experienced an increase in revenue for fiscal year 2021, as compared to fiscal year 2020. As a result of the impact of the COVID-19 pandemic, the Company experienced delays and re-work due to third party satellite launch providers schedule shifts, delays and increased expenses in its hiring process, some attrition from adjusting company policies due to the COVID-19 pandemic and additional time and expenses supporting customer contracts. Segment Information The Company operates as one reportable and operating segment, which relates to the sale of subscription-based data, insights, predictive analytics and related project-based services to global customers across a range of industries. The Company’s chief operating decision maker is its chief executive officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Management’s significant estimates include assumptions in revenue recognition, allowance for credit losses, valuation of certain assets and liabilities acquired from the business combination, realizability of deferred income tax assets, and fair value of equity awards, contingent earnout liabilities and warrant liabilities. Actual results could differ from those estimates. Management assessed the impact of COVID-19 on the estimates and assumptions and determined there was no material impact. Foreign Currency Translation The Company’s foreign subsidiaries, which have defined their functional currency as their local currency, translate their assets and liabilities into 76 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) U.S. Dollars at the exchange rate existing at the balance sheet date, and translate their results from operations at the average exchange rate for each period. The resulting translation adjustments are included as a component of Accumulated other comprehensive loss on the Consolidated Balance Sheets, Consolidated Statements of Changes in Stockholders’ Equity (Deficit) and as Other comprehensive loss in the Consolidated Statements of Comprehensive Loss. Gains and losses from foreign currency transactions are included in Other (expense) income, net in the Consolidated Statements of Operations. Fair Value Measurements To account for fair value measurements and disclosures, a fair value hierarchy was established that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company uses the following valuation techniques to measure fair value for its assets and liabilities: Level 1 Quoted market prices for identical assets and liabilities in active markets. Level 2 Significant other observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3 Unobservable inputs reflecting management’s assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Restricted cash included in Other long-term assets, including restricted cash on the Consolidated Balance Sheets, represents amounts pledged as guarantees or collateral for financing arrangements and lease agreements, as contractually required. The following table shows components of cash, cash equivalents, and restricted cash reported on the Consolidated Balance Sheets and in the Consolidated Statements of Cash Flows as of and for the years then ended: December 31, 2021 2020 Cash and cash equivalents $ 109,256 $ 15,571 Restricted cash included in Other long-term assets 389 415 $ 109,645 $ 15,986 Accounts Receivable Accounts receivable are stated at the amounts management expects to collect from outstanding balances. An allowance for credit losses is recorded based on historical loss experience, consideration of current and future economic conditions, and evaluation of a customer’s current and future financial condition. Increases and decreases in the allowance for credit losses are included as a component of general and administrative expense in the consolidated statements of income. Recoveries of accounts receivable for which an allowance exists, or those that were previously written off, are recorded when received. The Company recorded an expense for credit losses of $ 84 and $ 174 for the years ended December 31, 2021 and 2020, respectively. The Company generally grants credit to its customers on an unsecured basis. The Company does not have any off-balance sheet credit exposure related to its customers. Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents and restricted cash, and accounts receivable. The Company typically has cash accounts in excess of Federal Deposit Insurance Corporation insurance coverage. The Company has not experienced any losses on such accounts, and management believes that the Company’s risk of loss is remote. The Company has a concentration of contractual revenue arrangements with various government agencies. The Company had the following customers whose revenue and accounts receivable balances individually represented 10% or more of the Company’s total revenue and/or accounts receivable: Year Ended December 31, December 31, 2021 2020 2021 2020 Revenue Revenue Accounts Receivable Accounts Receivable Customer A 27 % 19 % 29 % * Customer B 16 % 17 % * 59 % Customer C 10 % 19 % 12 % * 77 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) * Revenue and/or accounts receivable from these customers were less than 10 % of total revenue and/or accounts receivable during the period. The Company has a concentration in vendor purchases. The Company believes its reliance on its vendors could be shifted over a period of time to alternative vendors should such a change be necessary. If the Company were to be unable to obtain alternative vendors due to factors beyond its control, operations would be disrupted in the short term while alternative vendors were secured. The Company has the following vendors where purchases of equipment, components and services individually represented 10% or more of the Company’s total purchases: Year Ended December 31, 2021 2020 Purchases Purchases Vendor A * 15 % Vendor B * 11 % Vendor C * 11 % Vendor D 10 % * * Purchases from these vendors were less than 10 % of total purchased during the period. The Company is dependent on third parties to launch its satellites into space, and any launch delay, malfunction, or failure could have a negative impact on revenue and might cause the Company not to be able to accommodate customers with sufficient data to meet minimum service level agreements until replacement satellites are available. The Company also incorporates technology and terrestrial data sets from third parties into its platform and its inability to maintain rights and access to such technology and data sets would harm its business and results of operations. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation and amortization. In-service satellites and related launch costs are capitalized based on its commission date of the underlying asset. Capitalized launch costs for each satellite are allocated based on the total cost of the launch divided by the number of satellites included on that launch. In-service ground stations and related costs are capitalized once signals are transmitted with in-service satellites. In the event of a failed launch or deployment of satellites, the related equipment impairment and launch costs are expensed and recorded in Loss on satellite deorbit and launch failure in the Consolidated Statements of Operations. The Company also capitalizes certain software costs incurred in connection with developing internal-use software during the project development stage so long as management with the relevant authority authorizes the project, it is probable the project will be completed, and the software will be used to perform the function intended. Costs incurred for enhancements that are expected to result in additional significant functionality are capitalized and amortized over the estimated useful life of the enhancement. Costs related to preliminary project activities and post-implementation operational activities are expensed as incurred. Internal-use software, which consists primarily of the Company’s enterprise software used to build and operate the Company’s satellites, is stated at cost less accumulated amortization. General maintenance and repairs are charged to expense as incurred. Significant refurbishment, renewal and betterments are capitalized. When assets are retired or disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected as Other income (expense) in the Company’s Consolidated Statements of Operations. Depreciation and amortization are computed utilizing the straight-line method over the estimated useful lives of depreciable assets in the table below. Leasehold improvements are amortized using the straight-line method over the lesser of the life of the asset or the remaining life of the lease. Years Furniture and fixtures 7 Machinery and equipment 5 In-service ground stations 4 Computer software and website development 3 Computer equipment 3 Capitalized satellite launch costs and in-service satellites 2 - 3 As of December 31, 2021 and 2020, 37 % and 74 %, respectively, of the Company’s long-lived assets were located in the U.S., 41 % and none , respectively were located in Canada, and 22 % and 26 %, respectively were located in Europe, Middle East and Africa (collectively, “EMEA”). Within EMEA, 20 % of the Company’s long-lived assets were located in the UK at December 31, 2021. Within EMEA, 19 % of the Company’s long-lived assets were located in the UK at December 31, 2020. Equity Method Investments The Company accounts for equity investments in which it has significant influence, but not a controlling financial interest, using the equity method of accounting. Under the equity method of accounting, investments are initially recorded at cost, less impairment, and subsequently adjusted to recognize the Company’s share of earnings or losses as a component of Other (expense) income, net in the Consolidated Statements of Operations. The Company’s equity method investments are required to be reviewed for impairment when it is determined there may be an other-than-temporary loss in value. The Company has not recorded any impairment losses related to our equity method investments during the years ended December 31, 2021 and 2020. 78 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) Business Combinations The Company recognizes identifiable assets acquired and liabilities assumed at their acquisition date fair values. Such valuations require us to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed, these estimates which include, but are not limited to, future revenue growth, margins, customer retention rates, technology life, royalty rates, expected use of acquired assets, and discount rates, are inherently uncertain and subject to refinement. Goodwill is measured as the excess of the consideration transferred over the fair value of assets acquired and liabilities assumed on the acquisition date. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred included in the General and administrative expenses in the Consolidated Statements of Operations. The authoritative guidance allows a measurement period of up to one year from the date of acquisition to make adjustments to the preliminary allocation of the purchase price. As a result, during the measurement period the Company may record adjustments to the fair values of assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent that it identifies adjustments to the preliminary purchase price allocation. Goodwill and Intangible Assets Goodwill represents the excess of the purchase price over the estimated fair value of net tangible and identifiable intangible assets acquired in business acquisitions. The Company performs a qualitative assessment on goodwill annually in the fourth quarter or if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. If it is determined in the qualitative assessment that the fair value of the Company's single reportable unit is more likely than not below its carrying amount, then the Company will perform a quantitative impairment test. The quantitative goodwill impairment test is performed by comparing the fair value of the reporting unit with its carrying amount. Any excess in the carrying value of the goodwill over its fair value is recognized as an impairment loss. For purposes of goodwill impairment testing, the Company has one reporting unit. Due to the timing of the acquisition of goodwill, this was not applicable for the year ended December 31, 2021. There were no goodwill impairments recorded during the years ended December 31, 2021 and 2020. Intangible assets consist of acquired intangible assets which include customer relationships, developed technology and trade names and the costs to obtain patents and perpetual nonexclusive license rights for the use of intellectual property. Acquired intangible assets, other than goodwill, are amortized over their estimated useful lives, ranging from 1 to 12 years, based upon the estimated economic value derived from the related intangible asset. Significant judgment is used in determining fair values of acquired intangible assets and their estimated useful lives. Fair value and useful life determinations may be based on, among other factors, estimates of future expected cash flows, royalty cost savings and appropriate discount rates used in calculating present values. Intangible assets are tested for impairment whenever there are indicators of impairment. The Company recognized impairment charges of $ 91 for intangible assets for the year ended December 31, 2021 and no ne for the year ended December 31, 2020. Impairment of Long-Lived Assets The Company assesses potential impairments to long-lived and intangible assets whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. An impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets or asset groups. If impairment exists, the impairment loss is measured and recorded based on undiscounted estimated future cash flows. In estimating future cash flows, assets are grouped at the lowest levels for which there are identifiable cash flows that are largely independent of cash flows from other asset groups. The Company did no t recognize any impairment charges for long-lived assets for the years ended December 31, 2021 and 2020. Deferred Offering Costs and Merger Costs The Company capitalizes within Other current assets on the Consolidated Balance Sheets certain legal, accounting and other third-party fees that are directly related to the Company’s in-process equity financing until such financings are consummated. After consummation of the equity financing, these costs are recorded as a reduction of the proceeds received from the offering (Note 3). Should a planned equity financing be abandoned, terminated or significantly delayed, the deferred offering costs are written off to operating expenses. There were no deferred offering costs capitalized as of December 31, 2021 and 2020. During the year ended December 31, 2021, the Company also incurred $ 6,591 of costs related to the Merger, including $ 4,846 for professional services and $ 1,745 of other merger related costs. These amounts have been included in General and administrative expenses in the Consolidated Statements of Operations for the year ended December 31, 2021. No such costs were incurred during the year ended December 31, 2020. Debt Issuance Costs For Long-term debt and Convertible notes payable, the Company presents debt issuance costs on the Consolidated Balance Sheets as a direct deduction from their carrying amounts. Debt issuance costs and the fair value assigned to stock warrants issued related to term loans and convertible notes payable are amortized over the respective term of the debt facility using the effective interest method. Warrants The Company generally classifies warrants for the purchase of shares of its common stock and preferred stock as liabilities on its Consolidated Balance 79 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) Sheets unless the warrants meet certain specific criteria that require the warrants to be classified within stockholders’ deficit. Those warrants accounted for as liabilities are freestanding financial instruments that may require the Company to transfer assets upon exercise. The warrant liability is initially recorded at fair value upon the date of issuance of each warrant and is subsequently remeasured to fair value at each reporting date. Changes in the fair value of the warrant liability are recognized as a component of Other income, net in the Consolidated Statements of Operations. Changes in the fair value of the warrant liabilities will continue to be recognized until the warrants are exercised, expire or qualify for equity classification. Warrants classified as equity are initially recorded at fair value on the date of issuance and recorded in Additional paid-in capital on the Company’s Consolidated Balance Sheets until the warrants are exercised or expire. The Company assumed 11,499,992 publicly-traded warrants (“Public Warrants”) and 6,600,000 private placement warrants issued by NavSight (“Private Warrants” and, together with the Public Warrants, the “Common Stock Warrants”) upon the Merger, all of which were issued in connection with NavSight’s initial public offering and entitled the holder to purchase one share of the Company’s common stock, par value $ 0.0001 (“Common Stock”) at an exercise price of $ 11.50 per share. The Public Warrants are publicly traded and are exercisable for cash unless certain conditions occur, such as the failure to have an effective registration statement related to the shares issuable upon exercise or redemption by the Company under certain conditions, at which time the warrants may be cashless exercised. The Private Warrants are non-redeemable for cash so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants are redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. The Company evaluated the Common Stock Warrants and concluded that they do not meet the criteria to be classified within stockholders’ equity. The agreement governing the Common Stock Warrants includes a provision that could result in a different settlement value for the Common Stock Warrants depending on their holder. Because the holder of an instrument is not an input into the pricing of a fixed-for-fixed option on the Company’s ordinary shares, the Private Warrants are not considered to be indexed to the Company’s own stock. In addition, the provision provides that in the event of a tender or exchange offer accepted by holders of more than 50% of the outstanding shares of the Company’s ordinary shares, all holders of the Common Stock Warrants would be entitled to receive cash for all of their Common Stock Warrants. Specifically, in the event of a qualifying cash tender offer (which could be outside of the Company’s control), all Common Stock Warrant holders would be entitled to cash, while only certain of the holders of the Company’s ordinary shares may be entitled to cash. These provisions preclude the Company from classifying the Common Stock Warrants in stockholders’ equity. As the Common Stock Warrants meet the definition of a derivative, the Company recorded these warrants as liabilities on the Consolidated Balance Sheets at fair value (Note 10), with subsequent changes in their respective fair values recognized in the Consolidated Statements of Operations at each reporting date. Contingent Earnout Liability In connection with the Reverse Recapitalization and pursuant to the Merger Agreement, eligible Spire equity holders are entitled to receive additional shares of the Company’s Common Stock upon the Company achieving certain Earnout Triggering Events (as described in the Merger Agreement and Note 3). In accordance with ASC 815-40, the earnout shares are not indexed to the Common Stock and therefore are accounted for as a liability and an offset to Additional paid-in capital on the Consolidated Balance Sheets at the reverse recapitalization date and subsequently remeasured at each reporting date with changes in fair value recorded as a component of Other income (expense), net in the Consolidated Statements of Operations. The contingent earnout liability is categorized as a Level 3 fair value measurement using the Monte Carlo model (Note 10) because the Company estimates projections during the Earnout Period utilizing unobservable inputs. Contingent earnout payments involve certain assumptions requiring significant judgment and actual results may differ from assumed and estimated amounts. Revenue Recognition The Company generates revenue from four main solutions: Maritime, Aviation, Weather and Space Services. The Company offers the following three data solutions to customers: • Maritime : precise space-based data used for highly accurate ship monitoring, ship safety and route optimization. • Aviation : precise space-based data used for highly accurate aircraft monitoring, aircraft safety and route optimization. • Weather : precise space-based data used for highly accurate weather forecasting. As a fourth solution, the Company is also pioneering an innovative “space-as-a-service” business model through its Space Services solution. The Company leverages its fully deployed infrastructure and large-scale operations to enable customers to obtain customized data through its API. Revenue recognition involves the identification of the contract, identification of performance obligations in the contract, determination of the transaction price, allocation of the transaction price to the previously identified performance obligations and recognition of revenue as the performance obligations are satisfied. The Company recognizes revenue for each separately identifiable performance obligation in a data solutions contract representing a promise to transfer data or a distinct service to a customer. In most cases, data provided under the Company’s data solutions contracts are accounted for as a single performance obligation due to the integrated nature of the Company’s precise space-based data. In some data access contracts, the Company provides multiple project-based services to a customer, most commonly when a contract covers multiple phases of the space services solution (e.g., development, manufacturing, launch and satellite operations). In those cases, the Company accounts for each distinct project-based deliverables as a separate performance obligation and allocates the transaction price to each performance obligation based on its relative standalone selling price, which is generally estimated using cost plus a reasonable margin. 80 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) The Company recognizes revenue when (or as) the performance obligation is satisfied, either over time or at a point in time. The Company has determined that each data access subscription provides a series of distinct services in which the customer simultaneously receives and consumes data. Therefore, for subscription-based data services, the Company recognizes revenue ratably over the subscription period. Revenue is recognized upon delivery for data products such as archive data and custom reports, which are performance obligations satisfied at a point in time upon transfer of control. For space services, control of the data typically is transferred at the time the customer gains access to the benefit of the service. If customer acceptance is required, revenue is recognized upon receipt of notice of customer acceptance, which is generally a short period of time after delivery. For certain project-based performance obligations (e.g., manufacturing and launch phases), revenue is recognized over time, using the output method, specifically contract milestones, which we have determined to be the most direct and reasonable measure of progress as they reflect the results achieved and value transferred to the customer. Contract Assets and Liabilities For each of the Company’s contracts, the timing of revenue recognition, customer billings, and cash collections determines the recorded accounts receivables, contract assets, and contract liabilities on the Company’s Consolidated Balance Sheets. Payment terms and conditions generally include a requirement to pay within 30 days. When revenue is recognized in advance of customer invoicing, a contract asset is recorded for the unbilled receivable. Conversely, contract liabilities are recorded when the Company has an unconditional right to consideration before it has satisfied a performance obligation. Contract liabilities consist of funds received in advance of revenue recognition from subscription services or project-based services that are subsequently recognized when the revenue recognition criteria are met. The non-current portion of Contract liabilities consists of funds received in advance of revenue recognition from subscription services or other project-based services that have remaining contractual obligations greater than one year from the balance sheet date. Deferred Contract Costs Sales commissions earned by the Company’s employees are considered incremental costs of obtaining a contract. An asset is recognized for sales commissions if the Company expects the period of benefit from these costs to be more than one year. The Company amortizes the deferred contract costs on a straight-line basis over the period of expected benefit, which is primarily 12 months, consistent with the pattern of revenue recognition of the related performance obligation. The amortized costs are recorded in Sales and marketing expense in the Company’s Consolidated Statements of Operations. The Company expenses sales commissions as incurred when the period of benefit is less than one year. Deferred contract costs are included in Other current assets, for the current portion, and Other long-term assets, for the non-current portion, on the Company’s Consolidated Balance Sheets. Deferred contract costs at December 31, 2021 and 2020 were $ 1,419 and $ 1,004 , respectively, of which $ 885 and $ 657 were classified as current, respectively. During the years ended December 31, 2021 and 2020, the Company recognized $ 730 and $ 396 , respectively, as amortization of deferred contract costs in Sales and marketing expense. Cost of Revenue Costs directly related to providing project-based services and producing data that is subscribed by the customers, including cost of third-party data sets, and allocated overhead costs, are included in Cost of revenue in the Consolidated Statements of Operations. Overhead costs primarily include allocable amounts of utilities, rent, depreciation expense on assets used directly in revenue producing activities, indirect materials, production and test administration expenses, and repairs and maintenance. Research and Development Costs Research and development expenses consist primarily of employee-related expenses, third-party consulting fees, and computing costs which are expensed as incurred. Sales and Marketing Sales and marketing expenses consist primarily of employee-related expenses, sales commissions, marketing and advertising costs, costs incurred in the development of customer relationships, brand development costs and travel-related expenses. The Company expenses advertising costs as incurred. Advertising expense for the years ended December 31, 2021 and 2020, was $ 797 and $ 285 , respectively, and is included in Sales and marketing expenses in the Consolidated Statements of Operations. General and Administrative Costs General and administrative expenses consist of employee-related expenses for personnel in the Company’s executive, finance and accounting, facilities, legal, human resources, global supply chain, and management information systems functions, as well as other administrative employees. In addition, general and administrative expenses include fees related to third-party legal counsel, fees related to accounting, tax and audit costs, office facilities costs, software subscription costs, and other corporate costs. Employee Benefit Plan The Company has a qualified retirement plan which covers all employees who meet certain eligibility requirements. Plan matching contributions, 81 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) discretionary profit-sharing contributions, and qualified nonelective contributions may be made to the 401(k) salary deferral plan at the discretion of the Company’s Board of Directors. The Company did no t make any matching contributions, discretionary profit-sharing contributions and/or qualified nonelective contributions during the years ended December 31, 2021 and 2020. The Company has defined contribution pension plans at its foreign subsidiaries which covers all employees who meet certain eligibility requirements. The contributions made by the Company under these plans during the years ended December 31, 2021 and 2020 were not material. Stock-Based Compensation The Company has an equity incentive plan under which the Company grants stock-based awards to employees and non-employees. The Company accounts for stock-based awards in accordance with FASB Accounting Standards Codification (“ASC”) 718, Stock-Based Compensation , which requires the measurement and recognition of compensation expense, based on estimated fair values, for all stock-based awards made to employees and non-employees for stock options. Restricted Stock Units ("RSU") with service-based vesting conditions, the fair value is calculated based upon the Company’s closing stock price on the date of grant using the intrinsic value method. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period and forfeitures are accounted for as they occur. Key assumptions used in the determination of fair value for stock options are as follows: Expected term . Because of the lack of sufficient historical data, the Company uses the simple average of the vesting period and the contractual term to estimate the period the stock options are expected to be outstanding. Expected volatility. The Company determines the expected stock price volatility based on the historical volatility of the Company's Class A common stock and the historical volatilities of an industry peer group. Expected dividend yield. The Company does not use a dividend rate due to the fact that the Company has never declared or paid cash dividends on its common stock and does not anticipate doing so in the foreseeable future. Risk-free interest rate. The Company bases its interest rate on a treasury instrument for which the term is consistent with the expected life of the stock options. Income Taxes The Company was incorporated in the state of Delaware as a C corporation. Deferred income taxes of the Company are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. All deferred tax assets and liabilities within each particular tax jurisdiction are offset and presented as a noncurrent deferred tax asset or liability. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The factors used to assess the likelihood of realization include the history of taxable income or loss, forecasts of future taxable income and available tax planning strategies that could be implemented to realize net deferred tax assets. The Company accounts for uncertainty in income taxes in accordance with ASC 740-10, Income Taxes , which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return, should be recorded in the consolidated financial statements. Under this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company recognizes interest accrued related to unrecognized tax benefits in Interest expense and penalties, if any, in General and administrative expenses in the accompanying Consolidated Statements of Operations. Related Parties In November 2021, in conjunction with the acquisition of exactEarth, Myriota, a Spire customer, became a related party, as exactEarth has 14 % ownership of Myriota. As of December 31, 2021, $ 4,101 of investment in Myriota is included in Other long-term assets, including restricted cash on the Consolidated Balance Sheets. The Company generated $ 408 in revenue during the year ended December 31, 2021 and $ 170 accounts receivable as of December 31, 2021 from Myriota. One of the Company’s stockholders and debtors is also a customer from which the Company generated $ 871 of revenue for the year ended December 31, 2020. No revenue was generated from this customer for the year ended December 31, 2021. The Company borrowed gross proceeds of $ 1,232 of Convertible notes payable in February 2021 and $ 6,414 of Convertible notes payable during the year ended December 31, 2019, from certain stockholders (Note 9). Interest expense recognized on related party Convertible notes payable is $ 413 and $ 783 for the years ended December 31, 2021 and 2020, respectively. Immediately prior to the effective time of the Merger, the Convertible Notes were automatically converted into shares of common stock of Old Spire (“Old Spire Common Stock”) (Note 3 and Note 9). Total carrying value of the related party balance included as Convertible notes payable, net on the Consolidated Balance Sheets was $ 0 and $ 7,498 as of December 31, 2021 and 2020, respectively. 82 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) Comprehensive Loss Comprehensive loss is comprised of Net loss and Other comprehensive loss consisting of Foreign currency translation adjustments. Net Loss Per Share The Company follows the two-class method when computing net income (loss) per share as the Company has issued shares that meet the definition of participating securities. The Company has two types of common stock, Class A and Class B. Class B common stock has no economic rights, therefore has been excluded from the computation of basic and diluted net loss per share. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared, if any, and participating rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The Company’s convertible preferred stock contractually entitles the holders of such shares to participate in dividends but does not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss, such losses are not allocated to participating securities. In such periods, diluted net loss per share is the same as basic net loss per share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. Upon the Closing Date of the merger, the preferred stock two-class method is no longer applicable. Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) is computed by adjusting net income (loss) to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net income (loss) per share is computed by dividing the diluted net income (loss) by the weighted-average number of common shares outstanding during the period, including potential dilutive common shares assuming the dilutive effect of common stock equivalents. JOBS Act Accounting Election The Company is provided the option to adopt new or revised accounting guidance under the requirements provided to an “emerging growth company” under the JOBS Act either (1) within the same periods as those otherwise applicable to public business entities, or (2) within the same time periods as non-public business entities, including early adoption when permissible. With the exception of certain accounting standards where the Company elected to early adopt when permissible, the Company has elected to adopt new or revised accounting guidance within the same time period as non-public business entities, as indicated below. Accounting Pronouncements Recently Adopted In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets not held at fair value. ASU 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses. The Company adopted the requirements of ASU 2016-13 effective January 1, 2021 and determined that the financial impact from the adoption of this standard was immaterial to its consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (A Consensus of the FASB Emerging Issues Task Force) (“ASU 2018-15”), which aligns the requirements for capitalizing implementation costs incurred in a cloud computing hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal use software. The Company adopted the requirements of ASU 2018-15 effective January 1, 2021 and determined that the financial impact from the adoption of this standard was immaterial to its consolidated financial statements. In March 2020 and January 2021, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and ASU 2021-01, Reference Rate Reform (Topic 848), respectively, which refine the scope of ASC Topic 848 and clarify some of its guidance as part of the FASB’s monitoring of global reference rate reform activities. These standards permit entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, for computing variation margin settlements, and for calculating price alignment interest in connection with reference rate reform activities under way in global financial markets. The amendments in ASU 2020-04 were effective for all entities as of March 12, 2020 through December 31, 2022 and the amendments in ASU 2021-01 are effective immediately for all entities. The Company determined that the financial impact from the adoption of these standards was immaterial to its consolidated financial statements. Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). Since this standard was originally issued, there have been improvements and clarification released by the FASB. Under the new standard, a lessee should recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. This standard is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company will adopt the new standard on January 1, 2022 using a modified retrospective approach with a cumulative-effect adjustment to opening retained earnings. Therefore, upon adoption, the Company will not adjust its comparative period 83 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) financial statements or disclose ASC 842 lease disclosures for periods before January 1, 2022. The Company has evaluated the available accounting policy elections and practical expedients permitted by the standard and will adopt the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. While the Company is still finalizing its evaluation of the impact of the new lease accounting guidance, the Company expects a material impact to the consolidated financial statements as a result of the recognition of right-of-use assets and leases liabilities. In addition, the Company does not expect the standard to have a material impact on the Company's liquidity or debt covenant compliance under its current agreement. The new standard also provides practical expedients for a company's ongoing accounting. The Company will elect the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities including for existing short-term leases of assets in transition. The Company also currently expects to elect the practical expedient to not separate lease and non-lease components for all its leases. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, by removing certain exceptions to the general principles and its intended to improve consistent application. A franchise tax that is partially based on income will be recognized as an income-based tax and any incremental amount will be recognized as non-income-based tax. This standard is effective for fiscal years beginning after December 15, 2021 (January 1, 2022 for the Company), with early adoption permitted. The Company does not expect the standard to have a material impact on the Company's Consolidated Financial Statements. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. The guidance is effective for annual reporting periods beginning after December 15, 2022, including interim periods within that reporting period and should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company did not early adopt for the most recent acquisition of exactEarth. In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), guidance on modifying the disclosure requirements to increase the transparency of government assistance including disclosure of the types of assistance, an entity's accounting for the assistance and the effect of the assistance on an entity's financial statements. The amendments in this update are effective for financial statements issued for annual periods beginning after December 15, 2021. The Company does not expect this accounting standard update to have a material impact on its consolidated financial statements. 3. Reverse Capitalization Immediately prior to the Closing: • All 12,671,911 outstanding shares of Old Spire Series A Convertible Preferred Stock were converted into an equivalent number of shares of Old Spire Common Stock on a one-to-one basis . • All 4,869,754 outstanding shares of Old Spire Series B Convertible Preferred Stock were converted into an equivalent number of shares of Old Spire Common Stock on a one-to-one basis • All 7,592,402 outstanding shares of Old Spire Series C Convertible Preferred Stock were converted into an equivalent number of shares of Old Spire Common Stock on a one-to-one basis • Each of the Convertible Notes (as defined in Note 9) automatically converted into shares of Old Spire Common Stock. The conversion ratio for the 2019 and 2020 Convertible Notes was 2.4808 and the conversion ratio for the 2021 Convertible Notes was 13.6466 . • Old Spire Warrants (with the exception of warrants for 909,798 shares issued to European Investment Bank (“EIB,” and such warrants, the “EIB Warrants”)) were exercised in full on a cashless basis into the right to receive shares of Old Spire Common Stock, which was settled on a net-basis. The EIB Warrants were settled as of December 31, 2021 (Note 8). Pursuant to the Merger Agreement, at the Closing: • Each share of outstanding Class A common stock and Class B common stock of NavSight was exchanged for one share of Class A Common Stock of New Spire, par value $ 0.0001 per share (“New Spire Class A Common Stock”). • Each share of Old Spire Common Stock, including shares of Old Spire Common Stock issued pursuant to the conversion of the Old Spire Preferred Stock, the Convertible Notes and the Old Spire Warrants (excluding the EIB warrants), was converted into a number of shares of New Spire Class A Common Stock equal to the Per Share Closing Consideration (“the exchange ratio”) of 1.7058 , as defined in the Merger Agreement. • Each share of Old Spire Common Stock is entitled to the contingent earnout right to receive a number of shares of New Spire Class A Common Stock equal to a Per Share Earnout Consideration of 0.1236 , as defined in the Merger Agreement, payable in four equal tranches if the trading price of the New Spire Class A Common Stock is greater than or equal to $ 13.00 , $ 16.00 , $ 19.00 , or $ 22.00 for any 20 trading days within any 30 consecutive trading day period on or prior to the date that is five years following the Closing Date, as adjusted based on the formula defined in the Merger Agreement with respect to the portion of earnout value allocated to holders of options to purchase shares of Old Spire Common Stock (“Old Spire Options”) assumed by NavSight. 84 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) • All outstanding Old Spire Options were assumed and converted into option awards that are exercisable for shares of New Spire Class A Common Stock pursuant to an option exchange ratio of 1.8282 . • The outstanding EIB Warrants were assumed by New Spire and converted into warrants that are exercisable for a number of shares of New Spire Class A Common Stock equal to the exchange ratio of 1.7058 . • The Old Spire Founders purchased 12,058,614 shares of New Spire Class B Common Stock, which equal the number of shares of New Spire Class A Common Stock that each Founder received at the Closing. Shares of New Spire Class B Common Stock carry nine votes per share, do not have dividend rights, are entitled to receive a maximum of $ 0.0001 per share of New Spire Class B Common Stock upon liquidation, are subject to certain additional restrictions on transfer, and are subject to forfeiture in certain circumstances. All fractional shares were rounded down. On February 28, 2021, concurrently with the execution of the Merger Agreement, NavSight entered into Subscription Agreements with the PIPE Investors, pursuant to which the PIPE Investors collectively subscribed for 24,500,000 shares of New Spire Class A Common Stock for an aggregate purchase price equal to $ 245,000 (the “PIPE Investment”) less approximately $ 7,142 of equity issuance costs associated with the PIPE Investment. The PIPE Investment was consummated immediately prior to the Closing. The number of shares of Common Stock issued immediately following the Closing was: Number of Shares Old Spire Common Stock (excluding Founders) 6,405,302 Old Spire Convertible Preferred Stock 42,873,636 Old Spire Convertible Notes 37,034,620 Old Spire Warrants (excluding EIB warrants) 672,355 Total Class A common shares to Old Spire stockholders (excluding Founders) 86,985,913 New Spire Class A Common Stock issued to Old Spire Founders 12,058,614 New Spire Class A Common Stock issued to PIPE Investors 24,500,000 New Spire Class A Common Stock held by public stockholders 1,979,515 New Spire Class A Common Stock issued to FP Lenders 2,468,492 New Spire Class A Common Stock resulting from conversion of NavSight Class B Common Stock 5,750,000 Total Shares of New Spire Class A Common Stock 133,742,534 New Spire Class B Common Stock issued to Old Spire Founders 12,058,614 Total Shares of New Spire Common Stock 145,801,148 The Merger is accounted for as a reverse recapitalization under GAAP. This determination is primarily based on Old Spire stockholders comprising a relative majority of the voting power of New Spire and having the ability to nominate the members of the board of directors of New Spire, Old Spire’s operations prior to the acquisition comprising the only ongoing operations of New Spire, and Old Spire’s senior management comprising a majority of the senior management of New Spire. Under this method of accounting, NavSight is treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the financial statements of Spire Global, Inc. represent a continuation of the financial statements of Old Spire with the Merger being treated as the equivalent of Old Spire issuing stock for the net assets of NavSight, accompanied by a recapitalization. The net assets of NavSight are stated at historical costs, with no goodwill or other intangible assets recorded. Operations prior to the Merger are presented as those of Old Spire. All periods prior to the Merger have been retrospectively adjusted using the exchange ratio for the equivalent number of shares outstanding immediately after the Merger to affect the reverse recapitalization. In connection with the Merger, the Company raised $ 264,823 of proceeds including the contribution of $ 230,027 of cash held in NavSight’s trust account from its initial public offering, net of redemptions of NavSight public stockholders of $ 210,204 , and $ 245,000 of cash in connection with the PIPE Investment. The Company incurred $ 38,569 of merger costs, consisting of banking, legal, and other professional fees, of which $ 31,978 was recorded as a reduction to additional paid-in capital, and the remaining $ 6,591 was expensed to General and administrative expenses in the Consolidated Statements of Operations. 4. Business Acquisition On November 30, 2021, through the execution of a share purchase agreement, the Company acquired 100 % of the voting equity interest of exactEarth for a purchase price of $ 128,953 , and was accounted for as a business combination. The acquisition of exactEarth accelerates growth of Spire’s existing maritime business with additional data solutions, cross-selling opportunities, and expansion of the Company’s geographic footprint. Each outstanding share of exactEarth common stock was exchanged for 0.1 shares of Spire Class A common stock and $ 1.95505 per share in cash. In 2021, the Company incurred $ 4,733 of acquisition-related costs. These expenses are included in General and administrative expense on the Consolidated Statement of Operations for the year ended December 31, 2021 and are reflected in pro forma earnings for the year ende d December 31, 2020, in the table below. The purchase price components are summarized in the following table: 85 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) Amount Value of Spire shares issued (1) $ 22,333 Cash consideration paid (2) 109,592 Less amount classified as post-combination expense (3) ( 2,972 ) Total purchase consideration $ 128,953 (1) Represents the fair value of 5,230,167 shares of Spire Class A common share transferred as of the November 30, 2021 ("acquisition date") as consideration (based on the closing market price of $ 4.27 per share on the acquisition date) consisting of 4,984,225 shares issued for outstanding exactEarth shares, in addition to 100,047 and 145,895 shares to settle exactEarth stock options and restricted stock units ("RSU"), respectively . (2) Included in the cash consideration are: a. $ 97,454 for outstanding exactEarth shares, b. $ 8,888 cash settlement of exactEarth stock options, RSU and deferred stock units, and c. $ 3,250 related to acquisition fees of exactEarth paid by Spire upon the closing of the acquisition. (3) $ 2,972 was treated as post-combination expense in connection with the replacement of exactEarth’s outstanding equity awards. This amount has been reflected in the Consolidated Statement of Operations for the year ended December 31, 2021. Purchase Price Allocation The purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess recorded to goodwill. The recognition of goodwill, none of which is expected to be deductible for income tax purposes, was made attributable to the workforce of the acquired business on synergies expected to arise and strategic benefits the Company expects to realize from the acquisition. The allocation of the purchase price has not been finalized, mainly due to the period of time between the acquisition of exactEarth and the date of this filing, and is based upon the best available information at the current time. The final determination of the fair values of the customer relationships, other intangible assets and investment in Myriota acquired is dependent upon certain valuation and other studies that have not yet been finalized, and will be completed as soon as practicable, but no later than one year after the consummation of the acquisition of exactEarth. The following table summarizes the preliminary estimated acquisition date fair value of the exactEarth assets acquired and liabilities assumed: Amount Cash and cash equivalents $ 5,700 Account receivable 1,707 Contract assets 1,233 Prepaid expenses and other current assets 7,980 Property and equipment 19,991 Goodwill 52,986 Customer relationships 24,265 Intangible assets 19,356 Prepaid data rights, non-current 6,219 Investment in Myriota 4,563 Other long-term assets 261 Total assets acquired 144,261 Accounts payable 1,091 Accrued expenses 9,056 Contract liabilities 1,219 Long-term debt 3,895 Other long-term-liabilities 47 Total liabilities assumed 15,308 Net assets acquired $ 128,953 The purchase price allocation to identifiable finite-lived intangible assets acquired was as follows: Estimated Useful Lives Amount Customer relationships 12 years $ 24,265 Developed technology 12 years 13,790 Trade names 5 years 2,337 Backlog 1 years 3,229 Total intangible assets $ 43,621 86 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) The Company applied the relief-from-royalty method to estimate the fair values of the developed technology and trade names, and the multi-period excess earnings method to estimate the fair values of the customer relationships and backlog for the acquired intangible assets. Unaudited Pro Forma Financial Information The following unaudited pro forma information presents the combined results of operations as if the acquisition of exactEarth had been completed in the beginning of the applicable comparable prior annual reporting period. The unaudited pro forma results include adjustments primarily related to the following: (i) amortization associated with preliminary estimates for the acquired intangible assets; (ii) depreciation of the property plant and equipment step-up in fair value (iii) expense relating to replacement awards; and (iv) the inclusion of acquisition costs as of the earliest period presented. The nonrecurring adjustments of $ 4,733 related to acquisition costs incurred and $ 2,972 related to replacement awards have been included in the pro forma income statement for the year ended December 31, 2020. The unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies or the effect of the incremental costs incurred from integrating exactEarth. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisitions had occurred at the beginning of the period presented, nor are they indicative of future results of operations: December 31, 2021 2020 Net revenue $ 61,497 $ 42,281 Net loss $ ( 37,407 ) $ ( 61,796 ) Revenues and losses attributable to the acquired business since the date of the acquisition recognized within the Consolidate Statement of Operations for the year ended December 31, 2021 were $ 1,479 and $ 1,470 , respectively. 5. Revenue, Contract Assets, Contract Liabilities and Remaining Performance Obligations Disaggregation of Revenue Revenue from subscription-based contracts was $ 20,356 and represented 47 % of total revenue for the year ended December 31, 2021. Revenue from subscription-based contracts was $ 7,677 , representing 27 % of total revenue for the year ended December 31, 2020. Revenue from non-subscription-based contracts was $ 23,019 and represented 53 % of total revenue for the year ended December 31, 2021. Revenue from non-subscription-based contracts was $ 20,813 , representing 73 % of total revenue for the year ended December 31, 2020. The following revenue disaggregated by geography was recognized: Year Ended December 31, 2021 Year Ended December 31, 2020 EMEA (1) $ 20,562 48 % $ 14,213 50 % Americas (2) 15,719 36 % 10,759 38 % Asia Pacific (3) 7,094 16 % 3,518 12 % Total $ 43,375 100 % $ 28,490 100 % (1) Netherlands represented 24 % and 37 % for the years ended December 31, 2021 and 2020, respectively. (2) U.S. represented 36 % and 38 % for the years ended December 31 2021 and 2020, respectively. (3) Australia represented 11 % and 9 % for the years ended December 31, 2021 and 2020, respectively. Contract Assets The increase in contract assets is due to the acquisition of exactEarth. At December 31, 2021 and 2020, Contract assets were $ 2,084 and $ 853 , respectively, on the Consolidated Balance Sheets. Changes in Contract assets were as follows: December 31, 2021 2020 Balance at the beginning of the year $ 853 $ 493 Contract assets recorded during the year 2,529 1,577 Reclassified to Accounts receivable ( 1,298 ) ( 1,217 ) Balance at the end of the year $ 2,084 $ 853 Contract Liabilities At December 31, 2021, Contract liabilities were $ 9,255 of which $ 8,627 is reported in current portion of Contract liabilities and $ 628 is reported in non-current potion in Other long-term liabilities on the Company’s Consolidated Balance Sheets. At December 31, 2020, Contract liabilities were $ 8,110 and is reported in current portion of Contract liabilities on the Consolidated Balance Sheets. 87 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) Changes in Contract liabilities were as follows: December 31, 2021 2020 Balance at the beginning of the year $ 8,110 $ 4,550 Contract liabilities recorded during the year 8,343 7,759 Revenue recognized during the year ( 6,950 ) ( 4,199 ) Other ( 248 ) — Balance at the end of the year $ 9,255 $ 8,110 Remaining Performance Obligations The Company has performance obligations associated with commitments in customer contracts for future services that have not yet been recognized as revenue. These commitments for future services exclude (i) contracts with an original term of one year or less, and (ii) cancellable contracts. As of December 31, 2021, the amount not yet recognized as revenue from these commitments is $ 83,171 . The Company expects to recognize 53 % of these future commitments over the next 12 months and the remaining 47 % thereafter as revenue when the performance obligations are met. 6. Other Balance Sheet Components Other current assets, including restricted cash consisted of the following: December 31, 2021 2020 Technology and other prepaid contracts $ 744 $ 767 Prepaid insurance 4,430 68 Deferred contract costs 885 657 Other receivables 1,396 409 Other current assets 2,616 211 $ 10,071 $ 2,112 Other accrued expenses consisted of the following: December 31, 2021 2020 Professional services $ 1,164 $ 420 Sales tax 195 122 Software 1,036 470 Satellite/launch/ground station material 312 — Other 2,116 801 $ 4,823 $ 1,813 Property and equipment, net consisted of the following: December 31, 2021 2020 Satellites in-service $ 51,368 $ 26,196 Internally developed software 2,160 2,166 Ground stations in-service 2,200 1,872 Leasehold improvements 1,754 1,589 Machinery and equipment 2,761 1,873 Computer equipment 2,168 1,153 Computer software and website development 472 472 Furniture and fixtures 1,167 379 64,050 35,700 Less: Accumulated depreciation and amortization ( 30,120 ) ( 23,260 ) 33,930 12,440 Satellite, launch and ground station work in progress 11,478 4,934 Finished satellites not in-service 3,296 3,084 Property and equipment, net $ 48,704 $ 20,458 Depreciation and amortization expense related to property and equipment for the years ended December 31, 2021 and 2020, was $ 8,509 and $ 5,330 , respectively, including amortization of internal-use software of $ 34 and $ 144 , respectively. There were no costs incurred from failed launches and losses from satellite deorbit and other equipment failure during the year ended December 31, 2021 and $ 666 for the year ended December 31, 2020. Costs related to failed launches are not capitalized and are included in Loss on satellite deorbit and launch failure in the Consolidated Statements of Operations. 88 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) 7. Goodwill and Intangible Assets The following table summarizes changes in goodwill balance: Balance at December 31, 2020 $ - Goodwill related to exactEarth acquisition 52,986 Impact of foreign currency translation 641 Balance at December 31, 2021 $ 53,627 Intangible assets consisted of the following: December 31, 2021 2020 Customer relationships $ 24,559 $ - Developed technology 13,957 - Trade names 2,366 - Backlog 3,268 - Patents 491 591 FCC licenses 480 480 45,121 1,071 Less: Accumulated amortization ( 968 ) ( 320 ) $ 44,153 $ 751 In conjunction with the exactEarth acquisition, the Company acquired intangible assets for a total of $ 43,621 in November 2021. As of December 31, 2021, the weighted-average amortization period for Customer relationships and Developed technology was 11.9 years, Trade names was 4.9 years, Backlog was 0.9 years and patents and FCC licenses was 7.6 years. Amortization expense related to intangible assets for the years ended December 31, 2021 and 2020, was $ 666 and $ 81 , respectively. During the year ended December 31, 2021, the Company recognized im pairment charges of $ 91 for intangible assets relating to patent costs. No impairment charges were recognized for the year ended December 31, 2020. The patents asset balance as of December 31, 2021 and 2020 includes $ 196 and $ 284 of capitalized patent costs, respectively, that will begin amortization upon the issuance of an official patent right to the Company. As of December 31, 2021, the expected future amortization expense of intangible assets is as follows: Years ending December 31, 2022 $ 6,747 2023 3,736 2024 3,729 2025 3,728 2026 3,675 2027 and thereafter 22,342 43,957 Capitalized patent costs, unissued 196 $ 44,153 8. Long-Term Debt Long-term debt consisted of the following: December 31, 2021 2020 Eastward Loan Facility $ — $ 15,000 EIB Loan Facility — 14,734 FP Term Loan 71,512 — PPP Loan — 1,699 Other 4,464 10 Total long-term debt 75,976 31,443 Less: Debt issuance costs ( 24,852 ) ( 4,798 ) Non-current portion of long-term debt $ 51,124 $ 26,645 The Company recorded $ 8,368 and $ 1,406 of interest expense from long-term debt for the years ended December 31, 2021 and 2020, respectively. 89 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) PPP Loan In April 2020, the Company received loan proceeds in the amount of $ 1,709 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, provides for loans to qualifying businesses for amounts up to 2.5 times the average monthly payroll expenses of the qualifying business. The loan under the PPP was in the form of a note payable to SVB (the “PPP Loan”) originally scheduled to mature in April 2022, which has been classified as Long-term debt on the Consolidated Balance Sheet at December 31, 2020. The PPP Loan incurred interest at a rate of 1.00 % per annum payable monthly. The PPP Loan and accrued interest are forgivable as long as the borrower uses the loan proceeds for eligible purposes. The Company’s PPP Loan and accrued interest were forgiven in January 2021. EIB Loan Facility In August 2020, the Company’s Luxembourg subsidiary entered into a loan agreement with the European Investment Bank (“EIB”) that provided for a total loan facility of EUR 20,000 distributable in three tranches (the “EIB Loan Facility”) and was collateralized by substantially all assets of the Company. In connection with the EIB debt agreement, on August 20, 2020, the Company issued to EIB 454,899 warrants exercisable into the Company’s common stock at a price of $ 0.0001 per share (Note 13) and drew EUR 5,000 under the Tranche A of the EIB Loan Facility on September 23, 2020. Borrowing under Tranche A did not carry an interest component. On October 29, 2020, the Company issued an additional 454,899 warrants to EIB exercisable into the Company’s common stock at a price of $ 0.0001 per share (Note 13) and drew EUR 7,000 under Tranche B of the EIB Loan Facility on November 23, 2020. Borrowing under Tranche B carried interest at EURIBOR plus 5 % per annum ( 4.457 % at December 31, 2020). The borrowings under the EIB Loan Facility were due in full five years from the disbursement date of the relevant tranche, which have been classified in non-current portion of Long-term debt on the Consolidated Balance Sheet at December 31, 2020, with interest payable quarterly in arrears. The prepayment premium on the EIB Loan Facility for Tranches B was 3 % in the first year, 2 % in the second year and 1 % in the third year on the principal amount of the loan repaid. The EIB Loan Facility included covenants that limit the Company’s ability to, among other things, dispose assets, consummate mergers and acquisitions, incur additional indebtedness, grant liens, pay dividends or other distributions without preapproval by EIB. The Company incurred $ 551 of debt issuance costs and issued common stock warrants with an estimated fair value of $ 3,612 at their dates of issuance, the total of which has been presented as a deduction from the carrying amounts of the EIB Loan Facility on the Consolidated Balance sheet and were being amortized to interest expense over the term of the EIB Loan Facility. In May 2021, the outstanding balance of the EIB Loan Facility was paid off. On September 24, 2021, EIB submitted a notice of cancellation for 775,966 EIB warrants (Tranche A). The valuation for settlement of these warrants was based on a 20 -day volume weighted average price (“VWAP”) valuation method using the Company’s publicly traded stock price as of September 30, 2021. On October 18, 2021, EIB submitted a notice of cancellation for the remaining 775,966 EIB warrants (Tranche B). The valuation for settlement of these warrants was based on the VWAP 20-day trading price method as of October 14, 2021, as stated in the notice of cancellation. These warrants were settled in November 2021 for $ 19,942 . Eastward Loan Facility In December 2020, the Company entered into a loan agreement with Eastward Fund Management, LLC (“Eastward”) to borrow up to $ 25,000 (the “Eastward Loan Facility”). On December 30, 2020, the Company drew $ 15,000 of the available loan facility under the Eastward Loan Facility and incurred a $ 300 repayment fee due upon maturity of the Eastward Loan Facility. In conjunction with the Eastward loan agreement, the Company agreed to issue to Eastward up to a total of 314,861 warrants to acquire the Company’s common stock if the full facility was drawn. The Company paid a 1 % commitment fee on the principal amount borrowed. The Company would have paid interest only for the first 24 months this loan was outstanding and then $ 625 plus interest during each of the final 24 months this loan was outstanding. The interest rate for the Eastward Loan Facility was 11.75 % per annum and the total term of this loan was 48 months. The prepayment premium on the Eastward Loan Facility was 3 % during the first two years, 2 % in the third year and 1 % thereafter on the principal amount of the loan repaid. The Eastward Loan Facility included covenants that limit the Company’s ability to, among other things, dispose assets, consummate mergers and acquisitions, incur additional indebtedness, grant liens, pay dividends or other distributions without preapproval by Eastward. On December 30, 2020, the Company issued to Eastward 188,916 warrants exercisable into the Company’s common stock at a price of $ 3.97 per share (Note 13). These warrants have been determined to be accounted for as equity at their estimated fair value at the date of issuance. The Company recorded $ 542 as Additional paid-in capital and presented the related debt issuance costs as a deduction from the carrying amounts of the Eastward Loan Facility on the Consolidated Balance Sheet which are being amortized to interest expense over the term of the Eastward Loan Facility. In May 2021, the outstanding balance of Eastward Loan Facility was paid off. FP Term Loan Facility On April 15, 2021, the Company entered into a credit agreement with FP Credit Partners, L.P., as agent for several lenders (the “FP Lenders”) (as amended on May 17, 2021, the “FP Credit Agreement”), for a $ 70,000 term loan facility (the “FP Term Loan”). Upon funding in May 2021, the FP Term Loan was used (i) to pay off the Company's existing credit facilities with Eastward Fund Management, LLC (the “Eastward Loan Facility”) and EIB (the “EIB Loan Facility”) and (ii) to fund working capital and for general corporate purposes. The Company incurred $ 12,277 of debt issuance costs relating to the FP Term Loan. The FP Lenders had the option to elect to convert a portion of their specified contractual return into common stock of the Company immediately preceding the Merger, at a conversion price specified in the FP Term Loan Agreement by submitting a notice to convert on or prior to the funding date in May 2021 (the “Conversion Election”). If the FP Lenders had exercised the Conversion Election, and the Company did not elect to repay the outstanding principal amount of the FP Term Loan at the Closing, then the interest rate would have increased to 9 % per annum. However, the FP Lenders did not 90 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) make the Conversion Election and so the interest rate would have decreased to 4 % per annum upon the occurrence of the Merger under the original terms of the FP Term Loan Agreement. At the date of the closing of the FP Term Loan Agreement, the contingent interest feature described immediately above was determined to be an embedded derivative asset with an associated debt premium recorded. The fair value of this financial instrument of $ 8,922 was presented net within Long-term Debt on the Consolidated Balance Sheets at June 30, 2021. However, because of the interest rate increase under the FP Amendment (as defined below), the contingent interest embedded derivative asset and associated debt premium were derecognized upon the execution of the FP Amendment. The FP Term Loan includes covenants that limit the Company’s ability to, among other things, make investments, dispose of assets, consummate mergers and acquisitions, incur additional indebtedness, grant liens, enter into transactions with affiliates, pay dividends or other distributions without preapproval by the FP Lenders. The Company was required to maintain minimum unrestricted cash of at least $ 15,000 as of each fiscal quarter end, except for the quarter immediately following the first quarter where the Company reports positive EBITDA, until the closing of a qualifying IPO, which includes the Merger. The Company issued an equity grant of 977,723 shares of New Spire Class A Common Stock with a value of $ 8,065 to the FP Lenders upon funding of the FP Term Loan. On August 5, 2021, the Company and FP Lenders executed an amendment (the “FP Amendment”) to the FP Term Loan to modify certain terms. Among other things, the FP Amendment waived the instance of the noncompliance with provisions for the timely notification of the Company’s election to add accrued unpaid interest as of June 30, 2021 to the outstanding principal. The FP Lenders also waived any default interest that would have applied as a result of the noncompliance. The FP Amendment also reinstated the previously expired Conversion Election and served as formal notice of this election by the FP Lenders. As a result, the FP Lenders received 1,490,769 shares of New Spire Class A Common Stock. In connection with FP’s exercise of the Conversion Election, the interest rate on the FP Term Loan increased to 9 % per annum following the Closing. The Company has determined that the FP Amendment represents an accounting modification of the original FP Term Loan. In connection with the debt modification accounting, no gain or loss was recorded related to the FP Amendment, and the Company capitalized the fair value of $ 14,803 for the 1,490,769 shares of New Spire Class A Common Stock issued to the FP Lenders to be amortized over the remaining life of the FP Term Loan as part of the effective yield of the FP Term Loan beginning in the third quarter of 2021. The FP Term Loan matures on April 15, 2026 and is collateralized by substantially all assets of the Company. The Company has the option to prepay the loan in advance of its final maturity, which was subject to a prepayment penalty under the original terms of the FP Term Loan Agreement that varied between $ 17,500 and $ 49,000 based on the timing and circumstances of the repayment. During the year ended December 31, 2021, the Company recognized within Other (expense) income, net on the Consolidated Statement of Operations, $ 4,954 as a loss on extinguishment of debt, resulting from paying off the EIB Loan Facility and the Eastward Loan Facility, and $ 1,699 as a gain from extinguishment of debt resulting from the U.S. government’s forgiveness of the Company’s loan under the Paycheck Protection Program (“PPP”) established as part of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. Government Loan In November 2021, the Company completed its acquisition of exactEarth and assumed an interest free loan agreement with the Strategic Innovation Fund ("SIF") which was recorded at an amount equal to the proceeds received. As of December 31, 2021 $ 4,464 was included in Long-term debt, non-current on the Consolidated Balance Sheets. Under this agreement and subsequent amendment, the Company is eligible to receive funding for certain expenditures incurred from February 13, 2018 to May 12, 2023 to a maximum of $ 5,701 . The loan is repayable in 15 annual payments beginning February 28, 2026. 9. Convertible Notes Between July 2019 and October 2020, the Company entered into several subordinated convertible note purchase agreements for gross proceeds totaling $ 42,884 (the “2019 and 2020 Convertible Notes”). The 2019 and 2020 Convertible Notes accrue interest at 8 % per annum, compounded quarterly. In May 2021, the Company and the holders of the 2019 and 2020 Convertible Notes agreed to extend the maturity date of all convertible promissory notes outstanding at December 31, 2020 from January 29, 2022 to July 31, 2022 . If not converted, at the option of the holders, all unpaid principal, interest and a balloon payment of 5 % of the principal balance is due on the stated maturity date of July 31, 2022. The accretion of the carrying value of the Convertible Notes for the additional balloon payment is recorded as additional interest expense over the term of the 2019 and 2020 Convertible Notes. In connection with securing the 2019 and 2020 Convertible Notes, the Company incurred debt issuance costs of $ 392 that have been recorded as a deduction of the carrying amount of convertible debt and are being amortized to interest expense over the term of the 2019 and 2020 Convertible Notes. Conversion of the 2019 and 2020 Convertible Notes can be automatic based on events such as an initial public offering (“IPO”) by the Company or voluntary based on events such as a change of control or maturity. From January 2021 through February 2021, the Company issued and sold several convertible promissory notes in the aggregate amount of $ 20,000 (the “2021 Convertible Notes”, and together with the 2019 and 2020 Convertible Notes, the “Convertible Notes”). The 2021 Convertible Notes mature four years from the date of issuance and accrue interest at 8 % per annum, compounded quarterly. In connection with securing the 2021 Convertible Notes, the Company incurred debt issuance costs of $ 62 that have been recorded as a deduction of the carrying amount of convertible debt and are being amortized to interest expense over the life of the 2021 Convertible Notes. Conversion of the 2021 Convertible Notes can be automatic based on events such as an IPO by the Company or voluntary based on events such as a change of control or maturity. 91 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) Immediately prior to the effective time of the Merger, the Convertible Notes were automatically converted into shares of Old Spire Common Stock. The conversion ratio to Old Spire Common Stock for the 2019 and 2020 Convertible Notes was 2.4808 whereas the conversion ratio to Old Spire Common Stock for the 2021 Convertible Notes was 13.6466 . This conversion then gave the right to receive shares of New Spire Class A Common Stock equal to the number of shares of Old Spire Common Stock received from such conversion multiplied exchange ratio of 1.7058 . Total accrued interest on Convertible Notes was $ 0 and $ 5,944 as of December 31, 2021 and 2020, respectively, and included in Convertible notes payable, net on the Consolidated Balance Sheets. After the conversion of the Convertible Notes, the balloon interest accrual of $ 1,698 was reversed in August 2021, which was only payable upon full maturity of the Convertible Notes. The Company recorded $ 2,103 and $ 4,490 of interest expense on the Convertible Notes for the years ended December 31, 2021 and 2020, respectively. 10. Fair Value Measurement The following tables present the Company’s fair value hierarchy for its financial instruments that are measured at fair value on a recurring basis: December 31, 2021 Level 1 Level 2 Level 3 Total Long-term liabilities Public warrants $ 5,060 $ — $ — $ 5,060 Private Placement warrants — 6,422 — 6,422 Contingent Earnout liability — — 10,026 10,026 $ 5,060 $ 6,422 $ 10,026 $ 21,508 December 31, 2020 Level 1 Level 2 Level 3 Total Long-term liabilities EIB warrant liability $ — $ — $ 4,007 $ 4,007 Public Warrants The fair value of the Public Warrants is based on quoted market prices and is classified as a Level 1 financial instrument. Private Placement Warrants The fair value of the Private Warrants is estimated using the Black-Scholes model with inputs that include the Company’s stock price in an actively traded market, making this fair value classified as a Level 2 financial instrument. The other significant assumptions used in the model are the exercise price, expected term, volatility, interest rate, and dividend yield. The table below quantifies the significant inputs used for the Private Warrants: December 31, August 16, 2021 2021 Fair value of the Company’s common stock $ 3.38 $ 9.93 Exercise price $ 11.50 $ 11.50 Risk-free interest rate 1.26 % 0.75 % Expected volatility factor 70.0 % 22.0 % Expected dividend yield — % — % Remaining contractual term (in years) 4.6 5.0 Contingent Earnout Liability The estimated fair value of the contingent earnout liability was determined using a Monte Carlo simulation using a distribution of potential outcomes on a monthly basis over the Earnout Period (Note 3) prioritizing the most reliable information available. The assumptions utilized in the calculation are based on the achievement of certain stock price milestones, including the current price of the Company’s common stock, expected volatility, risk-free rate, expected term and dividend rate. The table below quantifies the significant inputs used for the Contingent Earnout Liability: December 31, August 16, 2021 2021 Fair value of the Company’s common stock $ 3.38 $ 9.93 Risk-free interest rate 1.26 % 0.75 % Expected volatility factor 70.0 % 70.0 % Expected dividend yield — % — % Remaining contractual term (in years) 0.004 0.004 92 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) EIB Warrant Liabilities The warrant liability in the tables above consisted of the fair value of warrants to purchase the Company’s common stock at a price of $ 0.0001 per share (or redeem for cash) and preferred stock and was based on the significant inputs not observable in the market, which prior to the Merger represented a Level 3 measurement within the fair value hierarchy. The Company’s valuation of the stock warrants utilized the Black-Scholes option-pricing model, which incorporates assumptions and estimates to value the stock warrants. Changes in the fair value of the stock warrants are recognized in Other income (expense), net in the Consolidated Statements of Operations. The quantitative inputs utilized in the fair value measurement of the stock warrant liability include the fair value per share of the Company’s common stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield and expected volatility of the price of the Company’s common stock. Prior to the Merger, the Company determined the fair value per share of the Company’s common and preferred stock using a hybrid valuation method that utilized a combination of an option pricing model method and the Probability-Weighted Expected Return Method (“PWERM”). The PWERM is a scenario-based methodology that estimates the fair value of equity securities based upon an analysis of future values, assuming various outcomes. As the probability of the Merger closing increased, the fair value of the EIB warrant liability increased as of the date of the exercise. The risk-free interest rate is based on a treasury instrument for which the term is consistent with the expected life of the warrants. As there was no public market for the Company’s common and preferred stock, the Company determined the expected volatility for warrants granted based on an analysis of reported data for a peer group of companies. After the Merger, the EIB warrant liabilities moved from Level 3 to Level 2, as a result of the Company’s common stock now being traded on the New York Stock Exchange, until the date of settlement. In November 2021, EIB warrants were settled for a cash amount of $ 19,942 . As of December 31, 2021 no EIB warrants remained outstanding. The table below quantifies the inputs used for the EIB warrants: December 31, 2021 2020 Fair value of the Company’s common stock $ — $ 4.19 Risk-free interest rate — % 0.13 % Expected volatility factor — % 68.4 % Remaining contractual term (in years) — 4.7 The following table provides a roll-forward of the aggregate fair values of the Level 3 financial instruments: Contingent Earnout Liability Contingent Interest Embedded Derivative Warrant Liability Fair value at December 31, 2019 $ — $ — $ 197 Issuance of warrants to EIB — — 3,612 Change in fair value — — 198 Fair value at December 31, 2020 — — 4,007 Issuance of warrants to Silicon Valley Bank — — 308 Conversion of Silicon Valley Bank warrants to common stock — — ( 308 ) Exercise of Series C preferred warrants — — ( 891 ) Contingent interest embedded derivative recognized relating to the FP Term Loan agreement — 8,922 — Contingent interest embedded derivative derecognized upon the execution of the FP amendment — ( 8,922 ) — Contingent earnout liability recognized upon the closing of the reverse recapitalization 58,274 — — Change in fair value of contingent earnout liability ( 48,248 ) — — Change in fair value included in other income (expense), net — — 19,466 Transferred to Level 2 upon the closing of the reverse recapitalization — — ( 22,582 ) Fair value at December 31, 2021 $ 10,026 $ — $ — During the year ended December 31, 2021, the Company issued 32,412 warrants at a fair value of $ 308 to Silicon Valley Bank with an exercise price of $ 1.60 . The warrants allow the holder to acquire the Company’s common stock. Silicon Valley Bank exercised the Series C warrants and they were converted into common stock upon the Closing. Certain holders of Series C preferred stock exercised their warrants at a nominal amount to purchase 146,919 shares of the Company’s common stock at a fair value of $ 891 during the year ended December 31, 2021. Based on the recent rounds of debt financing during the years ended December 31, 2021 and 2020 and the terms of those debt agreements, current market conditions and the Company’s financial condition, the carrying amounts for Long-term debt and Convertible notes payable approximate fair value. The carrying amounts reported on the Consolidated Balance Sheets of other assets and liabilities which are considered to be financial instruments approximate fair value based on their short-term nature and current market indicators are classified as Level 3. 93 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) Warrant Equity The following tables present the Company’s fair value hierarchy for its warrants classified as equity that are measured at fair value on a nonrecurring basis: December 31, 2021 Level 1 Level 2 Level 3 Total Equity: Warrants $ — $ — $ 970 $ 970 December 31, 2020 Level 1 Level 2 Level 3 Total Equity: Warrants $ — $ — $ 970 $ 970 The warrant liability in the table above classified as equity was recorded at fair value on the date of issuance and is not remeasured. The fair value of warrants was based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The Company’s valuation of the stock warrants utilized the Black-Scholes option-pricing model, which incorporates assumptions and estimates to value the stock warrants. 11. Commitments and Contingencies Operating Leases The Company leases office facilities and sites for its ground stations under noncancelable operating leases. These leases expire at various dates through 2029 . Rent expense, including ground station leases, for the years ended December 31, 2021 and 2020, was $ 3,313 and $ 2,418 , respectively. Future minimum lease payments under noncancelable operating leases that have initial or remaining noncancelable lease terms greater than one-year as of December 31, 2021 are as follows: Years ending December 31, 2022 $ 2,600 2023 2,389 2024 2,307 2025 2,284 2026 2,275 2027 and thereafter 4,393 $ 16,248 L3Harris Commitment In conjunction with the exactEarth acquisition, the Company acquired the agreement with L3Harris ("L3Harris Agreement") to receive satellite automatic identification system ("S-AIS") data from the L3Harris AppStar payloads on-board Iridium NEXT Constellation, Iridium's Real-Time Second-Generation satellite constellation with 58 AppStar payloads. Under the Amended and Restated L3Harris Agreement dated January 21, 2020 ("A&R L3Harris Agreement"), the Company incurs a fixed fee of $ 358 per month. The A&R L3Harris Agreement concludes on August 7, 2031. Under the A&R L3Harris Agreement, the Company will pay a 30 % share of S-AIS data revenues for the portion of exactEarth annual S-AIS data revenue which is in excess of $ 16,000 . No revenue share was owed to L3Harris under the A&R L3Harris Agreement, with respect to AIS Analytics sales during the year ended December 31, 2021. For the year ended December 31, 2021, $ 417 was recognized in Cost of revenue on the Consolidated Statements of Operations. The following table summarizes the operational fees commitment under the A&R L3Harris Agreement, which includes the fixed payments to L3Harris: Years ending December 31, 2022 $ 4,296 2023 4,296 2024 4,296 2025 4,296 2026 4,296 2027 and thereafter 19,873 $ 41,353 94 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) Litigation At times, the Company is party to various claims and legal actions arising in the normal course of business. Although the ultimate outcome of these matters is not presently determinable, management believes that the resolution of all such pending matters, will not have a material adverse effect on the Company’s business, results of operations, financial condition or cash flows; however, there can be no assurance that the ultimate resolution of these matters will not have a material impact on the Company’s consolidated financial statements in any period. 12. Stock-Based Compensation In December 2012, the Company adopted the 2012 Stock Option and Grant Plan (the “Plan”) under which the Company may grant stock options to purchase shares of its common stock to certain employees and nonemployees of the Company. The 2012 Plan was terminated as of the Closing, and accordingly, no additional awards will be granted under the 2012 Plan thereafter. In connection with the Closing, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan”) and the 2021 Employee Stock Purchase Plan (“2021 ESPP”). The number of shares available for issuance under the 2021 Plan will be increased on the first day of each fiscal year, beginning on January 1, 2022, in an amount equal to the lesser of (i) 23,951,000 shares of New Spire Class A Common Stock, (ii) a number of shares of New Spire Class A Common Stock equal to 5 % of the total number of shares of all of New Spire Class A Common Stock outstanding as of the last day of the immediately preceding fiscal year, or (iii) such number of shares of New Spire Class A Common Stock as the Company’s board of directors or its designated committee may determine no later than the last day of the immediately preceding fiscal year. The 2021 Plan permits the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, and performance awards to employees, directors, or consultants under the 2021 Plan. The 2021 ESPP, the Company can grant stock options to employees to purchase shares of Class A common stock at a purchase price which equals to 85 % of the lower of (i) the fair market value of common stock on the first trading day of the offering period or (ii) the fair market value of common stock on the exercise date. As of December 31, 202 1, 8,983,092 and 3,194,000 shares were available for grant under the 2021 Plan and 2021 ESPP, respectively. The following table summarizes stock option activity under the Plan: Number of Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years) Options outstanding at December 31, 2020 (1) 19,444,178 $ 1.78 7.9 Granted 4,909,367 $ 4.88 Exercised ( 923,200 ) $ 1.40 Forfeited, canceled, or expired ( 2,166,498 ) $ 2.96 Options outstanding at December 31, 2021 21,263,847 $ 2.40 7.2 Vested and expected to vest at December 31, 2021 21,263,847 $ 2.40 7.2 Exercisable at December 31, 2021 12,651,086 $ 1.91 6.3 (1) These amounts have been adjusted to correctly present the prior period activity and options outstanding at December 31, 2020. The Company’s option award quantities and prices prior to the Merger have been retroactively restated to reflect the exchange ratio of approximately 1.8282 established in the Merger as described in Note 3. The aggregate intrinsic value of options exercised as of December 31, 2021 and 2020, was $ 5,339 and $ 68 , respectively. The aggregate fair value of options vested as of December 31, 2021 and 2020 was $ 3,908 and $ 940 , respectively. The Company received $ 1,289 and $ 75 in cash proceeds from options exercised during the years ended December 31, 2021 and 2020, respectively. The weighted-average grant date fair value of options granted for the years ending December 31, 2021 and 2020 was $ 2.92 and $ 2.37 , respectively. The aggregate intrinsic value of options outstanding as of December 31, 2021 and 2020 was $ 26,865 and $ 7,841 , respectively. The aggregate intrinsic value of options exercisable as of December 31, 2021 and 2020 was $ 18,639 and $ 6,446 , respectively. The following table summarizes stock RSU activity under the Plan: Number of Shares Weighted Average Grant Date Fair Value per Share Outstanding as of December 31, 2020 — $ - RSU granted 866,402 $ 4.08 RSU vested — $ - RSU forfeited ( 82,500 ) $ 5.35 Outstanding as of December 31, 2021 783,902 $ 3.94 For RSUs with service-based vesting conditions, the fair value is calculated based upon the Company’s closing stock price on the date of grant, and the stock-based compensation expense is recognized over the four-year vesting period. 95 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) As of December 31, 2021, there was $ 17,709 of total unrecognized compensation expense related to options and RSUs expected to be recognized over a weighted average-period of 3.01 years. The following table summarizes the components of total stock-based compensation expense based on roles and responsibilities of the employees within the Consolidated Statements of Operations: Year Ended December 31, 2021 2020 Cost of revenue $ 432 $ 39 Research and development 2,859 1,000 Sales and marketing 2,307 327 General and administrative 6,036 794 $ 11,634 $ 2,160 The fair value of stock-based compensation for stock options was estimated using the Black-Scholes option-pricing model requiring the use of subjective valuation assumptions and inputs, including the expected stock price volatility. The Company’s options have characteristics significantly different from those of traded options, and changes in input assumptions can materially affect the fair value estimates. Stock-based compensation expense for options is recognized over their respective vesting period, which ranges from one to four years The fair value of all stock-based compensation was estimated using the following assumptions at the date of the grant: Year Ended December 31, 2021 2020 Risk-free interest rate 0.6 % - 1.4 % 0.4 % - 1.5 % Expected volatility factor 66.9 % - 70.0 % 44.9 % - 68.4 % Expected option life 5.0 - 6.08 years 5.1 - 6.8 years Expected dividend yield — — 13. Stockholders’ Equity In August 2021, the Company’s Board of Directors approved the amended and restated certificate of incorporation which states the Company’s authority to issue 1,000,000,000 shares of Class A and 15,000,000 shares of Class B common stock with a par value of $ 0.0001 per share. The total number of shares of Preferred Stock authorized to be issued is 100,000,000 shares with a par value of $ 0.0001 per share. Common Stock Shares of Class A common stock have both economic and voting rights. Shares of Class B common stock have no economic rights, but do have voting rights. Each holder of shares of Class A common stock will be entitled to one vote for each share of common stock held at all meetings of shareholders and each holder of shares of Class B common stock will be entitled to nine votes for each share of common stock held at all meetings of shareholders. Prior to the Closing Date of the merger, voting, dividend and liquidation rights of the holders of the common stock were subject to and qualified by the rights, powers, and preferences of the holders of the preferred stock. The holders of the common stock were entitled to one vote for each share of common stock held at all meetings of shareholders. Dividends were issued to common stockholders only after holders of the preferred stock receive funds legally available in the amount equal to 8 % of the original issuance price per annum on each outstanding share of preferred stock. In the event of liquidation, dissolution, distribution of assets or winding-up of the Company, the holders of common stock would receive payment on a pro rata basis on the number of shares held by each such holder, after the rights of the holders of the preferred stock have been satisfied. Preferred Stock On May 15, 2014, the Company issued 5,506,734 shares of Series A preferred stock with an original issuance price of $ 4.1767 per share for $ 22,900 . In conjunction with the Series A preferred stock financing, convertible promissory notes of $ 8,000 , including principal and accrued interest, were converted into 7,165,177 shares of Series A preferred stock. On June 15, 2015, the Company issued 4,869,754 shares of Series B preferred stock at an issuance price of $ 7.2615 per share for $ 35,228 . Beginning on August 17, 2017, and at various subsequent closings in 2017, the Company issued 5,270,120 shares of Series C preferred stock with an original issuance price of $ 8.7078 per share for $ 45,800 . In conjunction with the Series C preferred stock financing, convertible promissory notes of $ 15,600 , including principal and accrued interest, were converted into 2,236,153 shares of Series C preferred stock. Upon the Closing Date of the merger, all preferred stock were converted into Class A Common Stock of New Spire (Note 3) The following were the rights and privileges of the Company’s preferred stock: Dividends Holders of preferred stock, in preference to the holders of common stock, shall be entitled to receive, but only out of funds legally available thereof, cash dividends at a rate of 8 % of the original issue price per annum on each outstanding share of preferred stock. Such dividends shall be payable only when, as and if declared by the Board of Directors and shall be noncumulative. As long as shares of preferred stock are outstanding, the Company is precluded 96 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) from declaring, paying or setting aside any dividends, or making any other distribution on the common stock, or purchasing, redeeming or otherwise acquiring for value any shares of common stock, unless all dividends on the preferred stock then have been paid or declared and set apart and the holders of the preferred stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of preferred stock in an amount at least equal to the dividend payable on each share. No dividends have been declared or paid out as of the Closing Date. Voting Rights Each holder of outstanding shares of preferred stock shall be entitled to cast the number of votes equal to the number of each share of common stock into which the shares of preferred stock held by each holder are convertible as of the record date for determining shareholders entitled to vote on such matter. Holders of preferred stock shall vote together with the holders of common stock as a single class. Liquidation In the event of any voluntary or involuntary liquidation, the holders of preferred stock shall be entitled to receive, prior and in preference to any distribution of the proceeds of such liquidation to the holders of common stock, an amount per share equal to the sum of the applicable original issue price for the preferred stock, plus declared but unpaid dividends on such share. Upon completion of the distribution to the preferred stockholders, all of the remaining proceeds available for distribution to stockholders shall be distributed among the holders of common stock pro rata based on the number of shares of common stock held by each holder. The Long-term debt and Convertible Notes are senior in order of preference to the Company’s preferred stock and then common stock in the event of a liquidation. Conversion Each share of preferred stock shall be convertible, at the option of the holder, at any time after the date of issuance of such share, into shares of common stock as is determined by dividing the applicable original issue price for such share of preferred stock by the applicable conversion price for such share of preferred stock. The initial conversion price per share for each series of preferred stock shall be the original issue price applicable to such series. Redemption The Company’s preferred stock is not redeemable at either the option of the Company or the holder. Common and Preferred Stock Warrants On September 29, 2017, the Company entered into a development agreement with an investor in the Series C preferred stock financing to develop an enhanced version of the Company’s hosted services which provides access to the Company’s satellite data. In accordance with the terms of the Development Agreement, the Company issued warrants to purchase additional shares of the Series C preferred stock at the original issuance price. The Series C warrants vest upon achievement of certain terms of the contract. As of December 31, 2020, the Series C warrants were fully vested and unexercised. As the Series C warrants were free-standing financial instruments that may require the Company to transfer assets upon exercise, these warrants were classified as liabilities and included in Other long-term liabilities on the Consolidated Balance Sheets at their estimated fair value as of each reporting date. Under the terms of the EIB Loan Facility, on August 20, 2020, the Company issued to EIB 454,899 warrants exercisable into common shares at a price of $ 0.0001 per share. On October 29, 2020, the Company issued to EIB an additional 454,899 warrants exercisable into common shares at a price of $ 0.0001 per share. These common stock warrants were determined to be derivative liabilities due to EIB’s put option and are included in Other long-term liabilities on the Consolidated Balance Sheets at their estimated fair value. As of December 31, 2020, the liability for these warrants was valued at $ 3,810 . These warrants were settled in November 2021 for $ 19,942 (Note 8). Under the terms of the Eastward Loan Facility, on December 30, 2020, the Company issued to Eastward 188,916 warrants exercisable into common shares at a price of $ 3.97 per share. These common stock warrants have been determined to be accounted for as equity classified warrants and the Company recorded $ 542 as Additional paid-in capital in the Statement of Changes in Stockholders Equity (Deficit) for the year ended December 31, 2020 at their estimated fair value as of the date of issuance. The Eastward warrants were settled upon the Closing Date of the Merger (Note 3). 14. Income Taxes Income (loss) before income taxes consisted of the following: Year Ended December 31, 2021 2020 Domestic income (loss) $ ( 17,976 ) $ ( 28,300 ) Foreign loss ( 19,617 ) ( 3,804 ) Loss before income taxes $ ( 37,593 ) $ ( 32,104 ) 97 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) The income tax provision consists of the following: Year Ended December 31, 2021 2020 Current income tax provisions: Federal $ — $ — State — — Foreign — 321 Current income tax provision — 321 Deferred income tax expense: Federal — — State — — Foreign 497 79 Deferred income tax expense 497 79 Total income tax provision $ 497 $ 400 The following table presents a reconciliation of the federal statutory rate of 21 % to effective tax rate: Year Ended December 31, 2021 2020 U.S. federal tax benefit at statutory rate 21.0 % 21.0 % State income taxes, net of federal benefit 5.2 % 3.5 % exactEarth acquisition costs ( 2.7 )% 0.0 % Merger costs ( 3.7 )% 0.0 % Merger contingent fees 4.3 % 0.0 % Contingent earnout liability 23.6 % 0.0 % Non-deductible expenses and other 0.3 % ( 0.9 )% Research and development credits 2.3 % 5.4 % Foreign rate differential 3.9 % ( 0.6 )% Change in valuation allowance, net ( 55.5 )% ( 29.6 )% Effective tax rate ( 1.3 )% ( 1.2 )% The significant components of deferred tax assets (liabilities) are as follows: Year Ended December 31, 2021 2020 Deferred tax assets Net operating loss carryforward $ 75,129 $ 38,529 Research and development credit carryforward 6,002 2,454 Stock-based compensation 599 52 Property and equipment 4,177 367 Intangibles 440 855 Other accruals 2,284 1,073 Gross deferred tax assets 88,631 43,330 Less: Valuation allowance ( 74,558 ) ( 43,330 ) Net deferred tax assets 14,072 — Deferred tax liabilities Intangibles ( 14,072 ) — Foreign property and equipment and intangibles ( 835 ) ( 338 ) Gross deferred tax liabilities ( 14,907 ) ( 338 ) Net deferred tax liabilities $ ( 835 ) $ ( 338 ) As of December 31, 2021, the Company had accumulated undistributed earnings generated by its foreign subsidiaries of $ 10,688 . The Company continues to assert that all its foreign earnings are to be permanent income reinvested and expects future U.S. cash generation to be sufficient to meet future U.S. cash needs. As such, the Company has not recognized a deferred tax liability related to unremitted foreign earnings. Realization of the deferred tax assets is dependent upon the generation of future taxable income, if any, the amount and timing of which are uncertain. The Company could not conclude that it was more likely than not that tax benefits from operating losses would be realized and, accordingly, has provided a full valuation allowance against its United States, Singapore, Luxemburg, Canada, and a portion of their United Kingdom deferred tax assets. The valuation allowance as of December 31, 2020 was $ 43,330 , which increased to $ 74,558 a s of December 31, 2021. The increase in the valuation allowance of $ 31,228 includes $ 10,300 re lated to the acquisition of exactEarth's deferred tax assets subjected to a valuation allowance through purchase accounting. The remaining valuation allowance change of $ 20,882 is mostly related to current year losses. 98 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (In thousands, except shares and per share data, unless otherwise noted) At December 31, 2021, the Company had $ 189,313 and $ 65,512 of federal and state net operating losses available to reduce future taxable income, which will begin to expire in 2032 for federal and state tax purposes. Approximately $ 106,788 of federal net operating loss included above can be carried forward indefinitely. At December 31, 2020, the Company ha d $ 135,134 and $ 38,323 of federal and state net operating losses available to reduce future taxable income. The Company also has federal research and development tax credit carryforward o f $ 3,332 a nd $ 2,454 as of December 31, 2021 and 2020, respectively. These federal tax credits begin to expire in 2039. The federal and state net operating loss carryforwards and certain tax credits may be subject to significant limitations under Section 382 and Section 383, respectively of the Internal Revenue Code of 1986, as amended, and similar provisions under state law. Under those sections of the Internal Revenue Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research and development tax credits, to offset its post-change income or tax liability may be limited. In general, an “ownership change” will occur if there is a cumulative change in ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. The Company has not yet undertaken an analysis of whether the past equity financing transactions constitute an “ownership change” for purposes of Internal Revenue Code Section 382 and Section 383. The Company may experience ownership changes in the future from the sale of its equity or business combination transactions. As of December 31, 2021, the Company had $ 12,063 , $ 2,685 , $ 16,793 and $ 188 of Luxembourg, Singapore, Canada and United Kingdom foreign net operating losses available to reduce future taxable income, which will begin to expire in 2035 for Luxembourg and in 2029 for Canada, while Singapore and United Kingdom have indefinite carry forward period. As of December 31, 2020, the Company had $ 6,227 , $ 2,336 , $ 16,398 and $ 192 of Luxembourg, Singapore, Canada and United Kingdom foreign net operating losses available to reduce future taxable income. Unrecognized Tax Benefits The Company does not have any significant uncertain tax positions. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties, if any, in general and administrative expense on the accompanying Consolidated Statements of Operations. The Company is subject to taxation in the United States, Canada, Luxembourg, Singapore and the United Kingdom. The Company has not been audited by the Internal Revenue Service or any state or foreign tax authority. The Company is subject to audit by the Internal Revenue Service for income tax returns filed since inception due to net operating loss carryforwards. The Company is subject to audit in Singapore and the United Kingdom from tax years 2017 and 2018, respectively, and in Luxembourg from tax year 2019. 15. Net Loss per Share The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders: Year Ended December 31, 2021 2020 Numerator: Net loss $ ( 38,090 ) $ ( 32,504 ) Denominator: Weighted-average shares used in computing basic and diluted net loss per share 62,137,434 17,610,405 Basic and diluted net loss per share $ ( 0.61 ) $ ( 1.85 ) The Company has two types of common stock, Class A and Class B. Class B common stock has no economic rights, therefore has been excluded from the computation of basic and diluted net loss per share. The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the years ended December 31, 2021 and 2020 because including them would have had an anti-dilutive effect: Year Ended December 31, 2021 2020 Stock options to purchase common stock 21,263,847 19,676,350 Public and private warrants 18,099,992 — RSU Shares 783,902 — Convertible preferred stock (if-converted) — 42,726,773 Warrants for the purchase of Series C convertible preferred stock (if-converted) — 146,919 Warrants for the purchase of common stock — 2,328,009 Convertible notes (if-converted) — 34,219,450 40,147,741 99,097,501 99 16. Restatement of Previously Issued Unaudited Condensed Consolidated Financial Statements As described in Note 2, the Company determined it necessary to restate the accompanying consolidated annual financial statements to correct the misstatements in the periods impacted. The following tables represent restatements to our unaudited condensed consolidated financial statements for quarterly periods in fiscal 2021 that are impacted by the errors identified in Note 2. As Previously Reported Adjustments As Restated Condensed Consolidated Statements of Operations: Three Months Ended September 30, 2021 Revenue $ 9,561 $ - $ 9,561 Gross profit $ 4,223 $ - $ 4,223 Loss from operations $ ( 17,372 ) $ - $ ( 17,372 ) Change in fair value of contingent earnout liability $ 1,265 $ ( 23,407 ) $ ( 22,142 ) Total other income (expense), net $ ( 15,060 ) $ ( 23,407 ) $ ( 38,467 ) Loss before income taxes $ ( 32,432 ) $ ( 23,407 ) $ ( 55,839 ) Net loss $ ( 32,701 ) $ ( 23,407 ) $ ( 56,108 ) Basic and diluted net loss per share $ ( 0.49 ) $ ( 0.34 ) $ ( 0.83 ) Condensed Consolidated Balance Sheet: September 30, 2021 Total current assets $ 276,343 $ - $ 276,343 Total assets $ 303,563 $ - $ 303,563 Total current liabilities $ 45,483 $ - $ 45,483 Contingent earnout liability $ 77,131 $ 3,286 $ 80,417 Total liabilities $ 200,274 $ 3,286 $ 203,560 Additional paid-in capital $ 393,872 $ 20,121 $ 413,993 Accumulated deficit $ ( 290,407 ) $ ( 23,407 ) $ ( 313,814 ) Total stockholders’ equity (deficit) $ 103,289 $ ( 3,286 ) $ 100,003 Consolidated Statements of Operations: Three Months Ended December 31, 2021 Revenue $ 14,985 $ - $ 14,985 Gross profit $ 8,658 $ - $ 8,658 Loss from operations $ ( 24,034 ) $ - $ ( 24,034 ) Change in fair value of contingent earnout liability $ 65,761 $ 4,629 $ 70,390 Total other income (expense), net $ 83,511 $ 4,629 $ 88,140 Income before income taxes $ 59,477 $ 4,629 $ 64,106 Net income $ 59,949 $ 4,629 $ 64,578 Basic net income per share $ 0.44 $ 0.04 $ 0.48 Diluted net income per share $ 0.38 $ 0.03 $ 0.41 Consolidated Balance Sheet: December 31, 2021 Total current assets $ 131,574 $ - $ 131,574 Total assets $ 290,194 $ - $ 290,194 Total current liabilities $ 24,920 $ - $ 24,920 Contingent earnout liability $ 11,369 $ ( 1,343 ) $ 10,026 Total liabilities $ 101,330 $ ( 1,343 ) $ 99,987 Additional paid-in capital $ 418,575 $ 20,121 $ 438,696 Accumulated deficit $ ( 230,458 ) $ ( 18,778 ) $ ( 249,236 ) Total stockholders’ equity (deficit) $ 188,864 $ 1,343 $ 190,207 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.