Spire Global, Inc. 10-K/A

Item 9A. Controls and Procedures E valuation of Disclosure Controls and Procedures Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed 100 or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Our principal executive officer and principal financial officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule(s) 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2021. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of December 31, 2021 because of the material weaknesses in internal control over financial reporting described below. In designing and evaluating disclosure controls and procedures, our management recognizes that any system of controls, however well designed and operated, can provide only reasonable assurance, and not absolute assurance, that the desired control objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals in all future circumstances. Accordingly, our disclosure controls and procedures must be designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Management's Report on Internal Control over Financial Reporting This Form 10-K/A does not include a report of management’s assessment regarding internal control over financial reporting, or an attestation report of our independent registered public accounting firm, as allowed by the SEC for reverse acquisitions between an issuer and a private operating company when it is not possible to conduct an assessment of the private operating company’s internal control over financial reporting in the period between the consummation date of the reverse acquisition and the date of management’s assessment of internal control over financial reporting (pursuant to Section 215.02 of the SEC Division of Corporation Finance’s Regulation S-K Compliance & Disclosure Interpretations). As discussed elsewhere in this Form 10-K/A, we completed the Merger on August 16, 2021. Prior to the Merger, we were a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more operating businesses. As a result, previously existing internal controls are no longer applicable or comprehensive enough as of the assessment date as our operations prior to the Merger were insignificant compared to those of the consolidated entity post-Merger. The design of internal control over financial reporting for Spire Global, Inc. post-Merger has required and will continue to require significant time and resources from management and other personnel. As a result, management was unable, without incurring unreasonable effort or expense to conduct an assessment of our internal control over financial reporting as of December 31, 2021. Material Weaknesses in Internal Control over Financial Reporting We have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses are as follows: We did not design and maintain an effective control environment commensurate with the financial reporting requirements of a public company. Specifically, we lacked a sufficient number of professionals with an appropriate level of internal controls and accounting knowledge, training, and experience to appropriately analyze, record and disclose accounting matters timely and accurately. Additionally, the lack of a sufficient number of professionals resulted in an inability to consistently establish appropriate authorities and responsibilities in pursuit of our financial reporting objectives, as demonstrated by, amongst other things, insufficient segregation of duties in our finance and accounting functions. This material weakness contributed to the following additional material weaknesses: i. We did not design and maintain an effective risk assessment process at a precise enough level to identify new and evolving risks of material misstatement in our financial statements. Specifically, changes to existing controls or the implementation of new controls have not been sufficient to respond to changes to the risks of material misstatement in the financial statements. ii. We did not design and maintain effective controls over the segregation of duties related to journal entries and account reconciliations. Specifically, certain personnel have the ability to both (a) create and post journal entries within our general ledger system, and (b) prepare and review account reconciliations; The material weaknesses above resulted in certain immaterial audit adjustments, which were recorded prior to the issuance of the consolidated financial statements as of and for the year ended December 31, 2020. Additionally, these material weaknesses could result in a misstatement of substantially all of our accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. iii. We did not design and maintain effective controls related to the identification of and accounting for certain non-routine, unusual or complex transactions, including the proper application of GAAP to such transactions. Specifically, we did not design and maintain: 101 a. controls to timely identify and account for warrant instruments, which resulted in the restatement of the previously issued financial statements of NavSight related to adjustments to warrant liabilities and equity; b. controls to account for business combinations, including the associated valuation estimates and the completeness and accuracy of the opening balance sheet, which did not result in a misstatement to our consolidated financial statements; and c. controls to timely identify and account for the fair value of the contingent earnout liability, which resulted in an error in the fair value of the contingent earnout liability in our previously issued consolidated financial statements as of and for the year ended December 31, 2021 that are being restated in this Form 10-K/A and in the restatement of the Company’s unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2021. Additionally, these material weaknesses could result in a misstatement of substantially all of our accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. iv. We did not design and maintain effective controls over certain information technology (“IT”) general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain: a. user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to appropriate company personnel; b. program change management controls for our financial systems to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized, and implemented appropriately; and c. testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements. These IT deficiencies did not result in a misstatement to the financial statements, however, the deficiencies, when aggregated, could impact our ability to maintain effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected. Accordingly, management has determined these deficiencies in the aggregate constitute a material weakness. Remediation Efforts on Material Weaknesses in Internal Control over Financial Reporting In response to the material weaknesses identified, we have implemented changes to our internal control over financial reporting throughout 2021, and will begin or continue performing the following remedial actions in 2022: Control Environment and Hiring Key Personnel Our remediation actions related to improving our control environment and hiring key personnel include the following: • In Q4 2021, the Company has hired additional accounting and IT personnel, to bolster its reporting, technical accounting, and IT capabilities to a level commensurate with the internal control requirements of a public company. Additionally, the Company has realigned and doubled its accounting group and established a managerial position to manage financial systems. • The Company continues to monitor personnel requirements and increase headcount and roles where needed to address corporate control structure, in addition to providing necessary ongoing training to its finance and accounting personnel. Risk Assessment Our remediation actions related to improving the controls related to our risk assessment process include the following: • The Company engaged a third party to assist in designing and implementing a risk assessment process to identify and evaluate changes in the Company’s business and the impact on its internal controls. • The Company conducted a financial risk assessment to identify key business processes and establish internal materiality thresholds. The Company performed walkthroughs of all key processes, identified key controls, and developed narratives describing risk points, processes, and corresponding controls. A Risk and Control Matrix (RCM) has been created that will serve as the basis for the 2022 testing program. • The Company engaged a third party to complete an initial Enterprise Risk Assessment. The Company identified key risks for technology-based organizations and interviewed management team members and the Chair of the Audit Committee. The Company reviewed responses received, compiled a list of identified risks, and developed heat maps to depict the likelihood, impact, and preparedness of the Company to respond to the 102 identified risks. During 2022, actions plan will be developed to address the risks, a testing plan will be created and executed, and results will be reviewed with management. Segregation of Duties Our remediation actions related to improving the controls related to segregation of duties include the following: • The Company has designed and implemented controls to prevent or detect a material misstatement resulting from certain personnel with the ability to create and post journal entries within the Company’s general ledger system. Management reviews all journal entries initiated and approved to ensure appropriate segregation of duties. These controls will be performed until automated controls are designed and operating effectively to ensure appropriate segregation of duties. • The Company has designed and implemented controls to ensure appropriate segregation of duties related to account reconciliation preparation and review. • In Q4 2021, the Company engaged a third party to complete an initial Segregation of Duties Assessment. In 2022, the Company will complete a thorough segregation of duties analysis across all processes and locations, including establishing appropriate authorities and responsibilities. Non-routine, unusual or complex transactions Our remediation actions related to improving our controls related to accounting for non-routine, unusual, or complex transactions include the following: • The Company will design and implement controls to timely identify and account for non-routine, unusual or complex transactions, including controls over the preparation and review of accounting memoranda addressing these matters. The Company will incorporate testing of controls over non-routine, unusual or complex transactions into its overall testing program during 2022. Since the Merger occurred in August 2021, warrant instruments are accounted for in accordance with the Company’s accounting policy which ensures proper application of GAAP to such transactions. IT General Controls Our remediation actions related to improving our IT general controls include the following: • Management designed and maintained testing and approval controls for program development to ensure that the software is aligned with business and IT requirements, which operated for a newly implemented application in 2021. This includes final approval and testing of the software prior to migration to production. • The Company will design and implement IT general controls, including controls over the review and update of user access rights and privileges and change management. As of March 2022, the Company has mapped a revised series of IT-related control activities for our Enterprise Resource Planning (ERP) system, with the goal to execute ITGCs over our ERP system, and then design and implement similar controls for the remaining of our financially relevant applications. While these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period, we are committed to continuous improvement and will continue to diligently review our internal control over financial reporting. The material weaknesses will not be considered remediated until management completes the design and implementation of the measures described above, until the controls operate for a sufficient period of time, and until management has concluded, through testing, that these controls are effective. Inherent Limitations on Effectiveness of Controls Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. 103 Changes in Internal Control over Financial Reporting We are taking actions to remediate the material weakness in our internal control over financial reporting. As described above, there were changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this item, including information about our Directors, Executive Officers and Audit Committee and Code of Business Conduct and Ethics, is incorporated by reference to the definitive Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the SEC, no later than 120 days after December 31, 2021. Item 11. Executive Compensation The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2021. Item 12. Security Ownership of Certain Beneficial Owners and Management, and Related Stockholder Matters The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2021. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2021. Item 14. Principal Accounting Fees and Services The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2021. PART IV Item 15. Exhibi ts, Financial Statement Schedules The following documents are filed as part of this Annual Report on Form 10-K: (1) Consolidated Financial Statements: Our consolidated financial statements are listed in the “Index to consolidated financial statements” under Part II, Item 8 of this Annual Report on Form 10-K. (2) Financial Statement Schedules: All financial statement schedules are omitted because the information called for is not required or is shown in the consolidated financial statements or in the notes thereto. (3) Exhibits: The documents listed below are incorporated by reference or are filed with this Annual Report on Form 10-K, in each case as indicated below. 104 Exhibit Index Incorporated by Reference Exhibit Number Description Form File No. Exhibit Filing Date 2.1 Business Combination Agreement, dated as of February 28, 2021, by and among the registrant, NavSight Merger Sub Inc., Spire Global Subsidiary, Inc., Peter Platzer, Theresa Condor, Joel Spark, and Jeroen Cappaert. S-4/A 333-256112 Annex A July 16, 2021 2.2 Arrangement Agreement and Plan of Arrangement, dated as of September 13, 2021, by and among the registrant, exactEarth Ltd. and Spire Global Canada Acquisition Corp., as amended October 15, 2021. 10-Q 001-39493 2.1 November 10, 2021 3.1 Certificate of Incorporation of Spire Global, Inc. S-1 333-259733 3.1 September 23, 2021 3.2 Bylaws of Spire Global, Inc. S-1 333-259733 3.2 September 23, 2021 4.1 Specimen Class A Common Stock Share Certificate of the registrant. 8-K 001-39493 4.1 August 20, 2021 4.2 Warrant Agreement, dated as of September 9, 2020, by and between American Stock Transfer & Trust Company, LLC and the registrant. S-1/A 333-240100 4.4 August 5, 2020 4.3 Description of Securities. 10-K 001-39493 4.3 March 30, 2022 10.1+ Spire Global, Inc. 2021 Equity Incentive Plan and forms of agreement thereunder. S-1 333-259733 10.3 September 23, 2021 10.2+ Spire Global, Inc. 2021 Employee Stock Purchase Plan. S-1 333-259733 10.4 September 23, 2021 10.3 Loan and Security Agreement by and among Spire, certain lenders party thereto, FP Credit Partners, L. P., as agent for the lenders, and certain of Spire’s subsidiaries as guarantors, dated as of April 15, 2021, with Amendment No. 1 dated as of May 17, 2021 and Amendment No. 2 dated as of August 5, 2021. S-1 333-259733 10.17 September 23, 2021 10.4+ Outside Director Compensation Policy of Spire Global, Inc., as amended November 9, 2021, and election forms thereunder. 10-Q 001-39493 10.6 November 10, 2021 10.5 Investor Rights Agreement, dated as of February 28, 2021, by and among the registrant, Six4 Holdings, LLC, Gilman Louie, Henry Crumpton, Jack Pearlstein, Robert Coleman, William Crowell, Peter Platzer, Theresa Condor, William Porteous and Stephen Messer. S-4/A 333-256112 Annex I July 16, 2021 10.6+ Long Term Employment Contract, dated as of January 1, 2022, by and between Spire Global Luxembourg Sàrl and Peter Platzer. 10-K 001-39493 10.6 March 30.2022 10.7+ Expatriation Letter, dated as of December 12, 2017, by and between Spire Global, Inc. and Peter Platzer. S-4/A 333-256112 10.10 July 16, 2021 10.8+ Tax Equalization Policy, dated as of December 12, 2017, by and between Spire Global, Inc. and Peter Platzer. S-4/A 333-256112 10.11 July 16, 2021 10.9+ Form of Offer Letter by and between Spire Global, Inc. and each of Thomas Krywe and Ananda Martin. S-4/A 333-256112 10.12 July 16, 2021 10.10+ Offer Letter, dated as of July 19, 2017, by and between Spire Global, Inc. and Keith Johnson. S-4/A 333-256112 10.13 July 16, 2021 10.11+ Long Term Employment Contract, dated as of January 1, 2018, by and between Spire Global Luxembourg Sàrl and Theresa Condor. S-4/A 333-256112 10.15 July 16, 2021 10.12+ Form of Spire Global, Inc. 2021 Commission Plan. S-4/A 333-256112 10.16 July 16, 2021 10.13+ Form of Spire Global, Inc. 2021 Salary Adjustment and Annual Performance Bonus. S-4/A 333-256112 10.17 July 16, 2021 10.14+ Form of Change in Control and Severance Agreement of Spire Global, Inc. S-4/A 333-256112 10.18 July 16, 2021 10.15 Contribution Agreement by and between Her Majesty the Queen in Right of Canada and exactEarth Ltd. dated as of October 18, 2018, with Amendment No. 1 dated as of November 22, 2021. 10-K 001-39493 10.15 March 30, 2022 21.1 Subsidiaries of Registrant. 10-K 001-39493 21.1 March 30, 2022 23.1 Consent of PricewaterhouseCoopers LLP. 24.1 Power of Attorney (included on signature page). 10-K 001-39493 24.1 March 30, 2022 31.1 Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101 The following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders’ Deficit, (v) Consolidated Statements of Cash Flows, and (vi) Notes to consolidated financial statements. 104 Cover Page Interactive Data File (contained in Exhibit 101) + Indicates management contract or compensatory plan. 105 Item 16. Form 10-K Summary None. 106 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized . Spire Global, Inc. Date: November 7, 2022 By: /s/ Peter Platzer Peter Platzer Chief Executive Officer and Director (Principal Executive Officer) Date: November 7, 2022 By: /s/ Thomas Krywe Thomas Krywe Chief Financial Officer (Principal Financial and Accounting Officer) 107