Spire Global, Inc. 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk Foreign currency exchange risk 66 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 results of operations 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 fiscal year 2022 and fiscal year 2021, we had a loss due to changes in foreign currency exchange rates of $0.9 million and $1.9 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 in our reported fiscal year 2022 pre-tax loss of approximately $2.6 million. Interest rate sensitivity We had cash and cash equivalents totaling $47.2 million and short-term marketable securities of $23.1 million as of December 31, 2022. These amounts were held primarily in demand deposit accounts and short-term marketable securities. The cash and cash equivalents are held for working capital purposes or strategic investment purposes. We are exposed to market risks related to fluctuations in interest rates related to the Blue Torch Credit Facility. The Blue Torch Credit Facility accrues interest at a floating rate, to be based, at our election, on either a reference rate or a 3-month Term SOFR rate (subject to a 1.0% floor), plus an interest rate margin of 7.0% for reference rate borrowings and 8.0% for 3-month Term SOFR borrowings, plus an incremental Term SOFR margin of 0.26161% . Accordingly, increases in SOFR could increase our interest payments under the Blue Torch Credit Facility. For example, a hypothetical increase of 100 basis points in the interest rate of the Blue Torch Credit Facility would have an approximately $1.2 million impact on an annual basis on our results of operations. The SIF loan is interest free. Inflation Risk We are exposed to inflation risk. Inflationary factors, such as increases in component parts, labor and other overhead expenses, could impair our operating results. Although there has been a significant increase in inflation in the recent period, it has not had a substantial impact on our results of operations for fiscal years 2022 or 2021. However, a higher rate of inflation in the future may have a negative impact on our operational and capital expenditures which we may not be able to pass along as cost increases to our customers. 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, 2022 and 2021 69 Consolidated Statements of Operations for the years ended December 31, 2022 and 2021 70 Consolidated Statements of Comprehensive Loss for the years ended December 31, 2022 and 2021 71 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2022 and 2021 72 Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021 75 Notes to Consolidated Financial Statements 78 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, 2022 and 2021, 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, 2022 and 2021, 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. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases as of January 1, 2022. 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. 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 15, 2023 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, 2022 2021 Assets Current assets Cash and cash equivalents $ 47,196 $ 109,256 Marketable securities 23,084 — Accounts receivable, net (including allowance of $ 395 and $ 339 as of December 31, 2022 and 2021, respectively) 13,864 10,163 Contract assets 3,353 2,084 Other current assets 9,279 10,071 Total current assets 96,776 131,574 Property and equipment, net 53,752 48,704 Operating lease right-of-use assets 11,687 — Goodwill 49,954 53,627 Customer relationships 20,814 24,388 Other intangible assets 13,967 19,765 Other long-term assets, including restricted cash 9,562 12,136 Total assets $ 256,512 $ 290,194 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 4,800 $ 5,824 Accrued wages and benefits 4,502 5,646 Contract liabilities, current portion 15,856 8,627 Other accrued expenses 8,210 4,823 Total current liabilities 33,368 24,920 Long-term debt 98,475 51,124 Contingent earnout liability 349 10,026 Deferred income tax liabilities 771 835 Warrant liability 1,831 11,482 Operating lease liabilities, net of current portion 10,815 — Other long-term liabilities 780 1,600 Total liabilities 146,389 99,987 Commitments and contingencies (Note 11) Stockholders’ equity Common stock, $ 0.0001 par value, 1,000,000,000 Class A and 15,000,000 Class B shares authorized, 143,679,385 Class A and 12,058,614 Class B shares issued and outstanding at December 31, 2022; 139,096,000 Class A and 12,058,614 Class B shares issued and outstanding at December 31, 2021 16 15 Additional paid-in capital 455,751 438,696 Accumulated other comprehensive (loss) income ( 6,997 ) 732 Accumulated deficit ( 338,647 ) ( 249,236 ) Total stockholders’ equity 110,123 190,207 Total liabilities and stockholders’ equity $ 256,512 $ 290,194 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, 2022 2021 Revenue $ 80,268 $ 43,375 Cost of revenue 40,327 18,720 Gross profit 39,941 24,655 Operating expenses: Research and development 35,153 31,615 Sales and marketing 28,502 20,387 General and administrative 44,831 40,479 Loss on decommissioned satellites 549 — Total operating expenses 109,035 92,481 Loss from operations ( 69,094 ) ( 67,826 ) Other income (expense): Interest income 948 23 Interest expense ( 13,955 ) ( 11,417 ) Change in fair value of contingent earnout liability 9,677 48,248 Change in fair value of warrant liabilities 8,757 ( 1,600 ) Loss on extinguishment of debt ( 22,510 ) ( 3,255 ) Other expense, net ( 2,912 ) ( 1,766 ) Total other (expense) income, net ( 19,995 ) 30,233 Loss before income taxes ( 89,089 ) ( 37,593 ) Income tax provision 322 497 Net loss $ ( 89,411 ) $ ( 38,090 ) Basic and diluted net loss per share $ ( 0.64 ) $ ( 0.61 ) Weighted-average shares used in computing basic and diluted net loss per share 139,879,423 62,137,434 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, 2022 2021 Net loss $ ( 89,411 ) $ ( 38,090 ) Other comprehensive gain (loss): Foreign currency translation adjustments ( 7,696 ) 1,714 Net unrealized loss on investments (net of tax) ( 33 ) — Comprehensive loss $ ( 97,140 ) $ ( 36,376 ) 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) 72 Series A Preferred Stock Series B Preferred Stock Series C Preferred Stock Common Stock Additional Paid Accumulated Other Comprehensive Accumulated Total Stockholders' Shares (1) Amount Shares (1) Amount Shares (1) Amount Shares (1) Amount Capital Income (Loss) Deficit Equity (Deficit) 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 Credit Partners, L.P. — — — — — — 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 PS Series A to common stock ( 21,615,723 ) ( 52,809 ) — — — — 21,615,723 2 52,807 — — — Conversion of PS Series B to common stock — — ( 8,306,818 ) ( 35,228 ) — — 8,306,818 1 35,227 — — — Conversion of PS Series C to common stock — — — — ( 12,951,095 ) ( 66,113 ) 12,951,095 1 66,112 — — — Conversion of convertible notes to common stock — — — — — — 37,034,620 4 70,929 — — 70,933 Issuance of common stock upon the reverse recapitalization, net of issuance costs — — — — — — 44,288,129 4 206,304 — — 206,308 Contingent earnout liability recognized upon the closing of the reverse recapitalization — — — — — — — — ( 58,274 ) — — ( 58,274 ) Net loss — — — — — — — — — — ( 38,090 ) ( 38,090 ) Foreign currency translation adjustments — — — — — — — — — 1,714 — 1,714 Balance, December 31, 2021 — $ — — $ — — $ — 151,154,614 15 438,696 732 ( 249,236 ) 190,207 Exercise of stock options 503,805 — 806 — — 806 Release of Restricted Stock Units 242,486 — ( 70 ) — — ( 70 ) 73 Issuance of common stock under Employee Stock Purchase Plan 525,808 — 623 — — 623 Stock compensation expense — — 11,491 — — 11,491 Conversion of warrants to common stock 3,311,286 1 4,205 — — 4,206 Net loss — — — — ( 89,411 ) ( 89,411 ) Foreign currency translation adjustments — — — ( 7,696 ) — ( 7,696 ) Net unrealized loss on investments (net of tax) — — — ( 33 ) — ( 33 ) Balance, December 31, 2022 155,737,999 $ 16 $ 455,751 $ ( 6,997 ) $ ( 338,647 ) $ 110,123 (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. The accompanying notes are an integral part of these consolidated financial statements. 74 Spire Global, Inc. Consolidated Statements of Cash Flows (In thousands) 75 Year Ended December 31, 2022 2021 Cash flows from operating activities Net loss $ ( 89,411 ) $ ( 38,090 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 18,341 8,509 Stock-based compensation 11,491 11,634 Amortization of operating lease right-of-use assets 2,344 — Accretion on carrying value of convertible notes — 2,103 Amortization of debt issuance costs 3,781 3,876 Change in fair value of warrant liability ( 8,757 ) 1,600 Change in fair value of contingent earnout liability ( 9,677 ) ( 48,248 ) Deferred income tax liabilities 23 497 Loss on impairment of assets and decommissioned satellites 784 91 Loss on extinguishment of debt 22,271 2,277 Other, net ( 22 ) — Changes in operating assets and liabilities: Accounts receivable, net ( 4,180 ) ( 5,010 ) Contract assets ( 1,364 ) ( 1 ) Other current assets 324 ( 6,565 ) Other long-term assets 1,852 13 Accounts payable ( 1,808 ) 2,291 Accrued wages and benefits ( 923 ) 1,751 Contract liabilities 7,776 161 Other accrued expenses 1,012 2,917 Operating lease liabilities ( 1,632 ) — Other long-term liabilities ( 45 ) 2,208 Net cash used in operating activities ( 47,820 ) ( 57,986 ) Cash flows from investing activities Purchases of short-term investments ( 40,213 ) — Maturities of short-term investments 17,300 — Purchase of property and equipment ( 18,915 ) ( 15,421 ) Investment in intangible assets — ( 166 ) Payments made in connection with business acquisition, net — ( 103,892 ) Net cash used in investing activities ( 41,828 ) ( 119,479 ) 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 100,973 70,515 Payments on long-term debt ( 71,512 ) ( 29,628 ) Proceeds from issuance of convertible notes payable — 20,000 Payments on redemption of warrants — ( 19,942 ) Payments of debt issuance costs ( 4,516 ) ( 4,717 ) Proceeds from exercise of stock options 806 1,289 Proceeds from employee stock purchase plan 622 — Net cash provided by financing activities 26,373 270,534 Effect of foreign currency translation on cash, cash equivalent and restricted cash 1,199 590 Net (decrease) increase in cash, cash equivalents and restricted cash ( 62,076 ) 93,659 Cash, cash equivalents and restricted cash Beginning of year 109,645 15,986 End of year $ 47,569 $ 109,645 Supplemental disclosure of cash flow information Cash paid for interest $ 9,438 $ 3,130 Income taxes paid $ 210 $ 173 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 Conversion of warrants to Class A common stock $ 4,205 $ — Exercise of Series C preferred stock warrants $ — $ 891 Property and equipment purchased but not yet paid $ 957 $ 687 Issuance of stock warrants with long-term debt (Note 8) $ 3,579 $ 308 76 The accompanying notes are an integral part of these consolidated financial statements. 77 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (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), Spire Global Australia Pty Ltd. (Australia), and Spire Global Canada Acquisition Corp. (Canada). Spire Global Canada Acquisition Corp. is the sole owner of exactEarth Ltd. (Canada) ("exactEarth"), which in turn is the sole owner of exactEarth Europe Ltd. (England and Wales). The Company currently operates offices in nine locations: San Francisco (U.S.), Boulder (U.S.), Vienna (U.S.), Glasgow (U.K.), Oxfordshire (U.K.), Luxembourg, Cambridge (U.K.), Ontario (Canada), and Singapore. On August 16, 2021 (the “Closing Date”), Spire Global Subsidiary, Inc. (formerly known as Spire Global, Inc.) (“Legacy 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 “Legacy Spire Founders,” and such agreement, the “Merger Agreement”). As a result, NavSight Merger Sub merged with and into Legacy Spire, the separate corporate existence of NavSight Merger Sub ceased, and Legacy Spire continued as the surviving corporation and a wholly owned subsidiary of NavSight (the “Merger,” and such consummation, the “Closing”). NavSight then changed its name to Spire Global, Inc. (together with its consolidated subsidiary, “New Spire” or “Spire”) and Legacy Spire changed its name to Spire Global Subsidiary, Inc. 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 (the "Acquisition"). The Acquisition was accounted for as a business combination. On September 14, 2022, the Company entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Canaccord Genuity LLC, as sales agent (the “Agent” or “Canaccord”). In accordance with the terms of the Equity Distribution Agreement, the Company may offer and sell its Class A common stock, having an aggregate offering price of up to $ 85,000 from time to time through the Agent pursuant to a registration statement on Form S-3, which became effective on September 26, 2022. There had been no sales under the Equity Distribution Agreement as of December 31, 2022. 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 "SEC"). 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 years ended December 31, 2022 and 2021 include the accounts of Spire Global, Inc. (i.e. former NavSight) and its wholly-owned subsidiary, Legacy 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 (as defined in Note 3) with the exception of authorized shares. Issued and outstanding shares and warrants as disclosed herein have been adjusted to reflect the Exchange Ratio. 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, 2022, net loss was $ 89,411 and cash used in operations was $ 47,820 . 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 $ 47,196 , excluding restricted cash of $ 373 , and investment in marketable securities of $ 23,084 as of December 31, 2022. The Company believes that it will have sufficient working capital to operate for a period of at least one year from the issuance of the December 31, 2022 consolidated financial statements. 78 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) 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. M acroeconomic, Geopolitical and COVID-19 Impact Over the past two years, the Company has been impacted by the macroeconomic environment, such as fluctuations in foreign currencies, the COVID-19 pandemic, increasing interest rates and the Russian invasion of Ukraine. A strong U.S. dollar relative to the Company's foreign subsidiaries' local functional currency for most of 2022 negatively impacted the Company’s revenue, since approximately one-third of the Company’s sales are transacted in foreign currencies, though it positively impacted the Company’s expenses, since a majority of the Company’s employees reside in countries outside of the United States. The COVID-19 pandemic has caused existing or potential customers to re-evaluate their decision to purchase the Company's offerings, at times resulting in additional customer discounts, extended payment terms, longer sales cycles, and a few contract cancellations. The pandemic also led to reduced company-wide travel, resulted in a move to a hybrid work model, created a more difficult hiring process and at times resulted in employee attrition. Increasing interest rates in 2022 resulted in higher interest expenses, as the Company’s credit facility is based on a floating interest rate. The Russian invasion of Ukraine and the continued conflict created additional global sanctions, which at times caused scheduling shifts or launch cancellations by third-party satellite launch providers, which has delayed revenue recognition of certain sales contracts. If any of these factors continue or worsen, and/or if new macroeconomic or geopolitical issues arise, the Company's results and financial condition could be further negatively impacted. The Company cannot predict the timing, strength, or duration of any economic slowdown, downturn, instability, or recovery, generally or within any particular industry or geography. Any downturn of the general economy or industries in which the Company operates would adversely affect its business, financial condition, and results of operations. 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, and 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 Acquisition, 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 in the reporting periods. Foreign Currency Translation The Company’s foreign subsidiaries, which have defined their functional currency as their local currency, translate their assets and liabilities into 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, net in the consolidated statements of operations. 79 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) 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 prices in active markets for identical assets or liabilities. 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, Marketable Securities 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 Company invests in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. The Company’s investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer. The Company’s investments in marketable debt securities have been classified and accounted for as available-for-sale. The Company classifies its marketable debt securities as either short-term or long-term based on each instrument’s underlying contractual maturity date. Unrealized gains and losses on marketable debt securities classified as available-for-sale are recognized in accumulated other comprehensive (loss) income. Interest on securities classified as available-for-sale is included in interest income in the consolidated statements of operations. 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, 2022 2021 Cash and cash equivalents $ 47,196 $ 109,256 Restricted cash included in Other long-term assets 373 389 $ 47,569 $ 109,645 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 operations. 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 $ 139 and $ 84 for the years ended December 31, 2022 and 2021, 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, marketable securities, 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: 80 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) Year Ended December 31, December 31, 2022 2021 2022 2021 Revenue Revenue Accounts Receivable Accounts Receivable Customer A 11 % 27 % 16 % 29 % Customer B 19 % 16 % * * Customer C * 10 % * 12 % * Revenue and/or accounts receivable from these customers were less than 10 % of total revenue and/or accounts receivable during the year. 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 until alternative vendors were secured. The Company did not have any vendors for the year ended December 31, 2022, and one vendor for the year ended December 31, 2021, from which purchases of equipment, components and services individually represented 10% or more of the Company’s total purchases. 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 the 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 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 refurbishments, renewals 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 expense, net 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 - 10 Computer software and website development 3 Computer equipment 3 Capitalized satellite launch costs and in-service satellites 2 - 3 As of December 31, 2022 and 2021, 34 % and 37 %, respectively, of the Company’s long-lived assets were located in the U.S., 27 % and 41 %, respectively were located in Canada, and 39 % and 22 %, respectively were located in Europe, the Middle East and Africa (collectively, “EMEA”). Within EMEA, 30 % and 20 % of the Company’s long-lived assets were located in the UK at December 31, 2022 and 2021, respectively. 81 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) 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, 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, 2022 and 2021. 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 line item 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 first performs a qualitative assessment of goodwill annually in the fourth quarter, and more frequently 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 reporting 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. The annual goodwill impairment assessment performed in the fourth quarter of 2022 indicated that the fair value significantly exceeded the carrying value of goodwill. 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 $ 72 and $ 91 for intangible assets relating to patents for the years ended December 31, 2022 and 2021, respectively. Impairment of Long-Lived Assets The Company assesses potential impairments to long-lived 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 recognized impairment charges of $ 549 on decommissioned satellites and $ 143 of other long-lived assets for the year ended December 31, 2022 and no impairment charges for long-lived assets for the year ended December 31, 2021. 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, 2022 and 2021. 82 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) During the year ended December 31, 2021, the Company 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, 2022. Debt Issuance Costs For long-term debt, the Company presents debt issuance costs on the consolidated balance sheets as a direct deduction from the carrying amount of the related debt facility. Debt issuance costs and the fair value assigned to stock warrants issued related to term loans 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 as liabilities on its consolidated balance sheets unless the warrants meet certain specific criteria that require the warrants to be classified within stockholders’ equity. 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 liabilities are recognized as a component in other income (expense) 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 holders to purchase one share of the Company's Class A 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. On November 16, 2022, the Company commenced a warrant exchange (Note 10), pursuant to which 9,956,489 Public Warrants and 6,600,000 Private Warrants were each exchanged for 0.2 shares of the Company's Class A common stock on December 19, 2022. On December 19, 2022, the Company also entered into an amendment to the warrant agreement (the “Warrant Amendment”) that provided the Company with the right to require the exchange of the Company’s remaining outstanding Public Warrants for Class A common stock at an exchange ratio of 0.18 shares for each Public Warrant. The Company exercised its exchange right on December 19, 2022 and the remaining 1,543,493 Public Warrants were exchanged on January 4, 2023. 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 Class A common stock upon the Company achieving certain Earnout Triggering Events (as described in the Merger Agreement and Note 3). In accordance with Accounting Standards Codification (“ASC”) 815-40, the earnout shares are not indexed to the Company's common stock and therefore were 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) 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. 83 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) 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 deliverable 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 based on value added to the customer. 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 receivable, 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, 2022 and 2021 were $ 890 and $ 1,419 , respectively, of which $ 439 and $ 885 , respectively, were classified as current. During the years ended December 31, 2022 a nd 2021, the Company recognized $ 809 and $ 730 , respectively, as amortization of deferred contract costs in sales and marketing expense. 84 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) Cost of Revenue Cost of revenue consists primarily of personnel costs, depreciation, hosted infrastructure and high-power computing costs, third-party operating and royalty costs associated with delivering data and services to customers, allocated overhead costs and amortization of purchased intangibles customer relationships and developed technology associated with the Acquisition. 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, travel-related expenses and amortization of purchased intangible backlog associated with the Acquisition. The Company expenses advertising costs as incurred. Advertising expense for the years ended December 31, 2022 and 2021, was $ 933 and $ 797 , 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, 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, discretio nary profit-sharing contributions and/or qualified nonelective contributions during the years ended December 31, 2022 and 2021. The Company has defined contribution pension plans at its foreign subsidiaries which cover all employees who meet certain eligibility requirements. The contributions made by the Company under these plans during the years ended December 31, 2022 and 2021 were $ 737 and $ 506 , respectively. 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 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, the fair value is calculated using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the input of assumptions, including the fair value of the underlying common stock, the expected term of the option, the expected volatility of the price of the Company’s common stock, risk-free interest rates, and the expected dividend yield of the Company’s common stock. For 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. 85 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) 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. Beginning in 2022, the Tax Cuts and Jobs Act (the "Tax Act") requires taxpayers to capitalize research and development expenses with amortization periods over five and fifteen years, which reduced the Company’s taxable loss, and created a new deferred tax asset for capitalized research and development costs, and corresponding adjustments to tax on foreign source income through global intangible low-taxed income ("GILTI"), all of which have been accounted for in determining the Company’s tax provision or benefit. The Company reports income taxes in accordance with Financial Accounting Standards Board ("FASB") ASC 740, Income Taxes, which requires an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as net operating loss and tax credit carryforwards. Deferred tax amounts are determined by using the enacted tax rates expected to be in effect when the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance reduces the deferred tax assets to the amount that is more likely than not to be realized. Related Parties As a result of the Acquisition in November 2021, Spire's customer, Myriota Pty Ltd ("Myriota"), became a related party, as exactEarth has a 14 % ownership stake in Myriota. As of December 31, 2022, the Company's investment in Myriota, in the amount of $ 3,296 , was included in other long-term assets on the consolidated balance sheets. The Company accounts for this investment using the equity method of accounting. The Company's share of earnings or losses on the investment is recorded based on a one-month lag, due to the timing of receipt of financial statements from Myriota, as a component of other (expense) income, net in the consolidated statements of operations. The Company generated $ 2,278 and $ 408 in revenue during the years ended December 31, 2022 and 2021, respectively, and had $ 170 and $ 170 accounts receivable as of December 31, 2022 and 2021, respectively, from Myriota. The Company borrowed gross proceeds of $ 1,232 of Convertible Notes (defined in Note 8) payable in February 2021 and $ 6,414 of Convertible Notes payable during the year ended December 31, 2019, from certain stockholders (Note 8). Immediately prior to the effective time of the Merger, the Convertible Notes were automatically converted into shares of common stock of Legacy Spire (“Legacy Spire Common Stock”) (Note 3 and Note 8). Interest expense recognized on the related party Convertible Notes payable was $ 413 for the year ended December 31, 2021. No interest expense was recognized on the related party Convertible Notes payable for the year ended December 31, 2022. Comprehensive Loss Comprehensive loss is comprised of net loss and other comprehensive loss consisting of foreign currency translation adjustments and net unrealized loss on investments. 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, and 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. Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of common shares 86 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) 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. Prior Period Reclassifications Certain amounts in prior periods have been reclassified to conform with current period presentation. 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 February 2016, FASB issued Accounting Standards Update ("ASU") No. 2016-02, Leases ("ASC 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 clarifications released by the FASB. Under the new guidance, at the commencement date, lessees are required to recognize a lease liability with a corresponding right-of-use ("ROU") asset. On January 1, 2022, the Company adopted ASC 842 using the modified retrospective approach with the effective date as of the date of initial application. Consequently, results for the year ended December 31, 2022 are presented under ASC 842. Prior period amounts were not adjusted and continue to be reported in accordance with previous lease guidance under ASC Topic 840, Leases . The Company elected the following practical expedients as permitted per the guidance: • The "package of practical expedients" which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company has elected this package of practical expedients in its entirety. • 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 for existing short-term leases of assets in transition. • The practical expedient to not separate lease and non-lease components for all of the Company's leases. Adoption of ASC 842 resulted in the recording of $ 11,775 in ROU assets and $ 12,611 in lease liabilities, as of January 1, 2022. The difference between the ROU assets and lease liabilities is driven primarily by lease incentives and deferred rent balances that were reclassified from liabilities, presented in other accrued expenses for the current portion and other long-term liabilities for the long-term portion, to the ROU asset balance, presented in operating lease assets. The standard did not materially impact retained earnings, consolidated net loss, and the statements of cash flows. 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 which is 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 was effective for fiscal years beginning after December 15, 2021 (January 1, 2022 for the Company), with early adoption permitted. The adoption of ASU 2019-12 as of January 1, 2022 did not materially impact the Company's consolidated financial statements. 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 and should be applied either prospectively or retrospectively. The adoption of ASU 2021-10 as of December 31, 2022 did not have a material impact on Company’s consolidated financial statements. 87 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) Accounting Pronouncements Not Yet Adopted 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 Acquisition. In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50), guidance on modifying the disclosure requirements to enhance the transparency of supplier finance programs including disclosure of the key terms of the program, the amount outstanding that remains unpaid by the buyer as of the end of the annual period, a description of where those obligations are presented in the balance sheet, and a roll forward of those obligations during the annual period. The amendments in this update are effective for financial statements issued for annual periods beginning after December 15, 2022. The Company does not expect this ASU to have a material impact on its consolidated financial statements. 3. Reverse Recapitalization On August 16, 2021, Spire Global Subsidiary, Inc., merged with NavSight. As a result of the Merger, NavSight changed its name to Spire Global, Inc. and Legacy Spire changed its name to Spire Global Subsidiary, Inc. Immediately prior to the Closing: • All 12,671,911 outstanding shares of Legacy Spire Series A Convertible Preferred Stock were converted into an equivalent number of shares of Legacy Spire Common Stock on a one-to-one basis . • All 4,869,754 outstanding shares of Legacy Spire Series B Convertible Preferred Stock were converted into an equivalent number of shares of Legacy Spire Common Stock on a one-to-one basis • All 7,592,402 outstanding shares of Legacy Spire Series C Convertible Preferred Stock were converted into an equivalent number of shares of Legacy Spire Common Stock on a one-to-one basis • Each of the Convertible Notes automatically converted into shares of Legacy 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 . • Legacy 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 Legacy 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 Legacy Spire Common Stock, including shares of Legacy Spire Common Stock issued pursuant to the conversion of the Legacy Spire Preferred Stock, the Convertible Notes and the Legacy 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 Legacy 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 Legacy Spire Common Stock (“Legacy Spire Options”) assumed by NavSight. • All outstanding Legacy 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 Legacy 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. 88 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) 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 Legacy Spire Common Stock (excluding Founders) 6,405,302 Legacy Spire Convertible Preferred Stock 42,873,636 Legacy Spire Convertible Notes 37,034,620 Legacy Spire Warrants (excluding EIB warrants) 672,355 Total Class A common shares to Legacy Spire stockholders (excluding Founders) 86,985,913 New Spire Class A common stock issued to Legacy 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 Legacy 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 Legacy 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, Legacy Spire’s operations prior to the acquisition comprising the only ongoing operations of New Spire, and Legacy 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 Legacy Spire with the Merger being treated as the equivalent of Legacy 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 Legacy 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 interests of exactEarth for a purchase price of $ 128,953 , 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 in the consolidated statements of operations for the year ended December 31, 2021. 89 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) The purchase price components are summarized in the following table: 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 RSUs, respectively . (2) Included in the cash consideration are: a. $ 97,454 for outstanding exactEarth shares, b. $ 8,888 cash settlement of exactEarth stock options, RSUs 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 statements 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 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 following table summarizes the acquisition date fair value allocation 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 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. 90 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) 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 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 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 Net revenue $ 61,497 Net loss $ ( 37,407 ) Revenues and losses attributable to the acquired business recognized within the consolidated statements of operations between the date of the acquisition and 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 $ 57,082 and represented 71 % of total revenue for the year ended December 31, 2022. Revenue from subscription-based contracts was $ 21,466 , representing 49 % of total revenue for the year ended December 31, 2021. Revenue from non-subscription-based contracts was $ 23,186 and represented 29 % of total revenue for the year ended December 31, 2022. Revenue from non-subscription-based contracts was $ 21,909 , representing 51 % of total r evenue for the year ended December 31, 2021. The following revenue disaggregated by geography was recognized: Year Ended December 31, 2022 Year Ended December 31, 2021 EMEA (1) $ 31,962 40 % $ 20,562 48 % Americas (2) 36,734 46 % 15,719 36 % Asia Pacific (3) 11,572 14 % 7,094 16 % Total $ 80,268 100 % $ 43,375 100 % (1) Netherlands represented 24 % for the year ended December 31, 2021. (2) U.S. represented 35 % and 36 % for the years ended December 31, 2022 and 2021, respectively, and Canada represented 10 % for the year ended December 31, 2022. (3) Australia represented 11 % for the year ended December 31, 2021. Contract Assets At December 31, 2022 and 2021, contract assets were $ 3,353 and $ 2,084 , respectively, on the consolidated balance sheets. The increase in contract assets was primarily due to the increase in revenue. Changes in contract assets were as follows: December 31, 2022 2021 Balance at the beginning of the year $ 2,084 $ 853 Contract assets recorded during the year 3,353 2,529 Reclassified to accounts receivable ( 1,694 ) ( 1,298 ) Other ( 390 ) — Balance at the end of the year $ 3,353 $ 2,084 Contract Liabilities At December 31, 2022, contract liabilities were $ 16,628 of which $ 15,856 was reported in contract liabilities, current portion, and $ 772 was reported in other long-term liabilities on the Company’s consolidated balance sheets. At December 31, 2021, contract liabilities were $ 9,255 , of which $ 8,627 was reported in contract liabilities, current portion, and $ 628 was reported in other long-term liabilities on the Company’s consolidated balance sheets. The increase in contract liabilities was primarily due to the increase in revenue. 91 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) Changes in contract liabilities were as follows: December 31, 2022 2021 Balance at the beginning of the year $ 9,255 $ 8,110 Contract liabilities recorded during the year 15,963 8,343 Revenue recognized during the year ( 8,230 ) ( 6,950 ) Other ( 360 ) ( 248 ) Balance at the end of the year $ 16,628 $ 9,255 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, 2022, the amount not yet recognized as revenue from these commitments was $ 167,164 . The Company expects to recognize 39 % of these future commitments over the next 12 months and the remaining 61 % thereafter as revenue when the performance obligations are met. 6. Other Balance Sheet Components Other current assets consisted of the following: December 31, 2022 2021 Technology and other prepaid contracts $ 4,695 $ 744 Prepaid insurance 2,594 4,430 Deferred contract costs 439 885 Other receivables 1,123 1,396 Other current assets 428 2,616 $ 9,279 $ 10,071 Property and equipment, net consisted of the following: December 31, 2022 2021 Satellites in-service $ 49,889 $ 51,368 Internally developed software 2,119 2,160 Ground stations in-service 3,369 2,200 Leasehold improvements 4,175 1,754 Machinery and equipment 3,585 2,761 Computer equipment 1,985 2,168 Computer software and website development 99 472 Furniture and fixtures 1,156 1,167 66,377 64,050 Less: Accumulated depreciation and amortization ( 32,974 ) ( 30,120 ) 33,403 33,930 Satellite, launch and ground station work in progress 15,364 11,478 Finished satellites not in-service 4,985 3,296 Property and equipment, net $ 53,752 $ 48,704 Depreciation and amortization expense related to property and equipment for the years ended December 31, 2022 and 2021, was $ 11,771 and $ 8,509 , respectively. For the year ended December 31, 2022 there was a $ 549 loss from decommissioned satellites. Other accrued expenses consisted of the following: December 31, 2022 2021 Professional services $ 1,198 $ 1,164 Operating lease liabilities, current 2,333 - Third-party operating costs 1,541 900 Corporate and sales tax 542 195 Accrued interest 765 276 Software 580 1,036 Other 1,251 1,252 $ 8,210 $ 4,823 92 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (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, 2021 $ 53,627 Impact of foreign currency translation ( 3,673 ) Balance at December 31, 2022 $ 49,954 Intangible assets consisted of the following: December 31, 2022 2021 Customer relationships $ 22,877 $ 24,559 Developed technology 13,001 13,957 Trade names 2,204 2,366 Backlog 3,043 3,268 Patents 419 491 FCC licenses 480 480 42,024 45,121 Less: Accumulated amortization ( 7,243 ) ( 968 ) $ 34,781 $ 44,153 As part of the Acquisition, the Company acquired intangible assets for a total of $ 43,621 in November 2021. As of December 31, 2022, the weighted-average amortization period for customer relationships and developed technology was 10.9 years, trade names was 3.9 years, and patents and FCC licenses was 7.0 years. Amortization expense related to intangible assets for the years ended December 31, 2022 and 2021, was $ 6,570 an d $ 666 , respectively. During the years ended December 31, 2022 and 2021, the Company recognized im pairment charges o f $ 72 and $ 91 , respectively, for intangible assets relating to patent costs which are included in other expense, net in the consolidated statements of operations. The patents asset balance as of December 31, 2022 and 2021 includes $ 57 and $ 196 of capitalized patent costs, respectively, that will begin amortization upon the issuance of an official patent right to the Company. As of December 31, 2022, the expected future amortization expense of intangible assets is as follows: Years ending December 31, 2023 $ 3,503 2024 3,489 2025 3,480 2026 3,435 2027 3,023 Thereafter 17,794 34,724 Capitalized patent costs, unissued 57 $ 34,781 8. Long-Term Debt and Convertible Notes Long-term debt consisted of the following: December 31, 2022 2021 Blue Torch term loan $ 100,511 $ — FP term loan — 71,512 Other 4,857 4,464 Total long-term debt 105,368 75,976 Less: Debt issuance costs ( 6,893 ) ( 24,852 ) Non-current portion of long-term debt $ 98,475 $ 51,124 The Company recorded $ 13,955 and $ 8,368 of interest expense which included amortization of deferred issuance costs of $ 3,781 and $ 3,471 from long-term debt for the years ended December 31, 2022 and 2021, respectively. 93 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) Blue Torch Credit Agreement On June 13, 2022, the Company, as borrower, and Spire Global Subsidiary, Inc. and Austin Satellite Design, LLC, as guarantors, entered into a Financing Agreement (the “Blue Torch Financing Agreement”) with Blue Torch Finance LLC, a Delaware limited liability company (“Blue Torch”), as administrative agent and collateral agent, and certain lenders (the “Lenders”). The Blue Torch Financing Agreement provides for, among other things, a term loan facility in an aggregate principal amount of up to $ 120,000 (the “Blue Torch Credit Facility”). A portion of the proceeds of the term loan was used to repay the Company’s then-existing $ 70,000 credit facility with FP Credit Partners, L.P., and the remainder of the proceeds of the term loan may be used for general corporate purposes. The Blue Torch Credit Facility is scheduled to mature on June 13, 2026, upon which the Company must repay the outstanding principal amount of any outstanding loans thereunder, together with all accrued but unpaid interest, fees and other obligations owing under the Blue Torch Credit Facility. Subject to certain exceptions, prepayments of the Blue Torch Credit Facility will be subject to early termination fees in an amount equal to 3.0% of the principal prepaid if prepayment occurs on or prior to the first anniversary of the closing date, 2.0% of principal prepaid if prepayment occurs after the first anniversary of the closing date but on or prior to the second anniversary of the closing date and 1.0% of principal prepaid if prepayment occurs after the second anniversary of the closing date but on or prior to the third anniversary of the closing date, plus if prepayment occurs on or prior to the first anniversary of the closing date, a make-whole amount equal to the amount of interest that would have otherwise been payable through the maturity date of the Blue Torch Credit Facility. The $120,000 term loan was available and drawn at closing, of which $19,735 was placed in an escrow account by Blue Torch with such amount to be released upon the Company achieving certain metrics related to annualized recurring revenue and a total annualized recurring revenue leverage ratio. These metrics were achieved and the $19,735 was released from the escrow account and delivered to the Company in February 2023 (Note 16). The term loan accrues interest at a floating rate, to be based, at the Company's election, on either a reference rate or a 3-month Term Secured Overnight Financing Rate ("SOFR") (subject to a 1.0% floor), plus an interest rate margin of 7.0% for reference rate borrowings and 8.0% for 3-month Term SOFR borrowings, plus an incremental Term SOFR margin of 0.26161%. The Company elected the Term SOFR rate which was 12.75713 % as of December 31, 2022. Principal on the term loan is only payable at maturity and interest on the term loan is due and payable monthly for reference rate borrowings and quarterly for Term SOFR borrowings. The Company is also required to pay other customary fees and costs in connection with the Blue Torch Credit Facility, including a commitment fee in an amount equal to $ 2,400 on the closing date, a $ 250 agency fee annually and an exit fee in an amount equal to $ 1,800 upon termination of the Blue Torch Financing Agreement. The Company’s obligations under the Blue Torch Financing Agreement are or will be guaranteed by certain of its domestic and foreign subsidiaries meeting materiality thresholds set forth in the Blue Torch Financing Agreement. Such obligations, including the guarantees, are secured by substantially all of the personal property of the Company and the Company's subsidiary guarantors, including pursuant to a Security Agreement entered into on June 13, 2022 among the Company, Spire Global Subsidiary, Inc., Austin Satellite Design, LLC and Blue Torch. As of the closing date, such subsidiary guarantors were Spire Global Subsidiary, Inc., Austin Satellite Design, LLC, Spire Global Canada Subsidiary Corp. and exactEarth Ltd. The Blue Torch Financing Agreement contains customary affirmative covenants and customary negative covenants limiting the Company's ability and the ability of its subsidiaries to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock and make investments, in each case subject to certain exceptions. The Company must also comply with a maximum debt to annualized recurring revenue leverage ratio financial covenant tested monthly during the first two years of the Blue Torch Financing Agreement, a maximum debt to EBITDA leverage ratio financial covenant tested monthly during the third and fourth years of the Blue Torch Financing Agreement and a minimum liquidity financial covenant tested at all times. The Blue Torch Financing Agreement also contains customary events of default that include, among other things, certain payment defaults, cross defaults to other indebtedness, inaccuracy of representations and warranties, covenant defaults, change of control defaults, judgment defaults, and bankruptcy and insolvency defaults. If an event of default exists, Blue Torch as agent on behalf of the Lenders may require immediate payment of all obligations under the Blue Torch Financing Agreement and may exercise certain other rights and remedies provided for under the Blue Torch Financing Agreement, the other loan documents and applicable law. Under certain circumstances, a default interest rate will apply on all obligations during the existence of an event of default under the Blue Torch Financing Agreement at a per annum rate equal to 2.00 % above the applicable interest rate. On June 13, 2022, in connection with the Blue Torch Financing Agreement, the Company granted warrants to affiliates of the Lenders to purchase fully paid and non-assessable shares of Class A common stock (the “Blue Torch Warrants”), which are exercisable for an aggregate of 3,496,205 shares of the Company’s Class A common stock with a per share exercise price of $ 2.01 . In addition, on June 13, 2022, in connection with the closing of the financing, the Company paid Urgent Capital LLC, a Delaware limited liability company, a fee for introducing the Company to the Lenders, for the purpose of loan financing, in the amount equal to $ 600 in cash and a warrant to purchase fully paid and non-assessable shares of Class A common stock (the “GPO Warrant” and, collectively with the Blue Torch Warrants, the “Credit Agreement Warrants”), which is exercisable for an aggregate of 198,675 shares of the Company's Class A common stock with a per share exercise price of $ 2.01 . 94 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) The Company evaluated the Credit Agreement Warrants and concluded that they do not meet the criteria to be classified within stockholders’ equity. The agreements governing the Credit Agreement Warrants include a provision that could result in a different settlement value for the Credit Agreement Warrants depending on their holder. The exercise price is $ 2.01 per share subject to standard stock split, dividend, and routine anti-dilution adjustment provisions. Because the holder of an instrument is not an input into the pricing of a fixed-for-fixed option on the Company’s Class A common stock, the Credit Agreement Warrants are not considered to be indexed to the Company’s Class A common stock. As the Credit Agreement Warrants meet the definition of a derivative, the Company recorded these warrants as liabilities on the consolidated balance sheets at fair value (Note 10) based on the Black-Scholes model as of June 13, 2022 with inputs that include the Company’s Class A common 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. Subsequent changes in their respective fair values are recognized in the consolidated statements of operations at each reporting date. 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. The Company incurred $ 4,516 of debt issuance costs, inclusive of fees paid to the Lenders, and issued Credit Agreement Warrants with an estimated fair value of $ 3,579 at the date of issuance, the total of which has been presented as a deduction from the carrying amounts of the Blue Torch Credit Facility on the consolidated balance sheets and is being amortized to interest expense over the term of the Blue Torch Credit Facility. The Credit Agreement Warrants may be exercised on a cashless basis. The Credit Agreement Warrants are exercisable for a term beginning on the date of issuance and ending on the earlier to occur of ten years from the date of issuance or the consummation of certain of the Company's acquisitions as set forth in the Credit Agreement Warrants. The number of shares for which the Credit Agreement Warrants are exercisable and the associated exercise price are subject to certain proportional adjustments as set forth in the Credit Agreement Warrants. 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”), for a $ 70,000 term loan facility (as amended on May 17, 2021, the “FP Term Loan”). The FP Term Loan included covenants that limited 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, or 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 earnings before interest, taxes, depreciation, and amortization (EBITDA), until the closing of a qualifying initial public offering (IPO), which included the Merger. On June 13, 2022, the Company repaid in full all obligations and all amounts borrowed, and all obligations have terminated, under the FP Term Loan, which was replaced by the Blue Torch Financing Agreement. The outstanding principal and interest under the FP Term Loan in an aggregate amount equal to approximately $ 72,835 was repaid with proceeds of the term loan under the Blue Torch Credit Facility. The Company recognized $ 22,510 as a loss on extinguishment of debt on the consolidated statements of operations during the year ended December 31, 2022, upon extinguishing the FP Term Loan facility. The Company incurred no early termination penalties in connection with the termination of the FP Term Loan. During the year ended December 31, 2021, the Company recognized $ 4,954 as a loss on extinguishment of debt in the consolidated statements of operations, resulting from cash settlement of then-existing loan facilities from European Investment Bank and Eastward Fund Management, LLC using the proceeds received from the FP Term Loan facility. The loss on extinguishment of debt was partially offset by a $ 1,699 gain from extinguishment of debt resulting from the U.S. government’s forgiveness of the Company’s loan under the Paycheck Protection Program established as part of the Coronavirus Aid, Relief, and Economic Security Act. Government Loan In November 2021, the Company completed the Acquisition 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, 2022 and 2021, $ 4,857 and $ 4,464 , respectively, was included in long-term debt, non-current on the consolidated balance sheets related to the SIF loan agreement. 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 . Any amount outstanding under this loan is repayable in 15 annual payments beginning February 28, 2026. 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 accrued interest at 8 % per annum, compounded quarterly. The accretion of the carrying value of the Convertible Notes for the additional balloon payment was recorded as additional interest expense over the term of the 2019 and 2020 Convertible Notes. In connection with securing the 2019 and 2020 Convertible 95 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) Notes, the Company incurred debt issuance costs of $ 392 that were recorded as a deduction of the carrying amount of convertible debt and were being amortized to interest expense over the term of the 2019 and 2020 Convertible Notes. 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 would have matured four years from the date of issuance and accrued interest at 8 % per annum, compounded quarterly. In connection with securing the 2021 Convertible Notes, the Company incurred debt issuance costs of $ 62 that were recorded as a deduction of the carrying amount of convertible debt and were amortized to interest expense over the life of the 2021 Convertible Notes. Conversion of the 2019, 2020 and 2021 Convertible Notes could 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. Immediately prior to the effective time of the Merger, the Convertible Notes were automatically converted into shares of Legacy Spire Common Stock. The conversion ratio to Legacy Spire Common Stock for the 2019 and 2020 Convertible Notes was 2.4808 whereas the conversion ratio to Legacy 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 Legacy Spire Common Stock received from such conversion multiplied exchange ratio of 1.7058 . 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 of interest expense on the Convertible Notes for the year ended December 31, 2021 and no interest expense was recorded for the year ended. December 31, 2022. 9. Leases The Company adopted ASC 842 on January 1, 2022 and included below is the Company's accounting policy for lessee accounting. The Company leases office facilities, ground station facilities, and office equipment. At the inception of a contract, the Company determines whether the contract is or contains a lease. Leases are classified as operating or finance leases at the commencement date of the lease. Operating leases with a term greater than one year are recognized on the consolidated balance sheet as ROU assets and lease liabilities, which are reported as separate line items. Lease liabilities are classified between current and long-term liabilities based on the portion of the total payments that are due in the next 12 months that are attributed to principal payments. The Company does not currently have any leases that are classified as finance leases. The Company has elected the short-term leases practical expedient which allows any leases with a term of 12 months or less to be considered short-term and thus will not have an ROU asset or lease liability recognized on the balance sheet in respect of such leases. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the lease commencement date. As these leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate incurred to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. Operating lease ROU assets also include any lease payments made in advance of lease expense and excludes lease incentives and initial direct costs incurred. Lease terms may include options to extend or terminate the leases, which the Company does not include in its minimum lease terms unless the options are reasonably certain to be exercised. The majority of office facilities leases have an initial non-cancelable term of one to ten years with several renewal options that can extend the lease term from three to ten years . Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. ROU assets are subject to evaluation for impairment of disposal on a basis consistent with other long-lived assets. The amortization period for a ROU asset is from the lease commencement date to the earlier of the end of the lease term or the end of the useful life of the asset. The Company has lease agreements with lease and non-lease components which the Company has elected to account for as a single lease component. The Company's lease agreements do not contain any material residual value guarantees. Lease expenses for the year ended December 31, 2022 were $ 3,409 . Aggregate variable lease expenses and short-term lease expenses were $ 548 for the year ended December 31, 2022. The following table provides the required information regarding the Company's leases for which the Company is the lessee: As of December 31, 2022 As of January 1, 2022 Assets ROU assets $ 11,687 $ 11,775 Total ROU assets $ 11,687 $ 11,775 Liabilities Current $ 2,333 $ 2,086 Non-current 10,815 10,525 Total lease liabilities $ 13,148 $ 12,611 Weighted-average remaining lease term (years) 5.7 6.3 Weighted-average discount rate 9 % 9 % 96 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) The majority of the Company's ROU assets and lease liabilities, approximate ly 80 %, relate to office facilities leases, with the remaining amounts representing primarily ground station leases. As of December 31, 2022, the maturity of operating leases are as follows: Years ending December 31, 2023 $ 3,372 2024 2,958 2025 2,922 2026 2,899 2027 1,912 Thereafter 2,670 Total lease payments 16,733 Less: Interest on lease payments ( 3,585 ) Present value of lease liabilities $ 13,148 Operating cash flows paid included in the measurement of operating lease liabilities for the year ended December 31, 2022 was $ 1,632 and was included in net cash used in operating activities in the consolidated statements of cash flows. Amortization of ROU assets was $ 2,344 for the year ended December 31, 2022. Information as of December 31, 2021 under historical lease accounting guidance: Although the Company has adopted ASC 842 using the modified retrospective approach, prior periods presented in the Company's consolidated financial statements continue to be in accordance with the former lease standard, ASC 840, Leases. These disclosures include: Under the previous lease standard, the Company leases office facilities and sites for its ground stations under noncancelable operating leases. As of December 31, 2021, these leases expire at various dates through 2029. Rent expense, including ground station leases, for the year ended December 31, 2021 was $ 3,313 . 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 Thereafter 4,393 $ 16,248 97 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) 10. Fair Value Measurement Assets and Liabilities Measured at Fair Value on a Recurring Basis 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, 2022 Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents: Money market funds $ 5,180 $ — $ — $ 5,180 Commercial paper — 2,097 — 2,097 $ 5,180 $ 2,097 $ — $ 7,277 Marketable securities: U.S. treasury bills and bonds $ 1,494 $ — $ — $ 1,494 Corporate securities — 7,745 — 7,745 Commercial paper — 2,576 — 2,576 U.S. government and agency securities — 11,269 — 11,269 $ 1,494 $ 21,590 $ — $ 23,084 Liabilities: Current liabilities: Public Warrants $ 267 $ — $ — $ 267 Long-term liabilities: Credit Agreement Warrants $ — $ 1,831 $ — $ 1,831 Contingent earnout liability — — 349 349 $ — $ 1,831 $ 349 $ 2,180 December 31, 2021 (1) Level 1 Level 2 Level 3 Total Long-term liabilities: Public Warrants $ 5,060 $ — $ — $ 5,060 Private Warrants — 6,422 — 6,422 Contingent earnout liability — — 10,026 10,026 $ 5,060 $ 6,422 $ 10,026 $ 21,508 (1) There were no cash equivalents or marketable securities as of December 31, 2021. Financial Assets The Company values its Level 1 assets, consisting of money market funds and U.S. treasury bills and bonds, using quoted prices in active markets for identical instruments. Financial assets whose fair values that are measured on a recurring basis using Level 2 inputs consist of commercial paper, corporate securities, and U.S. government and agency securities. The Company measures the fair values of these assets with the help of a pricing service that either provides quoted market prices in active markets for identical or similar securities or uses observable inputs for their pricing without applying significant adjustments. Public and Private Placement Warrants In November 2022, the Company announced the commencement of an exchange offer (the "Offer") and consent solicitation relating to all holders of the Public Warrants and Private Warrants ("Warrants") to receive 0.2 shares of Class A common stock in exchange for each outstanding Warrant tendered by the holder. On December 19, 2022, a total of 16,556,489 Warrants were tendered and exchanged for 3,311,286 shares of Class A common stock. Concurrently with the Offer, the Company also solicited consents from holders of the Public Warrants to amend the Warrant Agreement to permit the Company to require that each Warrant that is outstanding upon the closing of the Offer be exchanged for 0.18 shares of Class A common stock, which is a ratio 10 % less than the exchange ratio applicable to the Offer (such amendment, the “Warrant Amendment”). Because consents were received from holders of more than 65 % of the Company’s outstanding Public Warrants, the Warrant Amendment was approved. On December 19, 2022, the Company exercised its right to acquire and retire all remaining outstanding Warrants in exchange for shares of Class A common stock in accordance with the terms of the Warrant Amendment, which occurred on January 4, 2023 (Note 16). Public Warrants The Company assumed 11,499,992 publicly-traded warrants (“Public Warrants”) upon the Merger, all of which were issued in connection with 98 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) NavSight’s initial public offering and entitled the holder to purchase one share of the Company’s Class A 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 fair value of the Public Warrants is based on the quoted market price and is classified as a Level 1 financial instrument. On December 19, 2022, a total of 9,956,489 Public Warrants were tendered for 1,991,298 shares of the Company's Class A common stock. On the same day, the Company exercised its right, pursuant to the Warrant Amendment, to acquire and retire all remaining outstanding Public Warrants in exchange for shares of Class A common stock in accordance with the terms of the Warrant Amendment, which occurred on January 4, 2023. Private Placement Warrants The Company assumed 6,600,000 private placement warrants issued by NavSight (“Private 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 Class A common stock at an exercise price of $ 11.50 per share. 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 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 expected dividend yield. On December 19, 2022, a total of 6,600,000 Private Warrants were tendered for 1,320,000 shares of the Company's Class A common stock. The table below quantifies the significant inputs used for the Private Warrants: December 31, 2022 2021 Fair value of the Company’s Class A common stock $ — $ 3.38 Exercise price $ — $ 11.50 Risk-free interest rate — % 1.26 % Expected volatility factor — % 70.0 % Expected dividend yield — % — % Remaining contractual term (in years) — 4.6 Credit Agreement Warrants In connection with the Blue Torch Financing Agreement, the Company issued the Blue Torch Warrants, which are exercisable for an aggregate of 3,496,205 shares of the Company’s Class A common stock with a per share exercise price of $ 2.01 . Additionally, in connection with the closing of the financing, the Company issued the GPO Warrant, which is exercisable for an aggregate of 198,675 shares of the Company's Class A common stock with a per share exercise price of $ 2.01 . The fair value of the Credit Agreement Warrants is estimated using the Black-Scholes model with inputs that include the Company’s Class A common 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 expected dividend yield. The table below quantifies the significant inputs used for the Credit Agreement Warrants: December 31, 2022 2021 Fair value of the Company’s Class A common stock $ 0.96 $ — Exercise price $ 2.01 $ — Risk-free interest rate 3.88 % — % Expected volatility factor 55.0 % — % Expected dividend yield — % — % Remaining contractual term (in years) 9.1 — Contingent Earnout Liability In connection with the Merger, eligible Spire equity holders are entitled to receive additional shares of the Company's Class A common stock upon the achievement of certain earnout triggering events. The estimated fair value of the contingent earnout liability is determined using a Monte Carlo simulation using a distribution of potential outcomes on a monthly basis over the earnout period, which is a period up to five years post-closing of the Merger, prioritizing the most reliable information available, making this fair value classified as a Level 3 liability. The assumptions utilized in the calculation are based on the achievement of certain stock price milestones, including the current price of the Company’s Class A common stock, expected volatility, risk-free interest rate, expected term and expected dividend yield. 99 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) The table below quantifies the significant inputs used for the contingent earnout liability: December 31, 2022 2021 Fair value of the Company’s Class A common stock $ 0.96 $ 3.38 Risk-free interest rate 4.16 % 1.26 % Expected volatility factor 55.0 % 70.0 % Earnout expiration date August 16, 2026 August 16, 2026 The following table presents a summary of the changes in the fair value of the Company’s Level 3 financial instruments that are measured at fair value on a recurring basis: Contingent Earnout Liability Fair value as of December 31, 2021 10,026 Change in fair value of contingent earnout liability ( 9,677 ) Fair value as of December 31, 2022 $ 349 Cash and Cash Equivalents and Marketable Securities The following table summarizes the Company's cash, cash equivalents and available-for-sale securities by significant marketable securities category: December 31, 2022 Amortized Cost Unrealized Gains Unrealized Losses Fair Value Cash and cash equivalents: Cash $ 39,919 $ — $ — $ 39,919 Cash equivalents: Money market funds 5,180 — — 5,180 Commercial paper 2,098 — ( 1 ) 2,097 $ 47,197 $ — $ ( 1 ) $ 47,196 Marketable Securities: U.S. treasury bills and bonds $ 1,495 $ — $ ( 1 ) $ 1,494 Corporate securities 7,771 — ( 26 ) 7,745 Commercial paper 2,578 — ( 2 ) 2,576 U.S. government and agency securities 11,272 — ( 3 ) 11,269 $ 23,116 $ — $ ( 32 ) $ 23,084 There were no cash equivalents or marketable securities as of December 31, 2021. The following table represents amortized cost and estimated fair value of marketable securities, by contractual maturity: December 31, 2022 Amortized Cost Fair Value Due in one year or less $ 23,116 $ 23,084 In accordance with the Company's investment policy, investments are placed in investment grade securities with high credit quality issuers, and generally limit the amount of credit exposure to any one issuer. The Company evaluates securities for impairment at the end of each reporting period. The Company did not record any impairment charges related to its available-for-sale securities during the year ended December 31, 2022. 11. Commitments and Contingencies L3Harris Commitment In conjunction with the 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 100 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) ("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 years ended December 31, 2022 and 2021. For the years ended December 31, 2022 and 2021, $ 5,045 and $ 417 was recognized in cost of revenue in the consolidated statements of operations for the initial costs incurred to acquire exclusive access rights to data generated from satellites. 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, 2023 $ 4,300 2024 4,300 2025 4,300 2026 4,300 2027 4,300 Thereafter 15,548 $ 37,048 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 “2012 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 Class A common stock, (ii) a number of shares of Class A common stock equal to 5 % of the total number of shares of all of Class A common stock outstanding as of the last day of the immediately preceding fiscal year, or (iii) such number of shares of 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, 2022 , 5,685,295 and 4,059,162 shares were available for grant under the 2021 Plan and 2021 ESPP, respectively. The following table summarizes stock option activity under the 2021 Plan and the 2012 Plan: Number of Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years) Options outstanding as of December 31, 2021 21,263,847 $ 2.40 7.2 Granted 179,119 $ 1.74 Exercised ( 503,805 ) $ 1.60 Forfeited, canceled, or expired ( 1,819,756 ) $ 3.43 Options outstanding as of December 31, 2022 19,119,405 $ 2.32 6.1 Vested and expected to vest at December 31, 2022 19,119,405 $ 2.32 6.1 Exercisable at December 31, 2022 14,553,588 $ 2.11 5.5 The Company’s option award quantities and prices prior to the Merger have been retroactively restated to reflect the exchange ratio of 101 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) approximately 1.8282 established in the Merger as described in Note 3. The aggregate intrinsic value of options exercised as of December 31, 2022 and 2021, was $ 483 and $ 5,339 , respectively. The aggregate fair value of options vested as of December 31, 2022 and 2021 wa s $ 6,072 and $ 3,908 , respectively. The Company received $ 806 and $ 1,289 in cash proceeds from options exercised during the years ended December 31, 2022 and 2021, respectively. The weighted-average grant date fair value of options granted for the years ending December 31, 2022 and 2021 was $ 0.95 and $ 2.92 , respectively. The aggregate intrinsic value of options outstanding as of December 31, 2022 and 2021 was $ 200 and $ 26,865 , respectively. The aggregate intrinsic value of options exercisable as of December 31, 2022 and 2021 was $ 200 and $ 18,639 , respectively. The following table summarizes stock RSU activity under the 2021 Plan: Number of RSUs Weighted Average Grant Date Fair Value per Share Outstanding as of December 31, 2021 783,902 $ 3.94 RSUs granted 12,839,420 $ 2.41 RSUs vested ( 242,486 ) $ 3.62 RSUs forfeited ( 1,000,591 ) $ 2.73 Outstanding as of December 31, 2022 12,380,245 $ 2.46 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. As of December 31, 2022, there was $ 31,518 of total unrecognized compensation expense related to options and RSUs expected to be recognized over a weighted average-period of 2.3 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, 2022 2021 Cost of revenue $ 232 $ 432 Research and development 3,154 2,859 Sales and marketing 2,822 2,307 General and administrative 5,283 6,036 $ 11,491 $ 11,634 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 stock options was estimated using the following assumptions at the date of the grant: Year Ended December 31, 2022 2021 Risk-free interest rate 2.9 % 0.6 % - 1.4 % Expected volatility factor 58.3 % 66.9 % - 70.0 % Expected option life 5.5 years 5.0 - 6.08 years Expected dividend yield — — 102 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) 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, par value $ 0.0001 per share, and no ne was outstanding as of December 31, 2022 and 2021. 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. 14. Income Taxes Loss before income taxes consisted of the following: Year Ended December 31, 2022 2021 Domestic loss $ ( 69,072 ) $ ( 17,976 ) Foreign loss ( 20,017 ) ( 19,617 ) Loss before income taxes $ ( 89,089 ) $ ( 37,593 ) The income tax provision consists of the following: Year Ended December 31, 2022 2021 Current income tax provisions: Federal $ — $ — State — — Foreign 386 — Current income tax provision 386 — Deferred income tax expense: Federal — — State — — Foreign ( 64 ) 497 Deferred income tax expense ( 64 ) 497 Total income tax provision $ 322 $ 497 The following table presents a reconciliation of the federal statutory rate of 21 % to effective tax rate: Year Ended December 31, 2022 2021 U.S. federal tax benefit at statutory rate 21.0 % 21.0 % State income taxes, net of federal benefit 4.2 % 5.2 % exactEarth acquisition costs ( 0.2 )% ( 2.7 )% Merger costs — ( 3.7 )% Merger contingent fees — 4.3 % Contingent earnout liability 2.3 % 23.6 % Non-deductible expenses and other 2.0 % 0.3 % Research and development credits 0.4 % 2.3 % Foreign rate differential 1.3 % 3.9 % Change in valuation allowance, net ( 31.3 )% ( 55.5 )% Effective tax rate ( 0.3 )% ( 1.3 )% 103 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) For 2022 and 2021, our effective tax rate differs from the amount computed by applying the statutory federal and state income tax rates to net loss before income tax, primarily as the result of state income taxes, R&D credits, foreign income taxes and changes in our valuation allowance. The significant components of deferred tax assets (liabilities) are as follows: Year Ended December 31, 2022 2021 Deferred tax assets Net operating loss carryforward $ 97,737 $ 75,129 Research and development credit carryforward 6,402 6,002 Stock-based compensation 1,836 599 Property and equipment 3,533 4,177 Operating lease liabilities 1,965 — Sec 174 Capitalized R&D 3,424 — Intangibles 56 440 Other accruals 3,422 2,284 Gross deferred tax assets 118,375 88,631 Less: Valuation allowance ( 102,480 ) ( 74,558 ) Net deferred tax assets 15,895 14,073 Deferred tax liabilities Intangibles ( 13,945 ) ( 14,073 ) Operating lease right-of-use assets ( 1,950 ) - Foreign property and equipment and intangibles ( 771 ) ( 835 ) Gross deferred tax liabilities ( 16,666 ) ( 14,908 ) Net deferred tax liabilities $ ( 771 ) $ ( 835 ) As of December 31, 2022, the Company had accumulated undistributed earnings generated by its foreign subsidiaries of $ 13,120 . 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 Spire Global United States, Australia, Singapore, Luxemburg, and exactEarth Canada and UK deferred tax assets. There is no valuation allowance on Spire Global UK. The valuation allowance as of December 31, 2021 was $ 74,558 , which increased to $ 102,480 a s of December 31, 2022. The increase in the valuation allowance of $ 27,922 includes $ 1 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 $ 27,921 is mostly related to current year losses. At December 31, 2022, the Company had $ 251,889 and $ 102,954 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 $ 169,364 of federal net operating loss included above can be carried forward indefinitely. At December 31, 2021, the Company ha d $ 189,313 and $ 64,739 of federal and state net operating losses available to reduce future taxable income. The Company also has federal research and development tax credit carryforwards o f $ 3,732 a nd $ 3,332 as of December 31, 2022 and 2021, 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 Merger constitutes an “ownership change” for purposes of Internal Revenue Code Section 382 and Section 383. The Company may experience ownership changes in the future as a result of subsequent shifts in its stock ownership. As of December 31, 2022, the Company had $ 16,350 , $ 3,125 , $ 18,631 , $ 232 and $ 84 of Luxembourg, Singapore, Canada, United Kingdom and Australia 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, United Kingdom and Australia have indefinite carry forward periods. 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. Unrecognized Tax Benefits The Company does not have any significant uncertain tax positions. 104 Spire Global, Inc. Notes to Consolidated Financial Statements December 31, 2022 and 2021 (In thousands, except shares and per share data, unless otherwise noted) 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 2018 and 2019, respectively, and in Luxembourg from tax year 2020 and in Australia from tax year 2018. 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, 2022 2021 Numerator: Net loss $ ( 89,411 ) $ ( 38,090 ) Denominator: Weighted-average shares used in computing basic and diluted net loss per share 139,879,423 62,137,434 Basic and diluted net loss per share $ ( 0.64 ) $ ( 0.61 ) 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, 2022 and 2021 because including them would have had an anti-dilutive effect: Year Ended December 31, 2022 2021 Stock options and 2021 ESPP to purchase Class A common stock 19,271,986 21,263,847 Public and Private Warrants 1,543,493 18,099,992 RSUs 12,380,245 783,902 Credit Agreement Warrants 3,694,880 — 36,890,604 40,147,741 105 16. Subsequent Events On December 19, 2022, the Company exercised its right to acquire and retire all remaining outstanding Public Warrants in exchange for shares of Class A common stock in accordance with the terms of the Warrant Amendment. The remaining 1,543,493 of Public Warrants were exchanged on January 4, 2023 for 277,828 shares of the Company's Class A common stock. Following the exchange, none of the Public Warrants or Private Warrants remain outstanding. The Company has a $ 120,000 term loan with Blue Torch which was available and drawn at closing, of which $ 19,735 was placed in an escrow account by Blue Torch with such amount to be released upon the Company achieving certain metrics related to annualized recurring revenue and a total annualized recurring revenue leverage ratio. Subsequent to December 31, 2022, these metrics were achieved and the $ 19,735 was released from the escrow account and delivered to the Company in February 2023. On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. On March 13, 2023, the FDIC announced that it had transferred all deposits – both insured and uninsured – and substantially all assets of the former SVB to a newly created, full-service FDIC-operated “bridge bank” called Silicon Valley Bank, N.A. As of the close of business on March 14, 2023, the Company had approximately $ 31.2 million in cash and cash equivalents at Silicon Valley Bank, N.A., of which approximately $ 30.8 million was invested in BlackRock money market mutual funds. The Company is in the process of transferring substantially all of its cash and cash equivalents out of Silicon Valley Bank, N.A. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure N one.