VERRA MOBILITY Corp 10-K/A

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that our management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. On March 1, 2021, we filed our original Form 10-K for the year ended December 31, 2020. Based upon their evaluation at that time, our Chief Executive Officer and our Chief Financial Officer concluded that, as of December 31, 2020, our disclosure controls and procedures were designed at a reasonable assurance level and were effective to provide reasonable assurance that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Subsequent to that evaluation, and as a result of the material weakness described below, our Chief Executive Officer and Chief Financial Officer re-evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2020. That evaluation included consideration of the views expressed in the SEC’s Staff statement on April 12, 2021 (“the SEC Statement”) in which the SEC staff clarified its interpretation of certain generally accepted accounting principles related to warrants issued by Special Purpose Acquisition Companies (“SPACs”). Based on the clarifications expressed in the SEC Staff Statement which resulted in the restatement discussed further in Note 2 to the Consolidated Financial Statements, the Company’s management and the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2020 in providing them with material information relating to the Company and its consolidated subsidiaries required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended. In addition, a material weakness has been determined to exist as described in Management’s Report on Internal Control Over Financial Reporting at December 31, 2020. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our management concluded that our internal control over financial reporting was not effective as of December 31, 2020. 118 In connection with the restatement of our consolidated financial statements included in this Annual Report on Form 10-K/A, our management, including our principal executive and financial officers, have re-evaluated the effectiveness of our internal control over financial reporting and concluded that we did not maintain effective internal control over financial reporting as of December 31, 2020 because of a material weakness in our internal control over financial reporting described below. Notwithstanding the material weakness described below, our management has concluded that our restated and revised audited financial statements included in this Annual Report on Form 10-K/A are fairly stated in all material respects in accordance with U.S. GAAP for each of the periods presented herein. Based on the review of the SEC Staff Statement, which resulted in the restatement of our consolidated financial statements, management identified a material weakness in our internal control over financial reporting related to the operation of certain review controls over the accounting for contracts in the Company’s own stock. This material weakness resulted in a material misstatement of our private placement warrant liability, change in fair value of private placement warrants, additional paid-in capital and accumulated deficit as of December 31, 2020 and 2019 and for years ended December 31, 2020, 2019 and 2018. A material weakness is a deficiency, or combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that the material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Our independent registered public accounting firm, Ernst & Young LLP, has audited the effectiveness of our internal control over financial reporting as of December 31, 2020, and issued an adverse opinion, as stated in their report which is included in Item 8 of this Annual Report on Form 10-K/A. Remediation of Material Weakness To remediate the material weakness related to the private placement warrants, the Company evaluated and clarified its understanding of the accounting of contracts that may be settled in the Company’s own stock, such as warrants, as equity of the entity or as an asset or liability as highlighted in the SEC Staff Statement. The Company restated its consolidated financial statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018 upon completing its evaluation of the SEC Staff Statement. All necessary revisions are summarized in Note 2 – “Restatement of Previously Issued Financial Statements”. The Company has established a new control to reassess the classification of warrants to conform the accounting with the SEC Staff Statement and any future accounting pronouncements or interpretations related thereto. The Company plans to complete the remediation of the material weakness during the quarter ended June 30, 2021. Remediation of a Prior Material Weakness We are committed to maintaining a strong internal control environment. Following the identification of the material weakness in internal controls described in our Annual Report on Form 10-K for the year ended December 31, 2019 related to ineffective information technology (“ IT ”) general controls in the area of user access over certain IT systems that support the Company’s financial reporting processes, we initiated remediation measures during 2020 to address the material weakness. Based on the implementation work and the results of testing performed, our management concluded that the previously identified material weakness (as of December 31, 2019) has been remediated as of December 31, 2020. 119 Limitations on the Effectiveness of Controls Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements and projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Changes in Internal Control over Financing Reporting In connection with correcting the accounting for the warrants assumed by us as part of the Business Combination, the Company has begun implementing additional review procedures, additional training and enhancements to the accounting policy related to the accounting for its warrants to determine proper accounting in accordance with GAAP (e.g., determine whether liability or equity classification and remeasurement is appropriate). There were no changes to our internal control over financial reporting that occurred during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. 120 PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this Item is incorporated by reference from our Proxy Statement that was filed on April 12, 2021. Item 11. Executive Compensation The information required by this Item is incorporated by reference from our Proxy Statement that was filed on April 12, 2021. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item is incorporated by reference from our Proxy Statement that was filed on April 12, 2021. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item is incorporated by reference from our Proxy Statement that was filed on April 12, 2021. Item 14. Principal Accountant Fees and Services The information required by this Item is incorporated by reference from our Proxy Statement that was filed on April 12, 2021. 121 PART IV Item 15. Exhibits, Financial Statement Schedules (a) The following documents are filed as part of this Annual Report on Form 10-K/A: 1. Consolidated Financial Statements The financial statements filed as part of this Annual Report on Form 10-K/A are listed in the “Index to Consolidated Financial Statements” under Part II, Item 8 of this Annual Report on Form 10-K/A. 2. Financial Statement Schedules • Appendix A, Schedule II – Consolidated Valuation and Qualifying Accounts Schedules not listed above are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or notes to the consolidated financial statements under Part II, Item 8 of this Annual Report on Form 10-K/A. 3. Exhibits. The exhibits listed below are filed as part of this Annual Report. References under the caption “Incorporated by Reference” to exhibits or other filings indicate that the exhibit or other filing has been filed, that the indexed exhibit and the exhibit referred to are the same and that the exhibit referred to is incorporated by reference. 122 EXHIBIT INDEX Incorporated by Reference Exhibit Number Description Form File No. Exhibit Filing Date Filed Herewith 2.1 Merger Agreement, dated as of June 21, 2018, by and among Gores Holdings II, Inc., AM Merger Sub I, Inc., AM Merger Sub II, LLC, Greenlight Holding II Corporation and PE Greenlight Holdings, LLC, in its capacity as the Stockholder Representative . 8-K 001-37979 2.1 June 21, 2018 2.2 Amendment No. 1 to Agreement and Plan of Merger, dated as of August 23, 2018, by and among Gores Holdings II, Inc., AM Merger Sub I, Inc., AM Merger Sub II, LLC, Greenlight Holding II Corporation and PE Greenlight Holdings, LLC, in its capacity as the Stockholder Representative . 8-K 001-37979 2.2 Aug. 24, 2018 2.3 Scheme Implementation Agreement, dated as of January 21, 2021, by and between Verra Mobility Corporation and Redflex Holdings Limited. 8-K 001-37979 2.1 Jan. 21, 2021 3.1 Second Amended and Restated Certificate of Incorporation of Verra Mobility Corporation . 8-K 001-37979 3.1 Oct. 22, 2018 3.2 Amended and Restated Bylaws of Verra Mobility Corporation . 8-K 001-37979 3.2 Oct. 22, 2018 4.1 Specimen Class A Common Stock Certificate . S-1 333-21503 4.2 Dec. 9, 2016 4.2 Specimen Warrant Certificate . S-1 333-21503 4.3 Dec. 9, 2016 4.3 Warrant Agreement, dated January 12, 2017, between the Registrant and Continental Stock Transfer & Trust Company, as warrant agent . 8-K 001-37979 4.1 Jan. 19, 2017 4.4 First Amendment to Warrant Agreement, dated January 15, 2020, by and among the Registrant, Continental Stock Transfer & Trust Company and American Stock Transfer & Trust Company. 10-K 001-37979 4.4 Mar. 2, 2020 4.5 Description of Verra Mobility Corporation’s Securities Registered Pursuant to Section 12 of the Exchange Act. 10-K 001-37979 4.5 Mar. 2, 2020 123 Incorporated by Reference Exhibit Number Description Form File No. Exhibit Filing Date Filed Herewith 10. 1 Form of Indemnity Agreement . S-1 333-21503 10.7 Dec. 9, 2016 10.2 Amended and Restated Registration Rights Agreement dated October 17, 2018, by and among Verra Mobility Corporation, Gores Sponsor II LLC, Randall Bort, William Patton, Jeffrey Rea and the stockholders of Greenlight Holding II Corporation. 8-K 001-37979 10.2 Oct. 22, 2018 10.3 Investor Rights Agreement dated October 17, 2018, by and among Verra Mobility Corporation and PE Greenlight Holdings, LLC . 8-K 001-37979 10.3 Oct. 22, 2018 10.4 Tax Receivable Agreement dated October 17, 2018, by and among Verra Mobility Corporation, the persons identified as “Stockholders” on Schedule 1 thereto, and PE Greenlight Holdings, LLC, solely in its capacity as the stockholders’ representative thereunder . 8-K 001-37979 10.4 Oct. 22, 2018 10.5 Revolving Credit Agreement dated as of March 1, 2018, among Greenlight Acquisition Corporation, ATS Consolidated Inc., each of the other borrowers party thereto, the lenders party thereto and Bank of America, N.A. as Administrative Agent and Collateral Agent . 8-K 001-37979 10.5 Oct. 22, 2018 10.6 First Lien Term Loan Credit Agreement dated as of March 1, 2018, among Greenlight Acquisition Corporation, ATS Consolidated, Inc., American Traffic Solutions, Inc., Lasercraft, Inc., the lenders party thereto and Bank of America, N.A. as Administrative Agent and Collateral Agent . 8-K 001-37979 10.6 Oct. 22, 2018 10.7 Amendment No. 1 to Revolving Credit Agreement dated as of July 24, 2018, among Greenlight Acquisition Corporation, Verra Mobility Corporation (formerly known as ATS Consolidated Inc.), each of the other borrowers party thereto, the lenders party thereto and Bank of America, N.A. as Administrative Agent and Collateral Agent . 8-K 001-37979 10.7 Oct. 22, 2018 124 Incorporated by Reference Exhibit Number Description Form File No. Exhibit Filing Date Filed Herewith 10. 8 Amendment No. 1 to First Lien Term Loan Credit Agreement dated as of July 24, 2018, among Greenlight Acquisition Corporation, Verra Mobility Corporation (formerly known as ATS Consolidated, Inc.), American Traffic Solutions, Inc., Lasercraft, Inc., the lenders party thereto and Bank of America, N.A. as Administrative Agent and Collateral Agent . 8-K 001-37979 10.8 Oct. 22, 2018 10.9 Amendment No. 2 to First Lien Term Loan Credit Agreement dated as of February 20, 2020, among Greenlight Acquisition Corporation, VM Consolidated, Inc. (formerly known as ATS Consolidated, Inc.), each of the other borrowers and subsidiary guarantors party thereto, the lenders party thereto and Bank of America, N.A. as Administrative Agent and Collateral Agent. 8-K 001-37979 10.1 Feb. 25, 2020 10.10# Employee Offer Letter by and between American Traffic Solutions, Inc. and David Roberts, dated June 27, 2014 . 8-K 001-37979 10.9 Oct. 22, 2018 10.11# Offer Letter Revision by and between American Traffic Solutions, Inc. and David Roberts, dated as of December 22, 2014 . 8-K 001-37979 10.10 Oct. 22, 2018 10.12# Employee Offer Letter by and between American Traffic Solutions, Inc. and Patricia Chiodo, dated May 15, 2015 . 8-K 001-37979 10.11 Oct. 22, 2018 10.13# Offer Letter Revision by and between American Traffic Solutions, Inc. and Patricia Chiodo, dated as of June 1, 2015 . 8-K 001-37979 10.12 Oct. 22, 2018 10.14# Separation and Release Agreement by and between VM Consolidated, Inc. and Vincent Brigidi, dated September 30, 2020 10-Q 001-37979 10.3 Nov. 5, 2020 10.15# Executive Employment Agreement by and between VM Consolidated, Inc. and Steven Lalla, dated January 31, 2021 10-K 001-37979 10.15 March 1, 2021 10.16# Employee Offer Letter by and between VM Consolidated, Inc. and Garrett Miller, dated as of April 24, 2019 . 10-Q 001-37979 10.1 Aug. 6, 2019 10.17# Employee Offer Letter by and between American Traffic Solutions, Inc. and Rebecca Collins, dated as of April 21, 2016. 10-K 001-37979 10.17 Mar. 2, 2020 125 Incorporated by Reference Exhibit Number Description Form File No. Exhibit Filing Date Filed Herewith 10.18# Verra Mobility Corporation 2018 Equity Incentive Plan . 8-K 001-37979 10.17 Oct. 22, 2018 10.19# Form of Notice of Grant of Restricted Stock Unit and Agreement under the Verra Mobility Corporation 2018 Equity Incentive Plan. 8-K 001-37979 10.18 Oct. 22, 2018 10.20# Form of Notice of Grant of Restricted Stock Unit and Agreement for Non-U.S. Participants under the Verra Mobility Corporation 2018 Equity Incentive Plan . 8-K 001-37979 10.19 Oct. 22, 2018 10.21# Form of Greenlight Holding Corporation 2018 Participation Plan Termination Agreement . 8-K 001-37979 10.20 Oct. 22, 2018 10.22# Form of Notice of Grant of Restricted Stock Unit for Non-Employee Directors under the Verra Mobility Corporation 2018 Equity Incentive Plan. 10-K 001-37979 10.30 Mar. 18, 2019 10.23# Form of Notice of Grant of Stock Option and Agreement under the Verra Mobility Corporation 2018 Equity Incentive Plan. 10-K 001-37979 10.24 Mar. 2, 2020 10.24# Form of Notice of Grant of Stock Option and Agreement for U.K. Participants under the Verra Mobility Corporation 2018 Equity Incentive Plan. 10-K 001-37979 10.25 Mar. 2, 2020 10.25# Form of Notice of Grant of Performance Share Unit and Agreement under the Verra Mobility Corporation 2018 Equity Incentive Plan. 10-K 001-37979 10.26 Mar. 2, 2020 10.26# 2020 Form of Notice of Grant of Restricted Stock Unit and Agreement for Non-U.S. Participants under the Verra Mobility Corporation 2018 Equity Incentive Plan. 10-Q 001-37979 10.1 Nov. 5, 2020 10.27# Form of Notice of Grant of Stock Option and Agreement for Non-U.S. Participants under the Verra Mobility Corporation 2018 Equity Incentive Plan. 10-Q 001-37979 10.2 Nov. 5, 2020 10.28# Verra Mobility Corporation Amended and Restated Short-Term Incentive Plan. 8-K 001-37979 10.1 Jan. 29, 2021 21.1 List of Subsidiaries 10-K 001-37979 21.1 March 1, 2021 23.1 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. X 24.1 Power of Attorney (included on the signature pages herein). X 126 Incorporated by Reference Exhibit Number Description Form File No. Exhibit Filing Date Filed Herewith 31.1 Certification of Principal Executive Officer Pursuant to Rules 13a ‑ 14(a) and 15d ‑ 14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 31.2 Certification of Principal Financial Officer Pursuant to Rules 13a ‑ 14(a) and 15d ‑ 14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 32.1* Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 32.2* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 101.INS Inline XBRL Instance Document. X 101.SCH Inline XBRL Taxonomy Extension Schema Document. X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. X 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document. X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase document. X 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). X # Management contract or compensatory plan or arrangement. * This certification is deemed not filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act. Item 16. Form 10-K Summary None. 127 S IGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. VERRA MOBILITY CORPORATION Date: May 14, 2021 By: /s/ David Roberts David Roberts President and Chief Executive Officer (Principal Executive Officer) 128 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints David M. Roberts and Patricia D. Chiodo, and each of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K/A, and to file the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or her or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated: Signature Capacity in Which Signed Date /s/ David Roberts President, Chief Executive Officer and Director May 14, 2021 David Roberts (Principal Executive Officer) /s/ Patricia D. Chiodo Chief Financial Officer May 14, 2021 Patricia D. Chiodo (Principal Financial and Accounting Officer) /s/ Patrick Byrne Director May 14, 2021 Patrick Byrne /s/ Douglas Davis Director May 14, 2021 Douglas Davis /s/ Bryan Kelln Director May 14, 2021 Bryan Kelln /s/ Jacob Kotzubei Director May 14, 2021 Jacob Kotzubei /s/ John Rexford Director May 14, 2021 John Rexford /s/ Cynthia Russo Director May 14, 2021 Cynthia Russo 129 Appendix A Verra Mobility Corporation Schedule II Consolidated Valuation and Qualifying Accounts for the Years Ended December 31, 2020, 2019 and 2018 Beginning Charged/Credited to Charged to Other Charges Utilized/ Ending ($ in thousands) Balance Net (Loss) Income Account Write-offs Balance Allowance for Credit Loss Year Ended December 31, 2020 (1) $ 8,456 $ 14,387 $ — $ (11,376 ) $ 11,467 Year Ended December 31, 2019 6,221 8,100 — (6,684 ) 7,637 Year Ended December 31, 2018 5,497 6,025 — (5,301 ) 6,221 Tax Valuation Allowance Year Ended December 31, 2020 $ 2,564 $ 858 $ — $ — $ 3,422 Year Ended December 31, 2019 2,254 310 — — 2,564 Year Ended December 31, 2018 105 2,149 — — 2,254 (1) This includes a $0.8 million increase to the beginning balance of allowance for credit loss as a result of adopting the credit loss standard. 130