Item 9A. Controls and Procedures
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2021, our disclosure controls and procedures were effective at the reasonable assurance level.
140
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria established in “Internal Control - Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that assessment, our management has concluded that our internal control over financial reporting was effective as of December 31, 2021. The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by Ernst & Young, LLP, an independent registered public accounting firm, as stated in their report which appears herein.
We acquired TIDAL on April 30, 2021, and our management excluded from our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2021, as TIDAL’s internal control over financial reporting is associated with less th an 2% of total assets, 1% of t otal net revenue and 1% of total gross profit within the consolidated financial statements as of and for the year ended December 31, 2021.
Item 9B. OTHER INFORMATION
Disclosure Pursuant to Item 1.01 of Form 8-K: Entry into a Material Definitive Agreement.
On February 23, 2022, we entered into the Sixth Amendment to Revolving Credit Agreement, among Block, the lenders that are party thereto, and Goldman Sachs Bank USA, as administrative agent (the “Revolver Amendment”). The Revolver Amendment amends the Revolving Credit Agreement, dated as of May 1, 2020 (as amended, modified, or supplemented, the “Amended Credit Agreement”), among Block, the lenders that are party thereto, and Goldman Sachs Bank USA, as Administrative Agent, to, among other things, provide for a new tranche of unsecured revolving loan commitments in an aggregate principal amount of up to $100 million (the “Tranche B Loans”). With the addition of the Tranche B Loans, the total revolving commitments under the Amended Credit Agreement has been increased to an aggregate principal amount of up to $600 million.
Under the Amended Credit Agreement, the Tranche B Loans bear interest, at our option, at an annual rate based on the forward-looking term rate based on the secured overnight financing rate (“Term SOFR”) or a base rate. Tranche B Loans based on Term SOFR shall bear interest at a rate equal to Term SOFR plus a margin of between 1.25% and 1.75%, depending on our total net leverage ratio. Tranche B Loans based on the base rate shall bear interest at a rate based on the highest of the prime rate, the federal funds rate plus 0.50%, and Term SOFR with a tenor of one-month plus 1.00%, in each case, plus a margin ranging from 0.25% to 0.75%, depending on our total net leverage ratio. We are required to pay a commitment fee equal to 0.15% per annum on the undrawn portion available under the revolving credit facility. Currently, the total revolving commitments of up to $600 million remain undrawn.
The foregoing description of the Revolver Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Revolver Amendment, a copy of which is filed as Exhibit 10.21 hereto and incorporated herein by reference.
Disclosure Pursuant to Item 2.03 of Form 8-K: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth pursuant to Item 1.01 of Form 8-K above is incorporated herein by reference.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
141
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item will be included under the captions "Board of Directors and Corporate Governance" and "Executive Officers" in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2021 (Proxy Statement) and is incorporated herein by reference. The information required by this item regarding delinquent filers pursuant to Item 405 of Regulation S-K will be included under the caption "—Delinquent Section 16(a) Reports" in the Proxy Statement and is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The information required by this item will be included under the captions "Board of Directors and Corporate Governance—Director Compensation," "Executive Compensation," and "Board of Directors and Corporate Governance—Compensation Committee Interlocks and Insider Participation" in the Proxy Statement and is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item will be included under the captions "Security Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plan Information" in the Proxy Statement and is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item will be included under the captions "Certain Relationships, Related Party and Other Transactions" and "Board of Directors and Corporate Governance—Director Independence" in the Proxy Statement and is incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item will be included under the caption "Ratification Of Appointment Of Independent Registered Public Accounting Firm" in the Proxy Statement and is incorporated herein by reference.
142
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as a part of this Annual Report on Form 10-K:
(1) Consolidated Financial Statements:
Our Consolidated Financial Statements are listed in the “Index to Consolidated Financial Statements” under Part II, Item 8 of this Annual Report on Form 10-K.
(2) Financial Statement Schedules:
Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes herein.
(3) Exhibits
The documents listed in the following Exhibit Index of this Annual Report on Form 10-K are incorporated by reference or are filed with this Annual Report on Form 10-K, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K):
EXHIBIT INDEX
Incorporated by Reference
Exhibit Number Description Form File No. Exhibit Filing Date
2.1
Agreement and Plan of Reorganization, dated as of April 26, 2018, by and among the Registrant, Weebly, Inc., Forest Merger Sub, Inc., Forest Merger LLC and Shareholder Representative Services.
8-K 001-37622 2.1 April 26, 2018
2.2
Scheme Implementation Deed, dated as of August 2, 2021, by and among Square, Inc., Lanai (AU) 2 Pty Ltd, and Afterpay Limited.
8-K 001-37622 2.1 August 2, 2021
2.3
Amending Deed, dated as of December 7, 2021, by and among Block, Inc., Lanai (AU) 2 Pty Ltd and Afterpay Limited.
8-K 001-37622 2.1 December 7, 2021
3.1*
Amended and Restated Certificate of Incorporation of the Registrant, as amended .
3.2
Second Amended and Restated Bylaws of the Registrant.
8-K 001-37622 3.2 December 10, 2021
4.1
Form of Class A common stock certificate of the Registrant.
S-1/A 333-207411 4.1 November 6, 2015
4.2
Fifth Amended and Restated Investors’ Rights Agreement among the Registrant and certain holders of its capital stock, dated as of September 9, 2014.
S-1 333-207411 4.2 October 14, 2015
4.3
Indenture, dated March 6, 2017, between the Registrant and The Bank of New York Mellon Trust Company, N.A.
8-K 001-37622 4.1 March 6, 2017
4.4
Form of 0.375% Convertible Senior Notes due 2022 (included in Exhibit 4.3).
8-K 001-37622 4.2 March 6, 2017
4.5
Indenture, dated May 25, 2018, by and between the Registrant and The Bank of New York Mellon Trust Company, N.A.
8-K 001-37622 4.1 May 25, 2018
4.6
Form of 0.50% Convertible Senior Note due 2023 (included in Exhibit 4.5).
8-K 001-37622 4.2 May 25, 2018
4.7
Indenture, dated March 5, 2020, between the Registrant and The Bank of New York Mellon Trust Company, N.A.
8-K 001-37622 4.1 March 5, 2020
4.8
Form of 0.125% Convertible Senior Note due 2025 (included in Exhibit 4.7) .
8-K 001-37622 4.2 March 5, 2020
4.9
Indenture, dated November 13, 2020, between the Registrant and The Bank of New York Mellon Trust Company, N.A. (2026 Convertible Notes).
8-K 001-37622 4.1 November 13, 2020
4.10
Form of 0% Convertible Senior Note due 2026 (included in Exhibit 4.9).
8-K 001-37622 4.2 November 13, 2020
4.11
Indenture, dated November 13, 2020, between the Registrant and The Bank of New York Mellon Trust Company, N.A. (2027 Convertible Notes).
8-K 001-37622 4.3 November 13, 2020
143
Incorporated by Reference
Exhibit Number Description Form File No. Exhibit Filing Date
4.12
Form of 0.25% Convertible Senior Note due 2027 (included in Exhibit 4.11).
8-K 001-37622 4.4 November 13, 2020
4.13
Indenture, dated as of May 20, 2021, by and between Square, Inc. and Bank of New York Mellon Trust Company, N.A., as Trustee (2.75% Senior Notes due 2026).
8-K 001-37622 4.1 May 20, 2021
4.14
Form of 2.75% Senior Note due 2026 (included in Exhibit 4.13).
8-K 001-37622 4.2 May 20, 2021
4.15
Indenture, dated as of May 20, 2021 by and between Square, Inc. and Bank of New York Mellon Trust Company, N.A., as Trustee (3.50% Senior Notes due 2031).
8-K 001-37622 4.3 May 20, 2021
4.16
Form of 3.50% Senior Note due 2031 (included in Exhibit 4.15).
8-K 001-37622 4.4 May 20, 2021
4.17
Trust Deed, dated as of March 12, 2021, by and between Afterpay and the Hongkong and Shanghai Banking Corporation Limited as trustee.
8-K 001-37622 4.1 January 31, 2022
4.18
Description of Class A Common Stock .
10-K 001-37622 4.7 February 26, 2020
10.1+
Form of Indemnification Agreement between the Registrant and each of its directors and executive officers.
S-1/A 333-207411 10.1 November 6, 2015
10.2.1+*
Block, Inc. 2015 Equity Incentive Plan, as amended and restated
10.2.2+*
Form of Restricted Stock Unit Award and Restricted Stock Unit Agreement.
10.2.3+*
Form of Restricted Stock Award and Restricted Stock Agreement.
10.2.4+*
Form of Stock Option Grant and Stock Option Agreement.
10.3+*
Block, Inc. 2015 Employee Stock Purchase Plan, as amended and restated.
10. 4 +
Square, Inc. 2009 Stock Plan and related form agreements.
S-1 333-207411 10.4 October 14, 2015
10. 5 +
Square, Inc. Executive Incentive Compensation Plan.
S-1 333-207411 10.5 October 14, 2015
10.6+*
Block, Inc. Outside Director Compensation Policy, as amended and restated.
10. 7 +
Form of Change of Control and Severance Agreement between the Registrant and certain of its executive officers.
S-1 333-207411 10.7 October 14, 2015
10.8+*
Form of Change of Control and Severance Agreement between the Registrant and certain of its executive officers entered into on and after January 27, 2020.
10. 9 +
Offer Letter between the Registrant and Jack Dorsey, dated as of March 7, 2016.
10-K 001-37622 10.8 March 10, 2016
10.1 0 +
Offer Letter between the Registrant and Alyssa Henry, dated as of October 1, 2015.
S-1/A 333-207411 10.12 November 6, 2015
10.1 1 +
Offer Letter between the Registrant and Amrita Ahuja, dated as of December 16, 2018 .
8-K 001-37622 10.1 January 4, 2019
10.15
Revolving Credit Agreement dated as of May 1, 2020 among the Registrant, the Lenders Party Thereto, and Goldman Sachs Bank USA, as Administrative Agent.
8-K 001-37622 10.1 May 6, 2020
10.16
First Amendment to Credit Agreement, dated as of May 28, 2020, among the Registrant, the Lenders Party Thereto, and Goldman Sachs Bank USA, as Administrative Agent.
8-K 001-37622 10.1 June 3, 2020
10.17
Second Amendment to Credit Agreement, dated as of November 9, 2020, among the Registrant, the Lenders Party Thereto, and Goldman Sachs Bank USA, as Administrative Agent.
8-K 001-37622 10.6 November 10, 2020
10.18
Third Amendment to Credit Agreement, dated as of January 28, 2021, by and among the Registrant, the Lenders party thereto, and Goldman Sachs Bank USA, as administrative agent.
8-K 001-37622 10.1 February 3, 2021
10.19
Fourth Amendment to Credit Agreement, dated as of May 25, 2021, by and among Square, Inc., the lenders party thereto, and Goldman Sachs Bank USA, as administrative agent.
8-K 001-37622 10.1 May 26, 2021
10.20
Fifth Amendment to Credit Agreement, dated as of January 28, 2022, by and among Block, Inc., the lenders party thereto, and Goldman Sachs Bank USA, as administrative agent .
8-K 001-37622 10.1 January 31, 2022
144
Incorporated by Reference
Exhibit Number Description Form File No. Exhibit Filing Date
10.21*
Sixth Amendment to Credit Agreement, dated as of February 23, 2022, by and among Block, Inc., the lenders party thereto, and Goldman Sachs Bank USA, as administrative agent.
10.2 2 #
Master Development and Supply Agreement by and between the Registrant and TDK Corporation, dated as of October 1, 2013.
S-1 333-207411 10.15 October 14, 2015
10.2 3 #
Master Manufacturing Agreement by and between the Registrant and Cheng Uei Precision Industry Co., Ltd., dated as of June 27, 2012.
S-1 333-207411 10.16 October 14, 2015
10.2 4 #
ASIC Development and Supply Agreement by and between the Registrant, Semiconductor Components Industries, LLC (d/b/a ON Semiconductor) and ON Semiconductor Trading, Ltd., dated as of March 25, 2013.
S-1 333-207411 10.17 October 14, 2015
10.25
Amendment 1 to ASIC Development and Supply Agreement, dated as of January 15, 2019.
10-K 001-37622 10.23 February 27, 2019
10.26
Paycheck Protection Program Liquidity Facility Letter Agreement, dated as of June 2, 2020.
8-K 001-37622 10.2 June 3, 2020
10.27
Paycheck Protection Program Liquidity Facility Letter of Agreement, dated as of January 29, 2021.
8-K 001-37622 10.2 February 3, 2021
10.28
Form of Convertible Note Hedge Confirmation.
8-K 001-37622 10.2 March 6, 2017
10.29
Form of Warrant Confirmation.
8-K 001-37622 10.3 March 6, 2017
10.30
Form of Convertible Note Hedge Confirmation.
8-K 001-37622 10.2 May 25, 2018
10.31
Form of Warrant Confirmation.
8-K 001-37622 10.3 May 25, 2018
10.32
Form of Convertible Note Hedge Confirmation.
8-K 001-37622 10.2 March 5, 2020
10.33
Form of Warrant Confirmation.
8-K 001-37622 10.3 March 5, 2020
10.34
Form of Convertible Note Hedge Confirmation (2026 Convertible Notes).
8-K 001-37622 10.2 November 10, 2020
10.35
Form of 2026 Warrant Confirmation.
8-K 001-37622 10.4 November 10, 2020
10.36
Form of Convertible Note Hedge Confirmation (2027 Convertible Notes).
8-K 001-37622 10.3 November 10, 2020
10.37
Form of 2027 Warrant Confirmation.
8-K 001-37622 10.5 November 10, 2020
21.1*
List of subsidiaries of the Registrant.
23.1*
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
31.1*
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1†*
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document..
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
____________________
* Filed herewith.
+ Indicates management contract or compensatory plan.
145
# The Registrant has omitted portions of the relevant exhibit and filed such exhibit separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 406 of the Securities Act of 1933, as amended.
† The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.
Item 16. FORM 10-K SUMMARY
None.
146
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 24, 2022
BLOCK, INC.
By: /s/ Jack Dorsey
Jack Dorsey
President, Chief Executive Officer, and Chairman
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Jack Dorsey, Amrita Ahuja and Sivan Whiteley, and each of them, as 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, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, 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 connection therewith, as fully for 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 their, his or her substitutes, may lawfully do or cause to be done by virtue hereof.
147
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date
/s/ Jack Dorsey President, Chief Executive Officer, and Chairman (Principal Executive Officer) February 24, 2022
Jack Dorsey
/s/ Amrita Ahuja Chief Financial Officer (Principal Financial Officer)
February 24, 2022
Amrita Ahuja
/s/ Ajmere Dale Chief Accounting Officer (Principal Accounting Officer)
February 24, 2022
Ajmere Dale
/s/ Roelof Botha Director February 24, 2022
Roelof Botha
/s/ Amy Brooks Director February 24, 2022
Amy Brooks
/s/ Shawn Carter Director February 24, 2022
Shawn Carter
/s/ Paul Deighton Director February 24, 2022
Paul Deighton
/s/ Randy Garutti Director February 24, 2022
Randy Garutti
/s/ Jim McKelvey Director February 24, 2022
Jim McKelvey
/s/ Mary Meeker Director February 24, 2022
Mary Meeker
/s/ Anna Patterson Director February 24, 2022
Anna Patterson
/s/ Sharon Rothstein Director February 24, 2022
Sharon Rothstein
/s/ Lawrence Summers Director February 24, 2022
Lawrence Summers
/s/ David Viniar Director February 24, 2022
David Viniar
/s/ Darren Walker Director February 24, 2022
Darren Walker
148