Spire Global, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Summary of Significant Accounting Policies (Policies)

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2021

The condensed consolidated financial statements and accompanying notes are unaudited and 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 for interim financial reporting. The condensed consolidated financial statements for the three and nine months ended September 30, 2021 include the accounts of Spire Global, Inc. (i.e. former NavSight) and its wholly-owned subsidiary, Old Spire, following the Reverse Recapitalization as further discussed in Note 3 “Reverse Recapitalization.” For periods prior to the Merger, the reported share and per share amounts have been retroactively converted by applying the Exchange Ratio with the exception of authorized shares. Issued and outstanding shares and warrants as disclosed herein have been adjusted reflecting the Exchange Ratio. All other accompanying financial statements as of December 31, 2020 and for the three and nine months ended September 30, 2020 include only the accounts of Old Spire. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes for the years ended December 31, 2020 and 2019.

The information as of December 31, 2020 included on the condensed consolidated balance sheets was derived from the Company’s audited consolidated financial statements. The unaudited condensed consolidated financial statements were prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, contain all adjustments, consisting of normal recurring adjustments necessary for a fair statement of its financial position, results of operations and cash flows for the periods indicated. All intercompany accounts and transactions have been eliminated in consolidation.

Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2021.

Restatement of Unaudited Condensed Consolidated Financial Statements

Restatement of Previously Issued Financial Statements

Subsequent to the filing of the Original Form 10-Q, the Company discovered that an incorrect number had been used in the calculation of the fair value of the contingent earnout liability. As a result, the Company’s contingent earnout liability was understated as of September 30, 2021. For the three and nine months ended September 30, 2021, the loss recorded on the change in fair value of contingent earnout liability, total other income (expense), net, loss before income taxes, net loss and basic and diluted net loss per share were each understated for each period. As a result of the error, the Company’s previously issued unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2021 were materially misstated and are being restated in this Form 10-Q/A.

The following tables reflect the impact of the restatement to the specific line items presented in the Company’s previously reported unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2021.


	As Previously Reported			Adjustments			As Restated
Condensed Consolidated Balance Sheet:
September 30, 2021
Contingent earnout liability	$	77,131		$	3,286		$	80,417
Total liabilities	$	200,274		$	3,286		$	203,560
Additional paid-in capital	$	393,872		$	20,121		$	413,993
Accumulated deficit	$	(290,407	)	$	(23,407	)	$	(313,814	)
Total stockholders’ equity	$	103,289		$	(3,286	)	$	100,003
Total liabilities and stockholders’ equity	$	303,563		$	—		$	303,563

Condensed Consolidated Statements of Operations:
Three Months Ended September 30, 2021
Change in fair value of contingent earnout liability (1)	$	1,265		$	(23,407	)	$	(22,142	)
Total other income (expense), net	$	(15,060	)	$	(23,407	)	$	(38,467	)
Loss before income taxes	$	(32,432	)	$	(23,407	)	$	(55,839	)
Net loss	$	(32,701	)	$	(23,407	)	$	(56,108	)
Basic and diluted net loss per share	$	(0.49	)	$	(0.34	)	$	(0.83	)

Nine Months Ended September 30, 2021
Change in fair value of contingent earnout liability (1)	$	1,265		$	(23,407	)	$	(22,142	)
Total other income (expense), net	$	(34,500	)	$	(23,407	)	$	(57,907	)
Loss before income taxes	$	(78,292	)	$	(23,407	)	$	(101,699	)
Net loss	$	(79,261	)	$	(23,407	)	$	(102,668	)
Basic and diluted net loss per share	$	(2.12	)	$	(0.63	)	$	(2.75	)

Condensed Consolidated Statements of Comprehensive Loss:
Three Months Ended September 30, 2021
Net loss	$	(32,701	)	$	(23,407	)	$	(56,108	)
Comprehensive loss	$	(32,377	)	$	(23,407	)	$	(55,784	)

Nine Months Ended September 30, 2021
Net loss	$	(79,261	)	$	(23,407	)	$	(102,668	)
Comprehensive loss	$	(78,470	)	$	(23,407	)	$	(101,877	)

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit):
Three Months and Nine Months Ended September 30, 2021
Contingent earnout liability upon closing of the merger	$	(78,395	)	$	20,121		$	(58,274	)
Additional paid-in capital	$	393,872		$	20,121		$	413,993
Accumulated Deficit	$	(290,407	)	$	(23,407	)	$	(313,814	)
Total stockholders’ equity	$	103,289		$	(3,286	)	$	100,003

Condensed Consolidated Statements of Cash Flows:
Nine Months Ended September 30, 2021
Net loss	$	(79,261	)	$	(23,407	)	$	(102,668	)
Change in fair value of contingent earnout liability	$	(1,265	)	$	23,407		$	22,142
Net cash used in operating activities	$	(40,008	)	$	—		$	(40,008	)
Noncash Investment and financing activities
Contingent earnout liability recognized upon the closing of the reverse recapitalization	$	78,395		$	(20,121	)	$	58,274

Liquidity Risks and Uncertainties

The unaudited condensed consolidated financial statements have been prepared on the basis of continuity of operations, the realization of assets, and the satisfaction of liabilities in the ordinary course of business. 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 nine months ended September 30, 2021, net loss was $102,668

and cash used in operations was $40,008

. During the nine months ended September 30, 2020, net loss was $22,340

and cash used in operations was $8,420

. The Company held cash and cash equivalents of $245,770

excluding restricted cash, at September 30, 2021. On August 16, 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 believes that it will have sufficient working capital to operate for a period of one year from the issuance of the Condensed Consolidated Financial Statements as of and for the nine months ended September 30, 2021 based on the borrowings under the FP Term Loan Agreement (as defined in Note 6) and the additional funds raised associated with the closing of the Merger (the “Closing”) (Note 3).

The Company’s assessment of the period of time through which its financial resources will be adequate to support its operations is a forward-looking statement and involves risks and uncertainties. The Company’s actual results could vary as a result of many factors, including its growth rate, subscription renewal activity, the timing and extent of spending to support its infrastructure and research and development efforts and the expansion of sales and marketing activities. The Company may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. The Company has based its estimates on assumptions that may prove to be wrong, and it could use its available capital resources sooner than it currently expects. The Company may be required to seek additional equity or debt financing. Future liquidity and cash requirements will depend on numerous factors, including market penetration, the introduction of new products, and potential acquisitions of related businesses or technology. In the event that additional financing is required from outside sources, the Company may not be able to raise it on acceptable terms or at all. If the Company is unable to raise additional capital when desired, or if it cannot expand its operations or otherwise capitalize on its business opportunities because it lacks sufficient capital, its business, operating results, and financial condition would be adversely affected.

COVID-19 Impact

COVID-19

Impact

In March 2020, the World Health Organization declared the outbreak of

COVID-19

a pandemic, which continues to spread throughout the United States and the world and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines,

shelter-in-place

orders, and business limitations and shutdowns. While the Company is unable to accurately predict the full impact that the

COVID-19

pandemic will have on its operating results, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic or any resurgences of the pandemic locally or globally, the Company’s compliance with these measures has impacted its

day-to-day

operations and could continue to disrupt its business and operations, as well as that of certain of the Company’s customers whose industries are more severely impacted by these measures, for an indefinite period of time. Through the nine months ended September 30, 2021, the Company has experienced adverse changes in customer buying behavior that began in March 2020 as a result of the impact of the

COVID-19

pandemic, including decreased customer engagement, delayed sales cycles, and deterioration in near-term demand. In 2021, the Delta variant of

COVID-19

has become the dominant strain in numerous countries around the world, including the United States, and is believed to be more contagious than other previously identified

COVID-19

strains. Despite these headwinds, the Company experienced an increase in revenue for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020. As a result of the impact of the

COVID-19

pandemic, the Company experienced delays and

re-work

due to third party satellite launch providers schedule shifts, delays and increased expenses in its hiring process, some attrition from adjusting company policies due to the

COVID-19

pandemic and additional time and expenses supporting customer contracts.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Management’s significant estimates include assumptions in revenue recognition, contingent earnout liability, allowance for doubtful accounts, realizability of deferred income tax assets, equity awards and warrant liabilities. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. The Company adjusts such estimates and assumptions based on the facts and circumstances. As future events and their effects cannot be determined with precision, actual results could differ from those estimates.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Restricted cash, current and restricted cash included in Other long-term assets in the Condensed Consolidated Balance Sheets represents amounts pledged as guarantees or collateral for financing arrangements (Note 6 and Note 12) and lease agreements, as contractually required.

The following table shows components of cash, cash equivalents, and restricted cash reported on the Condensed Consolidated Balance Sheets and in the Condensed Consolidated Statements of Cash Flows as of:


	September 30, 2021		December 31, 2020
Cash and cash equivalents	$	245,770	$	15,571
Restricted cash, current		12,801		—
Restricted cash included in Other long-term assets		396		415

	$	258,967	$	15,986

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents and restricted cash, and accounts receivable. The Company typically has cash account balances 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 governmental agencies and nongovernmental entities. Entities under common control are reported as a single customer. As of September 30, 2021, the Company had three customers that accounted for 21%, 19% and 12% of the Company’s total account receivable and as of December 31, 2020, the Company had one customer that accounted for 67% of the Company’s total accounts receivable.

The Company had the following customers whose revenue balances individually represented 10% or more of the Company’s total revenue:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Customer A		18	%		24	%		27	%		35	%
Customer B		17	%		20	%		19	%		21	%
Customer C		*			16	%		11	%		10	%

Revenue from these customers were less than 10% of total revenue during the period.

Deferred Offering and Merger Costs

The Company capitalizes within Other current assets on the Condensed Consolidated Balance Sheets certain legal, accounting and other third-party fees that are directly related to the Company’s

in-process

equity financing and merger related transactions until such transactions are consummated. After consummation of the equity financing, these costs are recorded as a reduction of the proceeds received from the offering. Should a planned equity financing be abandoned, terminated or significantly delayed, the deferred offering costs are written off to operating expenses. The Company has capitalized $3,871

of such costs as of September 30, 2021. As of the Closing, these capitalized merger costs were recorded to Additional paid-in capital on the Condensed Consolidated Balance Sheet (Note 3).

No costs were capitalized as of December 31, 2020.

During the nine months ended September 30, 2021, the Company incurred an additional $

6,591

of costs indirectly 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 Condensed Consolidated Statements of Operations for

the nine months ended September 30, 2021. No such costs were incurred
during the nine months ended September 30, 2020.

Related Parties

One of the Company’s stockholders and debtors is also a customer from which the Company generated $606 of revenue for the nine months ended September 30, 2020. No revenue was generated from this customer for the nine months ended September 30, 2021.

The Company borrowed gross proceeds of $1,232 of Convertible notes payable in February 2021 and $6,414 of Convertible notes payable during the year ended December 31, 2019, from certain stockholders (Note 7). Interest expense recognized on related party Convertible notes payable was $89 and $413

for the three and nine months ended September 30, 2021, respectively, and

$139 and $405 for the three and nine months ended September 30, 2020, respectively.

Immediately prior to the effective time of the Merger, the Convertible Notes were automatically converted into shares of common stock of Old Spire (“Old Spire Common Stock”) (Note 3 and Note 7). Total carrying value of the related party balance included as Convertible notes payable, net on the Condensed Consolidated Balance Sheets was

$0 and $7,498 as of September 30, 2021, and December 31, 2020, respectively.

Common Stock Warrants

The Company assumed

11,499,992

publicly-traded warrants (“Public Warrants”) and 6,600,000 private placement warrants issued by NavSight (“Private Warrants” and, together with the Public Warrants, the “Common Stock Warrants”) upon the Merger, all of which were issued in connection with NavSight’s initial public offering and entitled the holder to purchase one share of the Company’s

ommon 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

% 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 Condensed Consolidated Balance Sheet at fair value (Note 8), with subsequent changes in their respective fair values recognized in the Condensed Consolidated Statements of Operations at each reporting date.

Contingent Earnout Liability

In connection with the Reverse Recapitalization and pursuant to the Merger Agreement, eligible Spire equity holders are entitled to receive additional shares of the Company’s Common Stock upon the Company achieving certain Earnout Triggering Events (as described in the Merger Agreement and Note 3). In accordance with ASC

815-40,

the earnout shares are not indexed to the Common Stock and therefore are accounted for as a liability and an offset to Additional paid-in capital on the Condensed Consolidated Balance Sheet at the reverse recapitalization date and subsequently remeasured at each reporting date with changes in fair value recorded as a component of Other income (expense), net in the Condensed Consolidated Statements of Operations.

The contingent earnout liability is categorized as a Level 3 fair value measurement using the Monte Carlo model (Note 8) 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.

Accounting Pronouncements Recently Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2016-13,

Financial Instruments—Credit Losses (Topic 326)

Measurement of Credit Losses on Financial Instruments

, as amended (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets not held at fair value. ASU

2016-13

replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses. The Company adopted the requirements of ASU

2016-13

effective January 1, 2021 and determined that the financial impact from the adoption of this standard was immaterial to its Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU

2018-15,

Intangibles-Goodwill and Other-Internal Use Software

(Subtopic

350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (A Consensus of the FASB Emerging Issues Task Force)

(“ASU 2018-15”), which aligns the requirements for capitalizing implementation costs incurred in a cloud computing hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal use software. The Company adopted the requirements of ASU

2018-15

effective January 1, 2021 and determined that the financial impact from the adoption of this standard was immaterial to its Condensed Consolidated Financial Statements.

In March 2020 and January 2021, the FASB issued ASU

2020-04,

Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

, and ASU

2021-01,

Reference Rate Reform (Topic 848)

, respectively, which refine the scope of ASC Topic 848 and clarify some of its guidance as part of the FASB’s monitoring of global reference rate reform activities. These standards permit entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, for computing variation margin settlements, and for calculating price alignment interest in connection with reference rate reform activities under way in global financial markets. The amendments in ASU

2020-04

were effective for all entities as of March 12, 2020 through December 31, 2022 and the amendments in ASU

2021-01

are effective immediately for all entities. The Company determined that the financial impact from the adoption of these standards was immaterial to its Condensed Consolidated Financial Statements.

Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU

2016-02,

Leases (Topic 842)

, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). Since this standard was originally issued, there have been improvements and clarification released by the FASB. Under the new standard, a lessee should recognize in the statement of financial position a liability to make lease payments and a

right-of-use

asset representing its right to use the underlying asset for the lease term. This standard is effective for fiscal years beginning after December 15, 2021 (January 1, 2022 for the Company), with early adoption permitted. The adoption of this guidance will result in recognition of right of use assets and leases liabilities on the Condensed Consolidated Balance Sheets. The Company is currently evaluating the impact that the adoption of this standard will have on its Condensed Consolidated Financial Statements.

In December 2019, the FASB issued ASU

2019-12,

Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes

, by removing certain exceptions to the general principles and its intended to improve consistent application. A franchise tax that is partially based on income will be recognized as an income-based tax and any incremental amount will be recognized as

non-income-based

tax. This standard is effective for fiscal years beginning after December 15, 2021 (January 1, 2022 for the Company), with early adoption permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its Condensed Consolidated Financial Statements.

In October 2021, the FASB issued ASU 2021-08,

Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

, to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. The guidance is effective for annual reporting periods beginning after December 15, 2022, including interim periods within that reporting period. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its Condensed Consolidated Financial Statements in connection with any future business combinations.