SEC Form 10-Q filed by Spire Global Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from______ to______

Commission File Number: 001-39493

 

SPIRE GLOBAL, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware	85-1276957
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
8000 Towers Crescent Drive Suite 1100 Vienna, Virginia 22182
(Address of principal executive offices) (Zip Code)

(202) 301-5127

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A common stock, par value of $0.0001 per share		SPIR		New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☒
Emerging growth company		☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

 

The registrant had outstanding 24,317,560. shares of Class A common stock and 1,507,325 shares of Class B common stock as of April 30, 2024.

 

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Table of Contents

 

		Page
PART I.	FINANCIAL INFORMATION	5
Item 1.	Unaudited Condensed Consolidated Financial Statements	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive Loss	7
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	8
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	44
PART II.	OTHER INFORMATION	47
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults Upon Senior Securities	48
Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	48
Item 6.	Exhibits	49
Signatures		50

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “would,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “seek” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this

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Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to expectations as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to rely upon these statements.

 

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PART I—FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

Spire Global, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

		March 31,				December 31,
		2024				2023
Assets
Current assets
Cash and cash equivalents		$	51,985			$	29,144
Marketable securities			12,003				11,726
Accounts receivable, net (including allowance of $271 and $586 as of    March 31, 2024 and December 31, 2023, respectively)			12,346				9,911
Contract assets			5,205				6,215
Other current assets			12,241				12,340
Total current assets			93,780				69,336
Property and equipment, net			71,853				71,209
Operating lease right-of-use assets			14,324				14,921
Goodwill			50,051				51,155
Customer relationships			18,467				19,363
Other intangible assets			11,994				12,660
Other long-term assets, including restricted cash			7,503				8,181
Total assets		$	267,972			$	246,825
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable		$	5,869			$	8,012
Accrued wages and benefits			2,147				1,829
Contract liabilities, current portion			22,617				23,165
Other accrued expenses			11,309				8,540
Total current liabilities			41,942				41,546
Long-term debt			115,016				114,113
Contingent earnout liability			265				220
Deferred income tax liabilities			1,058				1,069
Warrant liability			10,672				5,988
Operating lease liabilities, net of current portion			12,488				13,079
Other long-term liabilities			1,221				272
Total liabilities			182,662				176,287
Commitments and contingencies (Note 9)
Stockholders’ equity
Common stock, $0.0001 par value, 1,000,000,000 Class A and 15,000,000 Class     B shares authorized, 24,315,589 Class A and 1,507,325 Class B shares issued     and outstanding at March 31, 2024; 21,097,351 Class A and 1,507,325 Class B shares     issued and outstanding at December 31, 2023			3				2
Additional paid-in capital			519,400				477,624
Accumulated other comprehensive loss			(6,234	)			(4,485	)
Accumulated deficit			(427,859	)			(402,603	)
Total stockholders’ equity			85,310				70,538
Total liabilities and stockholders’ equity		$	267,972			$	246,825

 

 

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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Spire Global, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)

 

		Three Months Ended March 31,
		2024				2023
Revenue		$	25,688			$	24,168
Cost of revenue			12,546				10,360
Gross profit			13,142				13,808
Operating expenses:
Research and development			9,909				9,663
Sales and marketing			5,118				6,850
General and administrative			9,818				11,770
Loss on decommissioned satellites			178				—
Total operating expenses			25,023				28,283
Loss from operations			(11,881	)			(14,475	)
Other income (expense):
Interest income			454				565
Interest expense			(5,053	)			(4,578	)
Change in fair value of contingent earnout liability			(45	)			76
Change in fair value of warrant liabilities			(4,202	)			746
Issuance of stock warrants			(2,399	)			—
Foreign exchange (loss) gain			(1,538	)			1,024
Other expense, net			(551	)			(762	)
Total other expense, net			(13,334	)			(2,929	)
Loss before income taxes			(25,215	)			(17,404	)
Income tax provision			41				269
Net loss		$	(25,256	)		$	(17,673	)
Basic and diluted net loss per share(1)		$	(1.16	)		$	(0.98	)
Weighted-average shares used in computing basic and diluted net loss per share(1)			21,813,045				18,096,363

(1) The shares of the Company's common stock and the per share amounts for the three months ended March 31, 2023 have been retroactively adjusted to reflect the 1-for-8 reverse stock split (Note 1).

 

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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Spire Global, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)

 

		Three Months Ended March 31,
		2024				2023
Net loss		$	(25,256	)		$	(17,673	)
Other comprehensive (loss) gain:
Foreign currency translation adjustments			(1,747	)			(1,589	)
Net unrealized (loss) gain on investments    (net of tax)			(2	)			44
Comprehensive loss		$	(27,005	)		$	(19,218	)

 

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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Spire Global, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

			Common Stock								Additional Paid in				Accumulated Other Comprehensive				Accumulated				Total Stockholders'
			Shares				Amount				Capital				Loss				Deficit				Equity
Balance, December 31, 2023				22,604,676			$	2			$	477,624			$	(4,485	)		$	(402,603	)		$	70,538
Release of Restricted Stock Units    and Performance Stock Units				204,511				—				—				—				—				—
Exercise of stock options				37,536				—				267				—				—				267
Stock compensation expense				—				—				3,628				—				—				3,628
Issuance of common stock under     Securities Purchase Agreements				2,976,191				1				37,881				—				—				37,882
Net loss				—				—				—				—				(25,256	)			(25,256	)
Foreign currency translation    adjustments				—				—				—				(1,747	)			—				(1,747	)
Net unrealized loss on    investments (net of tax)				—				—				—				(2	)			—				(2	)
Balance, March 31, 2024				25,822,914			$	3			$	519,400			$	(6,234	)		$	(427,859	)		$	85,310
			Common Stock								Additional Paid in				Accumulated Other Comprehensive				Accumulated				Total Stockholders'
			Shares(1)				Amount(1)				Capital(1)				Loss				Deficit				Equity
Balance, December 31, 2022				19,467,183				2				455,765				(6,997	)			(338,647	)			110,123
Release of Restricted Stock Units				261,153				—				—				—				—				—
Stock compensation expense				—				—				2,646				—				—				2,646
Conversion of warrants to common stock				34,728				—				286				—				—				286
Net loss				—				—				—				—				(17,673	)			(17,673	)
Foreign currency translation    adjustments				—				—				—				(1,589	)			—				(1,589	)
Net unrealized gain on    investments (net of tax)				—				—				—				44				—				44
Balance, March 31, 2023				19,763,064			$	2			$	458,697			$	(8,542	)		$	(356,320	)		$	93,837

(1) The shares of the Company's common stock have been retroactively adjusted to reflect the 1-for-8 reverse stock split (Note 1).

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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Spire Global, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

		Three Months Ended March 31,
		2024				2023
Cash flows from operating activities
Net loss		$	(25,256	)		$	(17,673	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			6,837				3,916
Stock-based compensation			3,628				2,646
Amortization of operating lease right-of-use assets			809				224
Amortization of debt issuance costs			900				554
Change in fair value of warrant liabilities			4,202				(746	)
Change in fair value of contingent earnout liability			45				(76	)
Issuance of stock warrants			2,399				—
Loss on decommissioned satellites and impairment of assets			432				—
Other, net			(20	)			(104	)
Changes in operating assets and liabilities:
Accounts receivable, net			(2,564	)			97
Contract assets			624				(855	)
Other current assets			392				117
Other long-term assets			516				410
Accounts payable			(1,508	)			(604	)
Accrued wages and benefits			343				323
Contract liabilities			775				1,259
Other accrued expenses			973				(548	)
Operating lease liabilities			(872	)			(230	)
Net cash used in operating activities			(7,345	)			(11,290	)
Cash flows from investing activities
Purchases of short-term investments			(10,920	)			(13,908	)
Maturities of short-term investments			10,800				11,600
Purchase of property and equipment			(8,564	)			(4,649	)
Net cash used in investing activities			(8,684	)			(6,957	)
Cash flows from financing activities
Proceeds from Securities Purchase Agreements, net			37,881				—
Proceeds from long-term debt			—				19,886
Proceeds from exercise of stock options			267				—
Net cash provided by financing activities			38,148				19,886
Effect of foreign currency translation on cash, cash equivalents and restricted cash			711				(1,846	)
Net increase (decrease) in cash, cash equivalents and restricted cash			22,830				(207	)
Cash, cash equivalents and restricted cash
Beginning balance			29,641				47,569
Ending balance		$	52,471			$	47,362
Supplemental disclosure of cash flow information
Cash paid for interest		$	3,983			$	3,827
Income taxes paid		$	15			$	451
Noncash operating, investing and financing activities
Property and equipment purchased but not yet paid		$	2,135			$	2,299
Right-of-use assets obtained in exchange for lease liabilities		$	353			$	1,007
Conversion of warrants to Class A common stock		$	—			$	286

 

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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12. Subsequent Events

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes thereto included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated by these forward-looking statements as a result of many factors. Factors that could cause or contribute to such differences include those identified below and those discussed in the section titled “Risk Factors” in the 2023 Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Overview

Spire is a global provider of space-based data, analytics and space services, offering unique datasets and powerful insights about Earth so that organizations can make decisions with confidence in a rapidly changing world. Spire builds, owns, and operates a fully deployed satellite constellation. We believe it is one of the world’s largest “listening” constellations, observing the Earth in real time using radio frequency technology.

The data acquired by our multipurpose satellites provide global weather intelligence, ship and plane movements, and spoofing and jamming detection to better predict how their patterns impact economies, global security, business operations and the environment. We also offer Space as a Service solutions that empower customers to leverage our established infrastructure to put their business in space. We provide customers these solutions through an application programming interface (“API”) infrastructure.

Our platform applies our value-add insights and predictive analytics to this proprietary data to create commercially valuable datasets. We offer three data solutions to our customers, which vary in complexity and price and can be delivered in near real-time via our API that can be easily integrated into our customers’ business operations:

For each data solution, we have the capability to offer customers a variety of features and additional value. The four forms of data we monetize are:

 

 

 

These value-add data features allow customers to solve various use cases and provide a path to expand throughout the customer’s relationship.

As our fourth solution, we are also pioneering an innovative business model through our Space Services solution. We leverage our fully deployed infrastructure and large-scale operations to enable our customers to obtain customized data through our API. Our customers can begin receiving data in less than a year after engaging with us and receive data by entering into a subscription agreement. Our Space Services offering provides our customers with fast, scalable and reliable access to space.

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Our solutions are offered to customers across numerous industries and we not only have the opportunity to upsell within each one, but we also have the opportunity to cross-sell among all our solutions.

We provide our solutions to global customers either through a subscription or based on a specific project. We currently sell directly to end customers and utilize reseller partners when beneficial.

 

Highlights from the Three Months Ended March 31, 2024

 

Macroeconomic and Geopolitical Impact

 

Over the past two years, we have been impacted by the macroeconomic environment, such as fluctuations in foreign currencies, increasing interest rates and geopolitical conflicts like the Russian invasion of Ukraine, Israel's war with Hamas and the increased tensions between China and the U.S.

The U.S. dollar exhibited a modest decrease in strength against the local functional currencies of our foreign subsidiaries for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. This had a marginal positive impact on our revenue, as about one-third of our sales are conducted in foreign currencies. Conversely, it had a marginal unfavorable impact on our expenses, given that a majority of our workforce resides in countries other than the United States.

The macroeconomic environment has caused existing or potential customers to re-evaluate their decision to purchase our offerings, at times resulting in additional customer discounts, extended payment terms, longer sales cycles, and a few contract cancellations. Particularly, the U.S. Congress' delay in approving appropriations bills negatively impacted the timeliness of some of our U.S. federal government orders and revenues expected in the first quarter of 2024.

Increasing interest rates in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 resulted in higher interest expenses, as our 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 and negatively impacted the availability of launch windows and our constellation replenishment efforts.

If any of these factors continue or worsen, and/or if new macroeconomic or geopolitical issues arise, our results and financial condition could be further negatively impacted. We 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 we operate would adversely affect our business, financial condition, and results of operations.

 

Key Factors Affecting Our Performance

 

We believe that our current and future performance depends on many factors, including, but not limited to, those described below. While these areas present significant opportunity, they also present risks that we must manage to achieve successful results. For additional information about these risks, see the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). If we are unable to address these risks, our business and results of operations could be adversely affected.

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Expansion of and Further Penetration of Our Customer Base

We employ a “land and expand” business model that focuses on efficiently acquiring new customers (“land”) and then growing our relationships with these customers over time (“expand”). We have the capability to offer customers additional data sets and a variety of enhanced features that potentially grow the value of the services for which our customers contract with us. Our future revenue growth and our path to profitability are dependent upon our ability to continue to land new customers and then expand adoption of our solutions within their organizations.

We track our progress landing new customers by measuring the number of ARR Solution Customers (as defined below) we have from one fiscal period to the next. The number of ARR Solution Customers decreased to 708 as of March 31, 2024. We track our increases and decreases in our customer contract values by measuring our ARR Net Retention Rate (as defined below). Our ARR Net Retention Rate was 102% for the three months ended March 31, 2024 and 108% for the three months ended March 31, 2023.

Expansion into New Industries and Geographies

As our solutions have grown, we continue to focus on further penetration of our initial industries including maritime, aviation, logistics, and government (civil and defense/intelligence) among others. We believe our technology and solutions give us the ability to also expand into additional industries, including energy, financial services, agriculture, transportation, and insurance, and into additional geographies, including Latin America, Africa and the Middle East. Our revenue growth is dependent upon our ability to continue to expand into new industries and geographies. The costs associated with these expansions may adversely affect our results of operations.

 

Impact of the Solar Cycle on our Assets' Remaining Life

A stronger solar cycle has the potential to impact some of our satellites, accelerating their deorbiting and shortening their useful lives. The solar cycle is the cycle that the Sun’s magnetic field goes through approximately every 11 years. In 2019, NOAA, NASA, and the International Space Environment Services panel forecasted that Solar Cycle 25 (December 2019 to approximately 2030) would be relatively weak after a relatively weak Solar Cycle 24 (December 2008 to December 2019). Subsequently, NOAA noted that Solar Cycle 24 was the weakest cycle in 100 years with sunspots reaching a maximum of 116 – below the average of 179. In October of 2023, NOAA updated their projection for the strength and duration of Solar Cycle 25, stating that the cycle is expected to be more intense than Cycle 24, and predicting that the peak of the cycle would be earlier, by the end of 2024. A stronger solar cycle may accelerate the deorbiting of our satellites sooner than expected or planned. Our ability to minimize the solar cycle impact, our ability to replenish our existing constellation in a timely manner and the costs associated with these actions may adversely affect our results of operations.

Investment in Growth

We continue investing in growing our business and capitalizing on our market opportunities while balancing the uncertainties from the macroeconomic environment and geopolitical factors. We intend to continue to add headcount to our global sales and marketing teams to acquire new customers and to increase sales to existing customers. We also intend to continue to add headcount as needed to our research and development teams and otherwise invest to improve and innovate our nanosatellite, ground station and data analytics technologies. For the three months ended March 31, 2024, our spending on research and development increased by $0.2 million, or 3%, from the three months ended March 31, 2023. Our total headcount across all functions increased from 418 employees as of March 31, 2023, to 430 employees as of March 31, 2024. The costs of these investments may adversely affect our results of operations, but we believe that these investments will contribute to our long-term growth.

 

Acquisitions

Our business strategy may include acquiring other complementary solutions, technologies, or businesses that we believe will allow us to continue on our path to profitability, reduce the time or costs required to develop new technologies, incorporate enhanced functionality into and complement our existing solution offerings, augment our engineering workforce and enhance our technological capabilities.

 

Impact of Foreign Exchange Rates

We report in U.S. dollars, and the functional currency of our foreign operating subsidiaries is the local currency, including the Euro, the British Pound, the Singapore Dollar and the Canadian Dollar. The U.S. dollar exhibited a modest decrease in strength against the local functional currencies of our foreign subsidiaries for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. This had a marginal positive impact on our revenue, as about one-third of our sales are conducted in foreign currencies. Conversely, it had a marginal unfavorable impact on our expenses, given that a majority of our workforce resides in countries other than the United States. Approximately 31% of our revenues were generated in non-U.S. dollar-denominated currencies. The financial statements of these subsidiaries are translated into U.S. dollars using exchange rates in effect at each balance sheet date for assets and liabilities and average exchange rates during the period for revenues and expenses. To the extent we experience significant currency fluctuations, our results of operations may be impacted.

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Key Business Metrics

We review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions:

Annual Recurring Revenue

We define ARR as our expected annualized revenue from customers that are under contracts with us at the end of the reporting period with a binding and renewable agreement for our subscription solutions or customers that are under a binding multi-year contract that can range from components of our Space Services solution to a project-based customer solution. Customers with project-based contracts are considered recurring when there is a multi-year binding agreement that has a renewable component in the contract. Customers are also considered recurring when they have multiple contracts over multiple years. Customer contracts for data trials and one-time transactions are excluded from the calculation of ARR.

Our ARR growth in the three months ended March 31, 2024 was driven by increasing the amount of ARR business with our existing customers. Due in part to the timing of some of our project-based contracts, including when engagements start and stop, our ARR has fluctuated from period to period in the past, and we expect our ARR to continue to fluctuate from period to period in the future. ARR is a leading indicator and accordingly will tend to outpace the impact on our revenue as we recognize the contract value of various agreements over time.

The following table summarizes our ARR as of each period end indicated:

 

		As of March 31,
(dollars in thousands)		2024				2023				% Change
ARR		$	120,890			$	104,763				15	%

 

Number of ARR Customers and ARR Solution Customers

We define an ARR Customer as an entity that has a contract with us or through our reseller partners contracts, that is either a binding and renewable agreement for our subscription solutions, or a binding multi-year contract as of the measurement date independent of the number of solutions the entity has under contract. A single organization with separate subsidiaries, segments, or divisions may represent multiple customers, as we treat each entity that is invoiced separately as an individual customer. In cases where customers subscribe to our platform through our reseller partners, each end customer that meets the above definition is counted separately as an ARR Customer. All entities that have contracts for data trials and one-time transactions are excluded from the calculation of ARR Customers.

We define an ARR Solution Customer similarly to an ARR Customer, but we count every solution the customer has with us separately. As a result, the count of ARR Solution Customers exceeds the count of ARR Customers at each period end, as some customers contract with us for multiple solutions. Our multiple solutions customers are those that are under contract for at least two of our solutions: Maritime, Aviation, Weather, and Space Services. All entities that have contracts for data trials and one-time transactions are excluded from the calculation of ARR Solution Customers.

The decrease in each of our ARR Customers and ARR Solution Customers at the dates presented was driven by our move to de-emphasize sales to customers with very low ARR or revenue. We expect this strategy to increase our ARR and revenue per customer, increase our ARR in total, and reduce our customer count as we drive towards the most efficient use of our resources.

The following table summarizes the number of our ARR Customers and ARR Solution Customers as of each period end indicated:

 

		As of March 31,
		2024				2023				% Change
ARR Customers			672				755				(11	)%
ARR Solution Customers			708				781				(9	)%

 

ARR Net Retention Rate

We calculate our ARR Net Retention Rate for a particular fiscal period end by dividing (i) our ARR from those ARR Customers at that fiscal period end that were also customers as of the last day of the prior fiscal period end by (ii) the ARR from all customers as of the last day of the prior fiscal period. This calculation measures the overall impact from increases in customer contract value (upsells), the decreases in customer contract value (downsells) and the decreases in customer value resulting from customers that have chosen not to renew their contracts with us (lost customers).

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The following table summarizes our ARR Net Retention Rate for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended March 31,
		2024				2023				% Change
ARR Net Retention Rate			102	%			108	%			(6	)%

 

Our ARR Net Retention Rate can be impacted from period to period by large increases or decreases in customer contract value and large decreases in contract value from customers that have not renewed their contracts with us. An ARR Net Retention Rate greater than 100% is an indication that we are growing the value of the solutions our customers are purchasing from us at a fiscal period end versus the prior fiscal period end. An ARR Net Retention Rate less than 100% is an indication that the value of the solutions our customers are purchasing from us declined at a fiscal period end versus the prior fiscal period end. For the three months ended March 31, 2024, our ARR Net Retention Rate decreased 6% from the three months ended March 31, 2023. This decrease was driven primarily by the reduced value of NOAA's RO weather award in the three months ended March 31, 2024 as compared to the value of the corresponding award in the three months ended March 31, 2023.

 

Components of Results of Operations

Revenue

We derive revenue from providing data, insights and access to our cloud-based technology platform sold on a subscription basis. Some of our customer arrangements include the delivery of specific performance obligations and subsequent customer acceptance of project-based deliverables, which may impact the timing of revenue recognition. Subscription periods for our solutions generally range from one to two years and are typically non-cancelable, with customers having the right to terminate their agreements only if we materially breach our obligations under the agreement. Our subscription fees are typically billed either monthly or quarterly in advance.

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 our data and services to our customers and amortization of purchased intangibles associated with our acquisition of exactEarth in November 2021 (the “Acquisition”). Personnel costs are primarily related to the cost of our employees supporting and managing our constellation operations including satellite operations, ground station control and launch management. Costs associated with the manufacture and launch of our satellites, including personnel costs, are capitalized and depreciated upon placement in service, typically over a four-year expected useful life. As satellites reach the end of their expected useful life, they are generally replaced with replenishment satellites to maintain our constellation at optimal performance. Costs associated with the acquisition and development of new ground stations, including the bill of materials and labor to install the ground station, are capitalized and depreciated upon placement in service typically over a four-year to ten-year expected useful life. We anticipate ongoing capital spending to repair and replenish ground stations as they reach the end of their expected useful life to keep our ground station network at optimal performance. Our proprietary ground station network is primarily located in third-party locations where we incur lease and other operational charges. Cost of revenue also includes royalties associated with third-party data sets that we integrate into our data solutions.

Operating Expenses

Research and Development. Research and development expenses consist primarily of employee-related expenses, third-party consulting fees, and computing costs. Our research and development efforts are focused on improving our satellite technology, developing new data sets, developing new algorithms, enhancing our smart and predictive analytics, and enhancing the ease of use and utility of our space-based data solutions.

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. Commission costs on new customer contract bookings are considered costs of obtaining customer contracts. Commission costs for multi-year deals are considered contract acquisition costs and are deferred and then amortized over the period of the contract excluding the last twelve months, which are expensed at the beginning of the final twelve-month period. Commission costs on contracts completed with a term of twelve months or less are expensed in the period incurred.

General and Administrative. General and administrative expenses consist of employee-related expenses for personnel in our 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, corporate insurance, fees related to accounting, tax and audit costs, office facilities costs, software subscription costs and other corporate costs.

Loss on Decommissioned Satellites. Loss on decommissioned satellites consists of the write-off of the remaining capitalized costs associated with the manufacture and launch of our satellites prior to the end of the satellite’s useful life. We contract with third-party companies to launch, carry and deploy our satellites into space. A loss could result from a third-party launch or deployer failure, a technical failure of the satellite, or the deorbit or decommissioning of a satellite before the end of the satellite’s useful life. A technical failure could include a satellite that is not able to communicate with our network of ground stations or fulfill its intended technical mission for a duration greater than one month. The loss amount is presented net of any insurance proceeds received. Due to the nature of these events, we cannot predict the magnitude or frequency of future satellite deorbit and launch failure losses. While we sometimes purchase launch insurance when financially practical, the proceeds from these policies will typically only

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cover a portion of our loss in the event of an unplanned satellite deorbit or launch failure. We incurred a $0.2 million loss on decommissioned satellites for the three months ended March 31, 2024 and no loss on decommissioned satellites for the three months ended March 31, 2023.

Other Income (Expense)

Interest Income. Interest income includes interest earned on our cash balances and short-term marketable securities.

Interest Expense. Interest expense includes interest costs associated with our debt and amortization of deferred financing costs.

Change in Fair Value of Contingent Earnout Liability. Change in fair value of contingent earnout liability includes mark-to-market adjustments to reflect changes in the fair value of the contingent earnout liability.

Change in Fair Value of Warrant Liabilities. Change in fair value of warrant liabilities includes mark-to-market adjustments to reflect changes in fair value of warrant liabilities.

Loss on Extinguishment of Debt. Loss on extinguishment of debt includes accelerated debt issuance expenses, legal and other fees associated with the payoff or refinancing of existing debt.

Foreign Exchange Gain/Loss. Foreign exchange gain/loss consists of the net effect of realized and unrealized foreign currency gains and losses resulting from changes in the underlying currency rates relative to the U.S. dollar as we re-measure foreign currency denominated transactions and balances into the functional currency of the entities in which they are recorded. We use the local currency as our functional currency for transactions and balances in Luxembourg, the United Kingdom, Singapore and Canada.

Other Expense, Net. Other expense, net consists primarily of tax credits, grant income, share of equity investment loss, sales and local taxes, and write-off of certain prepaid assets and legal settlements.

Income Tax Provision

Provision for income taxes consists of federal income taxes in the United States and income taxes in certain foreign jurisdictions. We do not provide for income taxes on undistributed earnings of our foreign subsidiaries since we intend to invest these earnings outside of the United States permanently. We account for income taxes using the asset and liability method, whereby deferred tax assets and liabilities are recognized based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted rates and laws that will be in effect when the differences are expected to reverse.

Results of Operations

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

The following tables set forth selected condensed consolidated statements of operations data for each of the periods indicated:

 

		Three Months Ended March 31,
(in thousands)		2024				2023
Revenue		$	25,688			$	24,168
Cost of revenue(1)			12,546				10,360
Gross profit			13,142				13,808
Operating expenses(1):
Research and development			9,909				9,663
Sales and marketing			5,118				6,850
General and administrative			9,818				11,770
Loss on decommissioned satellites			178				—
Total operating expenses			25,023				28,283
Loss from operations			(11,881	)			(14,475	)
Other income (expense):
Interest income			454				565
Interest expense			(5,053	)			(4,578	)
Change in fair value of contingent earnout liability			(45	)			76
Change in fair value of warrant liabilities			(4,202	)			746
Issuance of stock warrants			(2,399	)			—
Foreign exchange (loss) gain			(1,538	)			1,024
Other expense, net			(551	)			(762	)
Total other expense, net			(13,334	)			(2,929	)
Loss before income taxes			(25,215	)			(17,404	)
Income tax provision			41				269
Net loss		$	(25,256	)		$	(17,673	)

 

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		Three Months Ended March 31,
(in thousands)		2024				2023
Cost of revenue		$	61			$	77
Research and development			1,018				651
Sales and marketing			675				437
General and administrative			1,874				1,481
Total stock-based compensation		$	3,628			$	2,646

Revenue

 

		Three Months Ended March 31,
(dollars in thousands)		2024				2023				% Change
Revenue		$	25,688			$	24,168				6	%

 

Total revenue increased $1.5 million, or 6%, driven primarily by increasing the amount of ARR business with our existing customers combined with growth in revenue recognized for milestone-based projects, partially offset by a decrease in our RO-based revenue primarily from the reduced value of NOAA's RO weather award in the three months ended March 31, 2024 as compared to the value of the corresponding award in the three months ended March 31, 2023. Our ARR Customers decreased 11%, from 755 as of March 31, 2023 to 672 as of March 31, 2024. This was aligned with our stated move to de-emphasize sales to customers with very low ARR or revenue. Our ARR Net Retention Rate was 102% for the three months ended March 31, 2024 compared to 108% for the three months ended March 31, 2023, driven primarily by the reduced value of NOAA’s RO weather award.

 

For the three months ended March 31, 2024, we derived 55% of our revenue from the Americas, 36% of our revenue from Europe, Middle East, Africa (“EMEA”) and 8% of our revenue from Asia Pacific (“APAC”). For the three months ended March 31, 2023, we derived 53% of our revenue from the Americas, 36% of our revenue from EMEA and 11% of our revenue from APAC. For the three months ended March 31, 2024, we derived 66% of our revenue from subscription arrangements, compared to 78% for the three months ended March 31, 2023. This percentage mix can fluctuate significantly from period to period driven primarily by the timing of the non-subscription revenue recognition in our contracts.

Cost of Revenue

 

		Three Months Ended March 31,
(dollars in thousands)		2024				2023				% Change
Total cost of revenue		$	12,546			$	10,360				21	%
Gross profit			13,142				13,808				(5	)%
Gross margin			51	%			57	%			(6	)%
Headcount (at end of period)			36				41				(12	)%

Cost of revenue increased $2.2 million, or 21%, primarily driven by an increase in depreciation expense of $2.9 million and partially offset by a decrease in computing costs of $0.3 million, a decrease in personnel costs of $0.3 million and a decrease in other miscellaneous expenses of $0.1 million. The increase in depreciation expense was primarily driven by a reset of the estimated useful lives of our satellites to account for the potential impact of increased solar activity related to the current solar cycle. The decrease in computing costs was driven by cloud platform efficiencies. The decrease in personnel costs was driven by an overall reduction in headcount.

Gross margin for the three months ended March 31, 2024 and 2023 was 51% and 57%, respectively. The decrease was driven primarily by higher depreciation expense as described above. This metric can fluctuate significantly from period to period driven primarily by the timing of the revenue as well as the timing of our technology investments to support future revenue.

We expect cost of revenue, including depreciation and amortization expenses, third-party operating costs and royalties, and high-powered computing costs, to decrease in absolute dollars during the remainder of the year as accelerated depreciation declines to reflect our constellation replenishment efforts. We anticipate gross margins to increase closer to the 65-70% level as a consequence of our sales increases and reductions in cost of revenue.

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Operating Expenses

Operating expenses consist of our research and development, our sales and marketing, and our general and administrative expenses, as well as loss on decommissioned satellites in some periods. As we continue to invest in our growth, including through hiring additional personnel, we expect our operating expenses to increase in absolute dollars as revenue grows; however, we expect our operating expenses as a percentage of revenue to decrease over time.

Research and Development

 

		Three Months Ended March 31,
(dollars in thousands)		2024				2023				% Change
Research and development		$	9,909			$	9,663				3	%
Percentage of total revenue			39	%			40	%
Headcount (at end of period)			232				211				10	%

 

Research and development expenses increased $0.2 million, or 3%, primarily driven by an increase in professional services fees of $0.2 million, an increase in software expenses of $0.2 million and an increase in personnel costs of $0.1 million, partially offset by a decrease in bonus expenses of $0.3 million. The increase in professional services fees and software expenses was driven by additional technical resources required to support new development processes and capabilities. The increase in personnel costs was driven by overall growth in headcount.

We expect research and development expenses to increase in absolute dollars in future periods primarily due to higher headcount as we continue to invest in the development of our solutions offerings and new technologies; however, we expect research and development expenses to decrease as a percentage of revenue in future periods as our revenue growth exceeds our increase in research and development spend.

Sales and Marketing

 

		Three Months Ended March 31,
(dollars in thousands)		2024				2023				% Change
Sales and marketing		$	5,118			$	6,850				(25	)%
Percentage of total revenue			20	%			28	%
Headcount (at end of period)			70				80				(13	)%

Sales and marketing expenses decreased $1.7 million, or 25%, primarily driven by a decrease in bad debt expenses of $0.8 million, a decrease in bonus expenses of $0.4 million, a decrease in personnel costs of $0.2 million, a decrease in marketing expenses of $0.2 million and a decrease in other miscellaneous operating expenses of $0.1 million. The decrease in bad debt expenses was driven by cash collections and recovery efforts. The decrease in personnel costs was driven by an overall reduction in headcount. The decrease in marketing expenses was driven by lower advertising and event spend compared to the prior year quarter.

We expect sales and marketing expenses to generally grow in absolute dollars in the future, primarily due to increased employee-related expenses as we grow our headcount, to support our sales and marketing efforts and our continued expansion of our sales capacity across our solutions; however, we expect sales and marketing expenses as a percentage of revenue to decrease in future periods as our revenue growth exceeds our increases in sales and marketing spend.

General and Administrative

 

		Three Months Ended March 31,
(dollars in thousands)		2024				2023				% Change
General and administrative		$	9,818			$	11,770				(17	)%
Percentage of total revenues			38	%			49	%
Headcount (at end of period)			92				86				7	%

General and administrative expenses decreased $2.0 million, or 17%, primarily driven by a decrease in bonus expenses of $0.7 million, a reduction in insurance costs of $0.4 million and a reduction in professional services of $0.4 million. The decrease in bonus expenses was driven by lower bonus accruals for management. The decrease in business insurance costs was driven by an improvement in annual rates particularly on directors and officers insurance. The reduction in professional services was driven by lower legal and accounting service fees versus the prior year period.

We expect our general and administrative expenses to generally grow in absolute dollars in future periods as our employee-related expenses increase to support our revenue growth; however, we expect our general and administrative expenses as a percentage of revenue to decrease as revenue growth exceeds our increases in general and administrative spend.

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Loss on Decommissioned Satellites

 

		Three Months Ended March 31,
(dollars in thousands)		2024				2023				% Change
Loss on decommissioned satellites		$	178			$	—			*
Percentage of total revenues			1	%			—	%

*Not Meaningful

In the three months ended March 31, 2024, we recognized a non-cash expense of $0.2 million on decommissioned satellites prior to the ends of their useful lives. There were no satellites decommissioned or impaired in the three months ended March 31, 2023.

Due to the nature of these events, we cannot predict the magnitude or frequency of future decommissioning losses. While we sometimes purchase launch insurance when financially practical, the proceeds from these policies will typically only cover a portion of our loss in the event of an unplanned satellite deorbit or launch failure.

Other Income (Expense)

 

		Three Months Ended March 31,
(dollars in thousands)		2024				2023				% Change
Interest income		$	454			$	565				(20	)%
Interest expense		$	(5,053	)		$	(4,578	)			10	%
Change in fair value of contingent earnout liability		$	(45	)		$	76				(159	)%
Change in fair value of warrant liabilities		$	(4,202	)		$	746				(663	)%
Issuance of stock warrants		$	(2,399	)		$	—			*
Foreign exchange (loss) gain		$	(1,538	)		$	1,024				(250	)%
Other expense, net		$	(551	)		$	(762	)			(28	)%

*Not Meaningful

 

Interest income decreased by $0.1 million driven by lower short-term marketable securities available for investments.

Interest expense increased $0.5 million, or 10%, primarily as a result of incurring higher interest and amortized debt issuance costs associated with our Blue Torch Finance LLC (“Blue Torch”) term loan.

Change in fair value of contingent earnout liability was an immaterial loss in the three months ended March 31, 2024 compared to a gain of $0.1 million in the three months ended March 31, 2023, a reduction of 159%. The loss in three months ended March 31, 2024 was driven by an increase in the fair value of the liability driven by appreciation of the underlying stock price in the period. The gain in the prior period was primarily driven by the decrease in the fair value of the liability due to the decline in the underlying stock price during the period. For additional information, see Notes 2 and 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and Notes 2 and 8 to our consolidated financial statements included in our 2023 Form 10-K.

Change in fair value of warrant liabilities was a loss of $4.2 million in the three months ended March 31, 2024 compared to a gain of $0.7 million in the three months ended March 31, 2023, a reduction of 663%. The $4.2 million loss in the three months ended March 31, 2024 was primarily driven by the appreciation of the underlying stock valuation for the warrants issued to Blue Torch and subsequently amended in July 2023.

Issuance of stock warrants was a net loss of $2.4 million in the three months ended March 31, 2024 compared to no such expense in the three months ended March 31, 2023. In March 2024, we entered into a definitive Securities Purchase Agreement with institutional investors that included the issuance of stock warrants.

We recognized a foreign exchange loss of $1.5 million in the three months ended March 31, 2024 compared to a foreign exchange gain of $1.0 million in the three months ended March 31, 2023. The loss in 2024 was driven mainly by the revaluation of intercompany balances between our Luxemburg entity and the US denominated in U.S. dollars. The strengthening of the U.S. dollar for the period ended March 31, 2024 relative to Europe at December 31, 2023 triggered the revaluation and unrealized losses. The gain in the three months ended March 31, 2023 was a consequence of the U.S. dollar weakening during the period relative to the local currencies of our subsidiaries at year end 2022. The driver was also unrealized foreign exchange from intercompany balances owed from Luxemburg to our U.S. entities denominated in U.S. dollars.

Other expense, net was $0.6 million for the three months ended March 31, 2024, a decrease of 28% relative to the three months ended March 31, 2023, mostly driven by lower state taxes.

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Income Tax Provision

 

		Three Months Ended March 31,
(dollars in thousands)		2024				2023				% Change
Income tax provision		$	41			$	269				(85	)%

 

Income tax provision decreased $0.2 million, or 85%, primarily driven by the research and development expenditure deduction in our U.K. subsidiary.

Non-GAAP Financial Measures

We believe that in addition to our results determined in accordance with GAAP, non-GAAP Adjusted EBITDA is useful in evaluating our business, results of operations and financial condition. We believe that this non-GAAP financial measure may be helpful to investors because it provides consistency and comparability with past financial performance and facilitates period to period comparisons of operations, as this eliminates the effects of certain variables from period to period for reasons that we do not believe reflect our underlying business performance. In addition to our GAAP measures, we use this non-GAAP financial measure internally for budgeting and resource allocation purposes and in analyzing our financial results.

For the reasons set forth below, we believe that excluding the following items provides information that is helpful in understanding our results of operations, evaluating our future prospects, comparing our financial results across accounting periods, and comparing our financial results to our peers, many of which provide similar non-GAAP financial measures.

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The following table outlines the reconciliation from net loss to Adjusted EBITDA for the periods indicated:

 

		Three Months Ended March 31,
(in thousands)		2024				2023
Net loss		$	(25,256	)		$	(17,673	)
Depreciation & amortization			6,837				3,916
Interest, net			4,599				4,013
Taxes			41				269
EBITDA			(13,779	)			(9,475	)
Change in fair value of contingent earnout liability			45				(76	)
Change in fair value of warrant liabilities			4,202				(746	)
Issuance of stock warrants			2,399				—
Foreign exchange loss (gain)			1,538				(1,024	)
Other expense, net			551				762
Stock-based compensation			3,628				2,646
Mergers and acquisition related expenses			—				1,015
Loss on decommissioned satellites			178				—
Other acquisition accounting amortization			170				166
Adjusted EBITDA		$	(1,068	)		$	(6,732	)

Limitations on the Use of Non-GAAP Financial Measures

There are limitations to using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures provided by other companies.

The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which items are adjusted to calculate our non-GAAP financial measures. We compensate for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis and also by providing GAAP measures in our public disclosures. Some of these limitations are:

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Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure to evaluate our business, and to view our non-GAAP financial measures in conjunction with the most directly comparable GAAP financial measures.

Liquidity and Capital Resources

Our principal sources of liquidity to fund our operations are from cash and cash equivalents and marketable securities, which totaled $64.0 million as of March 31, 2024, mainly from net proceeds from borrowings under the Blue Torch Credit Facility (as defined below), proceeds from the Private Placement and Offering (each as defined below), and the sale of common stock under the Equity Distribution Agreement with Canaccord Genuity LLC, as sales agent (the "Equity Distribution Agreement"). Of the $64.0 million total, $52.0 million was in cash and cash equivalents of which approximately $12.8 million was held outside of the United States. The remaining $12.0 million was held in short-term marketable securities, all of which was held in the United States and which can be converted to cash with minimal transaction costs. These amounts compare to cash and cash equivalents, and marketable securities of $40.9 million as of December 31, 2023, of which $29.1 million was in cash and cash equivalents with $13.7 million held outside of the United States. The remaining $11.7 million was held in short-term marketable securities. The cash and cash equivalent amounts are exclusive of restricted cash which totaled $0.5 million as of each of March 31, 2024 and December 31, 2023.

On February 4, 2024, we entered into a securities purchase agreement for the issuance and sale of 833,333 shares of our Class A common stock to Signal Ocean Ltd at a price of $12.00 per share (the “Private Placement”). The Private Placement closed on February 8, 2024, resulting in gross proceeds to us of $10.0 million.

On March 21, 2024, we entered into a Securities Purchase Agreement with institutional investors (the “Investors”), pursuant to which we issued and sold in a registered direct offering (the “Offering”), (i) an aggregate of 2,142,858 shares of Class A common stock and (ii) warrants exercisable for an aggregate of 2,142,858 shares of Class A common stock ("Securities Purchase Agreement Warrants") to the Investors. Each share of Class A common stock and accompanying Securities Purchase Agreement Warrant to purchase one share of Class A common stock was sold at an offering price of $14.00. The aggregate gross proceeds to us from the Offering totaled $30,000 before deducting the placement agent’s fees and related offering expenses. The Securities Purchase Agreement Warrants have an exercise price equal to $14.50 per share of Class A common stock, are exercisable for a term beginning on March 25, 2024 and will expire on July 3, 2024.

We expect that our principal source of liquidity will be our cash and cash equivalents balance. We currently believe that we will meet our minimum liquidity covenant, as well as all other financial covenants under the Blue Torch Financing Agreement (as defined below), at each applicable measurement point over the period of at least one year from the issuance of the March 31, 2024 condensed consolidated financial statements, and that we will have sufficient working capital to operate for a period of at least one year from the issuance of the March 31, 2024 condensed consolidated financial statements, in each case based on our current cash and cash equivalent balance and expected future financial results. The sufficiency of our working capital and our ability to meet our financial covenants will depend on many factors, including our growth rate, the timing and extent of spending to support solution development efforts, the expansion of sales and marketing activities, the ongoing investments in technology infrastructure, the introduction of new and enhanced solutions, and the continuing market acceptance of our solutions, all of which are subject to risks, uncertainties, and other factors that may cause actual results to differ materially. From time to time, we may seek additional equity or debt financing to fund capital expenditures, strategic initiatives or investments and our ongoing operations. In the event that we decide, or are required, to seek additional financing from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired or unable to meet the minimum liquidity covenant or other financial covenants under the Blue Torch Financing Agreement, our business, financial condition, and results of operations could be adversely affected.

Blue Torch Credit Agreement

On June 13, 2022, we, as borrower, and certain of our subsidiaries, as guarantors, entered into a financing agreement (the “Blue Torch Financing Agreement”) with Blue Torch Finance LLC, 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 $120.0 million (the “Blue Torch Credit Facility”). A portion of the proceeds of the term loan was used to repay our then-existing $70.0 million 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 we 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 would have occurred 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 $120.0 million term loan was available and drawn at closing, of which $19.7 million was placed in an escrow account by Blue Torch with such amount to be released upon our achieving certain metrics related to annualized recurring revenue and a total annualized recurring revenue leverage ratio. These metrics were achieved and the $19.7 million was released from the escrow account and delivered to us in February 2023. The term loan

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accrues interest at a floating rate, to be based, at our election, on either a reference rate or a 3-month Term Secured Overnight Financing Rate ("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%. We elected the Term SOFR rate which was 13.5766% as of March 31, 2024. Principal on the term loan is only payable at maturity and interest on the term loan is due and payable quarterly for Term SOFR borrowings. We are 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 $2.4 million on the closing date, a $0.3 million agency fee annually and an exit fee in an amount equal to $1.8 million upon termination of the Blue Torch Financing Agreement.

Our obligations under the Blue Torch Financing Agreement are or will be guaranteed by certain of our 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 our personal property and that of our subsidiary guarantors, including pursuant to a Security Agreement entered into on June 13, 2022 among us, 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 and negative covenants limiting our ability and the ability of our 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. We 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. As of March 31, 2024, we were in compliance with all applicable financial covenants under the Blue Torch Financing Agreement.

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 September 27, 2023, we entered into the Waiver and Amendment No. 2 to Financing Agreement (the “Waiver and Amendment”) with Blue Torch and the Lenders, which amends the Blue Torch Financing Agreement to (a) waive an event of default under the Blue Torch Financing Agreement arising out of the total annualized recurring revenue leverage ratio being greater than the permitted ratio, (b) amend the financial covenants to provide covenant relief from the maximum debt to annualized recurring revenue leverage ratio and the maximum debt to EBITDA leverage ratio set forth in the Blue Torch Financing Agreement for future periods, and (c) provide for a second amendment exit fee. The second amendment exit fee is $1.8 million (which is an amount equal to one and a half percent (1.50%) of the aggregate outstanding principal balance of the term loans on the effective date of the Waiver and Amendment), bears interest from the date of the Waiver and Amendment at Adjusted Term SOFR for a 3-month interest period plus the applicable margin under the Financing Agreement, and is payable to Blue Torch by us in cash upon the termination of the Blue Torch Financing Agreement, either as a result of acceleration of the loans or at the final maturity date. The Waiver and Amendment required a repayment by the Company of $2.5 million of the outstanding principal balance of the term loans on October 2, 2023, with a prepayment premium of $0.05 million. The Waiver and Amendment also requires additional reporting if our liquidity level is less than $35.0 million at any time during a month and revises the minimum liquidity covenant to require liquidity of at least $30.0 million at all times, commencing on September 30, 2023, which in both cases represent a $5.0 million incremental change from the original requirements. We were in compliance with all applicable financial covenants as of March 31, 2024.

On June 13, 2022, in connection with the Blue Torch Financing Agreement, we issued warrants to affiliates of the Lenders to purchase shares of Class A common stock (the “2022 Blue Torch Warrants”), which were exercisable for an aggregate of 437,025 shares of our Class A common stock with a per share exercise price of $16.08.

In addition, on June 13, 2022, in connection with the closing of the financing, we paid Urgent Capital LLC, a Delaware limited liability company, a fee for introducing us to the Lenders, for the purpose of loan financing, in the amount equal to $0.6 million in cash and a warrant to purchase shares of Class A common stock (the “GPO Warrant” and, collectively with the 2022 Blue Torch Warrants and the 2023 Blue Torch Warrants (as defined below), the “Credit Agreement Warrants”), which is exercisable for an aggregate of 24,834 shares of our Class A common stock with a per share exercise price of $16.08.

On September 27, 2023, in connection with the Waiver and Amendment, we and certain affiliates of Blue Torch amended and restated the 2022 Blue Torch Warrants to reduce the per share exercise price from $16.08 to $5.44. We also concurrently issued new warrants to those affiliates that are exercisable for an additional 597,082 shares of the Company’s Class A common stock at a per share exercise price of $5.44 (the “2023 Blue Torch Warrants").

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 our 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.

On April 8, 2024, we entered into Amendment No. 3 to Financing Agreement (the “Third Amendment”) with Blue Torch and the Lenders, which amends the Blue Torch Financing Agreement to (i) increase the maximum debt to EBITDA leverage ratio for the monthly periods ending June 30, 2024, July 31, 2024 and August 31, 2024 and to decrease the maximum permitted ratio thereafter, and (ii) amend the minimum liquidity covenant to require liquidity of at least $20.0 million at all times, commencing on April 8, 2024, which represents a $10.0 million decrease from the requirement

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in effect immediately prior to the effective date of the Third Amendment. On April 8, 2024, in accordance with the terms of the Third Amendment, we made a repayment to Blue Torch of $10.0 million in principal, plus an early termination fee of $0.2 million.

Government Loan

As part of the Acquisition in November 2021, we assumed a loan agreement with the Strategic Innovation Fund ("SIF") which was recorded at fair value of the debt. As of March 31, 2024, $5.0 million was included in long-term debt, non-current on our unaudited condensed consolidated balance sheets related to the SIF loan agreement. Under this agreement and subsequent amendment, we were eligible to receive funding for certain expenditures incurred from February 13, 2018 to May 12, 2023, up to a maximum of $5.7 million. The loan is repayable in 15 annual payments beginning February 28, 2026 and has a stated interest rate of zero.

For additional information, see Note 6 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Equity Distribution Agreement

On September 14, 2022, we entered into the Equity Distribution Agreement with Canaccord Genuity LLC, as sales agent. In accordance with the terms of the Equity Distribution Agreement, we may offer and sell shares of our Class A common stock having an aggregate offering price of up to $85.0 million from time to time through the agent pursuant to a registration statement on Form S-3, which became effective on September 26, 2022. In June 2023, we sold approximately 2.2 million shares of our Class A common stock through this arrangement, resulting in net proceeds of $7.9 million. As of March 31, 2024, approximately $76.8 million of shares were remaining, but had not yet been sold, under the Equity Distribution Agreement.

Cash Flows

The following table summarizes our net cash used in operating activities, net cash used in investing activities, and net cash provided by financing activities for the periods indicated:

 

		Three Months Ended March 31,
(in thousands)		2024				2023
Net cash used in operating activities		$	(7,345	)		$	(11,290	)
Net cash used in investing activities		$	(8,684	)		$	(6,957	)
Net cash provided by financing activities		$	38,148			$	19,886

 

Cash Flows from Operating Activities

Our largest source of operating cash inflows is cash collections from our customers. Our primary uses of cash from operating activities are for employee-related expenditures, expenses related to our technology infrastructure, expenses related to our computing infrastructure (including computing power, database storage and content delivery costs), building infrastructure costs (including leases for office space), fees for third-party services, and marketing program costs.

 

Net cash used in operating activities in the three months ended March 31, 2024 was $7.3 million. This reflected our net loss of 25.3 million, adjustments for non-cash items of $19.3 million and a net decrease of $1.3 million in operating assets and liabilities. Non-cash items primarily consisted of $6.9 million of depreciation and amortization expense, $4.2 million change in fair value of warrant liabilities, $3.7 million of stock-based compensation expense, $2.4 million of issuance of stock warrants expense, $0.9 million of debt issuance amortization costs, $0.8 million of amortization of operating lease right-of-use assets, and a $0.4 million loss on decommissioned satellites and impairment of assets. Changes in operating assets and liabilities primarily included a $2.6 million increase in accounts receivable, net, a $1.5 million decrease in accounts payable, and a $0.9 million decrease in operating lease liabilities. This was partially offset by a $1.0 million increase in other accrued expenses, a $0.8 million increase in contract liabilities, a $0.6 million decrease in contract assets, a $0.5 million decrease in other long-term assets, a $0.4 million decrease in other current assets, and a $0.4 million increase in accrued wages and benefits.

Net cash used in operating activities in the three months ended March 31, 2023 was $11.3 million. This reflected our net loss of $17.7 million, adjustments for non-cash items of $6.4 million and an immaterial net change in operating assets and liabilities. Non-cash items primarily included $3.9 million of depreciation and amortization expense, $2.6 million of stock-based compensation, $0.6 million of debt issuance amortization costs, and $0.2 million of amortization of operating lease assets, partially offset by a $0.7 million gain on change in fair value of warrant liability and a $0.1 million gain on change in fair value of contingent earnout liability. Changes in operating assets and liabilities primarily included a $0.9 million increase in contract assets, a $0.6 million decrease in accounts payable, a $0.5 million decrease in other accrued expenses, and a $0.2 million decrease in operating lease liabilities. This was primarily offset by a $1.3 million increase in contract liabilities, a $0.4 million decrease in other long-term assets, a $0.3 million increase in accrued wages and benefits, a $0.1 million decrease in other current assets, and a $0.1 million decrease in accounts receivable, net.

Cash Flows from Investing Activities

Cash flows from investing activities primarily relate to cash used for business acquisitions, the procurement, development, and deployment of capital assets, including satellites and related launch costs, ground stations, machinery and equipment, furniture, computer equipment and software, and leasehold improvements.

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The following table summarizes our net cash used in investing activities relating to capital expenditures by source of spend:

		Three Months Ended March 31,								%
(dollars in thousands)		2024				2023				Change
Spire platform / Infrastructure		$	636			$	1,354				(53	)%
Customer funded (Space Services)			7,928				3,295				141	%
Total CapEx		$	8,564			$	4,649				84	%

Net cash used in investing activities in the three months ended March 31, 2024 was $8.7 million. This was driven by purchases of $10.9 million in short-term investments and $8.6 million of investment in property and equipment, partially offset by $10.8 million in maturities of short-term investments.

Net cash used in investing activities in the three months ended March 31, 2023 was $7.0 million. This was driven by purchases of $13.9 million in short-term investments and $4.7 million of investment in property and equipment, partially offset by $11.6 million in maturities of short-term investments.

Cash Flows from Financing Activities

Cash flows from financing activities relate primarily to net proceeds from the issuance of long-term debt, convertible notes, warrants and Class A common stock.

Net cash provided by financing activities in the three months ended March 31, 2024 was $38.1 million. This was driven by $37.9 million of proceeds from securities purchase agreements with Signal Ocean Ltd. and certain institutional investors and $0.3 million of proceeds from exercise of stock options.

Net cash provided by financing activities in the three months ended March 31, 2023 was $19.9 million. This was driven by $19.9 million from the Blue Torch term loan that was released from escrow in the quarter.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. In the preparation of these condensed consolidated financial statements, we are required to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in our 2023 Form 10-K.

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Accounting Pronouncements Recently Adopted and Not Yet Adopted

See Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in Section 2(a)(19) of the Securities Act of 1933, as amended, as modified by the Jumpstart our Business Startups Act (the "JOBS Act"). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we are (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Smaller Reporting Company Status

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common stock held by non-affiliates exceeds $250 million as of the prior June 30, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the prior June 30.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Exchange Risk

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 the three months ended March 31, 2024 and 2023, we had a loss of $1.5 million and a gain of $1.0 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, respectively, in our reported three months ended March 31, 2024, pre-tax loss of approximately $0.7 million.

Interest Rate Sensitivity

As of March 31, 2024, we had cash and cash equivalents totaling $52.0 million, which were held primarily in demand deposit accounts, and investment in short-term marketable securities of $12.0 million. 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 $1.0 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 recent periods, it has not had a substantial impact on our results of operations for the three months ended March 31, 2024 or 2023. 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.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended ("Exchange Act"), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

We performed an evaluation under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule(s) 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2024. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of March 31, 2024 because of the material weaknesses in internal control over financial reporting described below.

Notwithstanding the material weaknesses described below, our management has concluded that our condensed consolidated financial statements for the periods covered by and included in this Quarterly Report are prepared in accordance with GAAP and fairly present, in all material respects, our financial position, results of operations and cash flows for each of the periods presented herein.

Material Weaknesses in Internal Control over Financial Reporting

We have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses were identified:

We did not design and maintain an effective control environment commensurate with the financial reporting requirements of a public company. Specifically, we lacked a sufficient number of professionals with an appropriate level of internal controls and accounting knowledge, training, and experience to appropriately analyze, record and disclose accounting matters timely and accurately. Additionally, the lack of a sufficient number of professionals resulted in an inability to consistently establish appropriate authorities and responsibilities in pursuit of our financial reporting objectives, as demonstrated by, among other things, insufficient segregation of duties in our finance and accounting functions. This material weakness contributed to the following additional material weaknesses:

The material weaknesses above resulted in certain immaterial audit adjustments, which were recorded prior to the issuance of the consolidated financial statements as of and for the year ended December 31, 2020. Additionally, these material weaknesses could result in a misstatement of substantially all of our accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

Additionally, these material weaknesses could result in a misstatement of substantially all of our accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

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These IT deficiencies did not result in a misstatement to the financial statements; however, the deficiencies, when aggregated, could impact our ability to maintain effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected. Accordingly, management has determined these deficiencies in the aggregate constitute a material weakness.

Remediation Efforts on Material Weaknesses in Internal Control over Financial Reporting

In response to the material weaknesses identified, we have implemented several changes to our internal control over financial reporting and will continue performing remedial actions in 2024, as described below.

The remediation and ultimate resolution of each of the material weaknesses will be reviewed with the Audit Committee of the Company’s Board of Directors.

We have made progress to address the material weaknesses related to the control environment, as described below:

Key Professionals
In fiscal 2022 and 2023 and continuing to date, we identified and hired a number of professionals with appropriate levels of internal controls and accounting knowledge to improve the overall domestic and international financial accounting and reporting departments. The positions hired include chief accounting officer, director of accounting and Americas controller, director of technical accounting, accounting manager, senior and staff accountants, senior financial systems manager, and system administrator. In addition, we engaged with external consultants and experts to provide technical accounting and financial systems services. The Company continues to monitor personnel requirements and expertise needed to have an effective control environment, including providing necessary ongoing training to its finance and accounting personnel.

Risk Assessment
We engaged a third-party consulting firm to assist in designing and implementing a risk assessment process to identify and evaluate changes in the Company’s business and the impact on its internal controls. During fiscal 2023, we conducted a financial risk assessment to identify key business processes and establish internal materiality thresholds. We performed walkthroughs of all key processes, identified key controls, and developed narratives describing risk points, processes, and corresponding controls. A Risk and Control Matrix (RCM) was created to serve as the basis for a testing program in progress.

We engaged a third-party consulting firm to complete an initial Enterprise Risk Assessment ("ERA"). During fiscal 2023, with the assistance of the consulting firm, we identified key risks for technology-based organizations and interviewed management team members and the Chair of the Audit Committee to discuss key risk areas. We reviewed responses received, compiled a list of identified risks, and developed heat maps to depict the likelihood, impact, and preparedness of the Company to respond to the identified risks. Action and testing plans are being developed to address the risks and testing is in process, after which results will be monitored and reviewed with management. We are planning to perform an annual ERA to confirm that key risks remain current and relevant, and to identify any new key risk areas.

Segregation of Duties
During fiscal year 2022, we completed our initial assessment on segregation of duties with assistance from a third-party consulting firm and began our analysis across all processes and locations, including establishing appropriate authorities and responsibilities. During 2022, we designed and implemented controls over the segregation of duties related to journal entries and account reconciliations, including the implementation of automated controls, which replaced previously manual detective controls, designed to prevent the ability for the same person to create and post journal entries in our general ledger system. With the hiring of additional personnel including a senior financial system manager in late 2022, and an accounts receivable specialist and a senior accountant in 2023, we were able to implement additional automated controls and to further segregate the preparation and review of account reconciliations during fiscal year 2023. We are in the process of testing the controls designed over segregation of duties.

Non-routine, Unusual or Complex Transactions
Over the course of 2022, we hired key accounting personnel and engaged with third-party technical accounting experts to improve our controls related to the identification of and proper application of GAAP accounting for non-routine, unusual, or complex transactions. Since the Merger that occurred in August 2021, warrant instruments have been accounted for in accordance with the Company’s accounting policies based on GAAP. During the fourth quarter of 2022, Management trained the accounting team and designed new controls to timely identify and account for the fair value of the contingent earnout liability, and hired a third-party technical accounting firm to assist with the proper application of GAAP for non-routine, unusual, or complex transactions, including any business combinations that may arise in the future. We have tested the controls designed for non-routine, unusual or complex transactions and are in the process of monitoring the controls for operating effectiveness.

IT General Controls
Management designed and maintained testing and approval controls for program development to ensure that the software is aligned with business and IT requirements. This includes final approval and testing of the software prior to migration to production. Over the course of 2022 and continuing through 2024, the Company designed and implemented certain IT general controls, including controls over user access rights and privileges and change management.

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While the above actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period, we are committed to continuous improvement and will continue to diligently review our internal control over financial reporting. The material weaknesses will not be considered remediated until management completes the design and implementation of the measures described above, until the controls operate for a sufficient period of time, and until management has concluded, through testing, that the controls are effective.

Limitations on Effectiveness of Controls and Procedures

Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial Reporting

There have been no changes (other than those described above) in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we are involved in various legal proceedings arising from the normal course of business activities.

We are not currently a party to any legal proceedings that, if determined adversely to us, would, in our opinion, have a material adverse effect on our business, results of operations, financial condition, or cash flows. Future litigation may be necessary to defend ourselves, our partners, and our customers by determining the scope, enforceability, and validity of third-party proprietary rights, or to establish our proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

Item 1A. Risk Factors.

Our operations and financial results are subject to various risks and uncertainties. You should carefully consider the factors described in Part I, Item 1A, "Risk Factors" in the 2023 Form 10-K, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our stock. There have been no material changes to our risk factors included in our 2023 Form 10-K. Our business, financial condition, results of operations, or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.

 

 

 

 

 

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

 

During the three months ended March 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any non-Rule 10b5-1 trading arrangement (as defined in the SEC’s rules).

 

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Item 6. Exhibits

The exhibits listed below are filed as part of this Quarterly Report on Form 10-Q, or are incorporated herein by reference, in each case as indicated below.

 

Exhibit Number				Incorporated by Reference
				Description		Form	File No.	Exhibit	Filing Date
3.1		Certificate of Incorporation of Spire Global, Inc.		S-1	333-259733	3.1	September 23, 2021
3.2		Certificate of Amendment to Certificate of Incorporation of Spire Global, Inc., dated August 30, 2023		8-K	001-39493	3.1	August 30, 2023
3.3		Bylaws of Spire Global, Inc.		S-1	333-259733	3.2	September 23, 2021
4.1		Form of Warrant		8-K	001-39493	4.1	March 21, 2024
10.1		Securities Purchase Agreement, dated February 4, 2024, by and among Spire Global, Inc. and Signal Ocean Ltd.		8-K	001-39493	10.1	February 8, 2024
10.2		Securities Purchase Agreement, dated as of March 21, 2024, by and among Spire Global, Inc. and the purchasers party thereto.		8-K	001-39493	10.1	March 21, 2024
10.3		Placement Agency Agreement, dated as of March 21, 2024, by and among Spire Global, Inc. and A.G.P./Alliance Global Partners		8-K	001-39493	1.1	March 21, 2024
10.4		Amendment No. 3 to Financing Agreement, dated as of April 8, 2024, among Spire Global, Inc., Spire Global Subsidiary, Inc., Austin Satellite Design, LLC, Blue Torch Finance LLC and the lenders party thereto.
31.1		Certification of the Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of the Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certifications of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.
104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 has been formatted in Inline XBRL

 

* The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Spire Global, Inc. 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 Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

 

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SIGNATURES

Pursuant to the requirements 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.

 

		SPIRE GLOBAL, INC.
Date: May 15, 2024		By:	/s/ Peter Platzer
			Peter Platzer
			Chief Executive Officer
			(Principal Executive Officer)
Date: May 15, 2024		By:	/s/ Leonardo Basola
			Leonardo Basola
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

 

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