Exhibit 99.2

 

Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets			2
Condensed Consolidated Balance Sheets - Continued			3
Condensed Consolidated Statements of Operations			4
Condensed Consolidated Statements of Comprehensive Loss			5
Condensed Consolidated Statements of Temporary Equity and Stockholders’ Equity			6
Condensed Consolidated Statements of Cash Flows			8
Notes to Condensed Consolidated Financial Statements			9

 

1

Maple Holdings Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands USD, except share and per share amounts)

 

		June 30, 2021 (unaudited)				December 31, 2020
Assets
Current assets
Cash and cash equivalents		$	8,297			$	10,321
Accounts receivable, net of allowances for credits and doubtful accounts of $2,257 and $2,804, at June 30, 2021, and December 31, 2020, respectively			47,640				40,661
Inventories, net			9,864				5,842
Prepaid expenses and other receivables			14,246				5,429
Total current assets			80,047				62,253
Non-current assets
Restricted cash			371				372
Property and equipment, net			12,606				13,709
Intangible assets, net			221,990				240,203
Goodwill			382,428				382,749
Deferred tax assets			119				122
Other long-term assets			3,532				611
Total assets		$	701,093			$	700,019
Liabilities, temporary equity and stockholders’ (deficit) equity
Current liabilities
Revolving credit facility		$	22,000			$	—
Accounts payable			23,181				22,978
Accrued liabilities			12,496				17,209
Income taxes payable			199				244
Current portion of capital lease obligations			641				856
Deferred revenue			7,074				7,772
Current portion of term loan payable			3,153				3,161
Total current liabilities			68,744				52,220
Long-term liabilities
Deferred tax liabilities			38,474				42,840
Due to related parties			1,565				1,615
Warrant liability			13,561				15,944
Capital lease obligations			362				508
Term loan payable, net			297,773				298,404
Other long-term liabilities			4,296				4,377
Total liabilities		$	424,775			$	415,908
Commitments and contingencies (note 6)

 

2

Maple Holdings Inc. and Subsidiaries

Condensed Consolidated Balance Sheets—Continued

(In thousands USD, except share and per share amounts)

 

		June 30, 2021 (unaudited)				December 31, 2020
Temporary equity
Series A Preferred Stock; par value $1,000 per share; 42,800 shares authorized; 42,750 shares issued and outstanding at June 30, 2021, and December 31, 2020, respectively		$	82,562			$	77,562
Series A-1 Preferred Stock; par value $1,000 per share; 80,000 shares authorized; 60,013 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively			83,982				78,621
Series B Preferred Stock; par value $1,000 per share; 57,000 shares authorized, issued and outstanding at June 30, 2021 and December 31, 2020, respectively			95,474				90,910
Series C Convertible Preferred Stock; par value $1,000 per share; 45,000 shares authorized; 16,502 and 16,802 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively			16,502				16,802
Total temporary equity			278,520				263,895
Stockholders’ equity (deficit)
Common stock, voting; par value $0.01 per share; 400,000 shares authorized; 217,619 shares issued and outstanding at June 30, 2021, and December 31, 2020, respectively			2				2
Additional paid-in capital			121,322				135,617
Accumulated other comprehensive loss			(1,834	)			(1,677	)
Accumulated deficit			(121,692	)			(113,726	)
Total stockholders’ (deficit) equity			(2,202	)			20,216
Total liabilities, temporary equity and stockholders’ (deficit) equity		$	701,093			$	700,019

See accompanying notes to unaudited condensed consolidated financial statements.

 

3

Maple Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands USD, except share and per share amounts) (unaudited)

 

		For the three months ended June 30,								For the six months ended June 30,
		2021				2020				2021				2020
Revenues
Services		$	46,375			$	41,372			$	91,437			$	83,677
Products			14,368				9,690				24,603				17,363
Total revenues			60,743				51,062				116,040				101,040
Cost of revenues
Cost of services			17,826				15,095				34,037				31,918
Cost of products			11,511				7,449				19,672				13,068
Total cost of revenues (exclusive of depreciation and amortization shown separately below)			29,337				22,544				53,709				44,986
Operating expenses
Selling, general and administrative			23,004				16,792				40,525				32,115
Depreciation and amortization			12,393				13,650				25,507				25,708
Total operating expenses			35,397				30,442				66,032				57,823
Operating loss			(3,991	)			(1,924	)			(3,701	)			(1,769	)
Interest expense, including amortization of deferred financing costs, net			5,506				6,501				10,565				13,084
Change in fair value of warrant liability			41				4,743				(2,383	)			2,831
Loss before income taxes			(9,538	)			(13,168	)			(11,883	)			(17,684	)
Income tax provision (benefit)
Current			289				279				391				510
Deferred			(2,942	)			(2,389	)			(4,308	)			(4,368	)
Total income tax benefit			(2,653	)			(2,110	)			(3,917	)			(3,858	)
Net loss		$	(6,885	)		$	(11,058	)		$	(7,966	)		$	(13,826	)
Loss per share:
Basic		$	(63.39	)		$	(78.10	)		$	(100.65	)		$	(119.48	)
Diluted			(63.39	)			(78.10	)			(100.65	)			(119.48	)
Weighted average shares outstanding (in Number):
Basic			227,433				227,433				227,433				227,478
Diluted			227,433				227,433				227,433				227,478

See accompanying notes to unaudited condensed consolidated financial statements.

 

4

Maple Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

(In thousands USD) (unaudited)

 

		For the three months ended June 30,								For the six months ended June 30,
		2021				2020				2021				2020
Net loss		$	(6,885	)		$	(11,058	)		$	(7,966	)		$	(13,826	)
Other comprehensive income (loss):
Foreign currency translation adjustment			743				830				(157	)			(2,283	)
Comprehensive loss		$	(6,142	)		$	(10,228	)		$	(8,123	)		$	(16,109	)

See accompanying notes to unaudited condensed consolidated financial statements.

 

5

Maple Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Temporary Equity and Stockholders’ (Deficit) Equity

(In thousands, USD or shares) (unaudited)

 

		Series A Preferred Stock								Series A-1 Preferred Stock								Series B Preferred Stock								Series C Convertible Preferred Stock								Total Temporary Equity				Common Stock								Additional paid-in capital				Accumulated Other Comprehensive Loss				Accumulated Deficit				Total Stockholders’ (Deficit) Equity
																		Temporary Equity																												Stockholders’ Equity
		Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Amount				Shares				Amount				Amount				Amount				Amount				Amount
Balance at December 31, 2020			43			$	77,562				60			$	78,621				57			$	90,910				17			$	16,802			$	263,895				218			$	2			$	135,617			$	(1,677	)		$	(113,726	)		$	20,216
Accrued dividends payable			—				2,486				—				2,666				—				2,241				—				—				7,393				—				—				(7,393	)			—				—				(7,393	)
Foreign currency translation adjustment			—				—				—				—				—				—				—				—				—				—				—				—				(900	)			—				(900	)
Share-based compensation			—				—				—				—				—				—				—				—				—				—				—				315				—				—				315
Net loss			—				—				—				—				—				—				—				—				—				—				—				—				—				(1,081	)			(1,081	)
Balance at March 31, 2021			43			$	80,048				60			$	81,287				57			$	93,151				17			$	16,802			$	271,288				218			$	2			$	128,539			$	(2,577	)		$	(114,807	)		$	11,157
Accrued dividends payable			—				2,514				—				2,695				—				2,323				—				—				7,532				—				—				(7,532	)			—				—				(7,532	)
Derecognition of shares			—				—				—				—				—				—				—				(300	)			(300	)			—				—				—				—				—				—
Foreign currency translation adjustment			—				—				—				—				—				—				—				—				—				—				—				—				743				—				743
Share-based compensation			—				—				—				—				—				—				—				—				—				—				—				315				—				—				315
Net loss			—				—				—				—				—				—				—				—				—				—				—				—				—				(6,885	)			(6,885	)
Balance at June 30, 2021			43			$	82,562				60			$	83,982				57			$	95,474				17			$	16,502			$	278,520				218			$	2			$	121,322			$	(1,834	)		$	(121,692	)		$	(2,202	)

 

6

Maple Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Temporary Equity and Stockholders’ (Deficit) Equity—Continued

(In thousands, USD or shares) (unaudited)

 

		Series A Preferred Stock								Series A-1 Preferred Stock								Series B Preferred Stock								Series C Convertible Preferred Stock								Total Temporary Equity				Common Stock								Additional paid-in capital				Accumulated Other Comprehensive Loss				Accumulated Deficit				Total Stockholders’ (Deficit) Equity
		Temporary Equity																																				Stockholders’ Equity
		Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Amount				Shares				Amount				Amount				Amount				Amount				Amount
Balance at December 31, 2019			43			$	68,360				60			$	69,495				57			$	82,338				17			$	16,802			$	236,995				218			$	2			$	161,556			$	(3,792	)		$	(78,526	)		$	79,240
Repurchase of common stock			—				—				—				—				—				—				—				—				—				—				—				(200	)			—				—				(200	)
Accrued dividends payable			—				2,216				—				2,383				—				2,053				—				—				6,652				—				—				(6,652	)			—				—				(6,652	)
Foreign currency translation adjustment			—				—				—				—				—				—				—				—				—				—				—				—				(3,113	)			—				(3,113	)
Share-based compensation			—				—				—				—				—				—				—				—				—				—				—				216				—				—				216
Net loss			—				—				—				—				—				—				—				—				—				—				—				—				—				(2,768	)			(2,768	)
Balance at March 31, 2020			43			$	70,576				60			$	71,878				57			$	84,391				17			$	16,802			$	243,647				218			$	2			$	154,920			$	(6,905	)		$	(81,294	)		$	66,723
Accrued dividends payable			—				2,215				—				2,382				—				2,104				—				—				6,701				—				—				(6,701	)			—				—				(6,701	)
Foreign currency translation adjustment			—				—				—				—				—				—				—				—				—				—				—				—				830				—				830
Share-based compensation			—				—				—				—				—				—				—				—				—				—				—				315				—				—				315
Net loss			—				—				—				—				—				—				—				—				—				—				—				—				—				(11,058	)			(11,058	)
Balance at June 30, 2020			43			$	72,791				60			$	74,260				57			$	86,495				17			$	16,802			$	250,348				218			$	2			$	148,534			$	(6,075	)		$	(92,352	)		$	50,109

See accompanying notes to unaudited condensed consolidated financial statements.

 

7

Maple Holdings Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands USD) (unaudited)

 

		Six months ended June 30,
		2021				2020
Cash flows from operating activities
Net loss		$	(7,966	)		$	(13,826	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Depreciation and amortization			25,507				25,708
Amortization of deferred financing costs			1,047				1,057
Deferred income taxes			(4,308	)			(4,368	)
Non-cash foreign currency loss (gain)			77				(1,684	)
Share-based compensation			630				531
Provision for doubtful accounts			11				861
Change in fair value of warrant liability			(2,383	)			2,831
Change in operating assets and liabilities, net of operating assets and liabilities acquired:
Accounts receivable			(7,049	)			1,473
Inventories			(4,089	)			(2,450	)
Prepaid expenses and other receivables			(9,016	)			(1,355	)
Accounts payable and accrued liabilities			(6,103	)			2,821
Deferred revenue			(671	)			214
Income taxes payable			(32	)			227
Cash (used in) provided by operating activities		$	(14,345	)		$	12,040
Cash flows used in investing activities
Additions to intangible assets			(4,754	)			(5,543	)
Additions to property and equipment			(1,219	)			(428	)
Acquisition of Integron LLC, net of cash acquired			—				366
Net cash used in investing activities		$	(5,973	)		$	(5,605	)
Cash flows from financing activities
Proceeds from revolving credit facility			22,000				21,700
Repayments on revolving credit facility			—				(15,000	)
Repayment of term loan			(1,584	)			(1,623	)
Repurchase of common stock			—				(200	)
Equity financing fees			(1,373	)			—
Payment of capital lease obligations			(668	)			(385	)
Cash provided by financing activities		$	18,375			$	4,492
Effect of Exchange Rate Change on Cash and Cash Equivalents			(82	)			(236	)
Change in Cash and Cash Equivalents and Restricted Cash			(2,025	)			10,691
Cash and Cash Equivalents and Restricted Cash, beginning of period			10,693				8,692
Cash and Cash Equivalents and Restricted Cash, end of period		$	8,668			$	19,383
Non-cash financing activities:
Capital leases		$	346			$	66
Equity financing fees accrued			1,648				—
Supplemental cash flow information:
Interest paid		$	9,329			$	11,888

See accompanying notes to unaudited condensed consolidated financial statements.

 

8

Maple Holdings Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(In thousands USD, except share amounts) (unaudited)

NOTE 1—NATURE OF OPERATIONS

Business Combination

On March 12, 2021, the Company entered into a definitive merger agreement (the “Business Combination”) with Cerberus Telecom Acquisition Corp. (NYSE: CTAC). The Business Combination closed September 30, 2021 as discussed in Note 13. The combined company remains listed on the NYSE under the new ticker symbol “KORE”.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, in accordance with those rules and regulations, do not include all information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, the unaudited condensed consolidated interim financial statements reflect all adjustments, which consist only of normal recurring adjustments, necessary to state fairly the results of operations, financial condition and cash flows for the interim periods presented herein. The preparation of unaudited condensed consolidated interim financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures.

These unaudited condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2020 consolidated financial statements included in this Form S-4. The year-end condensed consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by GAAP. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.

COVID-19 Impact

During the period ended June 30, 2021, an outbreak of the novel coronavirus (“COVID-19”) has continued to spread across the globe and continued to result in significant economic disruption. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak; however as of this filing, COVID-19 has not had a negative impact on the Company.

Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents include highly liquid instruments with an original maturity of less than 90 days from the date of purchase or the ability to redeem amounts on demand. Cash and cash equivalents are stated at cost, which approximates their fair value.

Restricted cash represents cash deposits held with financial institutions for letters of credit and is not available for general corporate purposes.

Emerging Growth Company

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The Company qualifies as an “Emerging Growth Company” and has elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows the Company to adopt the new or revised standard at the same time periods as private companies.

Recently Adopted Accounting Pronouncement

In December 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for public business

 

9

entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this standard as of January 1, 2021, and depending on the amendment, adoption was applied on a retrospective, modified retrospective, or prospective basis. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In July 2018, ASU 2018-10, Codification Improvements to ASC 2016-02, Leases, was issued to provide more detailed guidance and additional clarification for implementing ASU 2016-02. Furthermore, in July 2018, the FASB issued ASU 2018-11, Leases: Targeted Improvements, which provides an optional transition method in addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. Furthermore, on June 3, 2020, the FASB deferred by one year the effective date of the new leases standard for private companies, private not-for-profits and public not-for-profits that have not yet issued (or made available for issuance) financial statements reflecting the new standard. Additionally, in March 2020, ASU 2020-03, Codification Improvements to Financial Instruments, Leases, was issued to provide more detailed guidance and additional clarification for implementing ASU 2016-02. Furthermore, in June 2020, ASU 2020-05, Revenue from Contracts with Customers and Leases, was issued to defer effective dates of adoption of the new leasing standard beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. These new leasing standards (collectively “ASC 842”) are effective for the Company beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the effect of the adoption of this guidance in the consolidated financial statements. However, based on the Company’s lease obligations, the Company expects to recognize material assets and liabilities for right-of-use assets and operating lease liabilities on its consolidated balance sheet upon adoption of ASC 842. ASC 842 will also require additional footnote disclosures to the Company’s financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires the use of a new current expected credit loss (“CECL”) model in estimating allowances for doubtful accounts with respect to accounts receivable and notes receivable. Receivables from revenue transactions, or trade receivables, are recognized when the corresponding revenue is recognized under ASC 606, Revenue from Contracts with Customers. The CECL model requires that the Company estimate its lifetime expected credit loss with respect to these receivables and record allowances when deducted from the balance of the receivables, which represent the estimated net amounts expected to be collected. Given the generally short-term nature of trade receivables, the Company does not expect to apply a discounted cash flow methodology. However, the Company will consider whether historical loss rates are consistent with expectations of forward-looking estimates for its trade receivables. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses to clarify that operating lease receivables recorded by lessors are explicitly excluded from the scope of ASU 2016-13. This ASU (collectively “ASC 326”) is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is still evaluating the impact of the adoption of this ASU.

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which requires a customer in a hosting arrangement that is a service contract to apply the guidance on internal-use software to determine which implementation costs to recognize as an asset and which costs to expense. Costs to develop or obtain internal-use software that cannot be capitalized under Subtopic 350-40, Internal-Use Software, such as training costs and certain data conversion costs, also cannot be capitalized for a hosting arrangement that is a service contract. The amendments require a customer in a hosting arrangement that is a service contract to determine whether an implementation activity relates to the preliminary project stage, the application development stage, or the post-implementation stage. Costs for implementation activities in the application development stage will be capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages will be expensed immediately. The ASU is effective for the Company for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. Early adoption is permitted, including adoption in any interim period, for all entities. The Company is still evaluating the impact of the adoption of this standard.

 

10

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting, to provide guidance on easing the potential burden in accounting for reference rate reform on financial reporting. This ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company is still evaluating the impact of the adoption of this ASU.

In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments, which clarifies specific issues raised by stakeholders. Specifically, the ASU:

 

•

Clarifies that all entities are required to provide the fair value option disclosures in ASC 825, Financial Instruments.

 

•

Clarifies that the portfolio exception in ASC 820, Fair Value Measurement, applies to nonfinancial items accounted for as derivatives under ASC 815, Derivatives and Hedging.

 

•

Clarifies that for purposes of measuring expected credit losses on a net investment in a lease in accordance with ASC 326, Financial Instruments—Credit Losses, the lease term determined in accordance with ASC 842, Leases, should be used as the contractual term.

 

•

Clarifies that when an entity regains control of financial assets sold, it should recognize an allowance for credit losses in accordance with ASC 326.

 

•

Aligns the disclosure requirements for debt securities in ASC 320, Investments—Debt Securities, with the corresponding requirements for depository and lending institutions in ASC 942, Financial Services—Depository and Lending.

The amendments in the ASU have various effective dates and transition requirements, some depending on whether an entity has previously adopted ASU 2016-13 about measurement of expected credit losses. The Company will adopt the guidance in ASU 2020-03 as it adopts the related ASU effected by these codification improvements.

In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations, or cash flows.

In May 2021, the FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, which provides guidance on modifications or exchanges of a freestanding equity-classified written call option that is not within the scope of another Topic. An entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument, and provides further guidance on measuring the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. ASU 2021-04 also provides guidance on the recognition of the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration. The amendments are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the impact of the adoption of this standard.

NOTE 3 – REVENUE RECOGNITION

The Company recognized all deferred revenue related to the connectivity performance obligations that were not fully satisfied in previous periods in the amount of $7.8 million for the six months ended June 30, 2021. The Company does not have material unfulfilled performance obligation balances for contracts with an original length greater than one year in any periods presented. Additionally, the Company does not have material costs related to obtaining a contract with amortization periods greater than one year for any period presented. The Company applies ASC 606 utilizing the following allowable exemptions or practical expedients:

 

•

Exemption to not disclose the unfulfilled performance obligation balance for contracts with an original length of one year or less.

 

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•

Practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.

 

•

Election to present revenue net of sales taxes and other similar taxes.

 

•

Election from recognizing shipping and handling activities as a separate performance obligation.

 

•

Practical expedient not requiring the entity to adjust the promised amount of consideration for the effects of a significant financing component if the entity expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

Contract Balances

Deferred revenue as of June 30, 2021 and December 31, 2020, was $7.1 million and $7.8 million, respectively, and primarily relates to revenue that is recognized over time for Connectivity monthly recurring charges, the changes in balance of which are related to the satisfaction or partial satisfaction of these contracts. The balance also contains a deferral for goods that are in-transit at period end for which control transfers to the customer upon delivery. All of the December 31, 2020, balance was recognized as revenue during the period ended June 30, 2021.

Disaggregated Revenue Information

The Company views the following disaggregated disclosures as useful to understand the composition of revenue recognized during the respective three-month and six-month reporting periods:

 

		Three months ended June 30,								Six months ended June 30,
(in ‘000)		2021				2020				2021				2020
Connectivity*		$	41,114			$	36,050			$	81,705			$	73,651
Hardware Sales			13,584				8,173				21,381				13,931
Hardware Sales - bill-and-hold			784				1,517				3,222				3,432
Deployment services, professional services and other			5,261				5,322				9,732				10,026
Total		$	60,743			$	51,062			$	116,040			$	101,040

 

*	Includes connectivity-related revenues from Connectivity and IoT Solutions

Significant Customer

The Company has one customer representing 18% and 16% of the Company’s total revenue for the three months ending June 30, 2021 and June 30, 2020, respectively, and 17% and 15% of the Company’s total revenue for the six months ending June 30, 2021, and June 30, 2020, respectively.

NOTE 4 – SHORT-TERM AND LONG-TERM DEBT

The fair values of the Company’s outstanding borrowings approximate the carrying values.

Term Loan - UBS

On December 21, 2018, the Company entered into a credit agreement with UBS that consisted of a term loan of $280.0 million and required quarterly principal and interest payments with all remaining principal and interest due on December 21, 2024. The term loan had an interest rate of LIBOR plus 5.5%.

On November 12, 2019, the Company amended its term loan with UBS in order to raise an additional $35.0 million. Under the amended agreement, the maturity date of the term loan and interest rate remained unchanged. However, the quarterly principal repayment changed to $0.8 million. The principal and quarterly interest are paid on the last business day of each quarter, except at maturity.

As a result of this debt modification, the Company incurred $1.5 million in debt issuance costs, which was capitalized and will be amortized over the remaining term of the loan along with the unamortized debt issuance costs of the original debt.

The Company’s principal outstanding balances on the UBS Term Loan were $307.4 million and $309.0 million as of June 30, 2021 and December 31, 2020, respectively.

 

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Senior Secured Revolving Credit Facility - UBS

On December 21, 2018, the Company entered into a $30 million revolving credit facility with UBS. As of June 30, 2021 and December 31, 2020, the Company had $22 million and $0 drawn on the revolving credit facility, respectively. Borrowings under the revolving credit facility mature on December 21, 2023.

Borrowings under the revolving debt facility bear interest at a floating rate which can be, at the Company’s option, either (1) a LIBOR rate for a specified interest period plus an applicable margin of up to 5.50% or (2) a base rate plus an applicable margin of up to 4.5%. After the Closing Date, the applicable margins for LIBOR rate and base rate borrowings are each subject to a reduction to 5.25% and 4.25%, respectively, if the Company maintains a total leverage ratio of less than or equal to 5.00:1.00. The LIBOR rate applicable to the revolving credit facility is subject to a “floor” of 0.0%. Additionally, the Company is required to pay a commitment fee of up to 0.50% per annum of the unused balance.

Term Loan - BNP Paribas

The loan matured in January 2021 and bore interest at 2.15% per annum with fixed payments of $7,740, which were payable monthly. On January 2, 2021, the Company extinguished the term loan outstanding with BNP Paribas by making the final fixed monthly payment.

Bank Overdraft Facility – BNP Paribas Fortis N.V.

On October 8, 2018, a Belgium subsidiary of the Company entered into a €250,000 bank overdraft facility with BNP Paribas Fortis. As of June 30, 2021 and December 31, 2020, the Company had €0 drawn on the revolving credit facility. Borrowings under the bank overdraft facility have an indefinite term.

Borrowings under the bank overdraft facility bear interest at a floating rate which is a base rate plus an applicable margin of up to 2.0%. The base fee amounts to 9.4% as of June 30, 2021 and is variable. Any overages are charged against a percentage of 6% on a yearly basis. There is no commitment fee payable for the unused balance of the bank overdraft facility.

NOTE 5 – INCOME TAXES

The Company determines its estimated annual effective tax rate at the end of each interim period based on estimated pre-tax income (loss) and facts known at that time. The estimated annual effective tax rate is applied to the year-to-date pre-tax income (loss) at the end of each interim period with certain adjustments. The tax effects of significant unusual or extraordinary items are reflected as discrete adjustments in the periods in which they occur. The Company’s estimated annual effective tax rate can change based on the mix of jurisdictional pre-tax income (loss) and other factors. However, if the Company is unable to make a reliable estimate of its annual effective tax rate, then the actual effective tax rate for the year to date period may be the best estimate. For the three and six months ended June 30, 2021 and 2020, the Company determined that its annual effective tax rate approach would provide for a reliable estimate and therefore used this method to calculate its tax provision.

The Company’s effective income tax rate was 27.8% and 16.0% for the three months ended June 30, 2021 and 2020, respectively, and 33.0% and 21.8% for the six months ended June 30, 2021 and 2020, respectively. The provision for (benefit from) income taxes was $(2,653) and ($2,110) for the three months ended June 30, 2021 and 2020, respectively, and $(3,917) and $(3,858) for the six months ended June 30, 2021 and 2020, respectively. The change in the provision for (benefit from) income taxes for the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020 was primarily due to changes in the jurisdictional mix of earnings and the impact of the change in fair value of warrant liability which is not taxable.

The effective income tax rate for the three and six months ended June 30, 2021 and 2020 differed from the federal statutory rate primarily due to the geographical mix of earnings and related foreign tax rate differential, permanent differences, research and development tax credits, and the valuation allowance maintained against certain deferred tax assets.

 

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NOTE 6 – COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases various office spaces under non-cancellable operating leases expiring through 2029. Rent expense for the three months ended June 30, 2021 and 2020 was $0.7, million and $0.6 million, respectively. Rent expense for the six months ended June 30, 2021 and 2020 was $1.4 million, and $1.3 million, respectively.

The future minimum lease payments under operating leases as of June 30, 2021 for the next five years is as follows:

 

(in ‘000)		Amount
From July 1, 2021 to December 31, 2021		$	1,472
2022			2,434
2023			1,464
2024			1,084
2025			753
Thereafter			2,157
Total		$	9,364

Off-Balance-Sheet Credit Exposures

The Company has standby letters of credit and bank guarantees of $0.4 million as of June 30, 2021 and December 31, 2020, respectively. These contingent liabilities are secured by highly liquid instruments included in restricted cash.

Purchase Obligations

The Company has vendor commitments primarily relating to carrier and open purchase obligations that the Company incurs in the ordinary course of business. As of June 30, 2021, the purchase commitments were as follows:

 

(in ‘000)		Amount
From July 1, 2021 to December 31, 2021		$	25,020
2022			1,513
2023			1,328
2024			1,328
2025			1,328
Total		$	30,517

Legal Proceedings

From time to time, the Company is involved in litigation arising out of the ordinary course of our business. There are no material legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of the Company’s subsidiaries are a party or of which any of the Company or the Company’s subsidiaries’ property is subject.

NOTE 7 – PREPAID AND OTHER ASSETS

Prepaid Expenses and Other Receivables

The Company’s prepaid expenses and other receivables consist of the following:

 

		June 30, 2021				December 31, 2020
Prepaid Deposits		$	10,007			$	1,734
Prepaid Expenses and Other Receivables			4,239				3,695
Total Prepaid Expenses and Other Receivables		$	14,246			$	5,429

 

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Other Long-term Assets

The Company’s other ling-term assets consist of the following:

 

		June 30, 2021				December 31, 2020
Unamortized Revolver Financing Fees		$	510			$	611
Deferred Equity Issuance Costs			3,022				—
Total Other Long-term Assets		$	3,532			$	611

NOTE 8 – TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY

The Company operates subject to the terms and conditions of the Certificate of Incorporation of Maple Holdings Inc. (the “Certificate of Incorporation”) dated September 18, 2019.

The Certificate of Incorporation provides for overall management and control of the Company to be vested in the Board of Directors (the “Board”). The shareholders’ interests are represented by five classes: common stock, Series A preferred stock, Series A-1 preferred stock, Series B preferred stock and Series C convertible preferred stock. Shareholders owning a majority of the common stock are required to elect directors to the Board to serve shareholder interests. Each holder of common stock shall be entitled to one vote per share held. The holders of Series A preferred stock, Series A-1 preferred stock, Series B preferred stock and Series C convertible preferred stock do not have voting rights in respect to their units held. No shareholder shall be liable for any debts or losses of capital or profits of the Company or be required to guarantee the liabilities of the Company.

Common Stock

The Board authorized up to 400,000 shares of common stock. As of June 30, 2021 and December 31, 2020, 217,619 shares are issued and outstanding.

Series A Preferred Stock

The Board authorized up to 42,800 Series A preferred shares. As of June 30, 2021 and December 31, 2020, there are 42,750 Series A preferred shares issued and outstanding. The shares were issued at a discount of 2%. Series A preferred shareholders are entitled to receive a cumulative preferred dividend at the rate of thirteen percent (13%) per year on the sum of the par value plus unpaid preferred dividends through the date of such distribution on a pari passu basis with Series A-1 and Series B shareholders and in preference to all other shareholders. The Company has the option to redeem the Series A preferred shares for par value plus unpaid preferred dividends. Series A preferred shareholders have an option to put the shares back to the Company for par value plus unpaid preferred dividends on or after April 11, 2027. The Company determined that the put option is a redemption event not solely within the control of the Company. Therefore, the Series A preferred stock is classified outside of permanent equity (i.e., temporary equity) and presented at its redemption value. In addition, upon a Sale Transaction (as defined in the Certificate of Incorporation), the Series A preferred shares are required to be redeemed prior to and in preference to any other shares at par value plus unpaid cumulative preferred dividends.

Series A-1 Preferred Stock

The Board authorized up to 80,000 Series A-1 preferred shares. As of June 30, 2021 and December 31, 2020, there are 60,013 Series A-1 preferred shares issued and outstanding. The shares were issued at a discount of 2%. Series A-1 preferred shareholders are entitled to receive a cumulative preferred dividend at the rate of thirteen-point seven five percent (13.75%) per year on the sum of the par value plus unpaid preferred dividends through the date of such distribution on a pari passu basis with Series A and Series B shareholders and in preference to all other shareholders. The Company has the option to redeem the Series A-1 Preferred shares for par value plus unpaid preferred dividends subject to a current redemption premium of 1%. Series A-1 preferred shareholders have an option to put the shares back to the Company for par value plus unpaid preferred dividends on or after April 11, 2027. The Company determined that the put option is a redemption event not solely within the control of the Company. Therefore, the Series A-1 Preferred Stock is classified outside of permanent equity (i.e., temporary equity) and presented at its redemption value. In addition, upon a Sale Transaction (as defined in the Certificate of Incorporation), the Series A-1 Preferred shares are required to be redeemed prior to and in preference to any other shares at par value plus unpaid cumulative preferred dividends.

Series B Preferred Stock

The Board authorized up to 57,000 Series B preferred shares. As of June 30, 2021 and December 31, 2020, there are 57,000 Series B preferred shares issued and outstanding. Series B preferred shareholders are entitled to receive a cumulative preferred dividend at the rate of ten percent (10%) per year on the sum of the unreturned par value plus unpaid preferred dividends through the date of such distribution on a pari passu basis with Series A and Series A-1 shareholders and in preference to all other shareholders. On or after October 11, 2018, the Company has the option to redeem the Series B Preferred shares for par value plus unpaid preferred dividends. Because the controlling shareholder is the majority holder of Series B preferred shares, the Company redemption option functions as a holder put option.

 

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Accordingly, the Company determined that the option could result in a redemption that is not solely within the control of the Company. Therefore, the Series B Preferred stock is classified outside of permanent equity (i.e., temporary equity) and presented at its redemption value each period.

A summary of the accumulated but unpaid preferred dividends for the Series A, Series A-1 and Series B preferred shares as of March 31 and June 30, 2021 and March 31 and June 30, 2020, is as follows:

 

(in ‘000)		Series A				Series A-1				Series B
Accumulated and unpaid, December 31, 2020		$	34,812			$	18,608			$	33,910
Accumulated			2,486				2,666				2,241
Distributed			—				—				—
Accumulated and unpaid, March 31, 2021		$	37,298			$	21,274			$	36,151
Accumulated			2,514				2,695				2,323
Distributed			—				—				—
Accumulated and unpaid, June 30, 2021		$	39,812			$	23,969			$	38,474

 

(in ‘000)		Series A				Series A-1				Series B
Accumulated and unpaid, December 31, 2019		$	25,610			$	8,794			$	25,338
Accumulated			2,216				2,359				2,053
Distributed			—				—				—
Accumulated and unpaid, March 31, 2020		$	27,826			$	11,153			$	27,391
Accumulated			2,215				2,359				2,104
Distributed			—				—				—
Accumulated and unpaid, June 30, 2020		$	30,041			$	13,512			$	29,495

The redemption value of Series A, Series A-1 and Series B preferred stock is equal to the par value of $1,000 per share plus the above accumulated unpaid dividends and any applicable redemption premium. In the case of Series A-1, the Company would incur 1% redemption premiums if redeemed prior to December 21, 2020.

Series C Convertible Preferred Stock

The Board authorized up to 45,000 Series C convertible preferred stock. As of June 30, 2021 and December 31, 2020, there are 16,502 and 16,802 Series C convertible preferred shares issued and outstanding, respectively. Subordinate to the payment of dividends to Series A, Series A-1 and Series B preferred shareholders, the Series C shareholders are entitled to receive dividends equal to 1.5X initial investment in conjunction with common stock, then subject to a catch-up, followed by pro rata sharing thereafter. Series C convertible preferred shareholders have a de facto option to put the shares back to the Company for liquidation value. The Company determined that the option could result in a deemed liquidation that is not solely within the control of the Company. Therefore, the Series C convertible preferred stock is classified outside of permanent equity (i.e., temporary equity).

Series C convertible preferred shares are convertible at any time, at the option of the holder, into common stock at a rate of 1 to 1 initially, subject to adjustments for dilution.

Distribution Preference

Distributions are authorized at the discretion of the Board. Distributions shall be made first to the holders of Series A, Series A-1 and Series B preferred stock, ratably among such holders based on the relative aggregate unpaid dividends with respect to all outstanding preferred shares held by each such holder immediately prior to such distribution, until the aggregate unpaid dividends for the preferred shares have been reduced to $0.

Distributions shall be made second to the holders of Series C convertible preferred stock, ratably among such holders based on the relative aggregate unpaid dividends with respect to all outstanding preferred shares held by each such holder immediately prior to such distribution, until the aggregate unpaid dividends for the preferred shares have been reduced to $0.

Distributions shall be made third to the holders of common stock, ratably among such holders of a Common Catch-Up Amount, as defined in the Certificate of Incorporation.

 

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Distributions will then be made to holders of Series C convertible preferred stock and common stock in proportion to their ownership percentages.

Liquidation Preference

In the event of the dissolution of the Company, the Company’s cash and proceeds obtained from the disposition of the Company’s noncash assets shall be distributed. Distributions shall be made first to the Company’s creditors, to satisfy the liabilities of the Company. The remaining cash will then be distributed first to holders of Series A and Series A-1 preferred stock and second to holders of Series B preferred stock. Remaining undistributed proceeds are to be distributed following the distribution preferences for Series C convertible preferred stock and common stock described above.

NOTE 9 – SHARE-BASED PAYMENT AND RELATED STOCK OPTION PLAN

During 2020, the Company granted awards to certain employees and Board members of the Company. Under the 2014 Equity Incentive Plan (the “Plan”), the Board is authorized to grant stock options to eligible employees and directors of the Company. The fair value of the options is expensed on a straight-line basis over the requisite service period, which is generally the vesting period. Stock based compensation expense during the three-month period ended June 30, 2021, and June 30, 2020 was $0.3 million. Stock based compensation expense during the six-month period ended June 30, 2021 and June 30, 2020 was $0.6 million and $0.5 million, respectively.

The Company has determined its share-based payments to be a Level 3 fair value measurement and has used the Black-Scholes option pricing model to calculate its fair value using the following assumptions:

 

		June 30, 2020
Risk-free interest rate			1.58 - 2.47	%
Expected term (life) of options (in years)			2-4
Expected dividends			0	%
Expected volatility			67.9 -86.3	%

The Company did not grant any awards during the six month period ended June 30, 2021. The expected term of the options granted are determined based on the period of time the options are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. In selecting similar entities for determining expected volatility, the Company considered industry, stage of life cycle, size and financial leverage. The dividend yield on the Company’s options is assumed to be zero since the Company has not historically paid dividends.

The following is a summary of the Company’s stock options as of June 30, 2021 and June 30, 2020 and the stock option activity from December 31, 2020 through June 30, 2021 and December 31, 2019 through June 30, 2020:

 

		Number of Options				Weighted Average Grant Date Fair Value per Option (Amount)				Weighted Average Exercise Price (Amount)				Weighted Average Remaining Contractual Term (Years)
Balance, December 31, 2020			34,977				191			$	1,750				7.7
Granted			—				—				—				—
Exercised			—				—				—				—
Forfeited			—				—				—				—
Expired			—				—				—				—
Balance, June 30, 2021			34,977			$	191			$	1,750				7.2

 

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		Number of Options				Weighted Average Grant Date Fair Value per Option (Amount)				Weighted Average Exercise Price (Amount)				Weighted Average Remaining Contractual Term (Years)
Balance, December 31, 2019			32,280				196			$	1,750				8.4
Granted			5,181				167				1,750				—
Exercised			—				—				—				—
Forfeited			(2,484	)			195				1,750				—
Expired			—				—				—				—
Balance, June 30, 2020			34,977			$	191			$	1,750				8.2

The following is a summary of the Company’s share-based compensation expense during the respective three-month and six-month reporting periods:

 

		Three months ended June 30,								Six months ended June 30,
(in ‘000)		2021				2020				2021				2020
Total share-based compensation expense		$	315			$	315			$	630			$	531

As of June 30, 2021, the total unrecognized compensation cost related to outstanding stock options was $2.8 million, which is expected to be recognized over a weighted-average period of 2.2 years.

The following is a summary of the Company’s exercisable stock options as of June 30, 2021 and 2020:

 

		June 30, 2021				June 30, 2020
Range of exercise prices		$	$1,000 -$2,500			$	$1,000 -$2,500
Number of stock options			18,493				11,894
Weighted average remaining contractual term (in years)			6.9				7.8
Weighted average exercise price		$	1,750			$	1,750

The fair value of the Company’s vested shares for fiscal quarters ended June 30, 2021 and June 30, 2020, were $3.6 million and $2.4 million, respectively.

NOTE 10 – WARRANTS ON COMMON STOCK

In connection with the sale of Series B preferred stock, the Company issued warrants for the purchase of common stock at an exercise price of $0.01 per warrant. As of June 30, 2021 and December 31, 2020, there were 9,814 warrants issued and outstanding. Warrants are exercisable at any time, at the option of the holder, into common stock at a rate of 1 to 1 initially, subject to adjustments for dilution.

The Company evaluated the warrants for liability or equity classification in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity, and ASC 815-40, Derivatives and Hedging. Based on the provisions governing the warrants in the applicable agreement, the Company determined that the warrants meet the criteria and were required to be classified as a liability subject to the guidance in ASC 815-10 and 815-40 and should effectively be treated as outstanding common shares in both basic and diluted EPS calculations.

Initial Measurement

The warrants are initially measured at fair value. The estimated fair value of the warrants prior to entering into an Agreement and Plan of Merger with CTAC on March 12, 2021, was determined to be a Level 3 fair value measurement. The fair value of each warrant was approximately the fair value per share of common stock.

The aforementioned warrant liabilities are not subject to qualified hedge accounting.

Subsequent Measurement

The warrants are measured at fair value on a recurring basis. The subsequent measurement of the warrants as of June 30, 2021, is classified as Level 2 due to significant inputs used in a valuation technique that were previously unobservable becoming observable given transactions that were observed around the measurement date. As the warrants are expected to be exchangeable for CTAC shares following the close of the Business Combination, following the signing of the Business Combination agreement, Management determined the fair value of the warrants based on the

 

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equivalent number of shares exchangeable upon the consummation of the Business Combination. Such inputs include the number of CTAC shares exchangeable for the warrants of 1,365,612 and the current CTAC trading share price at June 30, 2021 of $9.93.

The change in fair value of the warrant liability for the three months ended June 30, 2021 and June 30, 2020 was $0.1 million and $4.7 million, respectively. The change in fair value of the warrant liability for the six months ended June 30, 2021 and June 30, 2020 was ($2.4) million and $2.8 million, respectively.

NOTE 11 – NET LOSS PER SHARE

The Company follows the two-class method when computing net loss per common share when shares are issued that meet the definition of participating securities. The two-class method requires income available to common shareholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The two-class method also requires losses for the period to be allocated between common and participating securities based on their respective rights if the participating security contractually participates in losses. As holders of participating securities do not have a contractual obligation to fund losses, undistributed net losses are not allocated to Series A, Series A-1, Series B and Series C preferred shares for purposes of the loss per share calculation.

Presented in the table below is a reconciliation of the numerator and denominator for the basic and diluted earnings per share (“EPS”) calculations for the periods ended:

 

		Three months ended June 30,								Six months ended June 30,
(in ‘000)		2021				2020				2021				2020
Numerator:
Net loss attributable to the Company		$	(6,885	)		$	(11,058	)		$	(7,966	)		$	(13,826	)
Less dividends to preferred shareholder			7,532				6,701				14,925				13,353
Net loss attributable to common shareholders		$	(14,417	)		$	(17,759	)		$	(22,891	)		$	(27,179	)
Denominator:
Weighted average common shares, basic and diluted (in number)			227,433				227,433				227,433				227,478
Net loss per share attributable to common shareholder, basic and diluted		$	(63.39	)		$	(78.10	)		$	(100.65	)		$	(119.48	)

The following securities were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive:

 

(number of shares)		June 30, 2021				June 30, 2020
Series C Convertible Preferred Stock			16,502				16,802
Stock Options			34,977				34,977

NOTE 12 – RELATED PARTY TRANSACTIONS

Leasing and Professional Services Agreement

KORE TM Data Brasil Processamento de Dados Ltda., a wholly owned subsidiary of the Company, maintains a lease and a professional services agreement with a company controlled by a key member of the subsidiary’s management team.

Aggregated related party transactions, which have been recorded at the exchange amount, representing the amount of consideration established and agreed by the related parties, was $0.1 million for the three and six months ended June 30, 2021 and June 30, 2020. The amount was recorded under general and administrative expenses in the consolidated statements of operations.

 

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