Form 10-Q

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 September 30, 2021

☐	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:

001-39647

KORE Group Holdings, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware		86-3078783
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3700 Mansell Road , Suite 300 Alpharetta, Georgia		30022
(Address of principal executive offices)		(Zip Code)

877-710-5673

(Registrant’s telephone number, including area code)

King Pubco, Inc.

875 Third Avenue

New York, NY 10022

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None.

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, a 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.

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. ☐


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.0001 par value per share	KORE	The New York Stock Exchange
Warrants to purchase common stock	KORE WS	The New York Stock Exchange

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No ☐

As of

November 16, 2021

, there were

71,989,432

shares of the registrant’s Class A common stock, par value $0.0001 per share, issued and outstanding.

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form

10-Q

contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report on Form

10-Q

may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form

10-Q

include, but are not limited to statements regarding our future results of operations and financial position, industry and business trends, equity compensation, business strategy, plans, market growth and our objectives for future operations.

The forward-looking statements in this Quarterly Report on Form

10-Q

are only current expectations and predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statement. The forward-looking statements in this Quarterly Report on Form

10-Q

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 unduly rely upon these statements.

You should read this Quarterly Report on Form

10-Q

and the documents that we reference in this Quarterly Report on Form

10-Q

and have filed as exhibits to this Quarterly Report on Form

10-Q

with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form

10-Q.

Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form

10-Q,

whether as a result of any new information, future events or otherwise.

KORE Group Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets - Continued

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


	September 30, 2021 (unaudited)			December 31, 2020
Temporary equity
Series A Preferred Stock; par value $1,000 per share; none authorized, issued and outstanding at September 30, 2021; 7,765,229 shares authorized, and 7,756,158 shares issued and outstanding at December 31, 2020	$	—		$	77,562
Series A-1 Preferred Stock; par value $1,000 per share; none authorized, issued and outstanding at September 30, 2021; 10,480,538 shares authorized, 7,862,107 shares issued and outstanding at December 31, 2020		—			78,621
Series B Preferred Stock; par value $1,000 per share; none authorized, issued and outstanding at September 30, 2021; 9,090,975 shares authorized, issued and outstanding at December 31, 2020		—			90,910
Series C Convertible Preferred Stock; par value $1,000 per share; none authorized, issued and outstanding at September 30, 2021; 6,872,894 shares authorized, 2,566,186 shares issued and outstanding at December 31, 2020		—			16,802

Total temporary equity		—			263,895

Stockholders’ equity (deficit)
Common stock, voting; par value $0.0001 per share, 315,000,000 shares authorized, 71,810,419 shares issued and outstanding at September 30, 2021; par value $0.01 per share, 55,659,643 shares authorized, 30,281,520 shares issued and outstanding at December 31, 2020		7			3
Additional paid-in capital		413,316			135,616
Accumulated other comprehensive loss		(3,156	)		(1,677	)
Accumulated deficit		(126,200	)		(113,726	)

Total stockholders’ equity		283,967			20,216

Total liabilities, temporary equity and stockholders’ equity	$	760,406		$	700,019

See accompanying notes to unaudited condensed consolidated financial statements.

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KORE Group 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 (as previously reported)		43		$	77,562			60		$	78,621			57		$	90,910			17		$	16,802		$	263,895			218	$	2	$	135,617		$	(1,677	)	$	(113,726	)	$	20,216

Conversion of stock		7,713			—			7,802			—			9,034			—			2,549			—			—			30,064		1		(1	)		—			—			—

Balance at December 31, 2020, effect of reverse recapitalization		7,756		$	77,562			7,862		$	78,621			9,091		$	90,910			2,566		$	16,802		$	263,895			30,282	$	3	$	135,616		$	(1,677	)	$	(113,726	)	$	20,216

Repurchase of stock		—
Accrued dividends payable		249			2,486			267			2,666			224			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		8,005		$	80,048			8,129		$	81,287			9,315		$	93,151			2,566		$	16,802		$	271,288			30,282	$	3	$	128,538		$	(2,577	)	$	(114,807	)	$	11,157

Derecognition of shares		—			—			—			—			—			—			(46	)		(300	)		(300	)		—		—		—			—			—			—
Accrued dividends payable		251			2,514			270			2,695			232			2,323			—			—			7,532			—		—		(7,532	)		—			—			(7,532	)
Foreign currency translation adjustment		—			—			—			—			—			—			—			—			—			—		—		—			743			—			743
Share-based compensation		—			—			—			—			—			—			—			—			—			—		—		315			—			—			315
Net loss		—			—			—			—			—			—			—			—			—			—		—		—			—			(6,885	)		(6,885	)

Balance at June 30, 2021		8,256		$	82,562			8,399		$	83,982			9,547		$	95,474			2,520		$	16,502		$	278,520			30,282	$	3	$	121,321		$	(1,834	)	$	(121,692	)	$	(2,202	)

Redemption of stock		—			—			—			—			—			—			—			—			—			—		—		—			—			—			—
Accrued dividends payable		266			2,656			288			2,880			236			2,361			—			—			7,897			—		—		(7,897	)		—			—			(7,897	)
Foreign currency translation adjustment		—			—			—			—			—			—			—			—			—			—		—		—			(1,322	)		—			(1,322	)
Share-based compensation		—			—			—			—			—			—			—			—			—			—		—		(3,519	)		—			—			(3,519	)
Distributions to and conversions of preferred stock		(8,522	)		(85,218	)		(8,687	)		(86,862	)		(9,783	)		(97,835	)		(2,520	)		(16,502	)		(286,417	)		7,120		1		56,502			—			—			56,503
CTAC shares recapitalized, net of equity issuance costs of $15,912		—			—			—			—			—			—			—			—			—			10,356		1		6,456			—			—			6,457
Conversion of KORE warrants		—			—			—			—			—			—			—			—			—			1,366		—		10,663			—			—			10,663
Private offering and merger financing, net of equity issuance costs of $7,718		—			—			—			—			—			—			—			—			—			22,686		2		217,280			—			—			217,282
Equity portion of convertible debt, net of issuance cost s of $224		—			—			—			—			—			—			—			—			—			—		—		12,510			—			—			12,510
Net loss		—			—			—			—			—			—			—			—			—			—		—		—			—			(4,508	)		(4,508	)

Balance at September 30, 2021		—		$	—			—		$	—			—		$	—			—		$	—		$	—			71,810	$	7	$	413,316		$	(3,156	)	$	(126,200	)	$	283,967

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KORE Group 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 (as previously reported)		43	$	68,360		60	$	69,495		57	$	82,338		17	$	16,802	$	236,995		218		$	2	$	161,556		$	(3,792	)	$	(78,526	)	$	79,240

Conversion of Stock		6,793		—		6,890		—		8,177		—		2,549		—		—		30,092			1		(1	)		—			—			—

Balanceat December 31, 2019, effect of reverse recapitalization		6,836	$	68,360		6,950		69,495		8,234		82,338		2,566		16,802		236,995		30,310			3		161,555			(3,792	)		(78,526	)		79,240

Repurchase of common stock		—		—		—		—		—		—		—		—		—		(28	)		—		(200	)		—			—			(200	)
Accrued dividends payable		222		2,216		238		2,383		205		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		7,058	$	70,576		7,188	$	71,878		8,439	$	84,391		2,566	$	16,802	$	243,647		30,282		$	3	$	154,919		$	(6,905	)	$	(81,294	)	$	66,723

Accrued dividends payable		222		2,215		238		2,382		210		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		7,280	$	72,791		7,426	$	74,260		8,649	$	86,495		2,566	$	16,802	$	250,348		30,282		$	3	$	148,533		$	(6,075	)	$	(92,352	)	$	50,109

Accrued dividends payable		239		2,385		257		2,574		218		2,180		—		—		7,139		—			—		(7,139	)		—			—			(7,139	)
Foreign currency translation adjustment		—		—		—		—		—		—		—		—		—		—			—		—			1,387			—			1,387
Share-based compensation		—		—		—		—		—		—		—		—		—		—			—		315			—			—			315
Net loss		—		—		—		—		—		—		—		—		—		—			—		—			—			(5,648	)		(5,648	)

Balance at September 30, 2020		7,519	$	75,176		7,683	$	76,834		8,867	$	88,675		2,566	$	16,802	$	257,487		30,282		$	3	$	141,709		$	(4,688	)	$	(98,000	)	$	39,024

See accompanying notes to unaudited condensed consolidated financial statements.

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KORE Group Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands USD) (unaudited)


	Nine months ended September 30,
	2021			2020
Cash flows from operating activities
Net loss	$	(12,474	)	$	(19,474	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Depreciation and amortization		37,947			38,884
Amortization of deferred financing costs		1,569			1,584
Deferred income taxes		(8,197	)		(6,087	)
Non-cash foreign currency loss (gain)		(163	)		(1,356	)
Share-based compensation		4,564			846
Provision for doubtful accounts		117			888
Change in fair value of warrant liability		(5,281	)		3,482
Change in operating assets and liabilities, net of operating assets and liabilities acquired:
Accounts receivable		(12,792	)		(3,572	)
Inventories		(6,461	)		(2,668	)
Prepaid expenses and other receivables		(5,054	)		(2,485	)
Accounts payable and accrued liabilities		(2,366	)		8,119
Deferred revenue		(911	)		307
Income taxes payable		63			225

Cash (used in) provided by operating activities	$	(9,439	)	$	18,693

Cash flows used in investing activities
Additions to intangible assets		(6,626	)		(8,224	)
Additions to property and equipment		(3,156	)		(1,450	)
Acquisition of Integron LLC, net of cash acquired		—			366

Net cash used in investing activities	$	(9,782	)	$	(9,308	)

Cash flows from financing activities
Proceeds from revolving credit facility		25,000			21,700
Repayments on revolving credit facility		(25,000	)		(25,000	)
Repayment of long-term debt		(2,373	)		(2,436	)
Proceeds from convertible debt		82,351			—
Proceeds from equity portion of convertible debt , n e t of issuance costs		12,510			—
Payment of deferred financing costs, relating to convertible debt		(1,449	)		—
Repayment of related party note		(1,538	)
Repurchase of common stock		—			(200	)
Proceeds from CTAC and PIPE financing, net of issuance costs		223,001			—
Settlement of preferred shares		(229,915	)		—
Payment of capital lease obligations		(815	)		(137	)

Cash provided by (used in) financing activities	$	81,772		$	(6,073	)

Effect of Exchange Rate Change on Cash and Cash Equivalents		(188	)		(88	)

Change in Cash and Cash Equivalents and Restricted Cash		62,363			3,224
Cash and Cash Equivalents and Restricted Cash, beginning of period		10,693			8,692

Cash and Cash Equivalents and Restricted Cash, end of period	$	73,056		$	11,916

Non-cash financing activities:
Capital leases	$	346		$	263
Equity financing fees accrued		3,025			—
Common shares issued to preferred shareholders		56,502			—
Equity financing fees settled in common shares		1,863			—
Common shares issued to warrant holders		10,663			—
Supplemental cash flow information:
Interest paid	$	14,762		$	16,879

See accompanying notes to unaudited condensed consolidated financial statements.

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KORE Group 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, Maple Holdings Inc. (“Maple” or “pre-combination KORE”) entered into a definitive merger agreement (the “Business Combination”) with Cerberus Telecom Acquisition Corp. (NYSE: CTAC) (“CTAC”). On September 29, 2021, CTAC held a special meeting, at which CTAC’s shareholders voted to approve the proposals outlined in the proxy statement filed by CTAC with the Securities Exchange Commission (the “SEC”) on August 13, 2021, including, among other things, the adoption of the Business Combination and approval of the other transactions contemplated by the merger agreement.

On September 30, 2021 (the “Closing Date”), as contemplated by the merger agreement, (i) CTAC merged

with and into King LLC Merger Sub, LLC (“LLC Merger Sub”) (the “Pubco Merger”), with LLC Merger Sub being the surviving entity of the Pubco Merger and King Pubco, Inc. (“Pubco”) as
parent of the surviving entity, (ii) immediately prior to the First Merger (as defined below), Cerberus Telecom Acquisition Holdings, LLC (the
“Sponsor”) contributed 100%

of its equity interests in King Corp Merger Sub, Inc. (“Corp Merger Sub”) to Pubco (the “Corp Merger Sub Contribution”), as a result of which Corp Merger Sub became a wholly owned subsidiary of Pubco, (iii) following the Corp Merger Sub Contribution, Corp Merger Sub merged with and Maple into (the “First Merger”), with Maple being the surviving corporation of the First Merger, and (iv) immediately following the First Merger and as part of the same overall transaction as the First Merger, Maple merged with and into LLC Merger Sub (the “Second Merger” and, together with the First Merger, being collectively referred to as the “Mergers” and, together with the other transactions contemplated by the merger agreement, the “Transactions” and the closing of the Transactions, the Business Combination), with LLC Merger Sub being the surviving entity of the Second Merger and Pubco being the sole member of LLC Merger Sub. In connection with the Business Combination, Pubco changed its name to “KORE Group Holdings, Inc.” (the “Company”). The combined Company remained 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 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.

Accordingly, these interim condensed consolidated financial statements should be read in conjunction with Maple’s the audited financial statements and accompanying notes for the years ended December 31, 2020 and 2019 previously filed with the SEC. The Condensed Consolidated Balance Sheet as of December 31, 2020, included herein, was derived from the audited financial statements of the Company as of that date. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.

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The Business Combination is accounted for as a reverse recapitalization as

pre-combination

KORE was determined to be the accounting acquirer under FASB’s ASC Topic 805, Business Combination (“ASC 805”). Pre-combination KORE was determined to be the accounting acquirer based on the evaluation of the following facts and circumstances:

•

the equity holders of

pre-combination

KORE hold the majority (54%) of voting rights in the Company;

•

the senior management of

pre-combination

KORE became the senior management of the Company; and

•

In comparison with CTAC,

pre-combination

KORE has significantly more revenue and total assets and a larger net loss;

•

the operations of

pre-combination

KORE comprise the ongoing operations of the Company, and the Company assumed

pre-Combination

KORE’s headquarters.

Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of pre-combination KORE with the acquisition being treated as the equivalent of pre-combination KORE issuing stock for the net assets of CTAC, accompanied by a recapitalization. The net assets of CTAC were stated at historical cost, with no goodwill or other intangible assets recorded. Pre-combination KORE was deemed to be the predecessor and the consolidated assets and liabilities and results of operations prior to September 30, 2021 are those of pre-combination KORE. Reported shares and earnings per share available to common stockholders, prior to the Business Combination, have been retroactively restated to reflect the exchange ratio established in the merger agreement. The number of shares of preferred stock was also retroactively restated based on the exchange ratio.

COVID-19

Impact

During the period ended September 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 as private companies.

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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 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 on 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

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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.

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. ASU 2020-04 is effective from March 12, 2020 and may be applied prospectively through December 31, 2022. 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.

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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 $7.1 million and

$7.8

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

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.

•

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.

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Contract Balances

Deferred revenue as of September 30, 2021 and December 31, 2020, was $6.8 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 September 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 nine-month reporting periods:


	Three months ended September 30,				Nine months ended September 30,
(in ‘000)	2021		2020		2021		2020
Connectivity*	$	40,738	$	37,932	$	122,444	$	111,583
Hardware Sales		19,221		9,345		40,602		23,276
Hardware Sales - bill-and-hold		229		2,476		3,451		5,908
Deployment services, professional services and other		7,690		5,504		17,422		15,530

Total	$	67,878	$	55,257	$	183,919	$	156,297

*	Includes connectivity-related revenue from IoT Connectivity and IoT Solutions

Significant Customer

The Company has one customer representing 28% and 18% of the Company’s total revenue for the three months ending September 30, 2021 and September 30, 2020, respectively, and 21% and 16% of the Company’s total revenue for the nine months ending September 30, 2021, and September 30, 2020, respectively.

NOTE 4 – REVERSE RECAPITALIZATION

On September 30, 2021,

pre-combination

KORE and CTAC consummated the merger contemplated by the merger agreement (see Note 1 – Nature of Operations).

Immediately following the Business Combination, there were 71,810,419 shares of common stock with a par value of $0.0001. Additionally, there were outstanding warrants to purchase 8,911,744 shares of common stock.

The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP as pre-combination KORE was determined to be the accounting acquirer. Under this method of accounting, while CTAC was the legal acquirer, it has been treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination was treated as the equivalent of pre-combination KORE issuing stock for the net assets of CTAC, accompanied by a recapitalization. The net assets of CTAC were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of pre-combination KORE. Reported shares and earnings per share available to holders of the Company’s common stock, prior to the Business Combination, have been retroactively restated to reflect the exchange ratio established in the Business Combination (approximately one pre-combination KORE share to

139.15 of the Company’s shares).

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The most significant change in the post-combination Company’s reported financial position and results was an increase in cash, net of transactions costs, paid at close of

$63.2 million including: $225.0 million in gross proceeds from the private placements (the “PIPE”), $20.0 million in proceeds from CTAC after redemptions, $95.1

million in proceeds from the Backstop Notes (see Note 5), and payments of

$229.9

million to KORE’s preferred shareholders. In connection with the Business Combination,

$19.0

million of transaction costs were paid on the Closing Date. The Company overpaid certain underwriting costs by $4.0 million on the Closing Date. The Company recorded the receivable related to this overpayment within prepaid expenses and other receivables in the Condensed Consolidated Balance Sheets as of September 30, 2021. The Company received payment of this amount subsequent to September 30, 2021. Additionally, on the Closing Date, the Company repaid the Senior Secured Revolving Credit Facility with UBS of

$25

million. The Company also repaid the outstanding related party loans due to Interfusion B.V and T-Fone B.V. of

$1.6

million. Refer to Note 5 – Short-term and Long-term Debt and Note 13 – Related Party Transactions.

The Company incurred $23.7 million in transaction costs relating to the Business Combination, of which $23.6 million has been recorded against additional

paid-in

capital in the Condensed Consolidated Balance Sheets and the remaining amount of $0.1 million was recognized as selling, general and administrative expenses on the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021.

Upon closing of the Business Combination, the shareholders of CTAC, including CTAC founders, were issued 10,356,593 shares of common stock of the Company. In connection with the closing, holders of 22,240,970 shares of common stock of CTAC were redeemed at a price per share of $10.00. In

connection with the Closing,

22,500,000 shares of the Company were issued to PIPE investors at a price per share of $10.00.

The number of shares of Class A common stock issued immediately following the consummation of the Business Combination were:


	Shares		Percentage
Pre-combination KORE shareholders		38,767,500		54.0	%
Public stockholders		10,356,593		14.4	%
Private offering and merger financing		22,686,326		31.6	%

Total		71,810,419		100.0	%

NOTE 5 – SHORT-TERM AND LONG-TERM DEBT

Term Loan - UBS

On December 21, 2018, the Company entered into

credit agreement with UBS that consisted of a term loan of $280.0 million and required quarterly principal and interest payments with a

l 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 is being amortized over the remaining term of the loan along with the unamortized debt issuance costs of the original debt.

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The Company’s principal outstanding balances on the UBS Term Loan were $306.6 million and $309.0 million as of September 30, 2021 and December 31, 2020, respectively.

Senior Secured Revolving Credit Facility - UBS

On December 21, 2018, the Company entered into a $30

million revolving credit facility with UBS. As of September 30, 2021 and December 31, 2020,

outstanding amounts were drawn on the revolving credit facility. Immediately prior to the Business Combination, the Company had an outstanding balance on the revolving credit facility of

$25 million, which was paid off in full at the close of the transaction on September 30, 2021.

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 September 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 September 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.

Backstop Agreement

On September 30, 2021, KORE Wireless Group Inc. borrowed $95.1 million in exchange for senior unsecured exchangeable notes due 2028 (“Backstop Notes”) pursuant to an indenture (the “Indenture”), dated September 30, 2021, by and among KORE Group Holdings, Inc., KORE Wireless Group Inc. and Fortress Credit Corp. (“Fortress”). The Backstop Notes were issued at par, bearing interest at the rate of 5.50%

per annum which is paid quarterly, and a maturity of

seven

years. The Backstop Notes are guaranteed by the Company and are exchangeable into common stock of the Company at $12.50

per

share (the “Base Exchange Rate”)

at any time at the option of Fortress.

At the Base Exchange Rate, the Backstop Notes are exchangeable into 7.6 million shares of common stock.

The Base Exchange Rate may be adjusted for certain dilutive events or change in control events as defined by the Indenture Agreement (the “Adjusted Exchange Rate”). Additionally, if after the

-year anniversary of the issuance of the Backstop Notes the Company’s shares are trading at a defined premium to the Base Exchange Rate or applicable Adjusted Exchange Rate, the Company may redeem the Backstop Notes for cash, force an exchange into shares of its common stock at an amount per share based on a time-value make whole table, or settle with a combination of cash and an exchange

(the “Company Option”). Since the Company may use the Company Option to potentially settle all or part of the Backstop Notes for the cash equivalent of the fair value of the common stock for which the notes may be exchanged, a portion of the proceeds of the Backstop Notes have been allocated to equity, based on the estimated fair value of Backstop Notes had they not contained the exchange features. As of September 30, 2021: the carrying amount of the equity component was $12.5 million, net of allocation issuance costs of $0.2 million; the liability component consisted of principal, unamortized discount, and unamortized issuance costs of $95.1 million, $12.7 million, and $1.5 million, respectively; and the net carrying amount is $80.9 million. The unamortized discount and issuance costs will be amortized through September 30, 2028. The effective interest rate of the liability component is

8.4

%. No interest cost was recognized on the Backstop Notes for the three month and nine month periods ended September 30, 2021.

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The Backstop Agreement contains a customary

six-month

lock up following the closing, which prohibits Fortress from hedging the Backstop Notes by short selling the Company’s common stock or hedging the notes via the Company’s warrants or options.

NOTE 6 – 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 nine months ended September 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

45.1% and 21.2%

for the three months ended September 30, 2021 and 2020, respectively. The income tax provision (benefit) was

$(3,710) and ($1,518)

for the three months ended September 30, 2021 and 2020, respectively. The change in the income tax benefit for the three months ended September 30, 2021 compared to the three months ended September 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 Company’s effective income tax rate was 37.9% and 21.6% for the nine months ended September 30, 2021 and 2020, respectively. The provision for (benefit from) income taxes was $(7,628) and ($5,376) for the nine months ended September 30, 2021 and 2020, respectively. The change in the provision for (benefit from) income taxes for the nine months ended September 30, 2021 compared to the nine months ended September 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 nine months ended September 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.

NOTE 7 – 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 September 30, 2021 and 2020 was $0.6 million and $0.7 million, respectively. Rent expense for both the nine months ended September 30, 2021 and 2020 was $2.0 million.

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


(in ‘000)	Amount
From October 1, 2021 to December 31, 2021	$	781
2022


		Page No.

PART I — FINANCIAL INFORMATION			2

Item 1.	Financial Statements (Unaudited)		2

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		48

Item 4.	Controls and Procedures		48

PART II – OTHER INFORMATION			49

Item 1.	Legal Proceedings		49

Item 1A. Risk Factors			49

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		50

Item 3.	Defaults Upon Senior Securities		50

Item 4.	Mine Safety Disclosures		50

Item 5.	Other Information		50

Item 6.	Exhibits		51


	September 30, 2021 (unaudited)		December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	72,689	$	10,321
Accounts receivable, net of allowances for credits and doubtful accounts of $1,601 and $2,804, at September 30, 2021, and December 31, 2020, respectively		52,638		40,661
Inventories, net		12,147		5,842
Prepaid expenses and other receivables		14,540		5,429

Total current assets		152,014		62,253
Non-current assets
Restricted cash		367		372
Property and equipment, net		12,630		13,709
Intangible assets, net		212,633		240,203
Goodwill		382,190		382,749
Deferred tax assets		114		122
Other long-term assets		458		611

Total assets	$	760,406	$	700,019

Liabilities, temporary equity and stockholders’ equity
Current liabilities
Accounts payable	$	20,522	$	22,978
Accrued liabilities		26,362		17,209
Income taxes payable		288		244
Current portion of capital lease obligations		528		856
Deferred revenue		6,797		7,772
Current portion of long-term debt		3,153		3,161

Total current liabilities		57,650		52,220
Long-term liabilities
Deferred tax liabilities		34,580		42,840
Due to related parties		1,122		1,615
Warrant liability		273		15,944
Capital lease obligations		304		508
Long-term debt		378,356		298,404
Other long-term liabilities		4,154		4,377

Total liabilities	$	476,439	$	415,908


	For the three months ended September 30,						For the nine months ended September 30,
	2021			2020			2021			2020
Revenue
Services	$	48,428		$	43,436		$	139,866		$	127,113
Products		19,450			11,821			44,053			29,184

Total revenue		67,878			55,257			183,919			156,297
Cost of revenue
Cost of services		17,379			15,675			51,417			47,594
Cost of products		17,585			9,853			37,258			22,921

Total cost of revenue (exclusive of depreciation and amortization shown separately below)		34,964			25,528			88,675			70,515

Operating expenses
Selling, general and administrative		26,001			17,792			66,525			49,907
Depreciation and amortization		12,440			13,176			37,947			38,884

Total operating expenses		38,441			30,968			104,472			88,791

Operating loss		(5,527	)		(1,239	)		(9,228	)		(3,009	)
Interest expense, including amortization of deferred financing costs, net		5,589			5,276			16,155			18,359
Change in fair value of warrant liability		(2,898	)		651			(5,281	)		3,482

Loss before income taxes		(8,218	)		(7,166	)		(20,102	)		(24,850	)
Income tax provision (benefit)
Current		179			201			569			711
Deferred		(3,889	)		(1,719	)		(8,197	)		(6,087	)

Total income tax benefit		(3,710	)		(1,518	)		(7,628	)		(5,376	)

Net loss	$	(4,508	)	$	(5,648	)	$	(12,474	)	$	(19,474	)


Loss per share:
Basic	$	(0.27	)	$	(0.42	)	$	(1.03	)	$	(1.32	)
Diluted		(0.27	)		(0.42	)		(1.03	)		(1.32	)
Weighted average shares outstanding (in Number):
Basic		30,732,921			30,281,520			30,433,641			30,285,684
Diluted		30,732,921			30,281,520			30,433,641			30,285,684


	For the three months ended September 30,						For the nine months ended September 30,
	2021			2020			2021			2020
Net loss	$	(4,508	)	$	(5,648	)	$	(12,474	)	$	(19,474	)
Other comprehensive income (loss):
Foreign currency translation adjustment		(1,322	)		1,387			(1,479	)		(896	)

Comprehensive loss	$	(5,830	)	$	(4,261	)	$	(13,953	)	$	(20,370	)