ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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• |
“Backstop Agreement” are to that certain backstop agreement dated July 27, 2021 between KORE Wireless Group, Inc., a wholly owned subsidiary of KORE, and Drawbridge Special Opportunities Fund LP, an affiliate of Fortress Credit Corp., in connection with the Backstop Financing, as amended November 15, 2021; |
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“Backstop Financing” are to the backstop financing to be provided by an affiliate of Fortress Credit Corp. pursuant to the Backstop Agreement and the Commitment Letter; |
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“Backstop Notes” are to the senior unsecured convertible notes in an aggregate principal amount of $120,000,000 issued by KORE Wireless Group, Inc. pursuant to the Backstop Financing and the Commitment Letter; |
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“Business Combination” are to the Pubco Merger, First Merger and Second Merger; |
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“CaaS” are to Connectivity-as-a-Service; |
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“CEaaS” are to Connectivity Enablement-as-a-Service; |
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“Closing” are to the consummation of the Transactions; |
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“Code” are to the Internal Revenue Code of 1986, as amended; |
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“Commitment Letter” are to that certain commitment letter dated as of September 21, 2021, and countersigned on October 1, 2021, by and among an affiliate of Fortress Credit Corp., KORE, Corp Merger Sub and LLC Merger Sub; |
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“Commitment Letter Financing” are to the financing under the Commitment Letter; |
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“Corp Merger Sub” are to King Corp Merger Sub, Inc.; |
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“COVID-19” are to SARS-CoV-2 COVID-19, any evolution or variations existing as of or following the date of the Merger Agreement, or any epidemics, pandemics or disease outbreaks; |
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“DGCL” are to the Delaware General Corporation Law, as amended; |
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“eSIM” or embedded subscriber identity module, is a form of programmable SIM. It provides the capability to store multiple network profiles that can be provisioned and managed over-the-air; |
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“eUICC” or embedded universal integrated circuit card is a form of programmable SIM card, often referred to as eSIM. It provides the capability to store multiple network profiles that can be provisioned and managed over-the-air; |
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“Exchange Act” are to the Securities Exchange Act of 1934, as amended; |
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“GAAP” are to generally accepted accounting principles in the United States; |
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“GNSS Receiver” are to a global navigation satellite system receiver which is integral to an electronic device that receives and digitally processes the signals from a navigation satellite constellation in order to allow the functioning of GPS systems and other location based devices; |
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“Incentive Plan” are to the KORE 2021 Incentive Award Plan; |
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“IoT” are to Internet of Things; |
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“KORE Common Stock” are to the shares of common stock of KORE, par value $0.0001 per share; |
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“KORE Wireless” are to KORE Wireless Group Inc., a Delaware corporation and wholly owned and principal operating subsidiary of KORE; |
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“LLC Merger Sub” are to King LLC Merger Sub, LLC; |
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“LTE” Long-Term Evolution is a standard for wireless broadband communication for mobile devices and data terminals, based on the GSM/EDGE and UMTS/HSPA standards; |
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“Merger Agreement” are to that certain Agreement and Plan of Merger, dated as of March 12, 2021, as amended on July 27, 2021 and September 21, 2021, by and among CTAC, KORE, Corp Merger Sub, LLC Merger Sub and Maple Holdings Inc.; |
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“Mergers” are to the First Merger and Second Merger, collectively; |
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“NYSE” is to the New York Stock Exchange; |
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“mPERS” are to mobile Personal Emergency Response System; |
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“PIPE” are to Private Investment in Public Equity; |
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“PIPE Investment” are to the private placement pursuant to which CTAC entered into subscription agreements (containing commitments to funding that are subject only to conditions that generally align with the conditions set forth in the Merger Agreement) with certain investors whereby such investors agreed to purchase an aggregate of 22,500,000 shares of KORE Common Stock at a purchase price of $10.00 per share for an aggregate commitment of $225,000,000; |
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“PIPE Investors” are to the investors participating in the PIPE Investment; |
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“SaaS” are to software-as-a-service; |
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“SEC” are to the United States Securities and Exchange Commission; |
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“Shareholder Representative” are to ABRY Partners VII, L.P., or such other person or entity who is identified as the replacement Shareholder Representative by the then existing Shareholder Representative giving prior written notice to KORE; |
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“Sponsor” are to Cerberus Telecom Acquisition Holdings, LLC, a Delaware limited liability company; |
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“Subscription Agreements” are to the subscription agreements entered into by and between CTAC and the PIPE Investors, in each case, dated as of March 12, 2021 in connection with the PIPE Investment; |
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“Transactions” are to, collectively, the Business Combination and the other transactions contemplated by the Merger Agreement and the other related transaction agreements; |
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“Treasury Regulations” are to the regulations promulgated under the Code; and |
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“Warrant Agreement” are to a certain warrant agreement entered into by and between CTAC and Continental Stock Transfer & Trust Company, dated as of October 26, 2020. |
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our ability to develop and introduce new products and services successfully; |
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our ability to compete in the market in which we operate; |
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our ability to meet the price and performance standards of the evolving 5G New Radio products and technologies; |
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our ability to expand our customer reach/reduce customer concentration; |
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our ability to grow the IoT and mobile portfolio outside of North America; |
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our ability to make scheduled payments on or to refinance our indebtedness; |
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our ability to introduce and sell new products that comply with current and evolving industry standards and government regulations; |
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our ability to develop and maintain strategic relationships to expand into new markets; |
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our ability to properly manage the growth of our business to avoid significant strains on our management and operations and disruptions to our business; |
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our reliance on third parties to manufacture components of our solutions; |
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our ability to accurately forecast customer demand and timely delivery of sufficient product quantities; |
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our reliance on sole source suppliers for some products, services and devices used in our solutions; |
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the continuing impact of uncertain global economic conditions on the demand for our products; |
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the impact of geopolitical instability on our business; |
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the emergence of global public health emergencies, such as the outbreak of the 2019 novel coronavirus, now known as “COVID-19,” which could extend lead times in our supply chain and lengthen sales cycles with our customers; |
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direct and indirect effects of COVID-19 on our employees, customers and supply chain and the economy and financial markets; |
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the impact that new or adjusted tariffs may have on the costs of components or our products, and our ability to sell products internationally; |
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our ability to be cost competitive while meeting time-to-market |
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our ability to meet the product performance needs of our customers in wireless broadband data access markets; |
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demand for software-as-a-service |
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our dependence on wireless telecommunication operators delivering acceptable wireless services; |
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the outcome of any pending or future litigation, including intellectual property litigation; |
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infringement claims with respect to intellectual property contained in our solutions; |
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our continued ability to license necessary third-party technology for the development and sale of our solutions; |
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the introduction of new products that could contain errors or defects; |
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conducting business abroad, including foreign currency risks; |
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the pace of 5G wireless network rollouts globally and their adoption by customers; |
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our ability to make focused investments in research and development; |
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our ability to identify suitable acquisition candidates or to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments, including our acquisitions of Business Mobility Partners Inc. and SIMON IoT LLC; |
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our ability to hire, retain and manage additional qualified personnel to maintain and expand our business; |
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the potential liquidity and trading of public securities; and |
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the ability to raise financing in the future. |
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The 5G market may take longer to materialize than KORE expects or, if it does materialize rapidly, KORE may not be able to meet the development schedule and other customer demands. |
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KORE’s development and investments in new technologies, may not generate operating income or contribute to future results of operations that meet its expectations. |
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If KORE is unable to support customers with low latency and/or high throughput IoT use cases, its revenue growth and profitability will be harmed. |
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If KORE is unable to effectively manage its increasingly diverse and complex businesses and operations, its ability to generate growth and revenue from new or existing customers may be adversely affected. |
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The loss of KORE’s largest customers, particularly its single largest customer, could significantly impact its revenue and profitability. |
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KORE’s products are highly technical and may contain undetected errors, product defects, security vulnerabilities, or software errors. |
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If there are interruptions or performance problems associated with the network infrastructure used to provide KORE’s services, customers may experience service outages, which may impact KORE’s reputation and future sales. |
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KORE’s inability to adapt to rapid technological change in its markets could impair its ability to remain competitive and adversely affect its results of operations. |
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The market for the products and services that KORE offers is rapidly evolving and highly competitive. KORE may be unable to compete effectively. |
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If KORE is unable to protect its intellectual property and proprietary rights, its competitive position and its business could be harmed. |
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Failure to maintain the security of KORE’s information and technology networks, including information relating to its customers and employees, could adversely affect KORE. |
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KORE’s internal and customer-facing systems, and systems of third parties they rely upon, may be subject to cybersecurity breaches, disruptions, or delays. |
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KORE is subject to evolving privacy laws that are subject to potentially differing interpretations in the United States as well as other jurisdictions that can adversely impact its business and require that it incur substantial costs. |
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KORE’s technology contains third-party open-source software components and failure to comply with the terms of the underlying open-source software licenses could restrict KORE’s ability to provide its platform. |
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KORE faces risks inherent in conducting business internationally, including compliance with international as well as U.S. laws and regulations that apply to its international operations. |
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KORE may be subject to legal proceedings and litigation, including intellectual property and privacy disputes, which are costly to defend and could materially harm its business, financial condition and results of operations. |
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KORE may be affected by fluctuations in currency exchange rates. |
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KORE’s management has identified internal control deficiencies that have resulted in material weaknesses in its internal control over financial reporting. |
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KORE’s future capital needs are uncertain, and KORE may need to raise additional funds in the future, but may not be able to raise such additional funds on acceptable terms or at all. |
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KORE has a history of losses and may not be able to achieve or sustain profitability in the future. |
ITEM 1. |
BUSINESS |
December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Revenue |
$ |
248,217 |
$ |
213,760 |
$ |
169,152 |
||||||
Net loss |
(24,453 |
) |
(35,201 |
) |
(23,443 |
) | ||||||
Adjusted EBITDA |
59,754 |
57,819 |
50,885 |
• |
Connected Health: Remote patient monitoring and telemedicine enabled by connected medical devices, IoT device enabled clinical drug trials, mPERS connected emergency devices, connected medical equipment diagnostics, electronic visit verification. |
• |
Fleet Management: Stolen vehicle recovery location tracking, connected cameras for tracking vehicle driving conditions and driver behavior, connected route optimization, fuel consumption optimization, connected preventive maintenance, usage-based insurance, connected cars. |
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Asset Monitoring: Home/business security sensor and camera solutions, offender tracking through ankle bracelets, tank monitoring, supply chain inventory and asset tracking, fuel pipeline flow monitoring. |
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Communication Services: IoT and consumer service providers, carrier IoT business units, enterprise connectivity / failsafe, private networking—KORE may provide CEaaS for some of these customers. |
• |
Industrial IoT: Smart utilities / meters, smart cities / buildings, smart factories, field service automation, manufacturers of smart or connected products. |
Product line |
Products |
Product description |
Primary pricing method | |||
IoT Connectivity 68% and 74% of full year 2021 and 2020 revenue, respectively |
IoT Connectivity as a Service (CaaS) |
• IoT Connectivity services offered through our market leading IoT platform ‘KORE One’ ™ • Our connectivity solutions allow devices to seamlessly and securely connect anywhere in the world across any connected network, which we call our multiple devices, multiple locations, multiple carriers CaaS multi-value proposition • IoT Connectivity Management Platform as a Service (or individual KORE One engine) • Cellular Core Network as a Service (Cloud Native Evolved Packet Core “EPC”) |
Per subscriber per month for lifetime of device (7-10 years and growing)Multi-year contracts with automatic renewals | |||
IoT Connectivity Enablement as a Service (CEaaS) | ||||||
IoT Solutions 32% and 26% of full year 2021 and 2020 revenue, respectively |
IoT Device Management Services |
• Outsourced platform-enabled services (e.g., logistics, configuration, device management) Sourcing of third-party devices globally, device design and selection services |
Upfront fee per device or per device per month | |||
IoT Security Location Based Services (LBS) |
• KORE’s SecurityPro ® SaaS platform• KORE’s PositionLogic ® SaaS platform and LBS APIs |
Per subscriber per month | ||||
• |
IoT Device Management Services: outsourced platform enabled services (logistics, configuration, device management). Among other logistics services, KORE offers access to a global supply chain and a global supply base at competitive prices which may include custom device design and manufacture; |
• |
Location Based Services: KORE’s SaaS cloud-based APIs (Position Logic ® ) platform for location and asset tracking; and |
• |
IoT Security (SecurityPro ® ): KORE’s SaaS platform for deep-network behavior-mining IoT device security. |
• |
Massive TAM and Disruptive End-Market Use Cases. KORE believes that 5G adoption will result in an addressable market of $13.2 trillion globally by 2035. Market growth is expected to be driven by key segments including smart manufacturing, mobile, smart city, intelligent retail, construction and mining, connected healthcare, and precision agriculture. |
• |
KORE Touchpoints. KORE expects to be the leading enabler of 5G adoption across 5G IoT, 5G broadband, and 5G ultra reliable segments because it: |
• |
Provides 5G connectivity and simplified management with 5G-ready eSIM and eUICC technology and multi-value proposition enabled by the proprietary KORE One platform. |
• |
Enables seamless transition to 5G with its strength in carrier relationships and experience in managing network transitions. |
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Accelerates 5G use cases with pre-configured solutions and an industry-specific IoT Managed Services portfolios. |
• |
Enables edge deployments with a roadmap for a fully virtualized multi-carrier gateway on the Edge (KORE Anywhere). |
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Enables private network deployments with a fully virtualized core network (Cloud Native Evolved Packet Core “EPC”). |
• |
Leveraging eSIMs coupled with eUICC Technology. eSIMs coupled with eUICC technologies are next-generation technologies driving rapid adoption of Enterprise IoT Connectivity. According to Ericsson, there is a massive growth of new IoT-connected devices expected to come online, with approximately 25 billion devices by 2025. One of the bigger challenges to achieving this growth is current SIM card technology. Today, the vast majority of cellular connected devices are using SIM cards which are locked into a specific cellular carrier. eSIMs and eUICC technology offers several benefits over traditional SIM card technology, including: |
• |
Enables devices to store multiple operator profiles on a device simultaneously and switch between them remotely. |
• |
Allows remote updates. |
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Permits remote SIM provisioning of any mobile device. |
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Delivers an effective way to significantly increase data security. |
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Offers protection from evolving network technologies, such as the retirement of legacy services like 2G and 3G. In some cases, eSIM technology plays a critical role providing secure out-of-the |
• |
For IoT Connectivity services: telecom carriers such as T-Mobile and Vodafone; Mobile Virtual Network Operators such as Aeris, Wireless Logic; and Twilio, Inc. |
• |
For IoT Solutions and Analytics: device management services providers such as Velocitor Solutions and Futura Mobility, fleet management SaaS providers such as Fleetmatics and GPS Trackit, and analytics services providers such as Galooli and Intellisite. |
• |
Significant organic volume growth from existing customer base: Leveraging strong IoT industry momentum with the average customer growing at double digit growth rates, maintaining high customer retention, and leveraging eSIMs to gain wallet share and market share. |
• |
Cross-sell and upsell KORE’s growing portfolio of IoT Solutions to our large base of IoT Connectivity services only customers: 23 of KORE’s top 30 customers are IoT Connectivity services-only customers and do not yet buy the IoT Solutions that KORE has developed over the past two years. |
• |
Deepening our presence in focused industry sectors: Leverage KORE’s presence in Connected Health and Fleet Management, deepening its presence in other verticals in the next 12 to 18 months, and deploying pre-configured industry solutions. |
• |
Enhance “AIoT” (Artificial Intelligence + IoT) and Edge Analytics capabilities in target industries. |
• |
Drive growth through strategic, accretive acquisitions, which add key capabilities. |
• |
KORE’s IoT Connectivity Services: |
• |
CaaS TM ® , KORE eSIM, and Cloud Native Evolved Packet Core “EPC” |
• |
CEaaS ® |
• |
KORE’s IoT Solutions and Analytics are supported by KORE’s proprietary intellectual property and technologies which work together as illustrated below: |
1. |
KORE One ™ Platform |
2. |
KORE eSIM |
3. |
Cloud Native Evolved Packet Core “EPC” (Cellular Network as a Service) |
4. |
IoT Network and Application Services |
a. |
ConnectivityPro ® |
b. |
SecurityPro ® |
c. |
PositionLogic TM : in-vehicle video, cargo monitoring, safety & security etc. |
ITEM 1A. |
RISK FACTORS |
• |
retaining key customers, key employees and key business relationships after the acquisition; |
• |
managing a larger combined company and consolidating corporate and administrative infrastructures successfully; |
• |
the inability to realize expected synergies and cost-savings; |
• |
difficulties in managing geographically dispersed operations, including risks associated with entering markets in which we have no or limited prior experience; |
• |
underperformance of any acquired business relative to our expectations and the price we paid; |
• |
negative near-term impacts on financial results after an acquisition, including acquisition-related earnings charges; |
• |
the assumption or incurrence of additional debt obligations or expenses, or use of substantial portions of our cash; |
• |
the issuance of equity securities to finance or as consideration for any acquisitions that dilute the ownership of our stockholders; |
• |
claims by terminated employees and shareholders of acquired companies or other third parties related to the transaction; |
• |
problems maintaining uniform procedures, controls and policies with respect to our financial accounting systems; |
• |
unanticipated issues in integrating information technology, communications, billing platforms, operational support systems and other systems; and |
• |
risks associated with acquiring intellectual property, including potential disputes regarding acquired companies’ intellectual property. |
• |
unexpected increases in manufacturing costs; |
• |
interruptions in shipments if a third-party manufacturer is unable to complete production in a timely manner; |
• |
inability to control quality of finished products; |
• |
inability to control delivery schedules; |
• |
inability to control production levels and to meet minimum volume commitments to our customers; |
• |
inability to control manufacturing yield; |
• |
inability to maintain adequate manufacturing capacity; and |
• |
inability to secure adequate volumes of acceptable components at suitable prices or in a timely manner. |
• |
the success of competitive services or technologies; |
• |
developments related to our existing or any future collaborations; |
• |
regulatory or legal developments in the United States and other countries; |
• |
developments or disputes concerning our intellectual property or other proprietary rights; |
• |
the recruitment or departure of key personnel; |
• |
actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; |
• |
variations in our financial results or those of companies that are perceived to be similar to us; |
• |
general economic, industry and market conditions; and |
• |
the other factors described in this “Risk Factors” section. |
• |
a limited availability of market quotations for our securities; |
• |
a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock; |
• |
a limited amount of analyst coverage; and |
• |
a decreased ability to issue additional securities or obtain additional financing in the future. |
ITEM 1B. |
UNRESOLVED STAFF COMMENTS |
ITEM 2. |
PROPERTIES |
ITEM 3. |
LEGAL PROCEEDINGS |
ITEM 4. |
MINE SAFETY DISCLOSURES |
ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
ITEM 6. |
RESERVED |
ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• |
Connected Health |
• |
Fleet Management |
• |
Asset Monitoring |
• |
Communication Services: |
• |
Industrial IoT: |
• |
Lack of readily available in-house IoT resources and expertise; |
• |
Significant time required to get to market; |
• |
High failure rate of IoT initiatives; |
• |
A highly fragmented vendor landscape; |
• |
An ecosystem that is quickly evolving and changing rapidly; |
• |
Substantial and increasing regulatory/compliance issues; |
• |
Interoperability and compatibility with assorted technologies. |
• |
We believe KORE One is now an industry leading platform for IoT subscription and network management, and which provides us with a competitive edge in the market. |
• |
Amongst industry analysts, KORE has continued to establish and improve its position as the only pure play IoT enabler. Recognized in 2019 by Gartner as the only independent service provider to be named a “Leader” in the Magic Quadrant for Managed IoT Connectivity Services, KORE continued its upward momentum in 2020 as it improved upon its position to be ranked among the top global services providers within the same category. |
• |
KORE’s product portfolio has expanded significantly. A few years ago, KORE was primarily IoT Connectivity Services focused while today its product portfolio includes IoT Solutions such as IoT Deployment Services and Security Software and Services. KORE’s IoT Connectivity Services have also become richer through the addition of the eSIMs and “Connectivity Enablement as a Service” to the IoT Connectivity Services product portfolio. |
• |
IoT Solutions has increased as a proportion of KORE’s total revenue each year since 2018. For the years ended December 31, 2021, and 2020, respectively, IoT Solutions represented 32% and 26% of KORE’s total revenue. |
• |
For IoT Connectivity —telecom carriers such as T-Mobile and Vodafone; Mobile Virtual Network Operators such as Aeris and Wireless Logic; and |
• |
For IoT Solutions and Analytics |
• |
Organic volume growth – leveraging the strong IoT industry growth expressed in terms of our customers’ revenue, device and data usage growth, while continuing to maintain high customer retention. |
• |
Cross-sell and upsell – selling KORE’s growing portfolio of IoT Solutions developed during the prior two years and going-forward, to our large base of connectivity services only customers. |
• |
Deepening our presence in focused industry sectors – developing more of a vertical orientation in our business and deepening industry domain knowledge that will in turn allow the development and deployment of pre-configured industry solutions. |
• |
Enhancing AIoT (Artificial Intelligence + IoT) and Edge Analytics capabilities. |
• |
Strategic acquisitions that will allow KORE to expand our IoT Solutions and advanced IoT connectivity capabilities while ensuring a highly disciplined use of capital for such acquisitions. |
• |
The number of carrier integrations (44) |
• |
KORE One platform (7 engines) |
• |
ConnectivityPro service and related APIs |
• |
eSIM technology stack/ proprietary IP |
• |
Hypercore technology |
• |
Deep industry vertical knowledge and experience (e.g., in Connected Health through FDA, HIPAA, ISO 9001/13485 compliance) |
• |
Breadth of solutions and analytics services |
• |
3,300+ connectivity-only customers provides us a unique opportunity to cross-sell and upsell our existing connectivity-only customers |
Years Ended December 31, |
Change 2021 |
|||||||||||||||
2021 |
2020 |
$ |
% |
|||||||||||||
Services |
$ |
187,962 |
$ |
172,845 |
$ |
15,117 |
9 |
% | ||||||||
Products |
60,255 |
40,915 |
19,340 |
47 |
% | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Revenue |
$ |
248,217 |
$ |
213,760 |
$ |
34,457 |
16 |
% | ||||||||
|
|
|
|
|
|
|
|
Years Ended December 31, |
Change 2021 |
|||||||||||||||
2021 |
2020 |
$ |
% |
|||||||||||||
IoT Connectivity |
$ |
168,804 |
$ |
158,748 |
$ |
10,056 |
6 |
% | ||||||||
IoT Solutions |
79,413 |
55,012 |
24,401 |
44 |
% | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Revenue |
$ |
248,217 |
$ |
213,760 |
$ |
34,457 |
16 |
% | ||||||||
|
|
|
|
|
|
|
|
December 31, |
||||||||
2021 |
2020 |
|||||||
Period End Connections |
14.6 million |
11.8 million |
||||||
Average Connections Count for the Period |
13.4 million |
10.7 million |
Years Ended December 31, |
Change 2021 |
|||||||||||||||
2021 |
2020 |
$ |
% |
|||||||||||||
Cost of services |
$ |
69,867 |
$ |
64,520 |
$ |
5,347 |
8 |
% | ||||||||
Cost of products |
52,357 |
33,410 |
18,947 |
57 |
% | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total cost of revenue |
$ |
122,224 |
$ |
97,930 |
$ |
24,294 |
25 |
% | ||||||||
|
|
|
|
|
|
|
|
Years Ended |
||||||||
December 31, |
||||||||
Gross margin rate |
2021 |
2020 |
||||||
Cost of services |
62.8 |
% |
62.7 |
% | ||||
Cost of products |
13.1 |
% |
18.3 |
% | ||||
Total gross margins |
50.8 |
% |
54.2 |
% |