QUARTERLY 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 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
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(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer |
☒ | Smaller reporting company | ||||
Emerging growth company |
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 May 11, 2022, there were |
Page No. |
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2 |
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2 |
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23 |
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35 |
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35 |
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38 |
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38 |
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38 |
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38 |
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38 |
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38 |
Item 1. |
Financial Statements (Unaudited) |
March 31 2022 |
December 31 2021 |
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(Unaudited) |
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Assets |
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Current assets |
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Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, net of allowances for credits and doubtful accounts of $ |
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Inventories, net |
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Income taxes receivable |
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Prepaid expenses and other receivables |
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Total current assets |
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Non-current assets |
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Restricted cash |
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Property and equipment, net |
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Intangibles assets, net |
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Goodwill |
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Operating lease right-of-use |
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Other long-term assets |
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Total assets |
$ |
$ |
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Liabilities and stockholders’ equity |
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Current liabilities |
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Accounts payable |
$ | $ | ||||||
Accrued liabilities |
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Current portion of operating lease liabilities |
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Income taxes payable |
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Deferred revenue |
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Current portion of long-term debt and other borrowings, net |
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Total current liabilities |
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Non-current liabilities |
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Deferred tax liabilities |
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Warrant liability |
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Non-current portion of operating lease liabilities |
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Long-term debt and other borrowings, net |
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Other long-term liabilities |
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Total liabilities |
$ |
$ |
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Commitments and contingencies |
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Stockholders’ equity |
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Common stock, voting; par value $ |
$ | $ | ||||||
Additional paid-in capital |
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Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
Accumulated deficit |
( |
) | ( |
) | ||||
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Total stockholders’ equity |
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|||||
Total liabilities and stockholders’ equity |
$ |
$ |
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For the three months ended March 31, |
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2022 |
2021 |
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Revenue |
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Services |
$ | $ | ||||||
Products |
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Total revenue |
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Cost of revenue |
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Cost of services |
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Cost of products |
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Total cost of revenue (exclusive of depreciation and amortization shown separately below) |
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Operating expenses |
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Selling, general and administrative |
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Depreciation and amortization |
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Total operating expenses |
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Operating income (loss) |
( |
) |
||||||
Interest expense, including amortization of deferred financing costs, net |
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Change in fair value of warrant liability |
( |
) | ( |
) | ||||
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Loss before income taxes |
( |
) |
( |
) | ||||
Income tax expense (benefit) |
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Current |
||||||||
Deferred |
( |
) | ( |
) | ||||
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Total income tax benefit |
( |
) |
( |
) | ||||
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|
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Net loss attributable to the Company |
$ |
( |
) |
$ |
( |
) | ||
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Loss per share: |
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Basic |
$ | ( |
) | $ | ( |
) | ||
Diluted |
$ | ( |
) | $ | ( |
) | ||
Weighted average number of shares outstanding: |
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Basic |
||||||||
Diluted |
For the three months ended |
||||||||
March 31, |
||||||||
2022 |
2021 |
|||||||
Net loss |
$ |
( |
) |
$ |
( |
) | ||
Other comprehensive loss: |
||||||||
Foreign currency translation adjustment |
( |
) | ( |
) | ||||
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|
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|
|||||
Comprehensive loss |
$ |
( |
) |
$ |
( |
) | ||
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|
|
Common Stock |
Additional paid-in capital |
Accumulated Other Comprehensive Loss |
Accumulated Deficit |
Total Stockholders’ Equity |
||||||||||||||||||||
Shares |
Amount |
Amount |
Amount |
Amount |
Amount |
|||||||||||||||||||
Balance at December 31, 2021 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
|||||||||||||||
Opening balance sheet adjustment |
— | — | ( |
) | — | ( |
) | |||||||||||||||||
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Adjusted opening balance |
( |
) |
( |
) |
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|
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Foreign currency translation adjustment |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Stock-based compensation |
— | — | — | — | ||||||||||||||||||||
Common stock issued pursuant to acquisition |
— | — | ||||||||||||||||||||||
Net loss |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
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Balance at March 31, 2022 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
|||||||||||||||
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|
Series A Preferred Stock |
Series A-1 Preferred Stock |
Series B Preferred Stock |
Series C Convertible Preferred Stock |
Total Temporary Equity |
||||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Amount |
||||||||||||||||||||||||||||
Balance at December 31, 2020 (as previously reported) |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||||||||||||
Conversion of stock |
— | — | — | — | — | |||||||||||||||||||||||||||||||
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Balance at December 31, 2020, effect of reverse recapitalization |
$ |
$ |
$ |
$ |
$ |
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Accrued dividends payable |
— | — | ||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Net loss |
— |
— |
— |
— |
— |
— |
— |
— |
— |
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Balance at March 31, 2021 |
$ |
$ |
$ |
$ |
$ |
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Common Stock |
Additional paid-in capital |
Accumulated Other Comprehensive Loss |
Accumulated Deficit |
Total Stockholders’ Equity |
||||||||||||||||||||
Shares |
Amount |
Amount |
Amount |
Amount |
Amount |
|||||||||||||||||||
Balance at December 31, 2020 (as previously reported) |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
|||||||||||||||
Conversion of stock |
( |
) | — | — | — | |||||||||||||||||||
|
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|
|
|
|||||||||||||
Balance at December 31, 2020, effect of reverse recapitalization |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
|||||||||||||||
|
|
|
|
|
|
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|
|
|
|
|
|||||||||||||
Accrued dividends payable |
— | — | ( |
) | — | — | ( |
) | ||||||||||||||||
Foreign currency translation adjustment |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Stock-based compensation |
— | — | — | — | ||||||||||||||||||||
Net loss |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
|
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|
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|||||||||||||
Balance at March 31, 2021 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
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For the three months ended |
||||||||
March 31, |
||||||||
2022 |
2021 |
|||||||
Cash flows from operating activities |
||||||||
Net loss |
$ |
( |
) | $ |
( |
) | ||
Adjustments to reconcile net loss to net cash used in operating activities |
||||||||
Depreciation and amortization |
||||||||
Amortization of deferred financing costs |
||||||||
Non-cash reduction to the operating lease right-of-use assets |
||||||||
Deferred income taxes |
( |
) | ( |
) | ||||
Non-cash foreign currency loss |
( |
) | ( |
) | ||||
Share-based compensation |
||||||||
Provision for doubtful accounts |
( |
) | ||||||
Change in fair value of warrant liability |
( |
) | ( |
) | ||||
Change in operating assets and liabilities, net of operating assets and liabilities acquired: |
||||||||
Accounts receivable |
( |
) | ( |
) | ||||
Inventories |
( |
) | ||||||
Prepaid expenses and other receivables |
( |
) | ||||||
Accounts payable and accrued liabilities |
( |
) | ( |
) | ||||
Deferred revenue |
( |
) | ||||||
Income taxes payable |
||||||||
Operating lease liabilities |
( |
) | ||||||
|
|
|
|
|||||
Net cash used in operating activities |
$ |
( |
) |
$ |
( |
) | ||
|
|
|
|
|||||
Cash flows used in investing activities |
||||||||
Additions to intangible assets |
( |
) | ( |
) | ||||
Additions to property and equipment |
( |
) | ( |
) | ||||
Payments for acquisitions, net of cash acquired |
( |
) | ||||||
|
|
|
|
|||||
Net cash used in investing activities |
$ |
( |
) |
$ |
( |
) | ||
|
|
|
|
|||||
Cash flows from financing activities |
||||||||
Proceeds from revolving credit facility |
||||||||
Repayment of term loan |
( |
) | ( |
) | ||||
Repayment of other borrowings—notes payable |
( |
) | ||||||
Equity financing fees |
( |
) | ( |
) | ||||
Payment of deferred financing costs |
( |
) | ( |
) | ||||
Payment of financing lease obligations |
( |
) | ||||||
Payment of capital lease obligations |
( |
) | ||||||
|
|
|
|
|||||
Net cash provided by/(used in) financing activities |
$ |
( |
) |
$ |
||||
|
|
|
|
|||||
Effect of Exchange Rate Change on Cash and Cash Equivalents |
( |
) | ( |
) | ||||
Change in Cash and Cash Equivalents and Restricted Cash |
( |
) | ||||||
Cash and Cash Equivalents and Restricted Cash, beginning of period |
||||||||
|
|
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|
|||||
Cash and Cash Equivalents and Restricted Cash, end of period |
$ |
$ |
||||||
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|
|||||
Supplemental cash flow information: |
||||||||
Interest paid |
$ | $ | ||||||
Taxes paid |
— | |||||||
Non-cash investing and financing activities: |
||||||||
Fair value of KORE common stock issued pursuant to acquisitions |
$ | $ | — | |||||
ASU 2020-06 Adoption |
— | |||||||
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities upon the adoption of ASC 842 |
||||||||
Operating lease right-of-use |
— | |||||||
Equity financing fees accrued |
— |
• | the pre-combination |
• | the pre-combination |
• | in pre-combination |
• | the operations of pre-combination KORE comprise the ongoing operations of the Company, and the Company assumed pre-combination KORE’s headquarters. |
• | Exemption |
• | 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 |
• | Election |
• | 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. |
(in ‘000 USD) |
At December 31, 2021 |
Adjustments due to Topic 842 |
At January 1 2022 |
|||||||||
Operating lease right-of-use |
$ | $ | $ | |||||||||
Current operating lease liabilities |
||||||||||||
Non-current operating lease liabilities |
||||||||||||
Current portion of capital lease liabilities |
( |
) | ||||||||||
Current portion of finance lease liabilities |
||||||||||||
Non-current portion of capital lease liabilities |
( |
) | ||||||||||
Non-current portion of finance lease liabilities |
||||||||||||
Accrued liabilities |
( |
) |
(in ‘000 USD) |
At December 31, 2021 |
Adjustments due to ASU 2020-06 |
At January 1 2022 |
|||||||||
Long-term debt and other borrowings, net |
$ | $ | $ | |||||||||
Additional paid-in capital |
( |
) | ||||||||||
Deferred tax |
( |
) | ||||||||||
Retained earnings |
( |
) | ( |
) |
• | 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. |
(in ‘000 USD) |
For the three months ended March 31, |
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2022 |
2021 |
|||||||
Connectivity* |
$ | $ | ||||||
Hardware Sales |
||||||||
Hardware Sales—bill-and-hold |
||||||||
Deployment services, professional services, and other |
||||||||
Total |
$ |
$ |
||||||
* | Includes connectivity-related revenues from Connectivity services and IoT Solutions services |
Shares |
Percentage |
|||||||
Pre-combination KORE shareholders |
% | |||||||
Public stockholders |
% | |||||||
Private offering and merger financing |
% | |||||||
Total |
% |
(in 000’ USD) |
Classification in Statement of operations |
Three Months Ended March 31, 2022 |
||||||
Operating lease cost |
Selling, general and administrative |
$ | ||||||
Finance lease cost |
||||||||
Amortization of leased |
Depreciation and amortization | |||||||
Interest on lease liabilities |
Interest expense | |||||||
Total net lease cost |
$ |
|||||||
(in 000’ USD) |
As of March 31, 2022 |
|||
Assets |
||||
Finance lease right-of-use assets included in property and equipment, net |
$ |
|||
Liabilities |
||||
Current portion of finance lease liabilities |
$ |
|||
Non-current portion of finance lease liabilities |
||||
Total finance lease liabilities |
$ |
|||
At March 31, 2022 |
||||
Weighted average remaining lease term (in years) |
||||
Operating leases |
||||
Finance leases |
||||
Weighted average discount rate: |
||||
Operating leases |
% | |||
Finance leases |
% |
Operating Leases |
Finance Leases |
|||||||
(in ‘000 USD) |
Amount |
Amount |
||||||
From April 1, 2022 to December 31, 2022 |
$ | $ | ||||||
2023 |
||||||||
2024 |
||||||||
2025 |
||||||||
2026 |
||||||||
Thereafter |
||||||||
Total minimum lease payments |
||||||||
Interest expense |
( |
) |
( |
) | ||||
Total |
$ |
$ |
||||||
Cash, (net of closing cash of $ |
$ | |||
Fair value of KORE common stock issued to sellers ( |
||||
|
|
|||
Total consideration |
$ |
|||
Assets acquired: |
||||
Accounts receivable |
||||
Inventories |
||||
Prepaid expenses and other receivables |
||||
Property and equipment |
||||
Intangible assets |
||||
|
|
|||
Total Assets acquired |
||||
|
|
|||
Liabilities assumed: |
||||
Deferred tax liabilities |
||||
Accounts payable and accrued liabilities |
||||
|
|
|||
Liabilities assumed |
||||
|
|
|||
Net identifiable assets acquired |
||||
|
|
|||
Goodwill (excess of consideration transferred over net identifiable assets acquired) |
$ |
|||
|
|
Post ASU 2020-06 As of March 31, |
Pre ASU 2020-06 As of December 31, |
|||||||
(in ‘000 USD) |
2022 |
2021 |
||||||
Principal balances outstanding |
$ | $ | ||||||
Net of unamortized debt issuance costs |
||||||||
Net of unamortized equity component costs |
||||||||
|
|
|
|
|||||
Net carrying amount(1) |
$ |
$ |
||||||
|
|
|
|
(in ‘000 USD) |
Series A |
Series A-1 |
Series B |
|||||||||
Accumulated and unpaid, December 31, 2020 |
$ |
$ |
$ |
|||||||||
Accumulated |
||||||||||||
Distributed |
||||||||||||
|
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|
|
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|
|||||||
Accumulated and unpaid, March 31, 2021 |
$ |
$ |
$ |
|||||||||
|
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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, 2020 |
$ |
$ |
||||||||||||||
Granted |
— | |||||||||||||||
Exercised |
— | — | — | — | ||||||||||||
Forfeited |
— | |||||||||||||||
Expired |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance, March 31, 2021 |
$ |
$ |
||||||||||||||
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|
|
For the three months ended |
||||||||
March 31, |
||||||||
(in ‘000 USD) |
2022 |
2021 |
||||||
Total Stock Compensation Expense |
$ | $ | ||||||
Unrecognized Compensation Cost |
||||||||
Weighted-average remaining recognition period (in years) |
— |
(in 000’ USD, except shares) |
Number of Awards outstanding |
Weighted- Average grant date fair value (per share) |
Aggregate Intrinsic Value (in Thousands) |
|||||||||
Unvested RSUs at December 31, 2021 |
$ | |||||||||||
Granted |
||||||||||||
Vested |
||||||||||||
Forfeited and canceled |
( |
) | ( |
) | ||||||||
|
|
|
|
|||||||||
Unvested RSUs at March 31, 2022 |
$ |
$ |
||||||||||
|
|
|
|
Three months ended |
March 31, |
|||
(in ‘000 USD) |
2022 |
|||
Expected volatility |
||||
Risk-free interest rate |
For the three months ended |
||||||||
March 31, |
||||||||
(in ‘000 USD) |
2022 |
2021 |
||||||
Total Stock Compensation Expense |
$ | $ | ||||||
Unrecognized Compensation Cost |
||||||||
Weighted-average remaining recognition period (in years) |
— |
For the three months ended |
||||||||
March 31, |
||||||||
(in 000’ USD, except share and per share amounts) |
2022 |
2021 |
||||||
Numerator: |
||||||||
Net loss attributable to the Company |
$ | ( |
) | $ | ( |
) | ||
Less cumulative earnings to preferred shareholder |
( |
) | ||||||
|
|
|
|
|||||
Net loss attributable to common stockholders |
( |
) |
( |
) | ||||
Denominator: |
||||||||
Weighted average common shares and warrants outstanding |
||||||||
Basic (in number) |
||||||||
Diluted (in number) |
||||||||
Net loss per unit attributable to common stockholder |
||||||||
Basic |
$ | ( |
) | $ | ( |
) | ||
Diluted |
$ | ( |
) | $ | ( |
) |
For the three months ended |
||||||||
(Number of shares) |
March 31, |
|||||||
2022 |
2021 |
|||||||
Series C Convertible Preferred Stock |
||||||||
Stock Options |
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Common stock issued under the Backstop Agreement |
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Restricted stock grants with only service conditions |
Item 2. |
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. KORE was the only independent IoT Connectivity provider recognized as a leader in Managed IoT Connectivity by Gartner in the 2022 Magic Quadrant report for the third year in a row. The Company was also listed as a leader by IDC MarketScape, highlighting the breadth and scale of KORE’s solutions. |
• | 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. In the three months ended March 31, 2022, and March 31, 2021, respectively, IoT Solutions represented 36% and 26% of KORE’s total revenue. |
• | For IoT Connectivity— 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 |