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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 10-Q
__________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 001-40856
__________________________
KORE Group Holdings, Inc.
(Exact Name of Registrant as Specified in its Charter)
__________________________
Delaware86-3078783
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
3 Ravinia Drive NE, Suite 500
Atlanta, Georgia
30346
(Address of principal executive offices)(Zip Code)
877-710-5673
(Registrant’s telephone number, including area code)
__________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Common stock, $0.0001 par value per shareKOREThe New York Stock Exchange
Warrants to purchase common stockKORE WSThe New York Stock Exchange
__________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
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 x No o
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.
Large accelerated fileroAccelerated filero
 
Non-accelerated filerxSmaller reporting companyo
 
Emerging growth companyx  
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of August 8, 2022, there were 76,239,989 shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding.


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Table of Contents
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. The Company intends 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. The Company has 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. The Company qualifies 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.


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PART I — FINANCIAL INFORMATION
Item 1.    Financial Statements (Unaudited)
KORE Group Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands USD, except share and per share amounts)
June 30,
2022
December 31,
2021
Assets
Current assets
Cash and cash equivalents$40,441 $85,976 
Accounts receivable, net of allowances for credits and doubtful accounts of $2,978 and $1,800, at June 30, 2022 and December 31, 2021, respectively
50,767 51,304 
Inventories, net9,897 15,470 
Income taxes receivable712 954 
Prepaid expenses and other receivables9,089 7,448 
Total current assets110,906 161,152 
Non-current assets
Restricted cash363 367 
Property and equipment, net11,890 12,240 
Intangibles assets, net211,829 203,474 
Goodwill426,126 381,962 
Operating lease right-of-use assets7,914 — 
Other long-term assets381 407 
Total assets$769,409 $759,602 
Liabilities and stockholders’ equity
Current liabilities
Accounts payable$19,288 $16,004 
Accrued liabilities15,348 21,502 
Current portion of operating lease liabilities1,764 — 
Income taxes payable502 467 
Deferred revenue7,698 6,889 
Current portion of long-term debt and other borrowings, net3,165 3,326 
Total current liabilities47,765 48,188 
Non-current liabilities
Deferred tax liabilities32,618 36,722 
Warrant liability153 286 
Non-current portion of operating lease liabilities6,852 — 
Long-term debt and other borrowings, net413,788 399,115 
Other long-term liabilities4,349 3,148 
Total liabilities$505,525 $487,459 
Stockholders’ equity
Common stock, voting; par value $0.0001 per share; 315,000,000 shares authorized, 76,239,989 and 72,027,743 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively
$8 $7 
Additional paid-in capital429,879 413,646 
Accumulated other comprehensive loss(6,074)(3,331)
Accumulated deficit(159,929)(138,179)
Total stockholders’ equity263,884 272,143 
Total liabilities and stockholders’ equity$769,409 $759,602 

See accompanying notes to the unaudited condensed consolidated financial statements
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KORE Group Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands USD, except share and per share amounts) (unaudited)
For the three months ended For the six months ended
June 30,June 30,
2022202120222021
Revenue
Services$47,778 $46,375 $95,284 $91,437 
Products22,575 14,368 44,010 24,603 
Total revenue70,353 60,743 139,294 116,040 
Cost of revenue
Cost of services16,577 17,826 34,105 34,037 
Cost of products17,298 11,511 34,741 19,672 
Total cost of revenue (exclusive of depreciation and amortization shown separately below)33,875 29,337 68,846 53,709 
Operating expenses
Selling, general and administrative29,413 23,004 57,042 40,525 
Depreciation and amortization13,774 12,393 26,970 25,507 
Total operating expenses43,187 35,397 84,012 66,032 
Operating loss(6,709)(3,991)(13,564)(3,701)
Interest expense, including amortization of deferred financing costs, net7,297 5,506 13,921 10,565 
Change in fair value of warrant liability(106)41 (133)(2,383)
Loss before income taxes(13,900)(9,538)(27,352)(11,883)
Income tax expense (benefit)
Current1,056 289 2,362 391 
Deferred(3,815)(2,942)(7,666)(4,308)
Total income tax benefit(2,759)(2,653)(5,304)(3,917)
Net loss $(11,141)$(6,885)$(22,048)$(7,966)
Loss per share:
Basic$(0.15)$(0.46)$(0.29)$(0.72)
Diluted$(0.15)$(0.46)$(0.29)$(0.72)
Weighted average number of shares outstanding:
Basic76,239,989 31,647,131 75,146,201 31,647,131 
Diluted76,239,989 31,647,131 75,146,201 31,647,131 

See accompanying notes to the unaudited condensed consolidated financial statements
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KORE Group Holdings, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Loss
(In thousands USD) (unaudited)
For the three months ended For the six months ended
June 30,June 30,
2022202120222021
Net loss$(11,141)$(6,885)$(22,048)$(7,966)
Other comprehensive loss:
Foreign currency translation adjustment(2,559)743(2,743)(157)
Comprehensive loss$(13,700)$(6,142)$(24,791)$(8,123)


See accompanying notes to the unaudited condensed consolidated financial statements
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KORE Group Holdings, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
(In thousands, USD) (unaudited)
Common StockAdditional
paid-in capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmountAmount Amount Amount Amount
Balance at December 31, 202172,028 $7 $413,646 $(3,331)$(138,179)$272,143 
Opening balance sheet adjustment— — (11,612)— 298 (11,314)
Adjusted opening balance72,028 7 402,034 (3,331)(137,881)260,829 
Foreign currency translation adjustment— — — (184)— (184)
Stock-based compensation— — 2,050 — — 2,050 
Common stock issued pursuant to acquisition4,212 1 23,294 — — 23,295 
Net loss— — — — (10,907)(10,907)
Balance at March 31, 202276,240 $8 $427,378 $(3,515)$(148,788)$275,083 
Foreign currency translation adjustment— — — (2,559)— (2,559)
Stock-based compensation— — 2,501 — — 2,501 
Net loss— — — — (11,141)(11,141)
Balance at June 30, 202276,240 $8 $429,879 $(6,074)$(159,929)$263,884 
See accompanying notes to the unaudited condensed consolidated financial statements
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KORE Group Holdings, Inc. and Subsidiaries
Consolidated Statements of Temporary Equity and Stockholders' Equity
(In thousands, USD) (unaudited)
Series A
Preferred Stock
Series A-1
Preferred Stock
Series B
Preferred Stock
Series C Convertible
Preferred Stock
Total
Temporary
Equity
SharesAmountSharesAmountSharesAmountSharesAmountAmount
Balance at December 31, 2020 (as previously reported)43 $77,562 60 $78,621 57 $90,910 17 $16,802 $263,895 
Conversion of stock7,713 — 7,802 — 9,034 — 2,549 — — 
Balance at December 31, 2020, effect of reverse recapitalization7,756 $77,562 7,862 $78,621 9,091 $90,910 2,566 $16,802 $263,895 
Accrued dividends payable249 2,486 267 2,666 224 2,241 — — 7,393 
Foreign currency translation adjustment— — — — — — — — — 
Stock-based compensation— — — — — — — — — 
Net loss— — — — — — — — — 
Balance at March 31, 20218,005 $80,048 8,129 $81,287 9,315 $93,151 2,566 $16,802 $271,288 
Derecognition of stock— — — — — — (46)(300)(300)
Accrued dividends payable251 2,514 270 2,695 232 2,323 — — 7,532 
Foreign currency translation adjustment— — — — — — — — — 
Stock-based compensation— — — — — — — — — 
Net loss— — — — — — — — — 
Balance at June 30, 20218,256 $82,562 8,399 $83,982 9,547 $95,474 2,520 $16,502 $278,520 
Common StockAdditional
paid-in
capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmountAmount Amount Amount Amount
Balance at December 31, 2020 (as previously reported)218 $2 $135,617 $(1,677)$(113,726)$20,216 
Conversion of stock30,064 1 (1)— — — 
Balance at December 31, 2020, effect of reverse recapitalization30,282 $3 $135,616 $(1,677)$(113,726)$20,216 
Accrued dividends payable— — (7,393)— — (7,393)
Foreign currency translation adjustment— — — (900)— (900)
Stock-based compensation— — 315 — — 315 
Net loss— — — — (1,081)(1,081)
Balance at March 31, 202130,282 $3 $128,538 $(2,577)$(114,807)$11,157 
Accrued dividends payable— — (7,532)— — (7,532)
Foreign currency translation adjustment— — — 743 — 743 
Stock-based compensation— — 315 — — 315 
Net loss— — — — (6,885)(6,885)
Balance at June 30, 202130,282 $3 $121,321 $(1,834)$(121,692)$(2,202)

See accompanying notes to the unaudited condensed consolidated financial statements
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KORE Group Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands USD) (unaudited)
For the six months ended
June 30,
20222021
Cash flows from operating activities
Net loss$(22,048)$(7,966)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization26,970 25,507 
Amortization of deferred financing costs1,188 1,047 
Non-cash reduction to the operating lease right-of-use assets1,129  
Deferred income taxes(7,666)(4,308)
Non-cash foreign currency loss489 77 
Share-based compensation4,551 630 
Provision for doubtful accounts183 11 
Change in fair value of warrant liability(133)(2,383)
Change in operating assets and liabilities, net of operating assets and liabilities acquired:
Accounts receivable2,421 (7,049)
Inventories6,661 (4,089)
Prepaid expenses and other receivables(769)(9,016)
Accounts payable and accrued liabilities(2,674)(6,103)
Deferred revenue872 (671)
Income taxes payable269 (32)
Operating lease liabilities(752)— 
Net cash provided by (used in) operating activities$10,691 $(14,345)
Cash flows used in investing activities
Additions to intangible assets(5,610)(4,754)
Additions to property and equipment(1,589)(1,219)
Payments for acquisitions, net of cash acquired(46,002) 
Net cash used in investing activities$(53,201)$(5,973)
Cash flows from financing activities
Proceeds from revolving credit facility 22,000 
Repayment of term loan(1,576)(1,584)
Repayment of other borrowings—notes payable(148) 
Equity financing fees(126)(1,373)
Payment of deferred financing costs(453) 
Payment of financing lease obligations(151)— 
Payment of capital lease obligations— (668)
Net cash provided by (used in) financing activities$(2,454)$18,375 
Effect of exchange rate change on cash and cash equivalents(575)(82)
Change in cash and cash equivalents and restricted cash(45,539)(2,025)
Cash and cash equivalents and restricted cash, beginning of period86,343 10,693 
Cash and cash equivalents and restricted cash, end of period$40,804 $8,668 
Supplemental cash flow information:
Interest paid$12,778 $9,329 
Taxes paid1,129  
Non-cash investing and financing activities:
ASU 2020-06 Adoption 15,163  
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities upon the adoption of ASC 8429,604 
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities420 — 
Capital leases— 346 
Equity financing fees accrued 1,648 

See accompanying notes to the unaudited condensed consolidated financial statements
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KORE Group Holdings, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(In thousands USD, except share amounts) (unaudited)
NOTE 1 – NATURE OF OPERATIONS
Business Combination
KORE Group Holdings, Inc. and Subsidiaries (“the Company”) operates subject to the terms and conditions of the Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) dated September 30, 2021. On March 12, 2021, Maple Holdings Inc. (“Maple” or “pre-combination KORE”) entered into a definitive merger agreement (the “Business Combination Agreement”) with Cerberus Telecom Acquisition Corp. (“CTAC”) (the Business Combination”).
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 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 into Maple (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 combined Company was listed on the NYSE under the new ticker symbol “KORE”.
The Business Combination was accounted for as a reverse recapitalization whereby pre-combination KORE was determined to be the accounting acquirer and CTAC was treated as the “acquired” company for accounting purposes. The condensed consolidated balance sheets, statements of operations and statements of temporary equity and stockholders’ equity and these notes to the condensed consolidated financial statements reflect the reverse recapitalization as discussed above.
Organization
The Company provides advanced connectivity services, location-based services, device solutions, managed and professional services used in the development and support of IoT technology for the Machine-to-Machine (“M2M”) market. The Company’s IoT platform is delivered in partnership with the world’s largest mobile network operators and provides secure, reliable wireless connectivity to mobile and fixed devices. This technology enables the Company to expand its global technology platform by transferring capabilities across new and existing vertical markets and delivers complimentary products to channel partners and resellers worldwide.



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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulation of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.
The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain accounting policies are repeated to ensure the condensed consolidated financial statements are not misleading. Therefore, these condensed consolidated financial statements should be read in conjunction with the condensed consolidated financial statements and notes included in the Company’s Annual Report.
The condensed consolidated financial statements include the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss, temporary equity and stockholders’ equity and cash flows for the interim periods but are not necessarily indicative of the results of operations to be anticipated for the full year 2022 or any future period.
The Business Combination was accounted for as a reverse recapitalization as pre-combination KORE was determined to be the accounting acquirer under the Financial Accounting Standards Board's (the "FASB") 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 held the majority (54%) of voting rights in the Company;
the senior management of pre-combination KORE became the senior management of the Company;
in comparison with CTAC, pre-combination KORE had significantly more revenues and total assets and a larger net loss; and
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.
Use of Estimates
The preparation of condensed consolidated financial statements, in conformity with US GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to revenue recognition such as determining the nature and timing of the satisfaction of performance obligations, revenue reserves, allowances for accounts receivable, the recognition and measurement of assets acquired and liabilities assumed in business combinations at fair value, assessment of indicators of goodwill impairment, determination of useful lives of the Company’s intangible assets and equipment, the assessment of expected cash flows used in evaluating long-lived assets for impairment, the calculation of capitalized software costs, accounting for uncertainties in income tax positions, and the value of securities underlying stock-based compensation. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from these estimates.


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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 new or revised standards at the same time as private companies.
Stock-Based Compensation
The Company has had several stock-based compensation plans, which are more fully described in “Note 11, Stock-Based Compensation”, to the condensed consolidated financial statements. Stock-based compensation is generally recognized as an expense following straight-line attribution method over the requisite service period. The fair value of stock-based compensation is measured on the grant date based on the grant-date fair value of the awards.
Leases
At the beginning of the first quarter of fiscal 2022, the Company adopted the FASB Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), and additional ASUs issued to clarify and update the guidance in ASU 2016-02 (collectively, the “new leases standard”).
The Company leases real estate, computer hardware and vehicles for use in our operations under both operating and finance leases. The Company assesses whether an arrangement is a lease or contains a lease at inception. For arrangements considered leases or that contain a lease that is accounted for separately, we determine the classification and initial measurement of the right-of-use asset and lease liability at the lease commencement date, which is the date that the underlying asset becomes available for use.
For both operating and finance leases, we recognize a right-of-use asset, which represents our right to use the underlying asset for the lease term, and a lease liability, which represents the present value of our obligation to make payments arising over the lease term. The present value of our obligation to make payments is calculated using the incremental borrowing rate for operating and finance leases. The incremental borrowing rate is determined using a portfolio approach based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. Management uses the unsecured borrowing rate and risk-adjusts that rate to approximate a collateralized rate, which will be updated on an annual basis for the measurement of new lease liabilities.
In those circumstances where the Company is the lessee, we have elected to account for non-lease components associated with our leases (e.g., common area maintenance costs) and lease components as a single lease component for all of our asset classes.
Operating lease cost for operating leases is recognized on a straight-line basis over the term of the lease and is included in selling, general and administrative expense in our consolidated statements of operations, based on the use of the facility on which rent is being paid. Operating leases with a term of 12 months or less are not recorded on the balance sheet; we recognize a rent expense for these leases on a straight-line basis over the lease term.
The Company recognizes the amortization of the right-of-use asset for our finance leases on a straight-line basis over the shorter of the term of the lease or the useful life of the right-of-use asset in depreciation and amortization expense in our consolidated statements of operations. The interest expense related to finance leases is recognized using the effective interest method based on the discount rate determined at lease commencement and is included within interest expense in our consolidated statements of operations.

Recently Adopted Accounting Pronouncements
The Company considers the applicability and impact of all ASUs issued by the FASB. ASUs not listed below were assessed and determined to be either not applicable or did not have a material impact on the Company's condensed consolidated financial statements. The following ASUs have been adopted by KORE since the Company’s last Annual Report on Form 10-K.
ASU 2016-02, ASU 2018-10, ASU 2018-11, ASU 2020-03 and ASU 2020-05, Leases (Topic 842)
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


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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” or “the new standard”) 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.

A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. We early adopted the new standard on January 1, 2022, which is the date as of our date of initial application. Consequently, financial information will not be updated, and the disclosures required under the new standard will not be provided for dates and periods ending before January 1, 2022.

The cumulative after-tax effect of the changes made to our condensed consolidated balance sheet for the adoption of ASC 842 were as follows:
(in ‘000 USD)At December 31, 2021Adjustments
due to
ASC 842
At
January 1
2022
Operating lease right-of-use assets$ $9,278 $9,278 
Current operating lease liabilities 2,121 2,121 
Non-current operating lease liabilities 7,483 7,483 
Current portion of capital lease liabilities included in Accrued liabilities191 (191) 
Current portion of finance lease liabilities included in Accrued liabilities 191 191 
Non-current portion of capital lease liabilities included in Other long-term liabilities264 (264) 
Non-current portion of finance lease liabilities included in Other long-term liabilities 264 264 
Accrued liabilities21,311 (326)20,985 

In addition to the increase to the operating lease liabilities and right-of-use assets, ASC 842 also resulted in reclassifying the presentation of accrued liabilities and deferred rent to operating lease right-of-use assets.

We elected the package of practical expedients permitted under the transition guidance within the new standard. Accordingly, we have adopted these practical expedients and did not reassess: (1) whether an expired or existing contract is a lease or contains an embedded lease; (2) lease classification of an expired or existing lease; (3) capitalization of initial direct costs for an expired or existing lease.

See Note 5 for additional information related to leases, including disclosure required under ASC 842.

2019-12, Income Taxes: Simplifying the Accounting for Income Taxes.

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 the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption is permitted, including adoption in any interim period, for all entities. 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 condensed consolidated financial statements and related disclosures.






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ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement

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 adopted this standard as of January 1, 2021. The adoption of the standard did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

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)
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. Early adoption is permitted, for fiscal years (including interim periods) beginning after December 15, 2020.
The Company early adopted ASU 2020-06 on January 1, 2022, using a modified retrospective transition approach. Consequently, financial information will not be updated, and the disclosures required under the new standard will not be provided for dates and periods ending before January 1, 2022. Refer to “Note 8 –Short Term and Long-Term Debt”, to the condensed consolidated financial statements for further detail.
The cumulative after-tax effect of the changes made to our condensed consolidated balance sheet for the adoption of ASU 2020-06 were as follows:
(in ‘000 USD)At December 31, 2021Adjustments
due to
ASU 2020-06
At
January 1,
2022
Long-term debt and other borrowings, net$399,115 $15,163 $414,278 
Additional paid-in capital413,646 (11,612)402,034 
Deferred tax liabilities36,722 (3,847)32,875 
Retained earnings(138,179)298 (137,881)

ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options

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. ASU 2021-04 was effective for the Company beginning on January 1, 2022,


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and we will apply the amendments prospectively through December 31, 2022. There was no impact to our condensed consolidated financial statements for the current period as a result of adopting this standard update.

Recently Issued Accounting Pronouncements
The Company considers the applicability and impact of all ASUs issued by the FASB. ASUs not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the Company's condensed consolidated financial statements.
ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires the use of a new current expected credit loss (“CECL”) model in estimating allowances for doubtful accounts with respect to accounts receivable and notes receivable. Receivables from revenue transactions, or trade receivables, are recognized when the corresponding revenue is recognized under ASC 606, Revenue from Contracts with Customers. The CECL model requires that the Company estimate its lifetime expected credit loss with respect to these receivables and record allowances when deducted from the balance of the receivables, which represent the estimated net amounts expected to be collected. Given the generally short-term nature of trade receivables, the Company does not expect to apply a discounted cash flow methodology. However, the Company will consider whether historical loss rates are consistent with expectations of forward-looking estimates for its trade receivables. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses to clarify that operating lease receivables recorded by lessors are explicitly excluded from the scope of ASU 2016-13. This ASU (collectively “ASC 326”) is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company is still evaluating the impact of the adoption of this ASU.
ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting
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 evaluating the impact of the adoption of this ASU on the Company’s debt which are based on reference rates.
ASU 2020-03, Codification Improvements to Financial Instruments
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 ASUs effected by these codification improvements.
NOTE 3 – REVENUE RECOGNITION
Contract Balances
Deferred revenue as of June 30, 2022 and December 31, 2021, was $7.7 million and $6.9 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


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which control transfers to the customer upon delivery. The deferred revenue balance as of December 31, 2021 was recognized as revenue during the three months ended March 31, 2022.
Disaggregated Revenue Information
In order to understand the composition of the Company’s revenues, the Company has presented the disaggregated disclosures below which are useful to understand the composition of the Company’s revenue during the respective reporting periods shown below:
For the three months ended For the six months ended
(in ‘000 USD)June 30,June 30,
2022202120222021
Connectivity*
$43,787 $41,114 $86,803 $81,705 
Hardware Sales20,928 13,584 39,940 21,381 
Hardware Sales—bill-and-hold1,646 784 4,070 3,222 
Deployment services, professional services, and other3,992 5,261 8,481 9,732 
Total$70,353 $60,743 $139,294 $116,040 
*Includes connectivity-related revenues from Connectivity services and IoT Solutions services
Significant Customer
The Company has one customer representing 11.5% and 19.0% of the Company’s total revenue for the three months ended June 30, 2022 and June 30, 2021, respectively. The Company has one customer representing 14.6% and 16.8% of the Company’s total revenue for the six months ended June 30, 2022 and June 30, 2021, 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. Refer to “Note 12 – Warrants on Common Stock” to the condensed consolidated financial statements. The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP, see “Note 1 – Nature of Operations” to our condensed consolidated financial statements for further detail.
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, and payments of $229.9 million to KORE’s preferred shareholders. Additionally, on the Closing Date, the Company repaid the Senior Secured Revolving Credit Facility with UBS of $25.0 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 8 –Short Term and Long-Term Debt” and “Note 14 – Related Party Transactions,” to the condensed consolidated financial statements.
The Company incurred $24.2 million in transaction costs relating to the Business Combination on the Closing Date, of which $24.1 million has been recorded against additional paid-in capital in the condensed consolidated balance sheet as of December 31, 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.


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The number of shares of Class A common stock issued immediately following the consummation of the Business Combination were:
SharesPercentage
Pre-combination KORE shareholders38,767,500 54.0 %
Public stockholders10,356,593 14.4 %
Private offering and merger financing22,686,326 31.6 %
Total71,810,419 100.0 %
NOTE 5 – RIGHT-OF USE ASSETS AND LEASE LIABILITIES
The Company leases real estate, computer hardware and vehicles for use in our operations under both operating and finance leases. Our leases have remaining lease terms ranging from 1 year to 10 years, some of which include options to extend the term for up to 10 years, and some of which include options to terminate the leases. The Company includes options to extend or terminate the lease when it is reasonably certain that we will exercise that option. For the majority of leases entered into during the current period, we have concluded it is not reasonably certain that we would exercise the options to extend the lease or terminate the lease early. Therefore, as of the lease commencement date, our lease terms generally do not include these options. Leasehold improvements are depreciated using the straight-line method over the shorter of the estimated useful life or the remaining term of the lease. Our leasehold improvements have lives ranging from 1 year to 8 years . Operating and finance lease cost for the three and six months ended June 30, 2022 were as follows:
(in 000’ USD)Classification in
Statement of operations
For the three months ended June 30, 2022For the six months ended June 30, 2022
Operating lease costSelling, general and administrative$874 $1,718 
Finance lease cost
Amortization of leased assetsDepreciation and amortization98 98 
Interest on lease liabilitiesInterest expense5 5 
Total net lease cost$977 $1,821 

Rent expense for the three and six months ended June 30, 2021, was $0.7 million and $1.4 million, respectively.
Supplemental disclosure for the balance sheet related to finance leases were as follows:
(in 000’ USD)At June 30, 2022
Assets
Finance lease right-of-use assets included in property and equipment, net$305 
Liabilities
Current portion of finance lease liabilities included in accrued liabilities$123 
Non-current portion of finance lease liabilities included in other long-term liabilities 182
Total finance lease liabilities$305 
The weighted-average remaining lease term and the weighted-average discount rate of our leases were as follows:
At June 30, 2022
Weighted average remaining lease term (in years)
Operating leases6.5
Finance leases0.63
Weighted average discount rate:
Operating leases7.2 %
Finance leases1.2 %


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The future minimum lease payments under operating and finance leases at June 30, 2022 for the next five years are as follows:
Operating
Leases
Finance
Leases
(in ‘000 USD)Amount Amount
From July 1, 2022 to December 31, 2022$1,002 $67 
20232,107 132 
20241,466 110 
20251,307 24 
20261,038  
Thereafter4,236  
Total minimum lease payments11,156 333 
Interest expense(2,540)(28)
Total$8,616 $305 

NOTE 6 – ACQUISITIONS AND DIVESTITURES
BMP Business Combination
On February 16, 2022, the Company acquired 100% of the outstanding share capital of Business Mobility Partners, Inc. and Simon IoT LLC ("Simon IoT"), collectively, the “Acquired Companies” or “BMP Acquisition” which are industry-leading mobility service providers, to expand the Company’s services and solutions within the healthcare and life sciences industries (the “BMP Business Combination Agreement”).
The transaction was funded by available cash and the issuance of the Company’s shares. Transaction costs for legal consulting, accounting, and other related costs incurred in connection with the acquisition of the Acquired Companies were $1.7 million. Included in the three and six months ended June 30, 2022, were $0 million and $1.4 million of transaction costs, which were included in selling, general and administrative expenses in the Company's consolidated statement of operations.
The following table summarizes the allocation of the consideration transferred for the Acquired Companies, including the identified assets acquired and liabilities assumed as of the acquisition date. The purchase price allocation is preliminary and is subject to revision as additional information about the fair value of the assets acquired and liabilities assumed, including certain working capital and income taxes, become available.
(in '000 USD)Fair Value
Cash, (net of closing cash of $1,995) and working capital adjustments
$46,002 
Fair value of KORE common stock issued to sellers (4,212,246 shares)
23,295 
Total consideration$69,297 
Assets acquired:
Accounts receivable3,303 
Inventories1,323 
Prepaid expenses and other receivables976 
Property and equipment201 
Intangible assets28,664 
Total Assets acquired34,467 
Liabilities assumed:
Deferred tax liabilities7,391 
Accounts payable and accrued liabilities2,638 
Liabilities assumed10,029 
Net identifiable assets acquired24,438 
Goodwill (excess of consideration transferred over net identifiable assets acquired)$44,859 


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During the three months ended June 30, 2022, the Company paid a working capital adjustment of $0.9 million.
Goodwill represents the future economic benefits that we expect to achieve as a result of the acquisition of the Acquired Companies. A portion of the goodwill resulting from the acquisition is deductible for tax purposes.
The BMP Business Combination Agreement contains customary indemnification terms. Under the BMP Business Combination Agreement, a portion of the cash purchase price, approximately $3.45 million paid at closing is being held in escrow, for a maximum of 18 months from the closing date, to guarantee performance of general representations and warranties regarding closing amounts and to indemnify the Company against any future claims. The financial results of the Acquired Companies are included in the Company’s consolidated statements of operations from the date of acquisition. For the three months ended June 30, 2022, the amounts of revenue and net income included in the Company’s consolidated statements of operations were $15.0 million and $3.2 million, respectively. For the six months ended June 30, 2022, the amounts of revenue and net income included in the Company’s consolidated statements of operations were $20.8 million and $4.7 million, respectively.
Unaudited pro forma information
Had the acquisition of the Acquired Companies been completed on January 1, 2021, net revenue would have been $70.4 and $68.2 million and the net loss would have been $11.1 and $5.9 million for the three months ended June 30, 2022 and 2021, respectively.
Had the acquisition of the Acquired Companies been completed on January 1, 2021, net revenue would have been $145.0 and $129.0 million and the net loss would have been $20.3 and $7.6 million for the six months ended June 30, 2022 and 2021, respectively.
This unaudited pro forma financial information presented is not necessarily indicative of what the operating results actually would have been if the acquisition had taken place on January 1, 2021, nor is it indicative of future operating results. The pro forma amounts include the historical operating results of the Company prior to the acquisition, with adjustments factually supportable and directly attributable to the acquisition, primarily related to transaction costs, and the amortization of intangible assets.
The pro forma net loss for the three and six months ended June 30, 2021 includes a non-recurring pro forma adjustment relating to the acquisition-related costs of $1.7 million.


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NOTE 7 – GOODWILL
The Company’s goodwill consists of following:
(in ‘000 USD)Amount
At December 31, 2021$381,962 
Acquisitions44,859 
Currency translation(695)
At June 30, 2022$426,126 
NOTE 8 – SHORT-TERM AND LONG-TERM DEBT
Senior Secured Term Loan —UBS
On December 21, 2018, the Company entered into a credit agreement with UBS that consisted of a term loan of $280.0 million as well as a senior secured revolving credit facility with UBS (the “Senior Secured UBS Term Loan”, and together with the senior secured revolving credit facility, the “Credit Facilities”). The Senior Secured UBS Term Loan required quarterly principal and interest payments of LIBOR plus 5.5%. All remaining principal and interest payments are due on December 21, 2023.
On November 12, 2019, the Company amended the Senior Secured UBS Term Loan 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.
The term loan agreement limits cash dividends and other distributions from the Company’s subsidiaries to the Company and restricts the Company’s ability to pay cash dividends to its shareholders. The term loan agreement contains, among other things, financial covenants related to maximum total debt to adjusted EBITDA ratio and a minimum total leverage ratio. The Company was in compliance with these covenants as of June 30, 2022 and December 31, 2021. The credit agreement is substantially secured by all the Company’s assets.
The Company’s principal outstanding balances on the Senior Secured UBS Term Loan were $304.2 and $305.8 million as of June 30, 2022 and December 31, 2021, respectively.
Senior Secured Revolving Credit Facility —UBS
On December 21, 2018, the Company entered into a $30.0 million senior secured revolving credit facility with UBS (the “Senior Secured Revolving Credit Facility”, and together with the Senior Secured UBS Term Loan, the “Credit Facilities”).
Borrowings under the Senior Secured Revolving Credit 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 Senior Secured 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.
The obligations of the Company and the obligations of the guarantors under the Credit Facilities are secured by first priority pledges of and security interests in (i) substantially all of the existing and future equity interests of KORE Wireless Group Inc. and each of its subsidiaries organized in the U.S., as well as 65% of the existing and future equity interests of certain first-tier foreign subsidiaries held by the borrower or the guarantors under the Credit Facilities and (ii) substantially all of the KORE Wireless Group Inc.’s and each guarantor’s tangible and intangible assets, in each case subject to certain exceptions and thresholds.
As of June 30, 2022, and December 31, 2021, no outstanding amounts were drawn on the revolving credit facility.


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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, (the “Bank Overdraft 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 9.40% as of June 30, 2022 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.
As of June 30, 2022, and December 31, 2021, the Company had €0 drawn on the Bank Overdraft Facility.
Backstop Agreement
On September 30, 2021, KORE Wireless Group Inc. issued $95.1 million in senior unsecured exchangeable notes due in 2028 (the “Backstop Notes”) to affiliates of Fortress Credit Corp. (“Fortress”) pursuant to the terms of the backstop agreement (the “Backstop Agreement”), dated July 27, 2021, by and among KORE Wireless Group Inc. and Fortress. The Backstop Notes were issued pursuant to an indenture (the “Indenture”), dated September 30, 2021, by and among the Company, KORE Wireless Group Inc. and Wilmington Trust, National Association, as trustee, as amended and restated on November 15, 2021. On October 28, 2021, KORE Wireless Group issued an additional $24.9 million in additional notes (the “Additional Notes” and together with the Backstop Notes, the “Notes”) to Fortress, pursuant to the terms of an exchangeable notes purchase agreement (the “Exchangeable Notes Purchase Agreement”), dated October 28, 2021, by and among KORE Wireless Group Inc., the Company and Fortress. The Additional Notes were issued pursuant to the Indenture and contain identical terms to the Backstop Notes. The Notes were issued at par, have a maturity of seven years, bearing interest at the rate of 5.50% per annum which is paid semi-annually, March 30 and September 30 of each year, beginning on March 30, 2022. The 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 Notes are exchangeable into approximately 9.6 million shares of common stock. As of June 30, 2022, the value of the approximately 9.6 million shares underlying the Notes is less than the fair value of the Notes. The Base Exchange Rate may be adjusted for certain dilutive events or change in control events as defined by the Indenture (the “Adjusted Exchange Rate”). Additionally, if after the 2-year anniversary of September 30, 2021, 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 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”). As consideration for Fortress entering into that certain commitment letter (the “Commitment Letter”), dated as of September 21, 2021, the Sponsor contributed 100,000 shares of common stock of the Company to LLC Merger Sub, which were transferred by LLC Merger Sub to Fortress, as a commitment fee, pursuant to the terms and upon the conditions set forth in the Commitment Letter. Prior to the implementation of ASU 2020-06, since the Company could use the Company Option to potentially settle all or part of the 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 Notes were required to be allocated to equity, based on the estimated fair value of the Notes had they not contained the exchange features. ASU 2020-06, simplifies and amends the cash conversion guidance so that the Company is no longer required to allocate to equity the estimated fair value of the Notes had they not contained the exchange features. Refer to “Note 2- Summary of Significant Accounting policies – Recently Adopted Accounting Pronouncements” to the condensed consolidated financial statements for a summary of the effects of the adoption of ASU 2020-06. The unamortized discount and issuance costs will be amortized through September 30, 2028. The effective interest rate after the adoption of ASU 2020-06 for the Additional Notes is 5.9% and 6.1% respectively.
The Backstop Agreement and the Exchangeable Notes Purchase Agreement each contain a customary six-month lock up following the Closing, which prohibits Fortress from hedging the Notes by short selling the Company’s common stock or hedging the Notes via the Company’s warrants or options.
The Indenture contains, among other things, financial covenants related to maximum total debt to adjusted EBITDA ratio. The Company was in compliance with these covenants as of June 30, 2022 and December 31, 2021.


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The table below outlines the principal balances and net carrying amounts outstanding of the Notes: