Quarterly report pursuant to Section 13 or 15(d)

Temporary Equity and Stockholders' Equity

v3.22.1
Temporary Equity and Stockholders' Equity
 3 Months Ended
Mar. 31, 2022
Stockholders' Equity Note [Abstract]  
Temporary Equity and Stockholders' Equity
NOTE 9 - TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY
The Company operates subject to the terms and conditions of the Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) dated March 31, 2022. Prior to the Business Combination
pre-combination
KORE had a different capital structure comprised of several classes of preferred stock and warrants. As a result of the Business Combination these were settled, however the Company believes a continued discussion is beneficial to readers of the Company’s condensed consolidated financial statements for the period ended March 31, 2022.

Capital Stock
As of March 31, 2022, the Company authorized up to 350,000,000 shares of capital stock, consisting of 315,000,000 shares of common stock and 35,000,000 shares of preferred stock. As of March 31, 2022, 76,239,989 shares of common stock and no shares of preferred stock were issued and outstanding.
Pre-Combination Kore Series A Preferred Stock
Prior to the Business Combination, the board of pre-combination KORE authorized up to
 
7,765,229
Series A preferred shares. The shares were issued at a discount of
 
2
%.
Series A preferred shareholders were entitled to receive a cumulative preferred dividend at the rate of thirteen percent
 
(13
%)
per year on the sum of the par value plus unpaid preferred dividends through the date of such distribution on a pari passu basis with Series
A-1
and Series B shareholders and in preference to all other shareholders. The Company had the option to redeem the Series A preferred shares for par value plus unpaid preferred dividends. Series A preferred shareholders had an option to put the shares back to the Company for par value plus unpaid preferred dividends on or after April 11, 2027. The Company determined that the put option is a redemption event not solely within the control of the Company. Therefore, the Series A preferred stock were classified outside of permanent equity (i.e., temporary equity) and presented at its redemption value. Upon closing of the Business Combination, all Series A preferred shares were settled with a redemption value of
 
$
85.2
 million in cash.
Pre-Combination Kore Series A-1 Preferred Stock
Prior to the Business Combination, the board of pre-combination KORE authorized up to
 10,480,538
Series
A-1
 
preferred shares. The shares were issued at a discount
of
2%.
Series
A-1
 
preferred shareholders were entitled to receive a cumulative preferred dividend at the rate of thirteen-point seven five percent
 
(13.75%) per year on the sum
of the par value plus unpaid preferred dividends through the date of such distribution on a pari passu basis with Series A and Series B shareholders and in preference to all other shareholders. The Company had the option to redeem the Series A-1 Preferred shares for par value plus unpaid preferred dividends subject to a current redemption premium of one percent. Series A-1 preferred shareholders had an option to put the shares back to the Company for par value plus unpaid preferred dividends on or after April 11, 2027. The Company determined that the put option is a redemption event not solely within the control of the Company. Therefore, the Series A-1 Preferred Stock was classified outside of permanent equity (i.e., temporary equity) and presented at its redemption value. Upon closing of the Business Combination, all Series A-1 preferred shares were settled with a redemption value o
f $86.9 million. Certain Series
A-1
preferred shareholders elected to received shares of common stock of the Company in lieu of cash.
Pre-Combination Kore Series B Preferred Stock
Prior to the Business Combination, the board of pre-combination KORE authorized up to
9,090,975
Series B preferred shares. Series B preferred shareholders were entitled to receive a cumulative preferred dividend at the rate of ten percen
t (10%)
per year on the sum of the unreturned par value plus unpaid preferred dividends through the date of such distribution on a pari passu basis with Series A and Series A-1 shareholders and in preference to all other shareholders. On or after October 11, 2018, the Company had the option to redeem the Series B Preferred shares for par value plus unpaid preferred dividends. Because the controlling shareholder was the majority holder of Series B preferred shares, the Company redemption option functioned as a holder put option. Accordingly, the Company determined that the option could result in a redemption that is not solely within the control of the Company. Therefore, the Series B Preferred stock was classified outside of permanent equity (i.e., temporary equity) and presented at its redemption value each period. Upon closing of the Business Combination, all Series B preferred shares were settled with a redemption value of
 
$97.8 million. Certain Series B preferred shareholders elected to received shares of common stock of the Company in lieu of cash.
As a result of the Business Combination on September 30, 2021, all classes of the pre-combination KORE’s preferred shares were settled for cash or converted into common stock. As a result, 
no accumulated or distributed earnings were accrued or paid after September 30, 2021.
A summary of the accumulated but unpaid preferred dividends for the Series A, Series
A-1
and Series B preferred shares as of March 31, 2021, is as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in ‘000 USD)

   
Series A
     
Series A-1
     
Series B
  
Accumulated and unpaid, December 31, 2020
   
$
34,812
 
   
$
18,608
 
   
$
33,910
 
Accumulated
      2,486        2,666        2,241  
Distributed
      —          —          —    
    
 
 
     
 
 
     
 
 
  
Accumulated and unpaid, March 31, 2021
   
$
37,298
 
   
$
21,274
 
   
$
36,151
 
    
 
 
     
 
 
     
 
 
  
The redemption value of Series A, Series
A-1
and Series B preferred stock is equal to the par value of $1,000 per share plus the above accumulated unpaid dividends and any applicable redemption premium.
Pre-Combination Kore Series C Convertible Preferred Stock
Prior to the Business Combination, the board of pre-combination KORE authorized up to
 6,872,894
Series C convertible preferred shares. Subordinate to the payment of dividends to Series A, Series A-1 and Series B preferred shareholders, the Series C shareholders were entitled to receive dividends equal to
 1.5X
initial investment in conjunction with common stock, then subject to a catch-up, followed by pro rata sharing thereafter. Series C convertible preferred shareholders have a de facto option to put the shares back to the Company for liquidation value. The Company determined that the option could result in a deemed liquidation that is not solely within the control of the Company. Therefore, the Series C convertible preferred stock was classified outside of permanent equity (i.e., temporary equity).
Series C convertible preferred shares were convertible at any time, at the option of the holder, into common stock at a rate of 1 to 1 initially, subject to adjustments for dilution.
Upon closing of the Business Combination, 16,802 shares of Series C Convertible Preferred Stock
(pre-combination)
converted into 2,520,368 shares of common stock of the Company.