KORE Group Holdings, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Summary of Significant Accounting Policies (Policies)

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2021

These statements have been prepared pursuant to the rules and regulations of the SEC and, in accordance with those rules and regulations, do not include all information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, the unaudited condensed consolidated interim financial statements reflect all adjustments, which consist only of normal recurring adjustments, necessary to state fairly the results of operations, financial condition and cash flows for the interim periods presented herein. The preparation of unaudited condensed consolidated interim financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures.

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

The Business Combination is accounted for as a reverse recapitalization as

pre-combination

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

•

the equity holders of

pre-combination

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

•

the senior management of

pre-combination

KORE became the senior management of the Company; and

•

In comparison with CTAC,

pre-combination

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

•

the operations of

pre-combination

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

pre-Combination

KORE’s headquarters.

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

Covid-19 Impact

COVID-19

Impact

During the period ended September 30, 2021, an outbreak of the novel coronavirus

(“COVID-19”)

has continued to spread across the globe and continued to result in significant economic disruption. The extent of the impact of

COVID-19

on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak; however as of this filing,

COVID-19

has not had a negative impact on the Company.

Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents include highly liquid instruments with an original maturity of less than 90 days from the date of purchase or the ability to redeem amounts on demand. Cash and cash equivalents are stated at cost, which approximates their fair value.

Restricted cash represents cash deposits held with financial institutions for letters of credit and is not available for general corporate purposes.

Emerging Growth Company

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The Company qualifies as an “Emerging Growth Company” and has elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows the Company to adopt the new or revised standard at the same time as private companies.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncement

In December 2019, the FASB issued Accounting Standards Update (“ASU”)

2019-12,

Income Taxes

Simplifying the Accounting for Income Taxes

. ASU

2019-12

simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU

2019-12

is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this standard as of January 1, 2021, and depending on the amendment, adoption was applied on a retrospective, modified retrospective, or prospective basis. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU

2016-02,

Leases

, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In July 2018, ASU

2018-10

, Codification Improvements to ASC

2016-02

Leases

, was issued to provide more detailed guidance and additional clarification for implementing ASU

2016-02.

Furthermore, in July 2018, the FASB issued ASU

2018-11,

Leases: Targeted Improvements

, which provides an optional transition method in addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance of retained earnings in the
period of adoption. Furthermore, on June 3, 2020, the FASB deferred by one year the effective date of the new leases standard for private companies, private

not-for-profits

and public

not-for-profits

that have not yet issued (or made available for issuance) financial statements reflecting the new standard. Additionally, in March 2020, ASU

2020-03,

Codification Improvements to Financial Instruments, Leases

, was issued to provide more detailed guidance and additional clarification for implementing ASU

2016-02.

Furthermore, in June 2020, ASU

2020-05,

Revenue from Contracts with
Customers and Leases

, was issued to defer effective dates of adoption of the new leasing standard beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

These new leasing standards (collectively “ASC 842”) are effective for the Company beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted.

The Company is currently evaluating the effect of the adoption of this guidance on the consolidated financial statements. However, based on the Company’s lease obligations, the Company expects to recognize material assets and liabilities for

right-of-use

assets and operating lease liabilities on its consolidated balance sheet upon adoption of ASC 842. ASC 842 will also require additional footnote disclosures to the Company’s financial statements

In June 2016, the FASB issued ASU

2016-13

, Financial

Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments,

which requires the use of a new current expected credit loss (“CECL”) model in estimating allowances for doubtful accounts with respect to accounts receivable and notes receivable. Receivables from revenue transactions, or trade receivables, are recognized when the corresponding revenue is recognized under ASC 606,

Revenue from Contracts with Customers

. The CECL model requires that the Company estimate its lifetime expected credit loss with respect to these receivables and record allowances when deducted from the balance of the receivables, which represent the estimated net amounts expected to be collected. Given the generally short-term nature of trade receivables, the Company does not expect to apply a discounted cash flow methodology. However, the Company will consider whether historical loss rates are consistent with expectations of forward-looking estimates for its

trade receivables. In November 2018, the FASB issued ASU

2018-19,

Codification Improvements to Topic 326, Financial Instruments—Credit Losses

to clarify that operating lease receivables recorded by lessors are explicitly excluded from the scope of ASU

2016-13.

This ASU (collectively “ASC 326”) is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is still evaluating the impact of the adoption of this ASU.

In August 2018, the FASB issued ASU

2018-15,

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

, which requires a customer in a hosting arrangement that is a service contract to apply the guidance on

internal-use

software to determine which implementation costs to recognize as an asset and which costs to expense. Costs to develop or obtain

internal-use

software that cannot be capitalized under Subtopic

350-40,

Internal-Use

Software

, such as training costs and certain data conversion costs, also cannot be capitalized for a hosting arrangement that is a service contract. The amendments require a customer in a hosting arrangement that is a service contract to determine whether an implementation activity relates to the preliminary project stage, the application development stage, or the post-implementation stage. Costs for implementation activities in the application development stage will be capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages will be expensed immediately. The ASU is effective for the Company for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. Early adoption is permitted, including adoption in any interim period, for all entities. The Company is still evaluating the impact of the adoption of this standard.

In March 2020, the FASB issued ASU

2020-04,

Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting,

to provide guidance on easing the potential burden in accounting for reference rate reform on financial reporting. ASU 2020-04 is effective from March 12, 2020 and may be applied prospectively through December 31, 2022. The Company is still evaluating the impact of the adoption of this ASU.

In March 2020, the FASB issued ASU

2020-03,

Codification Improvements to Financial Instruments

, which clarifies specific issues raised by stakeholders. Specifically, the ASU:

•

Clarifies that all entities are required to provide the fair value option disclosures in ASC 825,

Financial Instruments

•

Clarifies that the portfolio exception in ASC 820,

Fair Value Measurement

, applies to nonfinancial items accounted for as derivatives under ASC 815,

Derivatives and Hedging

•

Clarifies that for purposes of measuring expected credit losses on a net investment in a lease in accordance with ASC 326,

Financial Instruments - Credit Losses

, the lease term determined in accordance with ASC 842,

Leases

, should be used as the contractual term.

•

Clarifies that when an entity regains control of financial assets sold, it should recognize an allowance for credit losses in accordance with ASC 326.

•

Aligns the disclosure requirements for debt securities in ASC 320,

Investments—Debt Securities

, with the corresponding requirements for depository and lending institutions in ASC 942,

Financial Services—Depository and Lending

The amendments in the ASU have various effective dates and transition requirements, some depending on whether an entity has previously adopted ASU

2016-13

about measurement of expected credit losses. The Company will adopt the guidance in ASU

2020-03

as it adopts the related ASU effected by these codification improvements.

In August 2020, the FASB issued ASU 2020-06,

Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)

(“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations, or cash flows.

In May 2021, the FASB issued ASU

2021-04,

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

which provides guidance on modifications or exchanges of a freestanding equity-classified written call option that is not within the scope of another Topic. An entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument, and provides further guidance on measuring the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. ASU

2021-04

also provides guidance on the recognition of the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration. The amendments are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the impact of the adoption of this standard.