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

Quarterly report pursuant to Section 13 or 15(d)

DERIVATIVES

DERIVATIVES

9 Months Ended

Sep. 30, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives are complex financial instruments. The Company does not use derivatives to manage financial risks or as an economic hedge. The Company’s sole derivative instrument arose as part of the issuance of Series A-1 preferred stock, $0.0001 par value per share (the “Series A-1 preferred stock”), to Searchlight, in which transaction Searchlight was also granted Penny Warrants (historically referred to as “Penny Warrants,” however the exercise price has been adjusted to $0.05 per warrant due to the reverse stock split). The Penny Warrants are considered a freestanding derivative instrument, as they are separable and legally detachable from the Series A-1 preferred stock, were issued for nominal or no apparent consideration, and have the essential characteristics inherent in a derivative instrument of a notional amount, an underlying security, and a mechanism for net settlement.

The following table sets forth the details of the derivative instrument presented on the condensed consolidated balance sheets and notional amounts as of September 30, 2024 and December 31, 2023:


		September 30, 2024
Derivatives Not Designated as Hedging Instruments	Number of Warrants (Notional Amount)(1)	Warrant Liability		Exercise Price Per Share (1)
		($ in thousands, except for exercise price per share)
Penny Warrants issued to Searchlight	12,024,711	$	5,315	$	0.05


		December 31, 2023
Derivatives Not Designated as Hedging Instruments	Number of Warrants (Notional Amount)(1)	Warrant Liability		Exercise Price Per Share (1)
		($ in thousands, except for exercise per share)
Penny Warrants issued to Searchlight	12,024,711	$	11,664	$	0.05

(1) The number of shares of common stock covered by warrants outstanding at the effective time of the reverse stock split was reduced to one-fifth the number of shares of common stock covered by the warrants immediately preceding the reverse stock split, and the exercise price per

share was increased by five times the exercise price immediately preceding the reverse stock split, resulting in the same aggregate price being required to be paid therefor upon exercise thereof as was required immediately preceding the reverse stock split.

The gains and losses arising from this derivative instrument in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2024 (1) are set forth as follows:


	Three Months Ended September 30, 2024
Derivatives Not Designated as Hedging Instruments	Net Realized Gains (Losses) on Derivative Instruments		Net Change in Unrealized Gain (Loss) on Derivative Instruments
	(in thousands)
Penny Warrants issued to Searchlight	$	—	$	(337)


	Nine Months Ended September 30, 2024
Derivatives Not Designated as Hedging Instruments	Net Realized Gains (Losses) on Derivative Instruments		Net Change in Unrealized Gain (Loss) on Derivative Instruments
	(in thousands)
Penny Warrants issued to Searchlight	$	—	$	6,349

(1) No such instruments existed during the three and nine months ended September 30, 2023; therefore, there were no gains or losses from such instruments during those periods.