10-Q

☒ 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

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 ☒ No ☐

Indicate by checkmark 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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

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. ☐

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 5, 2023, there were 13,198,795 shares of the Company’s common stock issued and outstanding.

The accompanying notes are an integral part of these condensed consolidated financial statements.

1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Kaleyra, Inc., formerly GigCapital, Inc., (hereinafter “Kaleyra” or the “Company”), was incorporated in Delaware on October 9, 2017. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

On February 22, 2019, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) by and among the Company, Kaleyra S.p.A., Shareholder Representative Services LLC (the “Seller Representative”), as representative for the holders of the ordinary shares of Kaleyra S.p.A. immediately prior to the closing of the business combination with Kaleyra (the “Business Combination”), and all of the stockholders of all of the Kaleyra S.p.A. stock (collectively, such Kaleyra S.p.A. stockholders, the “Sellers”), for the purpose of the Company acquiring all of the shares of Kaleyra S.p.A.

As a result of the Business Combination, which closed on November 25, 2019, the Company (headquartered in Milan, Italy) became a multi-channel integrated communications services provider on a global scale. At the time of the closing of the Business Combination, Kaleyra operated in the Communications Platform as a Service (“CPaaS”) market with operations primarily in Italy, India, Dubai and the United States. In connection with the closing, the Company changed its name from GigCapital, Inc. to Kaleyra, Inc.

Kaleyra provides mobile communications services to financial institutions, e-commerce players, OTTs, software companies, logistic enablers, healthcare providers, retailers, and other large organizations worldwide. Through its proprietary cloud communications platforms (collectively, the “Platforms”), Kaleyra manages multi-channel integrated communications services on a global scale, consisting of inbound/outbound messaging solutions, programmable voice and Interactive Voice Response (IVR) configurations, hosted telephone numbers, conversational marketing solutions, RCS, and other types of IP communications services such as e-mail, push notifications, video/audio/chat, and WhatsApp®.

On October 22, 2019, Kaleyra’s U.S. subsidiary, The Campaign Registry Inc. (“TCR”), was incorporated under the laws of Delaware to promote a systems initiative to reduce spam by collecting robotically driven campaign information and processing and sharing that information with mobile operators and the messaging ecosystem. TCR started to account for its first revenue in the second half of fiscal year 2020 and revenue has constantly increased since then. On March 26, 2021, a wholly owned subsidiary of TCR was incorporated under the laws of Canada, with the registered office in Vancouver, British Columbia. This new subsidiary was established with the goal to further expand the registry legacy business in North America.

On July 29, 2020, Kaleyra registered a German branch of Kaleyra S.p.A. with the German Chamber Tax Authority of Commerce. Kaleyra established its branch in Germany to expand Kaleyra’s footprint in Central Europe and the Nordic countries and allow it to leverage Kaleyra’s trusted business solutions for customers in additional jurisdictions.

On February 18, 2021, Kaleyra entered into an agreement and plan of merger (the “Merger Agreement”) with Vivial, Inc. (“Vivial”) for the acquisition of the business known as mGage (“mGage”), a leading global mobile messaging provider in the United States (the transaction contemplated by the Merger Agreement, the “Merger”).

On June 1, 2021, Kaleyra completed its acquisition of mGage for a total purchase price of $218.0 million. The Merger consideration consisted of both cash consideration and common stock consideration. On August 30, 2021, the Company prepared and delivered to the Stockholder Representative a written statement (the “Post-Closing Statement”) setting forth the calculation of closing cash and closing net working capital which ultimately resulted in the final Merger consideration to be equal to $217.0 million pursuant to the terms of the Merger Agreement. The cash consideration amounted to $199.2 million of which $198.6 million was paid on June 1, 2021 and the remaining amount was settled during the period ended September 30, 2021, including a working capital adjustment of $997,000. The common stock consideration was paid with the issuance to Vivial’s former equity holders of a total of 457,143 shares of Kaleyra common stock at the $41.20 per share closing price of Kaleyra common stock on the date of issuance, equal to $18.8 million (on a post-reverse split basis). In support of the consummation of the Merger, on February 18, 2021, Kaleyra entered into subscription agreements (the “PIPE Subscription Agreements”), with certain institutional investors (the “PIPE Investors”), pursuant to which, among other things, Kaleyra agreed to issue and sell, in private placements to close immediately prior to the closing of the Merger, an aggregate of 2,400,000 shares of Kaleyra common stock to the PIPE Investors at $43.75 per share (on a post-reverse split basis). Kaleyra also entered into convertible note subscription agreements (the “Convertible Note Subscription Agreements”) with certain institutional investors (the “Convertible Note Investors”), pursuant to which Kaleyra agreed to issue and sell, in private placements to close immediately prior to the closing of the Merger, $200 million aggregate principal amount of unsecured convertible notes (the “Merger Convertible Notes”).

On July 1, 2021, Kaleyra completed a company reorganization of the acquired business of mGage through the initial dissolution of the Delaware single member LLCs of Vivial Holdings, LLC, Vivial Networks, LLC, and the following merger of mGage, LLC into

the surviving holding company, Vivial Inc., which subsequently changed its name into Kaleyra US Inc., as a result of the reorganization. As a result of the merger, Kaleyra US Inc. became the holding company and one hundred percent (100%) owner of Kaleyra UK Limited – previously known as mGage Europe Ltd. (UK) and mGage SA de SV (Mexico).

On July 8, 2021, Kaleyra completed the acquisition of Bandyer Srl (“Bandyer”) for cash consideration of $15.4 million. Bandyer offers cloud-based audio/video communications services via Web Real Time Communication (“WebRTC”) technology to financial institutions, retail companies, utilities, industries, insurance companies, human resources, and digital healthcare organizations. Bandyer provides customers with programmable audio/video APIs and Software Development Kits (“SDKs”) based on WebRTC technology for a variety of use cases, including Augmented Reality (“AR”) applications for smart glasses.

Effective August 31, 2021, the common stock of the Company ceased trading on the NYSE American and commenced trading on the NYSE under the ticker symbol “KLR”. Kaleyra’s warrants continue to trade on the NYSE American under the symbol “KLR WS”.

On October 11, 2021, Kaleyra Africa Ltd, a wholly owned subsidiary of Kaleyra Inc., was incorporated under the laws of South Africa with the registered office in Waterfall City, Gauteng. This newly established subsidiary is part of Kaleyra's broader strategic plan of expanding into emerging markets whereby South Africa will serve as Kaleyra's hub to enter the entire African market.

On November 15, 2021, pursuant to the provisions of the Merger Agreement, Kaleyra Dominicana, S.R.L., the ninety-nine percent (99%) direct owner of Kaleyra US Inc. and one percent (1%) direct owner of Kaleyra Inc., was incorporated under the laws of the Dominican Republic with the registered office in Santo Domingo. This newly established subsidiary is aimed to provide the Kaleyra group with back-office technology support and engage in product development and innovation.

On January 13, 2022, Kaleyra completed a company reorganization of the acquired business of Bandyer by means of the merger of the Italian legal entity of Bandyer into the holding company, Kaleyra S.p.A.. As a result of the merger, Bandyer ceased to exist as a separate legal entity and all its assets and liabilities have been incorporated under Kaleyra S.p.A. effective January 13, 2022.

Reverse Stock Split

On November 7, 2022, Kaleyra received a written notice (the “Price Notice”) from the New York Stock Exchange (the “NYSE”) that it was not in compliance with the continued listing criteria set forth in Section 802.01C of the NYSE’s Listed Company Manual, as the average closing share price of the Company’s common stock was less than $1.00 per share over a consecutive 30 trading-day period. Within ten business days of receipt of the Price Notice, the Company responded to the NYSE with respect to its intent to cure the deficiency and provided available alternatives, including, but not limited to, a reverse stock split, subject to shareholder approval, to regain compliance.

On February 14, 2023, Kaleyra held a special meeting of stockholders (the “Special Meeting”) to approve an amendment to the Company’s Certificate of Incorporation to effect, at the discretion of the Board of Directors, a reverse stock split (the “Reverse Stock Split”).

On March 6, 2023, the Company announced that, following shareholder approval at the Special Meeting of the stockholders held on February 14, 2023, the Company’s Board of Directors approved a 1-for-3.5 Reverse Stock Split of the Company’s issued and outstanding shares of common stock, par value $0.0001 per share, effective as of 12:01 a.m. Eastern Time on March 9, 2023. Beginning with the opening of trading on March 9, 2023, Kaleyra’s common stock began trading on the New York Stock Exchange on a split-adjusted basis under new CUSIP number 483379202 and continued to trade under the symbol “KLR”.

On April 3, 2023, Kaleyra received written confirmation from the NYSE that the Company has regained compliance with the minimum share price continued listing criteria set forth in Section 802.01C of the NYSE’s Listed Company Manual, as the Company's common stock had a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the consecutive 30 trading-day period ended March 31, 2023. Refer to Note 21 - Subsequent Events for more information.

All share, restricted stock unit, and per share information throughout the Company's condensed consolidated financial statements has been retrospectively adjusted to reflect this Reverse Stock Split in accordance with SEC Staff Accounting Bulletins Topic 4.C, Equity Accounts, Change in Capital Structure (ASC 505-10-S99-4).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements of the Company are unaudited, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, this interim quarterly financial

report does not include all disclosures required by US GAAP. In the opinion of the Company’s management, the unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, considered necessary to present fairly the financial position, results of operations and cash flows of the Company and its consolidated subsidiaries for all periods presented. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected in the future or for the full fiscal year. It is recommended that these condensed consolidated financial statements be read in conjunction with the Company’s consolidated financial statements and the notes thereto included in its 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2023. In January 2023, Kaleyra ceased to be an emerging growth company upon the end of fiscal year 2022, following the fifth anniversary of the IPO.

Substantial Doubt in Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.


Delaware		82-3027430
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)


85 Broad Street, New York, NY		10004
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	KLR	New York Stock Exchange
Warrants, at an exercise price of $40.25 per share of Common Stock	KLR WS	NYSE American LLC


PART I – FINANCIAL INFORMATION		Page

Item 1.	Condensed Consolidated Financial Statements (unaudited):	1

	Condensed Consolidated Balance Sheets	1

	Condensed Consolidated Statements of Operations	2

	Condensed Consolidated Statements of Comprehensive Loss	3

	Condensed Consolidated Statements of Stockholders’ Equity (Deficit)	4

	Condensed Consolidated Statements of Cash Flows	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

Item 4.	Controls and Procedures	39

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	40

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3.	Defaults Upon Senior Securities	42

Item 4.	Mine Safety Disclosures	42

Item 5.	Other Information	42

Item 6.	Exhibits	43

Signatures		44


	March 31, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	74,362		$	77,500
Restricted cash		488			480
Short-term investments		637			587
Trade receivables, net		82,948			86,783
Deferred cost		334			319
Prepaid expenses		3,764			3,989
Other current assets		3,944			3,387
Total current assets		166,477			173,045
Property and equipment, net		23,840			23,826
Operating right-of-use assets		2,781			2,931
Intangible assets, net		55,229			57,400
Goodwill		111,801			111,526
Deferred tax assets		—			—
Other long-term assets		1,995			1,445
Total Assets	$	362,123		$	370,173
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	80,331		$	82,258
Lines of credit		2,991			3,955
Current portion of notes payable		405			405
Current portion of bank and other borrowings		10,234			11,419
Deferred revenue		3,290			3,528
Payroll and payroll related accrued liabilities		7,371			5,993
Other current liabilities		14,502			9,431
Total current liabilities		119,124			116,989
Long-term portion of bank and other borrowings		11,675			13,459
Long-term portion of notes payable		192,293			191,777
Long-term portion of employee benefit obligation		2,359			2,373
Deferred tax liabilities		—			—
Other long-term liabilities		3,052			3,362
Total Liabilities		328,503			327,960
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, par value of $0.0001 per share; 1,000,000 shares authorized; no shares issued or outstanding		—			—
Common stock, par value of $0.0001 per share; 100,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 13,998,241 shares issued and 13,198,795 shares outstanding as of March 31, 2023 and 13,858,440 shares issued and 13,058,994 shares outstanding as of December 31, 2022		1			1
Additional paid-in capital		280,486			278,473
Treasury stock, at cost; 799,446 shares as of March 31, 2023 and December 31, 2022		(30,431	)		(30,431	)
Accumulated other comprehensive loss		(4,584	)		(5,212	)
Accumulated deficit		(211,852	)		(200,618	)
Total stockholders’ equity		33,620			42,213
Total liabilities and stockholders’ equity	$	362,123		$	370,173


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐


	Three Months Ended March 31,
	2023			2022
Revenue	$	83,618		$	80,481
Cost of revenue		62,518			62,743
Gross profit		21,100			17,738
Operating expenses:
Research and development		5,402			4,890
Sales and marketing		6,014			7,100
General and administrative		14,036			15,380
Total operating expenses		25,452			27,370
Loss from operations		(4,352	)		(9,632	)
Other income, net		15			46
Financial expense, net		(3,634	)		(3,152	)
Foreign currency income (loss)		(969	)		257
Loss before income tax expense		(8,940	)		(12,481	)
Income tax expense		1,024			691
Net loss	$	(9,964	)	$	(13,172	)
Net loss per common share, basic and diluted	$	(0.76	)	$	(1.09	)
Weighted-average shares used in computing net loss per common share, basic and diluted		13,044,570			12,070,720


	Three Months Ended March 31, 2023
	Common Stock				Additional Paid-in		Treasury Stock					Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Capital		Shares		Amount			Income (Loss)			Deficit			Equity
Balance as of December 31, 2022 (1)		13,858,440	$	1	$	278,473		799,446	$	(30,431	)	$	(5,212	)	$	(200,618	)	$	42,213
Adoption of ASC 326		—		—		—		—		—			—			(1,270	)		(1,270	)
Stock-based compensation (RSUs)		139,801		—		2,013		—		—			—			—			2,013
Net loss		—		—		—		—		—			—			(9,964	)		(9,964	)
Other comprehensive income		—		—		—		—		—			628			—			628
Balance as of March 31, 2023		13,998,241	$	1	$	280,486		799,446	$	(30,431	)	$	(4,584	)	$	(211,852	)	$	33,620


	Three Months Ended March 31, 2022
	Common Stock				Additional Paid-in		Treasury Stock					Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Capital		Shares		Amount			Income (Loss)			Deficit			Equity
Balance as of December 31, 2021 (1)		12,908,327	$	1	$	251,662		799,446	$	(30,431	)	$	(2,010	)	$	(101,800	)	$	117,422
Stock-based compensation (RSUs)		93,770		—		6,759		—		—			—			—			6,759
Net loss		—		—		—		—		—			—			(13,172	)		(13,172	)
Other comprehensive loss		—		—		—		—		—			(629	)		—			(629	)
Balance as of March 31, 2022 (1)		13,002,097	$	1	$	258,421		799,446	$	(30,431	)	$	(2,639	)	$	(114,972	)	$	110,380