klr-10q_20200630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-38320

KALEYRA, INC.

(Exact name of registrant as specified in its charter)

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

Via Marco D’Aviano, 2, Milano MI, Italy		20131
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: +39 02 288 5841

(Former name or former address, if changed since last report): N/A

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.:

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

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 ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	KLR	NYSE American LLC
Warrants, at an exercise price of $11.50 per share of Common Stock	KLR WS	NYSE American LLC

As of August 3, 2020, there were 28,475,081 shares of the Company’s common stock issued and outstanding.

KALEYRA, INC.

Quarterly Report on Form 10-Q

Table of Contents

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	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46

Item 4.	Controls and Procedures	46

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	48

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52

Item 3.	Defaults Upon Senior Securities	53

Item 4.	Mine Safety Disclosures	53

Item 5.	Other Information	53

Item 6.	Exhibits	54

Signatures		55

Item 1 – Financial Statements

KALEYRA, INC.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except share and per share data)

	June 30, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	37,221		$	16,103
Restricted cash		27			20,894
Short-term investments		4,805			5,124
Trade receivables, net		38,069			39,509
Prepaid expenses		1,098			648
Other current assets		1,921			4,224
Total current assets		83,141			86,502
Property and equipment, net		4,750			3,393
Intangible assets, net		8,229			9,353
Goodwill		16,296			16,953
Other long-term assets		1,700			1,203
Total Assets	$	114,116		$	117,404
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	55,152		$	63,320
Debt for forward share purchase agreements		7,525			34,013
Notes payable		—			1,667
Notes payable due to related parties		9,750			9,411
Lines of credit		4,995			3,627
Current portion of bank and other borrowings		8,082			7,564
Deferred revenue		1,500			1,397
Preference shares		1			683
Preference shares due to related parties		1			1,847
Payroll and payroll related accrued liabilities		5,267			1,038
Other current liabilities		1,687			1,379
Total current liabilities		93,960			125,946
Long-term portion of bank and other borrowings		18,755			16,134
Long-term portion of notes payable		2,700			—
Long-term portion of notes payable due to related parties		3,750			7,500
Long-term portion of employee benefit obligation		1,490			1,398
Deferred tax liabilities		1,304			2,045
Other long-term liabilities		1,147			3,155
Total Liabilities		123,106			156,178
Commitments and contingencies (Note 13)
Stockholders’ equity (deficit):
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 June 30, 2020 and December 31, 2019; 30,258,223 shares issued and 27,999,713 shares outstanding as of June 30, 2020 and 19,977,113 shares issued and outstanding as of December 31, 2019		3			2
Additional paid-in capital		74,284			2,143
Treasury stock, at cost; 2,258,510 and 0 shares as of June 30, 2020 and December 31, 2019, respectively		(24,218	)		—
Accumulated other comprehensive income (loss)		(1,115	)		74
Accumulated deficit		(57,944	)		(40,993	)
Total stockholders’ equity (deficit)		(8,990	)		(38,774	)
Total liabilities and stockholders’ equity (deficit)	$	114,116		$	117,404

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

KALEYRA, INC.

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except share and per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenue	$	31,199		$	30,871		$	64,832		$	58,596
Cost of revenue		26,846			24,848			55,748			47,324
Gross profit		4,353			6,023			9,084			11,272
Operating expenses:
Research and development		2,346			1,394			5,156			2,590
Sales and marketing		2,989			1,488			6,732			2,960
General and administrative		6,537			3,961			14,296			7,740
Total operating expenses		11,872			6,843			26,184			13,290
Loss from operations		(7,519	)		(820	)		(17,100	)		(2,018	)
Other income, net		11			13			53			95
Financial income (expense), net		(518	)		(135	)		(559	)		(65	)
Foreign currency income (loss)		(415	)		112			(247	)		(142	)
Loss before income tax expense (benefit)		(8,441	)		(830	)		(17,853	)		(2,130	)
Income tax expense (benefit)		(313	)		472			(902	)		551
Net loss	$	(8,128	)	$	(1,302	)	$	(16,951	)	$	(2,681	)
Net loss per common share, basic and diluted (1)	$	(0.39	)	$	(0.12	)	$	(0.84	)	$	(0.25	)
Weighted-average shares used in computing net loss per common share, basic and diluted (1)		20,606,816			10,687,106			20,293,203			10,687,106

______________________________

(1)

Amounts for the three and six months ended June 30, 2019 were retrospectively adjusted as a result of the accounting for the Business Combination (as defined below in the notes). Specifically, the number of common shares outstanding during periods before the Business Combination are computed on the basis of the number of common shares of Kaleyra S.p.A. (accounting acquiror) during those periods multiplied by the exchange ratio established in the stock purchase agreement. Common stock and net loss per share, basic and diluted were retrospectively adjusted accordingly.

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

KALEYRA, INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited, in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Net loss	$	(8,128	)	$	(1,302	)	$	(16,951	)	$	(2,681	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(691	)		(243	)		(1,193	)		318
Net unrealized gain on marketable securities, net of tax (1)		—			11			4			26
Total other comprehensive income (loss)		(691	)		(232	)		(1,189	)		344
Total comprehensive loss	$	(8,819	)	$	(1,534	)	$	(18,140	)	$	(2,337	)

______________________________

(1)

The Company recorded $0 and $1,000 of tax expense on unrealized gain on marketable securities for the three and six months ended June 30, 2020, respectively and $3,000 and $8,000 of tax expense on unrealized gain on marketable securities for the three and six months ended June 30, 2019, respectively.

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

KALEYRA, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited, in thousands, except share data)

	Three Months Ended June 30, 2020
	Common Stock					Additional Paid-in		Treasury Stock					Accumulated Other Comprehensive			Accumulated			Total Stockholders' Equity
	Shares			Amount		Capital		Shares		Amount			Income (Loss)			Deficit			(Deficit)
Balance as of March 31, 2020		20,019,048		$	2	$	11,190		235,169	$	(2,587	)	$	(424	)	$	(49,816	)	$	(41,635	)
Common stock repurchased in connection with forward share purchase agreements		(2,023,341	)		—		21,631		2,023,341		(21,631	)		—			—			—
Change in forward share purchase agreement liability		—			—		1,942		—		—			—			—			1,942
Stock-based compensation (RSUs)		22,000			—		4,630		—		—			—			—			4,630
Proceeds from issuance of common stock in public offering, net of issuance costs		7,777,778			1		31,996		—		—			—			—			31,997
Common stock issued to sellers (Earn-out 2019)		1,763,633			—															—
Common stock issued to settle a payable (1)		440,595			—		2,895		—		—			—			—			2,895
Net loss		—			—		—		—		—			—			(8,128	)		(8,128	)
Other comprehensive loss		—			—		—		—		—			(691	)		—			(691	)
Balance as of June 30, 2020		27,999,713		$	3	$	74,284		2,258,510	$	(24,218	)	$	(1,115	)	$	(57,944	)	$	(8,990	)

	Three Months Ended June 30, 2019
	Common Stock				Additional Paid-in		Treasury Stock				Accumulated Other Comprehensive			Accumulated			Total Stockholders' Equity
	Shares		Amount		Capital(3)		Shares		Amount		Income (Loss)			Deficit			(Deficit)
Balance as of March 31, 2019		10,687,106	$	1	$	10,186		—	$	—	$	607		$	(6,671	)	$	4,123
Net loss		—		—		—		—		—		—			(1,302	)		(1,302	)
Other comprehensive loss		—		—		—		—		—		(232	)		—			(232	)
Balance as of June 30, 2019		10,687,106	$	1	$	10,186		—	$	—	$	375		$	(7,973	)	$	2,589

	Six Months Ended June 30, 2020
	Common Stock					Additional Paid-in		Treasury Stock					Accumulated Other Comprehensive		Accumulated			Total Stockholders' Equity
	Shares			Amount		Capital		Shares		Amount			Income (Loss)		Deficit			(Deficit)
Balance as of December 31, 2019		19,977,113		$	2	$	2,143		—	$	—		$	74	$	(40,993	)	$	(38,774	)
Common stock repurchased in connection with forward share purchase agreements		(2,258,510	)		—		24,218		2,258,510		(24,218	)		—