☐ 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 August ~~5, 2022,~~4, 2023, there were ~~44,344,364~~13,325,920 shares of the Company’s common stock issued and outstanding.


	June 30, 2022			December 31, 2021			June 30, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	73,622		$	90,001		$	63,866		$	77,500
Restricted cash		468			1,701			488			480
Short-term investments		680			6,236			630			587
Trade receivables, net		95,768			85,945			73,653			86,783
Deferred cost		329			341			354			319
Prepaid expenses		4,340			5,357			3,451			3,989
Other current assets		1,436			2,599			4,748			3,387
Total current assets		176,643			192,180			147,190			173,045
Property and equipment, net		20,384			18,811			23,535			23,826
Operating right-of-use assets								2,599			2,931
Intangible assets, net		115,146			125,396			52,678			57,400
Goodwill		111,893			110,465			111,905			111,526
Deferred tax assets		376			1,230
Other long-term assets		1,525			399			2,219			1,445
Total Assets	$	425,967		$	448,481		$	340,126		$	370,173
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	71,934		$	70,942		$	73,038		$	82,258
Lines of credit		3,182			5,256			3,468			3,955
Current portion of notes payable								—			405
Current portion of bank and other borrowings		10,581			10,508			9,389			11,419
Current portion of notes payable		405			—
Deferred revenue		6,934			9,553			2,443			3,528
Payroll and payroll related accrued liabilities		6,567			6,907			6,855			5,993
Other current liabilities		6,327			8,274			10,644			9,431
Total current liabilities		105,930			111,440			105,837			116,989
Long-term portion of bank and other borrowings		15,928			22,910			9,494			13,459
Long-term portion of notes payable		190,733			190,147			192,844			191,777
Long-term portion of employee benefit obligation		2,377			2,338			2,380			2,373
Deferred tax liabilities		5,205			2,384
Other long-term liabilities		892			1,840			3,193			3,362
Total Liabilities		321,065			331,059			313,748			327,960
Commitments and contingencies (Note 13)
Stockholders’ equity (deficit):
Preferred stock, par value of $0.0001 per share; 1,000,000 shares authorized; 0 shares issued or outstanding		—			—
Common stock, par value of $0.0001 per share; 100,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 47,142,422 shares issued and 44,344,364 shares outstanding as of June 30, 2022 and 44,831,695 shares issued and 42,033,637 shares outstanding as of December 31, 2021		5			4
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 June 30, 2023 and December 31, 2022; 14,125,366 shares issued and 13,325,920 shares outstanding as of June 30, 2023 and 13,858,440 shares issued and 13,058,994 shares outstanding as of December 31, 2022								1			1
Additional paid-in capital		270,672			251,659			282,459			278,473
Treasury stock, at cost; 2,798,058 shares as of June 30, 2022 and December 31, 2021		(30,431	)		(30,431	)
Treasury stock, at cost; 799,446 shares as of June 30, 2023 and December 31, 2022								(30,431	)		(30,431	)
Accumulated other comprehensive loss		(4,535	)		(2,010	)		(4,710	)		(5,212	)
Accumulated deficit		(130,809	)		(101,800	)		(220,941	)		(200,618	)
Total stockholders’ equity		104,902			117,422			26,378			42,213
Total liabilities and stockholders’ equity (deficit)	$	425,967		$	448,481
Total liabilities and stockholders’ equity							$	340,126		$	370,173

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

Six Months Ended June 30,

2022

2021

Cash Flows from Operating Activities:

Net loss

$
(29,009
)

$
(14,845
)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

11,838

3,460

Stock-based compensation

15,249

9,270

Provision for doubtful accounts

925

808

Realized gains on marketable securities

9

21

Employee benefit obligation

752

122

Change in fair value of warrant liability

(810
)

830

Reversal of accrued interest on forward share purchase agreement

—

(659
)
Non-cash interest expense

1,014

325

Deferred taxes

176

(6,804
)
Change in operating assets and liabilities:

Trade receivables

(13,319
)

(7,259
)
Other current assets

1,916

(2,359
)
Deferred cost

12

46

Other long-term assets

(1,187
)

1,483

Accounts payable

5,361

(1,882
)
Other current liabilities

1,678

(2,508
)
Deferred revenue

(2,389
)

6,920

Long-term liabilities

(87
)

(82
)
Net cash used in operating activities

(7,871
)

(13,113
)
Cash Flows from Investing Activities:

Purchase of short-term investments

(1,165
)

(1,882
)
Sale of short-term investments

6,459

546

Purchase of property and equipment

(966
)

(177
)
Capitalized software development costs

(4,502
)

(1,633
)
Purchase of intangible assets

(17
)

(3
)
Acquisition of mGage, net of cash acquired

—

(195,709
)
Acquisition of Bandyer, net of cash acquired

(1,005
)

—

Net cash used in investing activities

(1,196
)

(198,858
)
Cash Flows from Financing Activities:

Proceeds from (repayments on) line of credit, net

(1,776
)

203

Repayments on term loans

(4,493
)

(3,451
)
Proceeds from issuance of convertible notes, net of issuance costs

—

188,637

Repayments on notes

—

(7,500
)
Receipts related to forward share purchase agreements

—

17,045

Proceeds from issuance of common stock in Private Investment in Public Equity offering, net of issuance costs

—

99,051

Proceeds related to settlement of non-forfeited 2020 Sponsor Earnout Shares

—

1,244

Proceeds from the exercise of common stock warrants

—

2,872

Repayments on capital lease

(46
)

(66
)
Net cash provided by (used in) financing activities

(6,315
)

298,035

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(2,230
)

(409
)
Net increase (decrease) in cash, cash equivalents and restricted cash

(17,612
)

85,655

Cash, cash equivalents and restricted cash, beginning of period (1)

91,702

32,970

Cash, cash equivalents and restricted cash, end of period (1)

$
74,090

$
118,625

Supplemental disclosures of cash flow information:

Cash paid for interest

$
6,460

$
763

Non-cash investing and financing activities

(1)

As of June 30, 2023, includes $63.9 million of cash and cash equivalents and $488,000 of restricted cash; as of December 31, 2022, includes $77.5 million of cash and cash equivalents and $480,000 of restricted cash.

Change in value of forward share purchase agreements

$
—

$
(483
)
Common stock issued to Vivial equity holders (mGage acquisition)

$
—

$
18,832

Stock-based compensation capitalized as software development costs

$
—

$
363

Conversion of convertible note to common stock

$
—

$
2,295

Restricted stock units granted to employees for bonuses

$
3,764

$
—

Fair value of warrant liability

$
—

$
344

Reclassification of warrant liability to additional paid-in capital upon exercise of warrants

$
—

$
(18
)
Consideration payable

$
468

$
633

~~______________________~~

~~(1)~~

As ~~of June 30, 2022, includes $73.6 million of cash and cash equivalents and $468,000 of restricted cash; as of December 31, 2021, includes $90.0 million of cash and cash equivalents~~ ~~and $1.7 million of restricted cash~~.

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

KALEYRA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 ~~communication~~communications services provider on a global scale. At the time of the closing of the Business Combination, Kaleyra ~~operates~~operated in the Communications Platform as a Service (“CPaaS”) market with operations primarily in Italy, India, Dubai and the United ~~States, Italy, India, UK and Dubai.~~States. In connection with the closing, the Company changed its name from GigCapital, Inc. to Kaleyra, Inc.

Kaleyra’s underlying technology used in the platform is the same across all its communication services which can generally be described as “omni-channel mobile first interactive notifications via a public or private cloud implementation”.

Kaleyra provides mobile ~~communication~~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 ~~communication~~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.

Kaleyra’s subsidiary, Campaign Registry Inc., 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, began its soft launch during the second quarter of fiscal year 2020, ending up with its first revenue contracts in the second half of fiscal year 2020.

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~~$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~~$217.0 million pursuant to the terms of the Merger Agreement. The cash consideration amounted to ~~$199.2~~$199.2 million of which ~~$198.6~~$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.~~$997,000. The common stock consideration was paid with the issuance to Vivial’s former equity holders of a total of ~~1,600,000~~457,143 shares of Kaleyra common stock at the ~~$11.77~~$41.20 per share closing price of Kaleyra common stock on the date of issuance, equal to ~~$18.8~~$18.8 million ~~in value.~~(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 ~~8,400,000~~2,400,000 shares of Kaleyra common stock to the PIPE Investors at ~~$12.50~~$43.75 per ~~share.~~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~~$200 million aggregate principal amount of unsecured convertible notes (the “Merger Convertible Notes”).

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,~~merger, Kaleyra US Inc. became the holding company and one hundred percent ~~(100%~~(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~~S.r.l. (“Bandyer”) for cash consideration of ~~$15.4~~$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 ~~uses,~~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~~New York Stock Exchange (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%~~(99%) direct owner of Kaleyra US Inc. and one percent ~~(1%~~(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..~~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~~were 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 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. Fractional shares were not issued in connection with the Reverse Stock Split. Stockholders, who otherwise would have been entitled to receive fractional shares because they held a number of shares not evenly divisible by the split ratio, received an additional fraction of a share of common stock to round up to the next whole share. Beginning with the opening of trading on March 9, 2023, Kaleyra’s common stock began trading on the NYSE 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.

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).

Merger Agreement with Tata Communications Limited

On June 28, 2023, Kaleyra and Tata Communications Limited, a company listed on BSE Limited and National Stock Exchange of India Limited (“Tata Communications”), entered into an Agreement and Plan of Merger, dated as of June 28, 2023 (the “Tata Merger Agreement”), pursuant to which, at the closing, upon the terms and subject to the conditions set forth therein, Merger Sub, a

Delaware corporation and wholly owned subsidiary of Tata Communications to be formed by Tata Communications, will merge with and into the Company (the “Tata Merger”), with the Company being the surviving corporation in the Tata Merger. Under the terms of the agreement, Tata Communications has agreed to acquire Kaleyra in a cash only transaction, at a price per share of $7.25 for a total consideration to Kaleyra shareholders of approximately $100 million and the assumption of all outstanding debt (approximately $157.4 million of net debt outstanding as of June 30, 2023). The Tata Merger has been unanimously approved by the Boards of Directors of both Tata Communications and Kaleyra. Consummation of the deal is subject to approval by Kaleyra's stockholders, certain regulatory approvals and other customary closing conditions. Upon closing of the transaction, expected in six to nine months of the announcement date, Kaleyra will become a subsidiary of Tata Communications. In connection with the execution of the Tata Merger Agreement, the Company has ceased its search for a new Chief Executive Officer. It is contemplated that Dario Calogero will continue to serve as Chief Executive Officer of the Company up to the closing of the Tata Merger.

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 and six months ended June 30, ~~2022~~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 ~~2021~~2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March ~~8, 2022.~~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

~~These condensed consolidated~~The accompanying financial statements have been prepared ~~in conformity with US GAAP applicable for an “emerging growth company” as defined~~on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ~~Jumpstart Our Business Startups Act (“JOBS Act”~~normal course of business.

On April 3, 2023, the Company received a written notice (the “Market Cap Notice”) from the NYSE, informing Kaleyra that it was not in compliance with the continued listing criteria set forth in Section 802.01B of the NYSE’s Listed Company Manual with respect to the minimum market capitalization and shareholders’ equity requirement. Within forty-five days of receipt of the Market Cap Notice, the Company responded to the NYSE with a business plan to cure the deficiency and to regain compliance, subject to review, acceptance and monitoring by the NYSE, within the eighteen-month cure period following the receipt of the Market Cap Notice. On July 5, 2023, Kaleyra received written confirmation from the NYSE that the business plan was accepted by the Listings Operations Committee and the quarterly monitoring activities of the plan by the NYSE were scheduled to run throughout the eighteen-month cure period from the receipt of the Market Cap Notice. The Company will be required to achieve the minimum continued listing standards of either average global market capitalization over a consecutive 30 trading-day period of $50 million or total shareholders’ equity of $50 million at the completion of the eighteen-month plan period. Under Section 802.02, the NYSE will evaluate an accelerated cure and an early termination of the plan period prior to the end of the eighteen months if the Company is able to demonstrate returning to compliance with the applicable continued listing standards, or achieving the ability to qualify under an original listing standard, for a period of two consecutive quarters. Refer to Note 21 - Subsequent Events for more information relating the Market Cap Notice.

As of June 30, 2023, and through the date the financial statements are issued, the Company believes it has sufficient liquidity to be able to operate its business for at least 12 months following the date that the financial statements are issued. However, the Company was not in compliance with NYSE continued listing criteria, as described above. If Kaleyra fails to regain and maintain compliance with the NYSE continued listing requirements, including, but not limited to, the above, the NYSE may take steps to delist the Company’s securities. Delisting from the NYSE (and the inability of Kaleyra to list its common stock on the Nasdaq Global Select Market or the Nasdaq Global Market, or any other eligible market) would trigger a fundamental change under the terms of the Indenture, which would entitle each holder of the Merger Convertible Notes, at such holder’s option, to require Kaleyra to repurchase for cash all or any portion of such holder’s notes at a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon – refer to Note 10 – Notes Payable for additional information relating the Merger Convertible Notes. In such event, Kaleyra may not have enough available cash or be able to obtain financing to meet the repurchase obligations that may arise if the Company is not able to regain compliance with the NYSE continued listing criteria for at least the 12 months following the date that the financial statements are issued, and Kaleyra’s failure to repurchase such notes would constitute a default under the Indenture.

On February 15, 2023, in conjunction with the Company’s fourth quarter and full year earnings release, to drive improved financial and operating performance, and ensure continued sustainable and scalable growth, the Company announced an initial restructuring and cost reduction program for 2023: the Value Creation Program (the “Program”). The ~~JOBS Act provides,~~Program is designed to position Kaleyra to serve the demand from global businesses using existing and emerging communication channels, while driving labor and cost efficiencies. The Program supports the organizational streamlining of labor intensive functions aimed at reducing monthly cash payroll costs by more than 15% on an annual basis. As a result of the Company’s launched initiatives, significant improvement in ~~part, that an emerging~~Adjusted EBITDA is expected in 2023 compared to 2022, with additional growth ~~company can take advantage~~anticipated in 2024 when compared to 2023. Ultimately, the result of ~~an extended transition period for complying with new or revised accounting standards. In particular, an emerging growth company can delay~~ the ~~adoption~~Company’s Adjusted EBITDA improvement will convert to cash throughout the life of ~~certain accounting standards until those standards would apply to private companies. For~~ the ~~purpose of these condensed consolidated financial statements,~~Program. The expected increase in cash flow is important and will significantly aid Kaleyra servicing its outstanding debt requirements. During the three months ended June 30, 2023, the Company ~~availed itself~~showed another sequential positive Adjusted EBITDA. This was mainly driven by the reduction of ~~an extended transition~~operating expenses, in particular the decrease in the Company's headcount of 34 full time equivalents during the six-month period ~~for complying~~ended June 30, 2023.

Despite the measures the Company is undertaking and plans to undertake, the Company might fail to regain and maintain compliance with ~~new or revised accounting standards and, as a result, did not adopt new or revised accounting standards on~~ the ~~relevant dates on which adoption~~NYSE continued listing requirements. Pending the consummation of ~~such standards is required for public companies.~~

~~Liquidity~~

~~The~~the Tata Merger, the factors described above raise substantial doubt about the ability of the Company ~~evaluated its ability~~ to continue as a going ~~concern. The Company has negative cash flows from operating activities through~~concern within one year after the date that these financial statements are issued.

Liquidity

As of June 30, ~~2022, mainly as~~2023, the ~~consequence~~Company had $63.9 million of cash and cash equivalents, $488,000 of restricted cash and $630,000 of short-term investments with maturity terms between 4 and 12 months held in India. Of the ~~payment of interest bearing on existing notes payable~~$65.0 million in cash, restricted cash and ~~bank borrowings~~short-term investments, $. 35.0 million was held in U.S. banks, $15.6 million was held in Italy, $12.7 million was held in India with the remainder held in other banks. Management currently plans to retain the cash in the jurisdictions where these funds are currently held.

The condensed consolidated balance sheet as of June 30, ~~2022~~2023 includes total current assets of ~~$176.6~~$147.2 million and total current liabilities of ~~$105.9~~$105.8 million, resulting in net current assets of ~~$70.7~~$41.4 million and a short-term net financial position of ~~$60.6~~$52.1 million.

~~On February 18, 2021,~~Kaleyra finances its operations through a combination of cash generated from operations and ~~for the purposes of raising the~~from borrowings under Kaleyra bank facilities primarily with banks located in Italy, as well as proceeds from equity offerings and convertible note arrangements. Kaleyra’s long-term cash ~~portion of the consideration for the Merger, the Company entered into the PIPE Subscription Agreements with the PIPE Investors~~needs primarily include meeting debt service requirements, working capital requirements and the Convertible Note Subscription Agreements with the Convertible Note Investors. Pursuant to these agreements, and prior to the closing of the Merger on June 1, 2021, the Company issued and sold in private placements an aggregate of $105 million or 8,400,000 shares of the Company’s common stock to the PIPE Investors at $12.50 per share, and $200 million aggregate principal amount of unsecured Merger Convertible Notescapital expenditures.~~, bearing interest at a rate of 6.125% per annum, payable semi-annually, in arrears on each June 1 and December 1 of each year~~.

Considering the effects of the financings described above and the typical financial cycle of the Company, the Company’s management believes that the Company’s cash and availability of borrowings will be sufficient to support its planned operations for at least the next 12 months from the date these condensed consolidated financial statements were issued.

Business seasonality

Historically, ~~the Company~~Kaleyra has experienced clear seasonality in its revenue generation, with slower traction in the first calendar quarter, and increasing revenues as the year progresses. ~~The Company~~Kaleyra typically experiences higher revenues in messaging and notification services during the fourth calendar quarter. This patterned revenue generation behavior takes place due to ~~the Company’s~~Kaleyra’s customers sending more messages to their ~~end-user customers~~end-users who are engaged in consumer transactions at the end of the calendar year, resulting in an increase in notifications of electronic payments, credit card transactions and ~~e-commerce orders.~~e-commerce.

Principles of Consolidation

The condensed consolidated financial statements include the Company and its wholly owned subsidiaries, including Kaleyra S.p.A., Solutions Infini, ~~Buc Mobile, mGage Europe Limited, Campaign Registry and~~ Kaleyra US Inc., Kaleyra UK Limited, Buc Mobile and TCR, which represent its major operations. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are used for, but not limited to, revenue recognition; allowance for doubtful accounts; valuation of the Company’s stock-based awards; recoverability of goodwill, long-lived and intangible assets; capitalization and useful life of the Company’s capitalized internal-use software development costs; fair value of acquired intangible assets and goodwill; accruals, including tax related ~~provision~~provisions and valuation ~~allowance~~allowances on deferred ~~taxes.~~taxes and legal contingent liabilities; incremental borrowing rate used in present valuing lease liabilities. Estimates are based on historical experience and on various assumptions that the Company believes are reasonable under current circumstances. However, future events are subject to change and best estimates and judgments may require further adjustments; therefore, actual results could differ materially from those estimates. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment due to the disruptive effects of global inflation ~~the continuing impact of the novel strain of the coronavirus (“COVID-19”)~~ and the armed conflict between Russia and Ukraine.

Impact of macroeconomic factors

Inflation

A combination of circumstances, including governmental fiscal and monetary policies, regional armed conflicts, supply chain constraints, and labor and/or energy shortages, has resulted in significant inflationary trends mainly in the cost of goods sold, labor and other expenses. These inflationary pressures could affect wages, Kaleyra's cost and ability to negotiate the cost of the mobile network operators, the price of its products and services, its ability to meet customer demand, and ultimately the Company's gross margins and operating profit. Notwithstanding the existence of inflationary pressures, Kaleyra concluded that its business, operating results, cash flows and financial condition would not be materially adversely affected.

Interest rate

Interest rates are highly sensitive to many factors including the current international economic and political scenario, as well as other factors beyond Kaleyra’s control. Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. Kaleyra’s interest rates on the bank borrowing held by Italian commercial banks are at market in Italy and well below market in other geographical locations. The Merger Convertible Notes bear interest at a fixed coupon rate of 6.125% per annum, and for this reason Kaleyra has no financial or economic interest exposure associated with changes in interest rates. Therefore, Kaleyra does not believe there is material exposure to market risk from changes in interest rates.

Foreign currency

Kaleyra’s condensed consolidated financial statements are presented in U.S. dollars while the functional currencies of foreign subsidiaries are other than U.S. dollar. The main functional currencies of foreign subsidiaries include: Euro for Kaleyra S.p.A., Indian Rupee for Solutions Infini Technologies Private Limited, Great Britain Pound for Kaleyra UK Limited, United Arab Emirates Dirham for Solutions Infini FZE.

More than 45% of Kaleyra's total revenue was generated outside the United States for the six-month period ended June 30, 2023. The Company's revenue and operating expenses denominated in currency other than U.S. dollars are currently subject to significant foreign currency risk. To the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currencies result in increased revenue and operating expenses for Kaleyra's non-U.S. operations. Similarly, Kaleyra's revenue and operating expenses for Kaleyra's non-U.S. operations decrease if the U.S. dollar strengthens against foreign currencies.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to a concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, short-term investments and trade receivables. The Company maintains its cash and cash equivalents, restricted cash and short-term investments with financial institutions that management believes are financially sound.

The Company sells its services to a wide variety of customers. If the financial condition or results of operations of any significant customers deteriorate substantially, the Company’s operating results could be adversely affected. To reduce credit risk, management performs ongoing credit evaluations of the financial condition of significant customers. The Company maintains reserves for estimated credit losses on customer accounts when considered necessary. Actual credit losses may differ from the Company’s estimates. In both of the three and six months ended June 30, 2023 and 2022, ~~and 2021,~~ there ~~was 0 customer~~were no customers that individually accounted for more than ~~10%~~10% of the Company’s consolidated total revenue. As of June 30, ~~2022~~2023 and December 31, ~~2021, 0 and 1~~2022, Kaleyra had no individual customer ~~respectively,~~that accounted for more than ~~10%~~10% of the Company’s consolidated total trade receivables. ~~Trade receivables accounted for by that one customer amounted to $9.6 million as of December 31, 2021.~~

Warrant Liability

The Company accounts for warrants for shares of the Company’s common stock that are not indexed to its own stock as liabilities at fair value on the condensed consolidated balance sheets. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized in “Financial expense, net” on the condensed consolidated statements of operations. The liability is included in the condensed consolidated balance sheet line item “Other long-term liabilities”. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the common stock warrants. At that time, the portion of the warrant liability related to the common stock warrants will be reclassified as additional paid-in capital.

Recent Accounting Pronouncements

In May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40) Issuer’s Accounting

for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” which clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. An entity should measure the effect of a modification or an exchange of a

freestanding equity-classified written call option that remains equity classified after modification or exchange as follows: i) for a modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements (hereinafter, referred to as a “debt” or “debt instrument”), as the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged; ii) for all other modifications or exchanges, as the excess, if any, of the fair value of the modified or exchanged written call option over the fair value of that written call option immediately before it is modified or exchanged. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The Company adopted the amendments in this update as of the beginning of its annual fiscal year 2022, and the adoption did not have a material impact on its condensed consolidated financial statements.

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) Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” which is aimed to address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. In addressing the complexity, the FASB focused on amending the guidance on convertible instruments and the guidance on the derivatives scope exception for contracts in an entity’s own equity. For convertible instruments, the Board decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The Company adopted the amendments in this update as of the beginning of its annual fiscal year 2021, which resulted in the embedded conversion features of the Merger Convertible Note not being separately recognized from the host contract pursuant to their scope exception from derivative accounting under ASC 815-10-15-74(a). ~~Interest Make-Whole Payment~~The interest make-whole payment feature provided by the Merger Convertible Note met the definition of a derivative but did not fall within the above scope exception, nonetheless its value was de minimis and as such no amount was recorded in the ~~consolidated~~ financial statements at the time of the issuance of the Merger Convertible Notes nor at any subsequent reporting date.

In June 2020, the FASB issued ASU 2020-05 “Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective dates for certain entities” (“ASU 2020-05”), which provides a limited one year deferral of the effective dates of the following updates (including amendments issued after the issuance of the original update) to provide immediate, near-term relief for certain entities for whom these updates are either currently effective or imminently effective: i) ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“Revenue”); and ii) ASU No. 2016-02, Leases (Topic 842) (“Leases”). The updates in ASU 2020-05 followed the updates to effective dates set forth within ASU 2019-10 “Financial Instruments -– Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates” (“ASU 2019-10”). The amendments in this ASU amended certain effective dates for the above ASU 2016-02, Leases (including amendments issued after the issuance of the original ASU). The effective dates for Leases after applying ASU 2019-10 were as follows: public business entities, excluding emerging growth companies and smaller reporting companies, for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. All other entities for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. ~~Early application continues to be allowed.~~ In ASU 2019-10, the FASB noted that challenges associated with transition to a major update ~~are~~were often magnified for private companies and smaller public companies. Those challenges ~~have been~~became significantly amplified by the ~~current~~ business and capital market disruptions caused by the COVID-19 pandemic. For this reason, the FASB issued the amendments in ASU 2020-05 by deferring the effective date for one additional year for entities in the “all other” category that have not yet issued their financial statements (or made financial statements available for issuance) reflecting the adoption of Leases. Therefore, under the amendments of ASU 2020-05, Leases (Topic 842) is effective for entities within the “all other” category for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. ~~Early application continues to be permitted, which means that an entity may choose to implement Leases before those deferred effective dates.~~ The Company ~~expects~~adopted the adoption to have a material impact to the consolidated balance sheets for the recording of the "right-to-use" asset and corresponding lease liability. The Company plans to adopt ASC Topic 842 – Leasesamendments in this update in its fiscal year ending December 31, 2022, by ~~utilizing~~using the modified retrospective ~~transition approach, which will result in an estimated current period adjustment~~adoption method as of January 1, 2022, ~~related~~and applied it to all leases that existed on that date through the ~~recognition of a right-of-use asset and corresponding lease liability between $3.0 million and $4.0 million on its condensed consolidated balance sheet.~~accounting transition date.

In February 2020, the FASB issued ASU 2020-02 “Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842)”. This ASU ~~applies to all registrants that are creditors in loan transactions that, individually or in the aggregate, have a material effect on the registrant’s financial condition. This ASU~~

guidance is applicable upon a registrant’s adoption of Accounting Standards Codification (“ASC”) Topic 326. ~~On November 15, 2019,~~This ASU also adds a note to an SEC paragraph pursuant to the ~~FASB delayed the~~issuance of ASU 2019-10 and certain effective ~~date of ASC Topic 326 (ASU 2019-10),~~dates amended therein, as noted below.

InOn November 15, 2019, the FASB issued ASU 2019-10 “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates”. The amendments in ASU 2019-10 amend certain effective dates for the following major ASUs (including amendments issued after the issuance of the original ASU):

a)ASU 2016-13, ~~Financial~~“Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial ~~Instruments (Credit Losses) (“ASU 2016-13”)~~Instruments”. The amendments in this ASU amend the mandatory effective dates for Credit Losses for all entities as follows: Public business entities that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies, as defined by the SEC, at the time the ASU was issued, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All other entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. ~~Early application continues to be allowed. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements.~~

b)ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (Hedging). The effective dates for Hedging after applying this ASU are as follows: Public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. All other entities for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early application continues to be allowed. The Company adopted the amendments in this update ason January 1, 2023, by utilizing the Current Expected Credit Losses (CECL) financial model to measure impairment on financial assets, mainly referring to trade receivables, which required, under the modified retrospective transition method, a cumulative-effect adjustment of $1.3 million on the ~~beginning~~opening balance sheet of ~~its annual fiscal year 2021, and~~retained earnings on the date of adoption ~~did not have a material impact on its condensed consolidated financial statements.~~without restating prior periods.

c)b) ASU 2016-02, Leases (Topic 842). The effective dates for Leases after applying ASU 2019-10 are as follows: public business entities, excluding emerging growth companies and smaller reporting companies, for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. All other entities for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. As noted above, the effective date of this ASU ~~has now been~~was delayed for one additional year byfollowing the issuance of ASU 2020-02 and ASU 2020-05.

In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract”. This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. The Company adopted the amendments in this update as of the beginning of its annual fiscal year 2021, and the adoption did not have a material impact on its condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20)”, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendments are effective for fiscal years ending after December 15, 2020 for public business entities and for fiscal years ending after December 15, 2021 for all other entities. The Company ~~is currently evaluating the impact of this standard on its condensed consolidated financial statements.~~

In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment”, which removes the second step of the goodwill impairment test that requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The Company adopted the amendments in this update as of the beginning of its annual fiscal year ~~2021,~~2022, and the adoption did not have a material impact on its condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments”, which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. ~~In November 2018, the FASB issued~~This ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments— Credit Losses”, which clarifies that receivables arising from operating leases are not within the scope of Topic 326, Financial Instruments—Credit Losses. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. These ASUs areis effective for public entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and for other entities for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. ~~Earlier application is permitted.~~ As noted above, the effective date of this ASU was delayed for two years byfollowing the issuance of ASU 2019-10. ~~The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements.~~

In February 2016, the FASB issued ASU 2016-02, “Leases”, which was further clarified by ASU 2018-10, “Codification Improvements to Topic 842, Leases”, and ASU 2018-11, “Leases—Targeted Improvements”, both issued in July 2018. ASU 2016-02

affects all entities that lease assets and will require lessees to recognize a lease liability and a right-of-use asset for all leases (except for short-term leases that have a duration of less than one year) as of the date on which the lessor makes the underlying asset available to the lessee. ~~For lessors, accounting for leases is substantially the same as in prior periods.~~ ASU 2018-10 clarifies or corrects unintended application of guidance related to ASU 2016-02. The amendment affects narrow aspects of ASU 2016-02 related to the implicit rate in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments. ASU 2018-11 adds a transition option for all entities and a practical expedient only for lessors. The transition option allows entities to not apply the new lease standard in the comparative periods they present in their financial statements in the year of adoption. Under the transition option, entities can opt to continue to apply the legacy guidance in ASC 840, “Leases”, including its disclosure requirements, in the comparative prior periods presented in the year they adopt the new lease standard. Entities that elect this transition option will still be required to adopt the new leases standard using the modified retrospective transition method required by the standard, but they will recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. The new standards are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for a public business entity. For all other entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. ~~Earlier application is permitted.~~ As noted above, the effective date of this ASU was delayed for two years byfollowing the issuance of ASU 2019-10 as amended by ASU 2020-02 and ASU 2020-05.

~~3. BUSINESS COMBINATIONS~~

~~Acquisition of mGage~~

On June 1, 2021, the Company completed its Merger with Vivial and the resulting acquisition of the business owned by Vivial known as mGage, a leading global mobile messaging provider. The acquisition of mGage provided an opportunity for the Company to expand its network operator connections and become one of only four companies providing direct connectivity to all tier-1 US carriers.

Pursuant to the Merger Agreement dated as of February 18, 2021, by and among the Company, Merger Sub, Vivial and GSO Special Situations Master Fund LP, solely in its capacity as the Stockholder Representative, Vivial was merged with and into Merger Sub, with Vivial surviving as a wholly-owned subsidiary of the Company. The name of Vivial was changed to mGage Group Holdings, Inc. (“mGage Group Holdings”) as a result of the Merger. Subsequently, on July 1, 2021, mGage Group Holdings changed its name to Kaleyra US Inc.

The Merger consideration consisted of cash consideration and common stock consideration and was subject to post-closing price adjustments as set forth in the Merger Agreement. 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 original cash consideration amounted to $199.2 million of which $198.6 million was paid on June 1, 2021 and the remaining amount was settled through 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 1,600,000 shares of Kaleyra common stock. The resulting value of the common stock consideration, which was based upon the $11.77 per share closing price of Kaleyra common stock as of June 1, 2021, was equal to $18.8 million and has been recognized as part of the consideration transferred.

The Merger was financed through (i) the proceeds from the issuance and sale by the Company, of an aggregate of 8,400,000 shares of Kaleyra common stock to PIPE Investors at $12.50 per share, pursuant to the subscription agreements dated February 18, 2021; and (ii) the proceeds from the issuance in a private placement, of $200 million aggregate principal amount of Merger Convertible Notes to certain institutional investors. See Note 9 – Notes Payable – for additional details on the Merger Convertible Notes.

The Merger was accounted for as a business combination and the total fair value of the consideration transferred of $217 million was allocated on a preliminary basis to the net tangible and intangible assets and liabilities based on their estimated fair values as of the acquisition date and the excess was recorded as goodwill. The Company evaluated certain assets, liabilities and tax estimates that were subject to change throughout the measurement period ended on June 1, 2022 (one year from the acquisition date).

During the three months ended September 30, 2021, Kaleyra redetermined the estimated fair value of certain identified finite-lived intangible assets, net of deferred tax liabilities and the resulting residual goodwill. The measurement period adjustment was recognized through a decrease of $8.9 million in the current period condensed consolidated balance sheet line item “Intangible assets, net” mostly relating to the acquired developed technology, a net decrease of $1.9 million in the current period condensed consolidated balance sheet line item “Deferred tax liability” and an increase of $5.9 million in the current period condensed consolidated balance sheet line item “Goodwill”.

During the three months ended June 30, 2022, Kaleyra redetermined the value of Deferred tax assets on loss carryforward following the filing of mGage Group Holding’s pre-affiliation tax return and remeasured the tax effected values of its identified finite-

lived intangible assets based upon the tax rates calculated in each domestic and foreign tax jurisdiction, including the UK. The measurement period adjustment was recognized through a net decrease of $5.1 million in the current period condensed consolidated balance sheet line item “Deferred tax assets”, a decrease of $2.0 million in the current period condensed consolidated balance sheet line item “Deferred tax liability” and a net increase of $14~~3.1~~

~~million in the current period condensed consolidated balance sheet line item “Goodwill”.~~

As referred to above, the measurement period adjustment also included a working capital adjustment of $997,000, pursuant to the terms of the Merger Agreement. The acquired entity’s results of operations have been included in the condensed consolidated financial statements of the Company from the date of acquisition.

~~The following table summarizes the fair value amount recognized for the assets acquired and liabilities assumed as of the acquisition date (in thousands):~~

Customer relationships (1)

$
76,256

Developed technology (1)

30,033

Trade names (1)

13,060

Deferred tax assets on loss carryforward

19,899

Goodwill (2)

89,391

Accounts receivable and other current assets

29,996

Property and equipment

8,450

Cash and cash equivalents

2,856

Total assets acquired

269,941

Deferred tax liabilities

30,242

Accounts payable and other current liabilities

22,665

Total liabilities assumed

52,907

Net assets acquired

$
217,034

~~(1)~~

Identified finite-lived intangible assets. The estimated fair value of the intangible assets acquired was determined by the Company, which considered or relied in part upon a valuation report of a third-party expert. The Company used income approaches to estimate the fair values of the identifiable intangible assets. The estimated useful life is 7 to 9 years for customer relationships, 6 years for developed technology and 8 years for trade names.

~~(2)~~

Goodwill is the excess of fair value of the consideration transferred over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed and represents expected synergies of the combination of the acquired business. Goodwill is not deductible for income tax purposes.

In 2021, the Company incurred costs related to this acquisition of $5.5 million that were expensed in general and administrative expenses in the accompanying condensed consolidated statements of operations.

~~The contribution of Kaleyra US Inc. to the consolidated revenue and consolidated net loss for the three months ended June 30, 2022 was $30.2 million, and net loss of $1.9 million.~~

~~The contribution of Kaleyra US Inc. to the consolidated revenue and consolidated net loss for the six months ended June 30, 2022 was $62.3 million, and net loss of $2.9 million.~~

~~Acquisition of Bandyer~~

On July 8, 2021, Kaleyra completed the acquisition of the entire share capital of Bandyer, a company based in Italy that offers cloud based audio/video communications services to Italian financial institutions, retail companies, utilities, insurance, human resources and digital healthcare organizations (the “Bandyer Acquisition”). Bandyer’s services are suitable for different industries and completely compatible with any device and expand and complete Kaleyra’s already wide offering of communication channels.

The consideration for the Bandyer Acquisition consisted of cash consideration of $15.4 million (€13 million) of which $13.3 million (€11.5 million) was paid at the acquisition date and the remaining amount was retained in an escrow account. The acquisition of Bandyer was financed through the available financial resources of Kaleyra.

The Bandyer Acquisition was accounted for as a business combination and the total fair value of the consideration transferred of $15.4 million was allocated to the net tangible and intangible assets and liabilities based on their estimated fair values as of the acquisition date and the excess was recorded as goodwill. The Company evaluated certain assets, liabilities and tax estimates that were subject to change throughout the measurement period ended on July 8, 2022 (one year from the acquisition date).

During the three months ended March 31, 2022, and pursuant to the Bandyer purchase agreement, the above purchase consideration was decreased by $58,000, which is an amount equal to the sum of the acquisition date net debt and the portion of the

acquisition date net working capital that was collected by December 31, 2021 (the “Price Adjustment”). The Price Adjustment favorable to Kaleyra was considered in the calculation of the final goodwill balance as of March 31, 2022.

During the three months ended March 31, 2022, Kaleyra adjusted the deferred tax liabilities arising from the acquired tangible and intangible assets and the resulting residual goodwill. The measurement period adjustment was recognized through an increase of $164,000 in the current period condensed consolidated balance sheet line item “Deferred tax liability” and a corresponding increase in the current period condensed consolidated balance sheet line item “Goodwill”.

As referred to above, the measurement period adjustment also included the above Price Adjustment of $58,000. The acquired entity’s results of operations have been included in the condensed consolidated financial statements of Kaleyra from the date of acquisition.

~~The following table summarizes the fair value amount recognized for the assets acquired and liabilities assumed as of the acquisition date (in thousands):~~

Property and equipment, net

$
116

Developed technology (1)

7,999

Customer relationship (1)

1,798

Goodwill (2)

8,146

Cash and cash equivalents

349

Trade receivables and other current assets

671

Other non current assets

21

Total assets acquired

19,100

Deferred tax liabilities

2,616

Accounts payable and other current liabilities

986

Long term portion of employee benefit obligation

126

Current portion of bank and other borrowings

39

Total liabilities assumed

3,767

Net assets acquired

$
15,333

~~(1)~~

Identified finite-lived intangible assets. The estimated fair value of the intangible assets acquired was determined by Kaleyra, which considered or relied in part upon a valuation report of a third-party expert. The Company used income approaches to estimate the fair values of the identifiable intangible assets. The estimated useful life is 8 years for customer relationships and 15 years for developed technology.

~~(2)~~

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.

On April 4, 2022, following the above Price Adjustment and pursuant to the terms of the purchase agreement, Kaleyra paid an aggregate of $1.1 million (€1.0 million) out of the escrow account as remaining consideration for the Bandyer Acquisition. As of June 30, 2022 the resulting balance of the escrow account that was originally retained at the acquisition date amounted to $468,000 (€451,000).

~~Unaudited supplemental pro-forma information~~

The results of operations for the three and six months ended June 30, 2022 are included in the condensed consolidated financial statements. The following table presents unaudited supplemental pro-forma information for the three and six months ended June 30, 2021 as if the Merger had occurred on January 1, 2021. The main adjustments reflected in the unaudited pro-forma financial information for the three and six months ended June 30, 2021 are as follows:

~~(i)~~

the amortization of intangible assets arising from the purchase price allocation amounting to $1.9 million and $4.6 million, respectively, for three and six months ended June 30, 2021, net of the related tax effect of $687,000 and $1.7 million, respectively, which are referred to the period starting on January 1, 2021 through the date of the business combination;

~~(ii)~~

the financial expenses incurred in connection with the Merger Convertible Notes amounting to $2.4 million and $5.9 million, respectively, for three and six months ended June 30, 2021, which are referred to the period starting on January 1, 2021 through the date of the Merger. No pro forma tax benefit has been reflected in connection with the pro forma

~~adjustment to financial income (expense), net as Kaleyra is in a net loss tax position and a valuation allowance would be established for the amount of any deferred tax assets.~~

Transaction costs incurred in connection with the transaction were not eliminated. The pro-forma financial information is not necessarily indicative of the results of operation that would have occurred had the transaction been affected on the assumed dates.

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except share and per share amounts)

2022

2021

2022

2021

Revenue

$
81,109

$
76,552

$
161,590

$
148,892

Net loss

(15,837
)

(5,792
)

(29,009
)

(19,772
)
Net loss per common share, basic and diluted

$
(0.36
)

$
(0.14
)

$
(0.68
)

$
(0.48
)
Weighted-average shares used in computing net loss per common share, basic and diluted

43,410,858

41,181,763

42,829,188

40,773,353

~~The contribution of Kaleyra US Inc. to the consolidated and pro-forma consolidated revenue was $30.2 million and $32.7 million for the three months ended June 30, 2022 and 2021, respectively.~~

~~The contribution of Kaleyra US Inc. to the consolidated and pro-forma consolidated revenue was $62.3 million and $64.6 million for the six months ended June 30, 2022 and 2021, respectively.~~

The contribution of Kaleyra US Inc. to the consolidated and pro-forma consolidated net loss was a loss of $1.9 million and an income of $3.9 million for the three months ended June 30, 2022 and 2021, respectively.

The contribution of Kaleyra US Inc. to the consolidated and pro-forma consolidated net loss was a loss of $2.9 million and an income of $7.5 million for the six months ended June 30, 2022 and 2021, respectively.

4.3. FAIR VALUE MEASUREMENTS

The following tables provide the assets and liabilities measured at fair value on a recurring basis as of June 30,~~, 2022~~ 2023 and December 31, ~~2021~~2022 (in thousands):


	Fair Value Hierarchy as of June 30, 2023						Aggregate
	Level 1		Level 2		Level 3		Fair Value
Assets:
Mutual funds (1)	$	594	$	—	$	—	$	594
Interest rate swap (2)		—		46		—		46
Certificates of deposit (3)		—		36		—		36
Total Assets	$	594	$	82	$	—	$	676
Liabilities:
Warrant liability (4)	$	—	$	52	$	—	$	52
Total Liabilities	$	—	$	52	$	—	$	52

Fair Value Hierarchy as of June 30, 2022

Aggregate

Level 1

Level 2

Level 3

Fair Value

Assets:

Mutual funds (1)

$
579

$
—

$
—

$
579

Certificates of deposit (2)

—

101

—

101

Interest rate swap (3)

—

8

—

8

Total Assets

$
579

$
109

$
—

$
688

Liabilities:

Warrant liability (4)

$
—

$
78

$
—

$
78

Total Liabilities

$
—

$
78

$
—

$
78

(1)

Included in the condensed consolidated balance sheet line item “Short-term investments”.

(2)

Included in the condensed consolidated balance sheet line item “Other long-term assets”.

(3)

Included in the condensed consolidated balance sheet line item “Short-term investments”, with maturity terms between 4 and 12 months held in India.

(4)

Included in the condensed consolidated balance sheet line item “Other long-term liabilities”.


	Fair Value Hierarchy as of December 31, 2022						Aggregate
	Level 1		Level 2		Level 3		Fair Value
Assets:
Mutual funds (1)	$	567	$	—	$	—	$	567
Interest rate swap (2)		—		66		—		66
Certificates of deposit (3)		—		20		—		20
Total Assets	$	567	$	86	$	—	$	653
Liabilities
Warrant liability (4)	$	—	$	26	$	—	$	26
Total Liabilities	$	—	$	26	$	—	$	26

(1)

Included in the condensed consolidated balance sheet line item “Short-term investments”.

(2)

Included in the condensed consolidated balance sheet line item “Other long-term assets”.

(3)

Included in the condensed consolidated balance sheet line item “Short-term investments”, with maturity terms between 4 and 12 months held in India.

(4)

Included in the condensed consolidated balance sheet line item “Other long-term liabilities”.

~~(1)~~

~~Included in the condensed consolidated balance sheet line item “Short-term investments”.~~

~~(2)~~

~~Included in the condensed consolidated balance sheet line item “Short-term investments”, with maturity terms between 4 and 12 months held in India.~~

~~(3)~~

~~Included in the condensed consolidated balance sheet line item “Other long-term assets”.~~

~~(4)~~

~~Included in the condensed consolidated balance sheet line item “Other long-term liabilities”. See Note 16 – Warrants – for further details.~~

Fair Value Hierarchy as of December 31, 2021

Aggregate

Level 1

Level 2

Level 3

Fair Value

Assets:

Mutual funds (1)

$
602

$
—

$
—

$
602

Certificates of deposit (2)

—

5,634

—

5,634

Total Assets

$
602

$
5,634

$
—

$
6,236

Liabilities

Interest rate swap (3)

$
—

$
35

$
—

$
35

Warrant liability (4)

—

889

—

889

Total Liabilities

$
—

$
924

$
—

$
924

~~(1)~~

~~Included in the condensed consolidated balance sheet line item “Short-term investments”.~~

~~(2)~~

~~Included in the condensed consolidated balance sheet line item “Short-term investments”, with maturity terms between 4 and 12 months held in India.~~

~~(3)~~

~~Included in the condensed consolidated balance sheet line item “Other long-term liabilities”.~~

~~(4)~~

~~Included in the condensed consolidated balance sheet line item “Other long-term liabilities”. See Note 16 – Warrants – for further details.~~

The values of short-term investments as of June 30, ~~2022~~2023 and as of December 31, ~~2021~~2022 were as follows (in thousands):


	As of June 30, 2022								As of December 31, 2021								As of June 30, 2023								As of December 31, 2022
	Cost		Unrealized Gains		Unrealized Losses		Fair Value		Cost		Unrealized Gains		Unrealized Losses		Fair Value		Cost		Unrealized Gains		Unrealized Losses		Fair Value		Cost		Unrealized Gains		Unrealized Losses		Fair Value
Mutual funds	$	570	$	9	$	—	$	579	$	572	$	30	$	—	$	602	$	520	$	74	$	—	$	594	$	509	$	58	$	—	$	567
Certificates of deposit		101		—		—		101		5,634		—		—		5,634		36		—		—		36		20		—		—		20

There were 0no transfers into or out of Level 2 or Level 3 for the six months ended June 30, ~~2022~~2023 and the year ended December 31, ~~2021.~~2022.

Goodwill as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was as follows (in thousands):

As of June 30, 2023, the Company evaluated the relevant events and circumstances under ASC 350-20-35-3C that would more likely than not reduce the fair value of a reporting unit below its carrying amount, including potential declines in Kaleyra's stock price, market capitalization and operating results, noting no such events or circumstances in the current quarter.

Following the launch of the Value Creation Program in early 2023, during the current quarter the Company decided to refocus the UK business on higher margin product offerings to further improve the group financial and operating performance, with a resulting downward revision to UK projected cash flows. In consideration of such event, the Company performed its goodwill impairment test analysis at June 30, 2023 on the reporting unit to which the relevant goodwill was allocated, driven by assumptions regarding estimated future cash flows, discount rates and perpetual growth rates to determine the relevant reporting unit’s estimated fair value. The recoverable amount of this reporting unit was estimated in accordance with the fair value approach under the discounted cash flows method based on a five-year projections period. As a result of this assessment, after recording the impairment of amortizable intangible assets, as described below, the Company concluded that no impairment losses were to be recorded on this reporting unit as of the interim date as the fair value of the reporting unit exceeded its carrying amount. No impairment indicators were noted in the other reporting units.

As of June 30, 2023 and December 31, 2022, the Company recorded the carrying amount of goodwill equal to $111.9 million and $111.5 million, respectively.

As of June 30, 2023, the Company evaluated the relevant events or changes in circumstances under ASC 360-10-35-21 that could potentially indicate that the carrying amount of the amortizable intangible assets may not be recoverable.

During the three months ended June 30, 2023, impairment charges of $234,000 and $87,000 were recorded on UK developed technology and trade names amortizable intangible assets, respectively. Impairment losses were recorded in relation to the no more recoverable amounts of intangible assets following the overall downward revision to UK projected cash flows, as described above. The revised estimated cash flow projections were the drivers for impairment losses determined as the difference between the carrying amount and the estimated fair values under the Relief from Royalty Method for the developed technology and trade names intangibles. No impairment indicators were noted on other amortizable intangible assets.

Impairment loss is included in “Intangible asset impairment” on the condensed consolidated statements of operations.

Amortization expense was ~~$8.8~~$2.3 million and ~~$2.2~~$4.4 million for the three months ended June 30, 2023 and 2022, respectively. Amortization expense was $4.5 million and $8.8 million for the six months ended June 30, 2023 and 2022, ~~and 2021,~~ respectively.

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the current portion of bank and other borrowings amounts to ~~$13.8~~$12.9 million and ~~$15.8~~$15.4 million, respectively. As of June 30, ~~2022,~~2023, this item was comprised of ~~$10.6~~$9.4 million of the current portion of bank and other borrowings and ~~$3.2~~$3.5 million of credit line facilities. As of December 31, ~~2021,~~2022, this item was comprised of ~~$10.5~~$11.4 million of the current portion of bank and other borrowings and ~~$5.3~~$4.0 million of credit line facilities.

As of June 30, ~~2022, the Company had credit line facilities~~ ~~denominated in Euro~~ ~~for a total amount of $5.2 million, of which $3.2 million had been used. As of December 31, 2021,~~2023, the Company had credit line facilities denominated in Euro for ~~$6.7~~a total amount of $5.4 million, of which ~~$5.3~~$3.5 million had been used. As of December 31, 2022, the Company had credit line facilities denominated in Euro for $5.4 million, of which $4.0 million had been used.

The credit lines denominated in Euro may be drawn upon at variable interest rates in the following range: ~~0.5%~~1.00% - ~~2.2%~~4.60%. The weighted average interest rate on those credit line facilities outstanding as of June 30, ~~2022~~2023 was ~~1.08%~~1.39%.

Long-term bank and other borrowings consist of the following (in thousands):


									Interest Nominal Rate														Interest Nominal Rate
	As of June 30,		As of December 31,			Interest Contractual Rate			As of June 30,			As of December 31,			As of June 30,		As of December 31,			Interest Contractual Rate			As of June 30,			As of December 31,
	2022		2021		Maturity	as of June 30, 2022			2022			2021			2023		2022		Maturity	as of March 31, 2023			2023			2022
UniCredit S.p.A. (Line A Tranche 1)	$	1,534	$	2,330	July 2023	Euribor 3 months + 3.10%				2.80	%		2.80	%	$	320	$	943	July 2023	Euribor 3 months + 3.10%				2.80	%		2.80	%
UniCredit S.p.A. (Line A Tranche 2)		78		113	November 2023	Euribor 3 months + 3.10%				2.80	%		2.80	%		27		53	November 2023	Euribor 3 months + 3.10%				2.80	%		2.80	%
UniCredit S.p.A. (Line B)		1,723		2,337	May 2024	Euribor 3 months + 2.90%				2.60	%		2.60	%		898		1,324	May 2024	Euribor 3 months + 2.90%				2.60	%		2.60	%
UniCredit S.p.A. (Line C)		1,217		1,833	August 2023	Euribor 3 months + 3.90%				3.71	%		3.33	%		258		755	August 2023	Euribor 3 months + 3.90%				7.48	%		6.03	%
Intesa Sanpaolo S.p.A. (Line 1)		—		290	April 2022	Euribor 3 months + 2.30%				2.11	%		1.73	%
Intesa Sanpaolo S.p.A. (Line 2)		2,135		2,872	April 2024	Euribor 3 months + 3.10%				2.91	%		2.53	%		1,131		1,654	April 2024	Euribor 3 months + 3.10%				6.68	%		5.23	%
Intesa Sanpaolo S.p.A. (Line 3)		8,256		8,961	June 2026	Euribor 3 months + 2.15%				1.96	%		1.58	%		6,450		7,927	June 2026	Euribor 3 months + 2.15%				5.73	%		4.28	%
Intesa Sanpaolo S.p.A. (Line 4)		4,914		5,927	July 2026	Euribor 3 months + 2.20%				2.01	%		1.63	%		3,958		4,466	July 2026	Euribor 3 months + 2.20%				5.78	%		4.33	%
Monte dei Paschi di Siena S.p.A. (Line 1)		—		76	April 2022		0.95	%		0.95	%		0.95	%
Monte dei Paschi di Siena S.p.A. (Line 2)		696		1,132	June 2023		1.50	%		1.50	%		1.50	%		—		356	June 2023		1.50	%		1.50	%		1.50	%
Banco BPM S.p.A. (Line 1)		367		593	June 2023	Euribor 3 months + 2.00%				2.00	%		2.00	%		—		189	June 2023	Euribor 3 months + 2.00%				5.58	%		4.13	%
Banco BPM S.p.A. (Line 3)		3,802		5,014	September 2024	Euribor 3 months + 3.00%				2.81	%		2.43	%		2,255		3,059	September 2024	Euribor 3 months + 3.00%				6.58	%		5.13	%
Banco BPM S.p.A. (Line 4)																2,071		2,491	July 2025	Euribor 3 months + 1.95%				5.53	%		4.08	%
Simest 1		174		189	December 2023		0.50	%		0.50	%		0.50	%		91		134	December 2023		0.50	%		0.50	%		0.50	%
Simest 2		173		188	December 2023		0.50	%		0.50	%		0.50	%		90		133	December 2023		0.50	%		0.50	%		0.50	%
Simest 3		318		345	December 2023		0.50	%		0.50	%		0.50	%		166		244	December 2023		0.50	%		0.50	%		0.50	%
Simest 4		1,122		1,218	April 2027		0.50	%		0.50	%		0.50	%		1,168		1,150	April 2027		0.50	%		0.50	%		0.50	%
Total bank and other borrowings		26,509		33,418												18,883		24,878
Less: current portion		10,581		10,508												9,389		11,419
Total long-term portion	$	15,928	$	22,910											$	9,494	$	13,459

On February 23, 2021, the Company entered into an amendment to the existing unsecured loan agreement with Intesa Sanpaolo S.p.A. (the “Intesa Sanpaolo S.p.A. - Line 1”) and an amendment to the existing unsecured loan agreement with Intesa Sanpaolo S.p.A. (the “Intesa Sanpaolo S.p.A. - Line 2”). The amendments each provide that certain financial covenants be amended, in particular as they relate to the previously agreed net financial position/equity ratio and the net financial position/gross operating income ratio. Upon

the approval of the audited statutory financial statements of Kaleyra S.p.A. for the year ended December 31, 2020 in June 2021, the calculated net financial position/gross operating income ratio failed to comply with the amended terms of the unsecured loan agreement with Intesa Sanpaolo S.p.A. As a result of such failure, Intesa Sanpaolo S.p.A. was entitled to raise the interest rate bearing on the existing financing agreements of Intesa Sanpaolo S.p.A. by fifty (50) bps. NaN principal amount was subject to early reimbursement under the amended terms of the loan agreement. On August 3, 2021, the Company was notified by Intesa Sanpaolo S.p.A. of their resolution to apply the incremental fifty (50) bps to the interest rate bearing on future payments of interest. In the audited fiscal year ended December 31, 2021, Kaleyra successfully complied with financial covenants in place with Intesa Sanpaolo S.p.A..

On March 9, 2021 and March 10, 2021, respectively, Kaleyra S.p.A. received the approval by UniCredit to postpone repayment of the principal amounts due under the existing Line A Tranche (2), Line B and Line C of the long-term financing agreements with UniCredit S.p.A. for a period of six (6) months starting from March 1, 2021 until August 31, 2021, and under Line A Tranche (1) of the long-term financing agreement with UniCredit S.p.A. starting from February 1, 2021 until July 31, 2021. Consequently, the repayment schedule under all financing agreements mentioned above was extended for the period equal to that of the six (6) month suspension period.

On April 15, 2021, Kaleyra S.p.A. and Banco Popolare di Milano S.p.A. entered into an agreement to postpone repayment of the principal amounts due under the existing Line 3 of the long-term unsecured financing agreement for a period of six (6) months starting from March 31, 2021 until September 30, 2021, without prejudice to Kaleyra S.p.A.’s obligations to continue to pay interest in relation to the principal amount at the original due dates.

~~On April 15, 2021,~~ the Company entered into a general unsecured loan agreement with Simest S.p.A for a total of ~~$3.6~~$3.6 million (€3.0 million at the April 15, 2021 exchange rate) relating to the Fund 394/81 (the “Simest Financing”) and Fund for Integrated Promotion (the “Co-financing”) for implementation of a program to break into foreign markets. The principal amount of ~~$3.1~~$3.1 million (€2.6 million at the April 15, 2021 exchange rate) applies to the Simest Financing. The Simest Financing bears a subsidized interest rate of ~~0.055%~~0.055% and a reference interest rate of ~~0.55%~~0.55%. The loan has a duration of six ~~(6)~~(6) years starting from the date of disbursement and is to be repaid in half-yearly installments starting after a two-year pre-amortization period. The principal amount of ~~$505,000~~$505,000 (€422,000 at the April 15, 2021 exchange rate) of the financing applies to the Co-financing and was granted in accordance with Section 3.1 of the Temporary Framework for State aid measures to support the economy in the ~~current~~ COVID-19 outbreak of the European Commission, and as such is non-refundable as long as the funds are used for the purposes stated within the Framework.

On September 15, 2021, the principal amount of ~~$1.3~~$1.3 million (€1.1 million at the September 15, 2021 exchange rate) and ~~$208,000~~$208,000 (€176,000 at the September 15, 2021 exchange rate) relating to the first installment of the Simest Financing (“Simest 4”) and Co-financing, respectively, was disbursed to the Company pursuant to the terms of the loan agreement with Simest S.p.A. The non-refundable Co-financing principal amount will be assessed under Section 3.1 of the Framework and will be accounted in the condensed consolidated statement of operations within the 25-month period of the agreement execution date.

On July 28, 2022, the Company entered into a new unsecured loan agreement with Banco Popolare di Milano S.p.A. for a total principal amount of $2.5 million (€2.5 million at the July 28, 2022 exchange rate) with a duration of 36 months and bearing interest rate equal to Euribor 3 months + 1.95%.

As of June 30, ~~2022,~~2023, all of the available long-term facilities were drawn in full except for the Simest Financing and Co-financing, as described above.

The above facilities include a series of statements and disclosure obligations, in line with the standard practice for these types of financings, whose breach could result in termination, early repayment or enforcement of acceleration rights. In addition, some of the above facilities require compliance with certain financial covenants, based on Kaleyra S.p.A.’s EBITDA, net financial position and equity, calculated upon the approved audited statutory financial statements of Kaleyra S.p.A. Failure to comply with those financial covenants may result in the repayment of the outstanding debt under the relevant facility or the increase in the interest rate bearing on the existing financing agreements. As of December 31, 2022, the Company was in compliance with all the financial covenants.

Interest expense on bank and other borrowings was ~~$133,000~~$275,000 and ~~$180,000~~$133,000 for the three months ended June 30, 2023 and 2022, ~~and 2021,~~ respectively.

Interest expense on bank and other borrowings was ~~$289,000~~$524,000 and ~~$370,000~~$289,000 for the six months ended June 30, 2023 and 2022, ~~and 2021,~~ respectively.

As consideration for the Business Combination, on November 25, 2019 the Company issued unsecured convertible promissory notes to each of Esse Effe and Maya in the amount of $6.0 million and $1.5 million, respectively, (the “Business Combination Convertible Notes”) and also issued other unsecured promissory notes to each of Esse Effe and Maya in the identical respective amounts (the “Non-convertible Notes”). The Non-convertible Notes held by Esse Effe and Maya were paid in full during fiscal year 2020 and 0 amount remains outstanding for such notes as of June 30, 2022.

~~As of June 30, 2022, the outstanding balance on the Business Combination Convertible Notes held by Esse Effe and Maya amounted to 0.~~

The Business Combination Convertible Notes are classified as “Notes payable due to related parties” in the accompanying condensed consolidated balance sheets. Any accrued interest payable is included in “Other current liabilities” in the accompanying condensed consolidated balance sheets.

On the fifteen-month anniversary of the Business Combination Date or February 25, 2021, the fifty percent (50%) of the previously outstanding amount of Business Combination Convertible Notes held by Esse Effe and Maya was repaid, with a total of $3.0 million and $750,000 in principal and $176,000 and $44,000 in accrued interest being paid to Esse Effe and Maya, respectively, pursuant to the terms of the Business Combination Convertible Notes.

Under the terms of the Business Combination Convertible Notes, the outstanding principal balance of the Business Combination Convertible Notes, plus all accrued and unpaid interest and fees due under these notes, became due and payable, upon the receipt by the Company of cash proceeds of an equity financing in an aggregate gross amount of $105.0 million or 8,400,000 shares of Kaleyra common stock at $12.50 per share issued to the PIPE Investors in the private placement equity financing event immediately prior to the closing of the Merger Agreement of June 1, 2021. The principal amount of $3.8 million plus accrued interest of $84,000 for the Business Combination Convertible Notes held by Esse Effe and Maya was paid in full on June 2, 2021. Following the repayment, the Business Combination Convertible Notes terminated pursuant to their terms and no further amounts were due.

On April 16, 2020, the Company entered into a Settlement Agreement and Release (the “Settlement Agreement”) with its Business Combination financial advisory service firms, Cowen and Company, LLC (“Cowen”) and Chardan Capital Markets, LLC, (“Chardan” and, collectively, the “Service Firms”), pursuant to which it agreed to pay an affiliate of Cowen, Cowen Investments II LLC (“Cowen Investments”), and Chardan, in full satisfaction of all amounts owed to the Service Firms as of December 31, 2019, ~~$5.4~~$5.4 million in the aggregate, as follows: (i) ~~$2.7~~$2.7 million in the aggregate in common stock of the Company (the “Settlement Shares”) to be issued the business day prior to the filing of a resale registration statement for such Settlement Shares (the “Bank Resale Registration Statement”), (ii) convertible notes totaling $2.7 million in the aggregate with a maturity date three years after issuance and bearing interest at five percent (5%) per annum (but with lower interest rates if the notes are repaid earlier than one year or two years after issuance) and with interest paid in arrears to the payee on March 15, June 15, September 15 and December 15 of each year, with such convertible notes to also be issued the business day prior to the filing of the Resale Registration Statement and (iii) in the event that the Beneficial Ownership Limitation (as defined below) would otherwise be exceeded upon delivery of the Settlement Shares above, a warrant agreement also to be entered into with and issued to the Services Firms the business day prior to the filing of the Resale Registration Statement, whereby the amount of common stock of the Company by which the Beneficial Ownership Limitation would otherwise have been exceeded upon delivery of the Settlement Shares will be substituted for by warrants with an exercise price of $0.01 per share issued pursuant to a Warrant Agreement (the “Warrant Agreement”) and the common stock underlying the Warrant Agreement (the “Warrant Shares”). The Beneficial Ownership Limitation was initially 4.99% of the number of shares of the common stock outstanding of the Company immediately after giving effect to the issuance of these shares of common stock. The number of Settlement Shares was calculated using as the price per Settlement Share an amount equal to a fifteen percent (15%) discount to the ten-day (10-day) trailing dollar volume-weighted average price for the common stock of the Company on the NYSE American LLC stock exchange (the “VWAP”) on the business day immediately prior to the date on which the Company filed the Resale Registration Statement. In addition, the price per share for determining the number of shares of common stock of the Company to be issued upon the conversion of the convertible notes is a five percent (5%) premium to the ten-day (10-day) trailing VWAP as of the date immediately prior to the issuance date of the convertible notes, rounded down to the nearest whole number.

On May 1, 2020, in connection with the Settlement Agreement, Kaleyra issued: (i) an aggregate of 125,885 Settlement Shares to Cowen Investments and Chardan, consisting of 107,002 Settlement Shares issued to Cowen Investments, and 18,883 Settlement Shares issued to Chardan (on a post-reverse split basis); and (ii) convertible promissory notes in the aggregate principal amount of $2.7 million to Cowen Investments and Chardan, consisting of a convertible promissory note in the principal amount of $2.3 million issued to Cowen Investments (the “Cowen Note”) and a convertible promissory note in the principal amount of $405,000 issued to Chardan (the “Chardan Note”). The unpaid principal of the Cowen Note was convertible at the option of Cowen Investments into 86,620 shares of common stock of Kaleyra, if there was no principal reduction, and the unpaid principal of the Chardan Note is convertible at the option of Chardan into 15,285 shares of common stock of Kaleyra, if there has been no principal reduction (on a post-reverse split basis). As the Beneficial Ownership Limitation was not triggered by the issuance of the Settlement Shares, no Warrant Agreement was necessary and no warrants were issued.

On February 4, 2021, Cowen Investments elected to convert the outstanding amount of the Cowen Note into 86,620 shares of common stock pursuant to the terms of the Cowen Note, and as a result the Company has no further obligations with respect to the Cowen Note (on a post-reverse split basis).

On May 1, 2023, Kaleyra reimbursed the outstanding principal amount of $405,000 plus accrued and unpaid interest thereon of the Chardan Note. Following this payment, the Company has no further obligations with respect to the Chardan Note.

As of June 30, 2023, there was no outstanding amount related to the Chardan Note.

On February 18, 2021, in support of the consummation of the Merger, Kaleyra entered into Convertible Note Subscription Agreements, each dated February 18, 2021, with the Convertible Note Investors. On June 1, 2021, the Company issued the Merger Convertible Notes with an aggregate principal amount of $200 million. The Company incurred $11.4 million of issuance costs as a result of the issuance of the Merger Convertible Notes.

In connection with the issuance of the Merger Convertible Notes pursuant to the terms of the Convertible Note Subscription Agreements, the Company entered into an indenture (the “Indenture”) with Wilmington Trust, National Association, a national banking association, in its capacity as trustee thereunder, in respect of the $200 million of Merger Convertible Notes that were issued to the Convertible Note Investors.

The Merger Convertible Notes bear interest at a rate of 6.125% per annum, payable semi-annually, in arrears on each June 1 and December 1 of each year, commencing on December 1, 2021, to holders of record at the close of business on the preceding May 15 and November 15, respectively. After giving effect to the Reverse Stock Split of Kaleyra's shares of common stock as of March 9, 2023, as described in Note 1 - Description of Organization and Business Operations, the Merger Convertible Notes are convertible into 3,386,243 shares of Parent Common Stock at a conversion price of $59.063 per share of Parent Common Stock in accordance with the terms of the Indenture, and mature five years after their issuance. The Company may, at its election, force conversion of the Merger Convertible Notes after the second anniversary of the issuance of the Merger Convertible Notes, subject to a holder’s prior right to convert, if the last reported sale price of the Parent Common Stock exceeds 130% of the conversion price for at least 20 trading days during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter. Following certain corporate events that occur prior to the maturity date or if the Company forces a mandatory conversion, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Merger Convertible Notes in connection with such a corporate event or has its Merger Convertible Notes mandatorily converted, as the case may be. In addition, in the event that a holder of the Merger Convertible Notes elects to convert its Merger Convertible Notes prior to the third anniversary of the issuance of the Merger Convertible Notes, the Company will be obligated to pay an amount equal to twelve months of interest, or if on or after such third anniversary of the issuance of the Merger Convertible Notes, any remaining amounts that would be owed to, but excluding, the fourth anniversary of the issuance of the Merger Convertible Notes (the “Interest Make-Whole Payment”). The Interest Make-Whole Payment will be payable in cash or shares of Parent Common Stock as set forth in the Indenture.

Upon the issuance of the Merger Convertible Notes, management made the assessment whether the convertible instrument contained embedded conversion features for bifurcation and concluded that such embedded conversion features met the definition of a derivative but qualified for the scope exception under ASC 815-10-15-74(a) as they are indexed to the Company’s stock and qualify for classification within stockholders’ equity. Management determined that the Interest Make-Whole Payment met the definition of a derivative, but the value was de minimis and as such no amount was recorded at the time of the issuance of the Merger Convertible Notes. Management will continue to monitor the valuation of the Interest Make-Whole Payment provision and assess the need to record a liability in future periods. There was no such liability recorded as of June 30, 2023 and December 31, 2022, respectively.

As of June 30, 2023, the outstanding amount of the Merger Convertible Notes was $192.8 million, net of issuance costs. During the three months ended June 30, 2023, contractual interest expense amounted to $3.1 million and amortization of the debt issuance costs amounted to $551,000. During the six months ended June 30, 2023, contractual interest expense amounted to $6.1 million and amortization of the debt issuance costs amounted to $1.1 million. The liability is included in the condensed consolidated balance sheet line item “Long-term portion of notes payable” and the interest expense is included in “Financial expense, net” on the condensed consolidated statements of operations.

The terms of the Merger Convertible Notes require Kaleyra to repurchase the Merger Convertible Notes for cash at the option of the holder in the event of a fundamental change, as defined under the Indenture, including, but not limited to, a change in beneficial ownership by a “person” or “group” within the meaning of Section 13(d) of the Exchange Act, representing more than 50% of the voting power of Kaleyra common stock or its delisting from any of the NYSE, The Nasdaq Global Select Market or The Nasdaq Global Market.

The Merger Convertible Notes provide that both the consummation of the Tata Merger and the delisting of our common stock from the NYSE would constitute a “fundamental change” under Section 15.02 of the Indenture, which would entitle each holder, at such holder’s option, to require the Company to repurchase for cash all or any portion of such holder’s notes at a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon.

On April 3, 2023, Kaleyra received the Market Cap Notice from the NYSE, informing the Company that it was not in compliance with the continued listing criteria set forth in Section 802.01B of the NYSE’s Listed Company Manual with respect to the minimum market capitalization and shareholders' equity requirement. Within forty-five days of receipt of the Market Cap Notice, the Company responded to the NYSE with a business plan to cure the deficiency and to regain compliance, subject to review, acceptance and monitoring by the NYSE, within the eighteen-month cure period following the receipt of the Market Cap Notice, as provided by the NYSE’s Listed Company Manual. On July 5, 2023, Kaleyra received written confirmation from the NYSE that the business plan was accepted by the Listings Operations Committee and the quarterly monitoring activities of the plan by the NYSE were scheduled to run throughout the eighteen-month cure period from the receipt of the Market Cap Notice. The Company will be required to achieve the minimum continued listing standards of either average global market capitalization over a consecutive 30 trading-day period of $50 million or total shareholders’ equity of $50 million at the completion of the eighteen-month plan period. Under Section 802.02, the NYSE will evaluate an accelerated cure and an early termination of the plan period prior to the end of the eighteen months if the Company is able to demonstrate returning to compliance with the applicable continued listing standards, or achieving the ability to qualify under an original listing standard, for a period of two consecutive quarters. Refer to Note 2 - Summary of Significant Accounting Policies and Note 21 - Subsequent Events for more information relating Kaleyra’s considerations on going concern basis of accounting and the Market Cap Notice, respectively.

As of June 30, 2023, and through the date the financial statements are issued, no fundamental change was triggered under the Indenture for the Merger Convertible Notes.

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

You should read the following management’s discussion and analysis in conjunction with the condensed consolidated financial statements of Kaleyra, Inc. (“Kaleyra,” the “Company,” “we,” “us,” and “our” refer to Kaleyra, Inc. and all of its consolidated subsidiaries) and the related notes included elsewhere in our Quarterly Report on Form 10-Q for the three-month period ended June 30, 2023. The discussion below includes forward-looking statements about Kaleyra’s business, operations and industry that are based on current expectations that are subject to uncertainties and unknown or changed circumstances. Kaleyra’s actual results may differ materially from these expectations as a result of many factors, including, but not limited to, those risks and uncertainties described under “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2022 and this Quarterly Report on Form 10-Q. We assume no obligation to update the forward-looking statements or such risk factors.

This Quarterly Report on Form 10-Q and the documents incorporated herein by reference include forward‑looking statements within the meaning and protections of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements are also made in reliance upon the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements with respect to Kaleyra’s beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

Kaleyra is a result of the expansion of the former Ubiquity, which was founded in Milan, Italy in 1999. Ubiquity secured a leading market position in mobile messaging on behalf of the Italian financial services industry and then expanded its products and geographic offerings. Ubiquity acquired Solutions Infini of Bangalore, India in 2017 and Buc Mobile of Vienna, Virginia in 2018. Kaleyra was rebranded as Kaleyra S.p.A. in February 2018. Following the integration of the acquired entities, the combined company became collectively engaged in the operation of the Platforms on behalf of Kaleyra’s customers.

On February 22, 2019, the Company (f/k/a GigCapital, Inc.) entered into a stock purchase agreement (the “Stock Purchase Agreement”) by and among the Company, Kaleyra S.p.A., Shareholder Representative Services LLC, 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. GigCapital Inc. was incorporated in Delaware on October 9, 2017 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

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 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, 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 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 (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 (on a post-reverse split basis) of Kaleyra common stock on the date of issuance, equal to $18.8 million. 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 S.r.l. (“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 New York Stock Exchange (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 law 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 ownership 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.

On November 7, 2022, Kaleyra received a written notice (the “Price Notice”) from 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 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. Pursuant to Section 802.01C, the Company had a period of six months following the receipt of the Notice to regain compliance with the minimum share price requirement.

On February 14, 2023, Kaleyra held the Special Meeting to approve an amendment to the Company’s Certificate of Incorporation to effect, at the discretion of the Board of Directors, the Reverse Stock Split.

Kaleyra to serve the demand from global businesses using existing and emerging communication channels, while driving labor and cost efficiencies. The Program supports the organizational streamlining of labor intensive functions aimed at reducing monthly cash payroll costs by more than 15% on an annual basis. As a result of the Company’s launched initiatives, significant improvement in Adjusted EBITDA is expected in 2023 compared to 2022, with additional growth anticipated in 2024 when compared to 2023. Ultimately, the result of the Company’s Adjusted EBITDA improvement will convert to cash throughout the life of the Program. The expected increase in cash flow is important and will significantly aid Kaleyra’s servicing its outstanding debt requirements. During the three months ended June 30, 2023, the Company showed another sequential positive Adjusted EBITDA. This was mainly driven by the reduction of operating expenses, in particular the decrease in the Company's headcount of 34 full time equivalents during the six-month period ended June 30, 2023.

On April 3, 2023, the Company received a written notice (the “Market Cap Notice”) from the NYSE, informing Kaleyra that it was not in compliance with the continued listing criteria set forth in Section 802.01B of the NYSE’s Listed Company Manual with respect to the minimum market capitalization and shareholders’ equity requirement. Within forty-five days of receipt of the Market Cap Notice, the Company responded to the NYSE with a business plan to cure the deficiency and to regain compliance, subject to review, acceptance and monitoring by the NYSE, within the eighteen-month cure period following the receipt of the Market Cap Notice. In addition, with the Market Cap Notice, Kaleyra also 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. On July 5, 2023, Kaleyra received written confirmation from the NYSE that the business plan was accepted by the Listings Operations Committee and the quarterly monitoring activities of the plan by the NYSE were scheduled to run throughout the eighteen-month cure period from the receipt of the Market Cap Notice. The Company will be required to achieve the minimum continued listing standards of either average global market capitalization over a consecutive 30 trading-day period of $50 million or total shareholders’ equity of $50 million at the completion of the eighteen-month plan period. Under Section 802.02, the NYSE will evaluate an accelerated cure and an early termination of the plan period prior to the end of the eighteen months if the Company is able to demonstrate returning to compliance with the applicable continued listing standards, or achieving the ability to qualify under an original listing standard, for a period of two consecutive quarters. Refer to Note 2 - Summary of Significant Accounting Policies and Note 21 - Subsequent Events in the Company’s condensed consolidated financial statements for more information relating Kaleyra’s considerations on going concern basis of accounting and the Market Cap Notice, respectively.

The Company continues to pursue avenues to expand its customer base as well as increase revenue from existing customers. Kaleyra’s revenue growth is fueled by the Company’s ability to maintain its customers, drive new services into existing customers, and monetize its pipeline to expand its enterprise customer base. Combined with deep integrations with customer software, and the ability to deliver messages across the world on its trusted network, the Company's product offering remains compelling. Brands are always going to seek to connect with their customers, especially on mobile devices, and Kaleyra is ready to be their partner regardless of channel. While challenges in the global economy may impact near-term growth rates, the industry remains vital and healthy. Kaleyra’s ability to further penetrate its customer base, expand margins and grow geographically is dependent on the Company's success in attracting new customers, selling additional products into our existing customer base, and adding higher gross margin products in our product portfolio. The Company also plans to expand its reach geographically. The ability to expand into new geographies is supported by an already sizeable global footprint, both in terms of carrier direct connections and physical offices.

Kaleyra has always invested heavily in research and development, as the market is fast moving, and new channels are always developing. There are opportunities to layer in intelligence into the CPaaS market and the Company is actively pursuing these areas. Kaleyra has already achieved early success with chatbots and SMS-over-IP which cuts out termination costs yielding higher gross margins.

Kaleyra’s competitive positioning in the market is due in part to its unique infrastructure and continued enhancements and investments in research and development. This infrastructure entails a combination of security, compliance and integration capabilities that protect the integrity and privacy of our customers’ transactions. The Company believes this foundation leads to continued customer satisfaction and enables Kaleyra to maintain a leadership position in the fast-evolving industry in which it operates. Evidence of our success in maintaining best in class customer satisfaction can be seen by the top ten customers contributing 46.3% of revenue in the quarter ended June 30, 2023, and zero customer churn over the past year.

On June 28, 2023, Kaleyra and Tata Communications entered into Tata Merger Agreement, pursuant to which, at the closing, upon the terms and subject to the conditions set forth therein, Merger Sub, a Delaware corporation and wholly owned subsidiary of Tata Communications to be formed by Tata Communications, will merge with and into the Company, with the Company being the surviving corporation in the Tata Merger. Under the terms of the agreement, Tata Communications has agreed to acquire Kaleyra in a cash only transaction, at a price per share of $7.25 for a total consideration to Kaleyra shareholders of approximately $100 million and the assumption of all outstanding debt (approximately $157.4 million of net debt outstanding as of June 30, 2023). The Tata Merger has been unanimously approved by the Boards of Directors of both Tata Communications and Kaleyra. Consummation of the deal is subject to approval by Kaleyra's stockholders, certain regulatory approvals and other customary closing conditions. Upon closing of the transaction, expected in six to nine months of the announcement date, Kaleyra will become a subsidiary of Tata Communications. In connection with the execution of the Tata Merger Agreement, the Company has ceased its search for a new Chief Executive Officer. It is contemplated that Dario Calogero will continue to serve as Chief Executive Officer of the Company up to the closing of the Tata Merger.

The demand for cloud communications is increasingly driven by the growing, and often mandated, need for enterprises to undertake a digital transformation that includes omnichannel, mobile-first and interactive customer communications. Mobile network operators and OTTs typically are the gateway to reach end-users’ mobile devices. Kaleyra enables its customers and business partners to connect enterprise software and applications to mobile network operators by providing carefully documented Application Programming Interfaces (“APIs”). APIs allow building omnichannel journeys in a seamless way, with failover capabilities from one channel to another. In addition, Kaleyra also offers an extensive set of no-coding cloud-based visual interfaces to program communications to the customers across multiple channels. Kaleyra’s Platforms couple the possibility of sending communications to end-users to a “Software as a Service” or SaaS business model, creating what is generally referred to as a “Communications Platform as a Service”, or simply CPaaS.

Kaleyra’s vision is to be the CPaaS provider that best aligns with its customers’ and business partners’ communication requirements and outcomes, and the most trusted provider in the world. This requires a combination of security, compliance and integration capabilities that protects the integrity and privacy of Kaleyra’s customers’ transactions and includes other key features such as ease of provisioning, reliable network connectivity, high availability for scaling, redundancy, embedded regulatory compliance, configurable monitoring, analytics, and reporting. Kaleyra believes the percentage of CPaaS customers that will require security, compliance and integrations will represent an increasingly larger portion of the market, particularly with the expected exponential growth of transactional-by-nature cloud communication applications, better enabling Kaleyra to set itself apart from its competition.

Kaleyra’s customers are primarily enterprises that use digital mobile communications in the conduct of their business. Kaleyra provides multiple levels of global customer support 24x7, SLAs and network reliability to meet the expectations and requirements of its customers. Customers and business partners that use the Platforms value the Platforms’ network reliability, and Kaleyra’s responsive customer support and competitive pricing. In particular, Kaleyra was listed by Gartner (Gartner, Market Guide for Communications Platform as a Service, Worldwide, Daniel O’Connell, Lisa Under-Farboud, October 2022) as a co-creator, in other words, a CPaaS focused on a consultative business model that emphasizes consulting services, solves business problems and often pursues specific verticals. Kaleyra also partners with consulting companies and digital transformation players worldwide. Kaleyra was awarded the Gold award for “CPaaS Provider of the Year” by Juniper Research in February 2022, and was ranked as a Leading Challenger in the global CPaaS market by Juniper Research, a leading independent market research, forecasting and consulting services firm, in its latest CPaaS Competitor Leaderboard (2023).

Kaleyra services a broad base of customers and business partners throughout the world operating in diverse sectors and regions. Kaleyra’s key customers are large Business to Consumer (“B2C”) and Business to Business to Consumer (“B2B2C”) enterprises that use digital and mobile communications in the conduct of their business. Kaleyra has a concentration of business within the financial services industry that serves its major European banking end-users. With each relationship, Kaleyra is the link between the financial institutions and their end-users. In linking these two parties, Kaleyra’s Platforms leverage the telecommunications providers to transmit message data to these end-users.

During the three months ended June 30, 2023, Kaleyra processed nearly 11.5 billion billable messages and 2.4 billion voice calls. Kaleyra organizes its efforts in four regions, Americas, Europe, APAC and MEA. Its workforce is spread across the globe either in full-remote or office-based mode, in one of its principal offices based in New York, New York, Vienna, Virginia, Atlanta, Georgia, Milan, Italy, Munich, Germany, London, United Kingdom, and Bangalore, India. Kaleyra has over 620 employees across the four regions.

Kaleyra has customers and business partners worldwide across industry verticals such as financial services, e-commerce and transportation. In both the three and six months ended June 30, 2023 and 2022, Kaleyra had no individual customer that accounted for more than 10% of Kaleyra’s consolidated total revenue.

For the three months ended June 30, 2023, 96.7% of revenues came from customers that have been on the Platforms for at least one year. Although Kaleyra continues to expand by introducing new customers to the Platforms, the breadth and stability of its existing customers provide it with a solid base of revenue upon which it can continue to innovate and make investments. In continuity with the past, Kaleyra is committed to strengthening its product portfolio, expand its global presence, recruit world-class talent and develop synergies with external players to capitalize on its growing market penetration opportunities and value creation.

For the three months ended June 30, 2023 and 2022, the majority of Kaleyra’s revenue was derived from its multi-channel CPaaS product offering market.

Kaleyra is exposed to fluctuations of the currencies in which its transactions are denominated. Specifically, a material portion of Kaleyra’s revenues and purchases are denominated in Euro, Indian Rupees and United Arab Emirates Dirham.

In the three-month period ending June 30, 2023, there are no material factors affecting the comparability of results.

Our critical accounting policies and significant estimates are detailed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Aside from the below listed change and improvements in accounting policy relating to Financial Instruments – Credit Losses (Topic 326) and the recoverability of Goodwill and Long-Lived and Intangible Assets, respectively, our critical accounting policies and significant estimates have not changed substantially from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022. 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. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment due to the disruptive effects of global inflation and the armed conflict between Russia and Ukraine.

Refer to Note 2 - Summary of Significant Accounting Policies in the Company's condensed consolidated financial statements for more information relating Kaleyra's considerations on going concern basis of accounting.

Refer to Note 5 – Goodwill and Intangible Assets, Net in the Company's condensed consolidated financial statements for more information relating to the Company’s consideration of events and circumstances triggering the test of goodwill and amortizable intangible assets for impairment at an interim date. In addition, following the announcement of the Tata Merger on June 28, 2023, pursuant to which Tata Communications has agreed to acquire Kaleyra for a total cash consideration of approximately $100 million and the assumption of all outstanding debt (approximately $157.4 million of net debt outstanding as of June 30, 2023), the market capitalization of the Company increased significantly above the book value of Kaleyra shareholders’ equity as of June 30, 2023, to approximate the price per share consideration offered by Tata Communications in the Tata Merger offer, which is indicative that the Company’s market capitalization was not an indicator of impairment at the interim date. This is further corroborated by a fairness opinion, publicly issued by an independent third party on June 28, 2023, supporting the fair value of the aggregate consideration offered by Tata Communications as compared to Kaleyra's implied enterprise value.

As of January 1, 2023, the Company adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The Company reports a loss allowance for expected credit losses on financial assets measured at amortized cost, mostly referring to trade receivables. In calculating expected credit losses the Company has determined a modified Loss Rate Method to be the most appropriate taking into consideration (i) data availability, (ii) familiarity with historical procedure and historical losses and (iii) compliance with the provisions of the standard with regard to the forecasting requirement. Receivables are grouped based on historical credit loss information, specific risk characteristics and any other credit factor determined appropriate such that the group of receivables shares a similar risk profile. An overall loss rate percentage is derived from an eight-quarter historical lookback period. The historical loss rate is then adjusted for reasonable and supportable forecasts with the adjusted

expected credit loss rates applied to the respective groupings trade receivable balances outstanding. Expected credit losses are reviewed periodically by management. Trade receivables are presented net of an allowance for credit losses.

Goodwill represents the excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a business combination. Goodwill is not amortized and is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Kaleyra has determined that it operates as three reporting units and has selected December 31 as the date to perform its annual impairment test. In the valuation of goodwill, management must make assumptions regarding estimated future cash flows to be derived from Kaleyra’s business. If these estimates or their related assumptions change in the future, Kaleyra may be required to record an impairment for these assets. Under ASC 350-20-35-3, management may first evaluate qualitative factors, including potential declines in Kaleyra's stock price, market capitalization and operating results, to assess if it is more likely than not that the fair value of a reporting unit is less than its carrying amount and to determine if an impairment test is necessary. Management may choose to proceed directly to the evaluation, bypassing the initial qualitative assessment. The impairment test involves comparing the fair value of the reporting unit to which goodwill is allocated to its net book value, including goodwill. A goodwill impairment loss would be the amount by which a reporting unit's carrying value exceeds its fair value, however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. No goodwill impairment charges have been recorded for any period presented. From the goodwill impairment test analysis performed at June 30, 2023, a significant amount of headroom resulted in the relevant reporting unit.

The Company evaluates long-lived assets, including property and equipment and intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group. If such evaluation indicates that the carrying amount of the asset or the asset group is not recoverable, any impairment loss would be equal to the amount the carrying value exceeds the fair value. During the six months period ended June 30, 2023 impairment charges of $234,000 and $87,000 were recorded on UK developed technology and trade names amortized intangible assets, respectively. During the year ended December 31, 2022, impairment charges of $29.3 million, $15.8 million and $4.3 million were recorded in relation to customer relationships, developed technology and trade names intangible assets, respectively.

Kaleyra’s revenue is generated primarily from usage-based fees earned from the sale of communications services offered through access to the Company’s Platforms to customers and business partners across enterprises. Revenue can be billed in advance or in arrears depending on the terms of the agreement; for the majority of customers, revenue is invoiced on a monthly basis in arrears.

Cost of revenue consists primarily of costs of communications services purchased from network service providers. Cost of revenue also includes the cost of Kaleyra’s cloud infrastructure and technology platform, amortization of capitalized internal-use software development costs related to the platform applications and amortization of developed technology acquired in past business combinations.

Gross profit is equal to the revenue less cost of revenue associated with delivering the communications services to Kaleyra’s customers.

Kaleyra’s operating expenses include research and development expense, sales and marketing expense, general and administrative expense, transactions costs and depreciation and amortization, excluding the depreciation and amortization expense related to the technology platform, which is included in cost of revenues as per above.

Research and development expense consists primarily of personnel costs, including stock-based compensation, the costs of the technology platform used for staging and development, outsourced engineering services, amortization of capitalized internal-use software development costs (other than those related to the technology platform) and an allocation of general overhead expenses. Kaleyra capitalizes the portion of its software development costs that meet the criteria for capitalization.

Sales and marketing expense is comprised of compensation, variable incentive compensation, benefits related to Kaleyra’s sales personnel, along with travel expenses, other employee related costs including stock-based compensation, and expenses related to advertising, marketing campaigns and events.

General and administrative expense is comprised of compensation and benefits of administrative personnel, including variable incentive pay and stock-based compensation, and other administrative costs such as facilities expenses, professional fees, and travel expenses.

In the three months ended June 30, 2023, revenue increased by $5.6 million, or 7%, compared to the three months ended June 30, 2022. This increase was mainly driven by the improved product and geographic mix, including the growth in the registry legacy business.

In the three months ended June 30, 2023, cost of revenue increased by $2.5 million, or 4%, compared to the three months ended June 30, 2022. Gross profit increased by $3.1 million, or 17%, in the quarter ended June 30, 2023, compared to the same period of the prior year, mainly driven by the improved product mix and geographies, including the growth in the registry legacy business.

In the three months ended June 30, 2023, research and development expenses decreased by $951,000, or 15%, results of operation compared to the three months ended June 30, 2022. Research and development expenses included $354,000 of stock-based compensation in the three months ended June 30, 2023, compared to $1.6 million in the three months ended June 30, 2022. Excluding such costs and $1.5 million in capitalized software development costs, compared to $2.2 million capitalized costs in the three months ended June 30, 2022, research and development expenses would have decreased by $380,000.

In the three months ended June 30, 2023, sales and marketing expenses decreased by $1.8 million, or 24%, compared to the three months ended June 30, 2022. Sales and marketing expenses included $110,000 of stock-based compensation in the three months ended June 30, 2023, compared to $1,2 million in the three months ended June 30, 2022. Excluding such costs, sales and marketing expenses would have decreased by $715,000, mainly as a result of the decrease in head count.

In the three months ended June 30, 2023, general and administrative expenses decreased by $1.4 million, or 8%, compared to the three months ended June 30, 2022. General and administrative expenses included (i) $1.5 million of stock-based compensation in the three months ended June 30, 2023, compared to $5.7 million in the three months ended June 30, 2022; and (ii) $661,000 of acquisition transaction costs in the three months ended June 30, 2023, compared to $75,000 in the three months ended June 30, 2022. Excluding such costs, general and administrative expenses would have increased by $2.2 million, mainly due to an increase in the provision for bad debt under ASC 326.

In the three months ended June 30, 2023, impairment charges of $234,000 and $87,000 were recorded in relation to developed technology and trade names intangibles, respectively. Impairment losses were recorded as the difference between the carrying amount and the estimated fair values of intangible assets, mainly driven by the overall decline in UK projected cash flows.

In the three months ended June 30, 2023, financial expense, net increased by $404,000, compared to the same period last year. Such increase in financial expense was mainly attributable to the accrued contractual interest expense and the amortization of issuance costs amounting to $3.1 million and $551,000, respectively, and the change in the fair value of the private warrant liability of $14,000. The same period last year accounted for the accrued contractual interest expense and the amortization of issuance costs amounting to $3.0 million and $515,000, respectively, partially offset by the change in fair value of the private warrant liability of $276,000. Excluding such costs, financial expense, net would have increased by $76,000.

In the three months ended June 30, 2023, foreign currency loss decreased by $961,000, compared to the three months ended June 30, 2022. Such change was mainly attributable to the effects of the fluctuation of the Euro and Indian Rupee against the U.S. dollar.

In the three months ended June 30, 2023, income tax expense increased by $492,000, from an income tax benefit of $95,000 to an income tax expense of $397,000, mainly due to the increase in registry legacy business revenue.

In the six months ended June 30, 2023, revenue increased by $8.8 million, or 5%, compared to the six months ended June 30, 2022. This increase was mainly driven by the improved product and geographic mix, including the growth in registry legacy business.

In the six months ended June 30, 2023, cost of revenue increased by $2.3 million, or 2%, compared to the six months ended June 30, 2022. Gross profit increased by $6.5 million, or 18%, in the six months ended June 30, 2023, compared to the same period of the prior year, mainly driven by the improved product mix and geographies, including the growth in the registry legacy business.

In the six months ended June 30, 2023, research and development expenses decreased by $439,000, or 4%, compared to the six months ended June 30, 2022. Research and development expenses included $412,000 of stock-based compensation in the six months ended June 30, 2023, compared to $2.6 million in the six months ended June 30, 2022. Excluding such costs and $3.3 million in capitalized software development costs, compared to $4.5 million capitalized costs in the six months ended June 30, 2022, research and development expenses would have increased by $568,000, mainly due to severance costs of the period.

In the six months ended June 30, 2023, sales and marketing expenses decreased by $2.9 million, or 20%, compared to the six months ended June 30, 2022. Sales and marketing expenses included $378,000 of stock-based compensation in the six months ended June 30, 2023, compared to $1.9 million in the six months ended June 30, 2022. Excluding such costs, sales and marketing expenses would have decreased by $1.3 million, mainly as a result of the decrease in head count.

In the six months ended June 30, 2023, general and administrative expenses decreased by $2.7 million, or 9%, compared to the six months ended June 30, 2022. General and administrative expenses included (i) $3.2 million of stock-based compensation in the six months ended June 30, 2023, compared to $10.7 million in the six months ended June 30, 2022; and (ii) $738,000 of acquisition transaction costs in the six months ended June 30, 2023, compared to $156,000 in the six months ended June 30, 2022. Excluding such costs, general and administrative expenses would have increased by $4.2 million, mainly due to an increase in the provision for bad debt under ASC 326.

In the six months ended June 30, 2023, impairment charges of $234,000 and $87,000 were recorded in relation to developed technology and trade names intangibles, respectively. Impairment losses were recorded as the difference between the carrying amount and the estimated fair values of intangible assets, mainly driven by the overall decline in UK projected cash flows.

In the six months ended June 30, 2023, financial expense, net increased by $886,000, compared to the same period last year. Such increase in financial expense is mainly attributable to the accrued contractual interest expense and the amortization of issuance costs amounting to $6.1 million and $1.1 million, respectively, and the change in the fair value of the private warrant liability of $26,000. The same period last year accounted for the accrued contractual interest expense and the amortization of issuance costs amounting to $6.1 million and $990,000, respectively, partially offset by the change in fair value of the private warrant liability of $810,000. Excluding such costs, financial expense, net would have remained unchanged.

In the six months ended June 30, 2023, foreign currency loss increased by $265,000, compared to the six months ended June 30, 2022. Such change was mainly attributable to the effects of the fluctuation of the Euro and Indian Rupee against the U.S. dollar.

In the six months ended June 30, 2023, income tax expense increased by $825,000, from an income tax expense of $596,000 to an income tax expense of $1.4 million, mainly due to the increase in registry legacy business revenue.

As of June 30, 2023, the Company had $63.9 million of cash and cash equivalents, $488,000 of restricted cash and $630,000 of short-term investments with maturity terms between 4 and 12 months held in India. Of the $65.0 million in cash, restricted cash and short-term investments, $35.0 million was held in U.S. banks, $15.6 million was held in Italy, $12.7 million was held in India with the remainder held in other banks. As of December 31, 2022, the Company had $77.5 million of cash and cash equivalents, $480,000 of restricted cash and $587,000 of short-term investments with maturity terms between 4 and 12 months held in India. Management currently plans to retain the cash in the jurisdictions where these funds are currently held.

The condensed consolidated balance sheets as of June 30, 2023 includes total current assets of $147.2 million and total current liabilities of $105.8 million, resulting in net current assets of $41.4 million and a short-term net financial position of $52.1 million.

Kaleyra finances its operations through a combination of cash generated from operations and from borrowings under Kaleyra bank facilities primarily with banks located in Italy, as well as proceeds from equity offerings and convertible note arrangements. Kaleyra’s long-term cash needs primarily include meeting debt service requirements, working capital requirements and capital expenditures.

There are a number of factors that may negatively impact its available sources of funds in the future including the ability to generate cash from operations, obtain additional financing or refinance existing short-term debt obligations, including those related to acquisitions completed in prior periods. The amount of cash generated from operations is dependent upon factors such as the successful execution of Kaleyra’s business strategies and worldwide economic conditions. The amount of debt available under future financings is dependent on Kaleyra’s ability to maintain adequate cash flow for debt service and sufficient collateral, and general financial conditions in Kaleyra’s market. If additional financing is required from outside sources, Kaleyra may not be able to raise it on terms acceptable to it or at all. If Kaleyra is unable to raise additional capital when desired, Kaleyra’s business, operating results and financial condition may be adversely affected.

Kaleyra has a number of long-standing business and banking relationships with major Italian commercial banks where it maintains both cash accounts and a credit relationship. Historically, Kaleyra has used cash generated from operations and other sources to fund its growth and investment opportunities. As Kaleyra’s management made the decision to expand its operations outside of Italy and acquire additional companies, it took on certain additional financing in order to fund cash payments due on the acquisitions. As of June 30, 2023, Kaleyra’s total bank and other borrowings, including amounts drawn under the revolving credit line facilities, was $22.4 million ($28.8 million as of December 31, 2022).

Kaleyra has credit line facilities of $5.4 million as of June 30, 2023, of which $3.5 million has been used. As of December 31, 2022, Kaleyra had credit line facilities of $5.4 million, of which $4.0 million had been used. Amounts drawn under the credit line facilities are collateralized by specific customer trade receivables and funds available under the line are limited based on eligible receivables.

The Company’s outstanding Merger Convertible Notes in the amount of $192.8 million contain redemption features in case of a “fundamental change”, as defined under the Indenture, including, but not limited to, the consummation of the Tata Merger and the delisting of Kaleyra common stock from the NYSE or another eligible market. Please refer the paragraph below under Merger Convertible Notes for Kaleyra's considerations on the fundamental change.

As of June 30, 2023, and through the date the financial statements are issued, the Company believes it has sufficient liquidity to be able to operate its business for at least 12 months following the date that the financial statements are issued. However, the Company was not in compliance with NYSE continued listing criteria, as described above. If Kaleyra fails to regain and maintain compliance with the NYSE continued listing requirements, the NYSE may take steps to delist the Company’s securities. Delisting from the NYSE (and the inability of Kaleyra to list its common stock on the Nasdaq Global Select Market or the Nasdaq Global Market, or any other eligible market) would trigger a fundamental change under the terms of the Indenture, which would entitle each holder of the Merger Convertible Notes, at such holder’s option, to require Kaleyra to repurchase for cash all or any portion of such holder’s notes at a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon – refer to Note 10 – Notes Payable in the Company's condensed consolidated financial statements for additional information relating the Merger Convertible Notes. In such event, Kaleyra may not have enough available cash or be able to obtain financing to meet the repurchase obligations that may arise if the Company is not able to regain compliance with the NYSE continued listing criteria for at least the 12 months following the date that the financial statements are issued, and Kaleyra’s failure to repurchase such notes would constitute a default under the Indenture.

On February 15, 2023, in conjunction with the Company’s fourth quarter and full year earnings release, to drive improved financial and operating performance, and ensure continued sustainable and scalable growth, the Company announced an initial restructuring and cost reduction program for 2023: the Value Creation Program (the “Program”). The Program is designed to position Kaleyra to serve the demand from global businesses using existing and emerging communication channels, while driving labor and cost efficiencies. The Program supports the organizational streamlining of labor intensive functions aimed at reducing monthly cash payroll costs by more than 15% on an annual basis. As a result of the Company’s launched initiatives, significant improvement in Adjusted EBITDA is expected in 2023 compared to 2022, with additional growth anticipated in 2024 when compared to 2023. Ultimately, the result of the Company’s Adjusted EBITDA improvement will convert to cash throughout the life of the Program. The expected increase in cash flow is important and will significantly aid Kaleyra’s servicing its outstanding debt requirements. During the three months ended June 30, 2023, the Company showed another sequential positive Adjusted EBITDA. This was mainly driven by the reduction of operating expenses, in particular the decrease in the Company's headcount of 34 full time equivalents during the six-month period ended June 30, 2023.

Despite the measures the Company is undertaking and plans to undertake, the Company might fail to regain and maintain compliance with the NYSE continued listing requirements. Pending the consummation of the Tata Merger, the factors described above

raise substantial doubt about the ability of the Company to continue as a going concern within one year after the date that these financial statements are issued.

On April 16, 2020, in connection with the Business Combination, Kaleyra entered into a Settlement Agreement and Release (the “Settlement Agreement”) with its financial advisory service firms, Cowen and Company, LLC (“Cowen”) and Chardan Capital Markets, LLC, (“Chardan” and collectively the “Service Firms”), pursuant to which it agreed to pay an affiliate of Cowen, Cowen Investments II LLC (“Cowen Investments”), and Chardan, in full satisfaction of all amounts owed to the Service Firms as of December 31, 2019, $5.4 million in the aggregate, as follows: (i) $2.7 million in the aggregate in common stock of Kaleyra (the “Settlement Shares”) to be issued the business day prior to the filing of a resale registration statement for such Settlement Shares (the “Resale Registration Statement”), (ii) convertible notes totaling $2.7 million in the aggregate with a maturity date three years after issuance and bearing interest at five percent (5%) per annum (but with lower interest rates if the notes are repaid earlier than one year or two years after issuance) and with interest paid in arrears to the payee on March 15, June 15, September 15 and December 15 of each year, with such convertible notes to also be issued the business day prior to the filing of the Resale Registration Statement and (iii) in the event that the Beneficial Ownership Limitation (as defined below) would otherwise be exceeded upon delivery of the Settlement Shares above, a warrant agreement also to be entered into with and issued to the Services Firms the business day prior to the filing of the Resale Registration Statement, whereby the amount of common stock of ~~the Company~~Kaleyra by which the Beneficial Ownership Limitation would otherwise have been exceeded upon delivery of the Settlement Shares will be substituted for by warrants with an exercise price of $0.01 per share issued pursuant to a Warrant Agreement (the “Warrant Agreement”) and the common stock underlying the Warrant Agreement (the “Warrant Shares”). The Beneficial Ownership Limitation ~~shall~~was initially be 4.99% of the number of shares of the common stock outstanding of ~~the Company~~Kaleyra immediately after giving effect to the issuance of these shares of common stock. The number of Settlement Shares was calculated using as the price per Settlement Share an amount equal to a fifteen percent (15%) discount to the ten-day (10-day) trailing dollar volume-weighted average price for the common stock of ~~the Company~~Kaleyra on the NYSE American LLC stock exchange (the “VWAP”) on the business day immediately prior to the date on which ~~the Company filed~~Kaleyra files the Resale Registration Statement. In addition, the price per share for determining the number of shares of common stock of ~~the Company~~Kaleyra to be issued upon the conversion of the convertible notes shall be a five percent (5%) premium to the ten-day (10-day) trailing VWAP as of the date immediately prior to the issuance date of the convertible notes, rounded down to the nearest whole number.

On May 1, 2020, in connection with the Settlement Agreement, ~~the Company~~Kaleyra issued: (i) an aggregate of ~~440,595~~125,885 Settlement Shares to Cowen Investments and Chardan, consisting of ~~374,506~~107,002 Settlement Shares issued to Cowen Investments, and ~~66,089~~18,883 Settlement Shares issued to Chardan ~~which resulted in~~(on a ~~$0.2 million loss on settlement on the issuance date of May 1, 2020;~~post-reverse split basis); and (ii)

convertible promissory notes in the aggregate principal amount of $2.7 million to Cowen Investments and Chardan, consisting of a convertible promissory note in the principal amount of $2.3 million issued to Cowen Investments (the “Cowen Note”) and a convertible promissory note in the principal amount of $405,000 issued to Chardan (the “Chardan Note”). The unpaid principal of the Cowen Note ~~was~~is convertible at the option of Cowen Investments into ~~303,171~~86,620 shares of common stock of ~~the Company,~~Kaleyra, if there ~~was~~has been no principal reduction, and the unpaid principal of the Chardan Note ~~was~~is convertible at the option of Chardan into ~~53,501~~15,285 shares of common stock of ~~the Company,~~Kaleyra, if there ~~was~~has been no principal ~~reduction.~~reduction (on a post-reverse split basis). As the Beneficial Ownership Limitation was not triggered by the issuance of the Settlement Shares, no Warrant Agreement was necessary and 0no warrants were issued.

On February 4, 2021, Cowen Investments elected to convert the outstanding amount of the Cowen Note into ~~303,171~~86,620 shares of common stock pursuant to the terms of the Cowen Note, and as a result the Company has 0no further obligations with respect to the Cowen ~~Note.~~Note (on a post-reverse split basis).

As of June 30, ~~2022, the~~2023, there was no outstanding amount ofrelated to the Chardan Note was $405,000 and accrued interest was $44,000. This note payable is included in “Current portion of notes payable” and the accrued interest payable is included in “Other current liabilities” in the accompanying condensed consolidated balance sheets.Note.

On February 18, 2021, in support of the consummation of the Merger, Kaleyra entered into Convertible Note Subscription Agreements, each dated February 18, 2021, with the Convertible Note Investors. OnIn June 1, 2021, the Company issued the Merger Convertible Notes with an aggregate principal amount of $200 million. The Company incurred $11.4 million of issuance costs as a result of the issuance of the Merger Convertible Notes.

In connection with the issuance of the Merger Convertible Notes pursuant to the terms of the Convertible Note Subscription Agreements, the Company entered into an indenture (the “Indenture”) with Wilmington Trust, National Association, a national banking association, in its capacity as trustee thereunder, ~~(the “Indenture Trustee”),~~ in respect of the $200 million of Merger Convertible Notes that were issued to the Convertible Note Investors.

and November 15, respectively. ~~The~~After giving effect to the Reverse Stock Split of Kaleyra's shares of common stock as of March 9, 2023, as described in Note 1 - Description of Organization and Business Operations, the Merger Convertible Notes are convertible into ~~11,851,852~~3,386,243 shares of Kaleyra common stock at a conversion price of ~~$16.875~~$59.063 per share of Kaleyra common stock in accordance with the terms of the Indenture, and mature five years after their issuance. The Company may, at its election, force conversion of the Merger Convertible Notes after (i) the first anniversary of the issuance of the Merger Convertible Notes, subject to a holder’s prior right to convert, if the last reported sale price of the Kaleyra common stock exceeds 150% of the conversion price for at least 20 trading days during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter and (ii) the second anniversary of the issuance of the Merger Convertible Notes, subject to a holder’s prior right to convert, if the last reported sale price of the Kaleyra common stock exceeds 130% of the conversion price for at least 20 trading days during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter. Following certain corporate events that occur prior to the maturity date or if the Company forces a mandatory conversion, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Merger Convertible Notes in connection with such a corporate event or has its Merger Convertible Notes mandatorily converted, as the case may be. In addition, in the event that a holder of the Merger Convertible Notes elects to convert its Merger Convertible Notes prior to the third anniversary of the issuance of the Merger Convertible Notes, the Company will be obligated to pay an amount equal to twelve months of interest, or if on or after such third anniversary of the issuance of the Merger Convertible Notes, any remaining amounts that would be owed to, but excluding, the fourth anniversary of the issuance of the Merger Convertible Notes (the “Interest Make-Whole Payment”). The Interest Make-Whole Payment will be payable in cash or shares of Kaleyra common stock as set forth in the Indenture.

Upon the issuance of the Merger Convertible Notes, management made the assessment whether the convertible instrument contained embedded conversion features for bifurcation and concluded that such embedded conversion features met the definition of a derivative but qualified for the scope exception under ASC 815-10-15-74(a) as they are indexed to the Company’s stock and qualify for classification within stockholders’ equity. Management determined that the Interest Make-Whole Payment met the definition of a derivative, but the value was de minimis and as such 0 amount was recorded at the time of the issuance of the Merger Convertible Notes nor at any subsequent reporting date. Management will continue to monitor the valuation of the Interest Make-Whole Payment provision and assess the need to record a liability in future periods.

As of June 30, 2022, the outstanding amount of the Merger Convertible Notes was $190.7 million, net of issuance costs. During the three and six months ended June 30, 2022, contractual interest expense amounted to $3.1 million and $6.1 million, respectively, and amortization of the debt issuance costs amounted to $513,000 and $1.0 million, respectively. The liability is included in the condensed consolidated balance sheet line item “Long-term portion of notes payable” and the interest expense is included in “Financial expense, net” on the condensed consolidated statements of operations.

~~The accumulated balances related to each component of accumulated other comprehensive loss are as follows (in thousands):~~

Revenue by geographic area is determined on the basis of the location of the customer, unless the delivery location is triggered by concentration criteria. The Company generates its revenue primarily in the United States, India and Italy. The following table sets forth revenue by geographic area for the three and six months ended June 30, 2022 and 2021 (in thousands):

As of June 30, 2022, the majority of the Company’s long-lived assets are located in United States and Italy. The following table sets forth long-lived assets by geographic area as of June 30, 2022 and December 31, 2021 (in thousands):

The Company entered into various operating lease agreements that expire over various years in the next seven years. The Company’s Milan office lease contains an option to renew the lease for six years under terms and conditions set forth in the lease agreement. Certain of the Company’s leases contain provisions for rental adjustments. Operating lease rentals are expensed on a straight-line basis over the life of the lease beginning on the date the Company takes possession of the property. Rent expense was $399,000 and $249,000 for the three months ended June 30, 2022 and 2021, respectively. Rent expense was $819,000 and $441,000 for the six months ended June 30, 2022 and 2021, respectively.

~~Future minimum lease payments under leasing obligations as of June 30, 2022 are as follows (in thousands):~~

~~Future minimum lease payment under capital leases as of June 30, 2022 consisted of the following (in thousands):~~

The current and long-term portion of the future minimum lease payments under capital lease are included in the condensed consolidated balance sheet line item “Other current liabilities” and “Other long-term liabilities”, respectively.

~~As of June 30, 2022, the Company had contingent liabilities of $119,000, relating to a tax appeal of Solutions Infini for which 0 provision was recognized as its occurrence was deemed remote.~~

~~The following table sets forth the activity related to the number of outstanding RSUs for the six months ended June 30, 2022:~~

~~RSUs compensation expense for the three and six months ended June 30, 2022 was $8.5 million and $15.2 million, respectively, which was recorded as follows (in thousands):~~

~~As of June 30, 2022, there was $21.1 million of unrecognized compensation cost related to non-vested RSUs to be recognized over a weighted-average remaining period of 1.39 years.~~

~~The tax expense and the effective tax rate resulting from operations were as follows (in thousands):~~

The decrease in the effective tax rate for the three and six months ended June 30, 2022, as compared to three and six months ended June 30, 2021, is mainly driven by the release of the valuation allowance related to previously reserved deferred tax assets following the mGage acquisition in the prior period.

The Company’s recorded effective tax rate is less than the U.S. statutory rate primarily due to the valuation allowance caused by a reduction in deferred tax liabilities, current tax expense in tax jurisdictions that provide for a valuation allowance, and foreign tax rate differentials from the U.S. domestic statutory tax rate.

The Company currently has valuation allowances recorded against its deductible temporary differences and net operating loss carryforwards in certain jurisdictions where the non-realizability of such deferred tax assets is concluded to be more likely than not. Each quarter, the Company evaluates all available evidence to assess the recoverability of its deferred tax assets in each jurisdiction, including significant events and transactions, both positive and negative, and the reversal of taxable temporary differences and forecasted earnings. As a result of the Company’s analysis, management concluded that it is more likely than not that a portion of its deferred tax assets will not be realized. Therefore, the Company continues to provide a valuation allowance against its deferred tax assets in certain jurisdictions. The Company continues to monitor available evidence and may reverse some or all of its remaining valuation allowance in future periods, if appropriate.

As of January 1, 2022, new tax regulations are in place in the US. In order to fully comply with internal revenue requirements, research and development expenses can no longer be deducted when incurred but instead they will be capitalized only for tax purposes and they will be amortized over a five or ~~fifteen-year~~ ~~period.~~

Under the acquisition method of accounting for business combinations, if changes are identified to acquired deferred tax asset valuation allowances or liabilities related to uncertain tax positions during the measurement period, and they are related to new information obtained about facts and circumstances that existed as of the acquisition date, those changes are considered a measurement-period adjustment, and offsets to goodwill are recorded. Kaleyra US, Inc.’s acquired deferred tax asset valuation measurement period is now closed as of June 30, 2022. All pre-acquisition income tax return filings were filed.

The Company’s warrants are only exercisable for whole shares at $11.50 per share. Under the terms of the warrant agreement dated December 12, 2017 (the “Warrant Agreement”), the Company agreed to use its best efforts to file a new registration statement following the completion of the Business Combination, for the registration of the shares of common stock issuable upon exercise of the warrants. That registration statement was filed by the Company on May 4, 2020 and declared effective by the SEC on May 8, 2020. NaN fractional shares are issuable upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exercise, round down to the nearest whole number for the number of shares of common stock to be issued to the warrant holder. Each warrant became exercisable 30 days after the completion of the Business Combination and will expire five years after the completion of the Business Combination or earlier upon redemption or liquidation. Once the warrants became exercisable, the Company could redeem the outstanding warrants in whole and not in part at a price of $0.01 per warrant upon a minimum of 30 days’ prior written notice of redemption, only in the event that the last sale price of the Company’s shares of common stock equals or exceeds $18.00 per share for any 20 trading days within the 30-trading day period ending on the third trading day before the Company sends the notice of redemption to the warrant holders.

On April 12, 2021, the SEC issued a SEC Staff Statement on “Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “SEC Staff Statement”). The SEC Staff Statement addresses certain accounting and reporting considerations related to warrants of a kind similar to those issued by the Company at the time of its initial public offering in December 2019. Based on ASC 815-40, “Contracts in Entity’s Own Equity”, warrant instruments that do not meet the criteria to be considered indexed to an entity’s own stock shall be initially classified as liabilities at their estimated fair values. In periods subsequent to issuance, changes in the estimated fair value of the derivative instruments should be reported in the consolidated statements of operations. Following the SEC Staff Statement, management evaluated the fact pattern set forth within the Company’s Warrant Agreement and concluded that the warrants issued in connection with private placements that occurred in December 2017 and January 2018 concurrently with its initial public offering (the “Private Placement Warrants”) should have been recorded as a liability at fair value as the Private Placement Warrants were not considered to be indexed to the entity’s own stock. Because the transfer of

Private Placement Warrants to anyone other than the initial purchasers or their permitted transferees would result in the Private Placement Warrants having substantially the same terms as warrants issued in the Company’s initial public offering, management determined that the fair value of each Private Placement Warrant approximated the fair value of its publicly traded warrants.

Management analyzed the impact of this error on the Company’s prior consolidated financial statements beginning from the date when the Private Placement Warrants were issued and concluded that the adjustments were immaterial to any period presented in previously issued consolidated financial statements and corrected this error in the three months ended March 31, 2021.

During the three and six months ended June 30, 2022, the Company recorded $276,000 and $810,000, respectively, in “Financial expense, net” on the condensed consolidated statements of operation for the change in fair value of the Private Placement Warrants.

On August 24, 2021, the Company entered into Warrant Repurchase Agreements with certain holders to repurchase warrants held by these holders for the purchase of an aggregate amount of 1,684,470 shares of the Company’s common stock. The warrants were initially issued by the Company in its initial public offering on December 7, 2017. Pursuant to the Warrant Repurchase Agreements, on August 27, 2021, the Company paid $3.25 per underlying share of common stock to repurchase these warrants, at an aggregate purchase price of $5.5 million for the surrender and cancellation of these warrants held by such holders.

~~The following table sets forth the calculation of basic and diluted net loss per share during the period presented (in thousands, except share and per share data):~~

The Company generated a net loss for each of the three and six months ended June 30, 2022 and 2021. Accordingly, the effect of dilutive securities is not considered in the net loss per share for such periods because their effect would be anti-dilutive on the net loss per share.

For the three months ended June 30, 2022, the weighted average number of outstanding shares of common stock equivalents, which were excluded from the calculation of the diluted net loss per share as their effect would be anti-dilutive, was 10,338,759, and 10,653,658 for the three months ended June 30, 2021.

For the six months ended June 30, 2022, the weighted average number of outstanding shares of common stock equivalents, which were excluded from the calculation of the diluted net loss per share as their effect would be anti-dilutive, was 10,096,382, and 11,679,120 for the six months ended June 30, 2021.

~~During the three and six months ended June 30, 2022 and 2021, related party transactions, other than compensation and similar arrangements in the ordinary course of business, were as follows:~~

~~The following table presents the expenses for transactions with related parties reported in the condensed consolidated statements of operations (in thousands):~~

Revenue is recognized upon transfer of control of promised products or services to customers using the Company’s Platforms in an amount that reflects the consideration Kaleyra expects to receive in exchange for those products or services. Kaleyra enters into contracts that can include various combinations of products and services, which are generally not capable of being distinct and are therefore accounted for as a series of distinct services under a single performance obligation in accordance with ASC 606-10-25-14 and ASC 606-10-25-15.

~~Revenue is recognized net of allowances for any credits and any taxes collected from customers, which are subsequently remitted to governmental authorities.~~

~~• Allocation of the transaction price to the performance obligations in the contract; and~~

~~• Recognition of revenue when, or as, the Company satisfies a performance obligation.~~

No significant judgments are required in determining whether products and services are considered distinct performance obligations and should be accounted for separately versus together, or to determine the stand-alone selling price.

Kaleyra’s arrangements do not contain general rights of return. The contracts do not provide customers with the right to take possession of the software supporting the applications. Amounts that have been invoiced are recorded in trade receivables and in revenue or deferred revenue depending on whether the revenue recognition criteria have been met.

Kaleyra's revenue is primarily derived from usage-based fees earned from the sale of communications services offered through access to the Company’s Platforms typically to large enterprises as well as medium-sized customers.

Revenue is recognized upon the sending of a SMS, a voice pulse (a measurement unit of call duration, typically of thirty or sixty seconds), a license attributed to a user for the platform usage, message or by the authentication of a financial transaction of an end-

user of the Company’s customer using the Company’s Platforms in an amount that reflects the consideration the Company expects to receive in exchange for those services which is generally based upon agreed fixed prices per unit.

Platforms access services are considered a monthly series comprised of 1 performance obligation and usage-based fees are recognized as revenue in the period in which the usage occurs. After usage occurs, there are no remaining obligations that would preclude revenue recognition. Revenue from usage-based fees represented 93% of total revenue for both the three and six months ended ~~June 30, 2022, and (96% and 97%, respectively, of total revenue for the three and six months ended~~ ~~June 30, 2021~~).

Subscription-based fees are derived from certain term-based contracts, such as with the sales of short code subscriptions and customer support, which is generally one year. Term-based contract revenue is recognized on a ratable basis over the contractual term of the arrangement beginning on the date that the service is made available to the customer. Revenue from term-based fees represented 7% of total revenue for both the three and six months ended June 30, 2022 (4% and 3%, respectively, of total revenue for the three and six months ended June 30, 2021).

Deferred revenue consists of advance cash payments from customers to be applied against future usage and customer billings in advance of revenues being recognized under the Company’s non-cancellable contracts. Deferred revenue is generally expected to be recognized during the succeeding 12-month period and is thus recorded as a current liability.

~~As of~~ ~~June 30, 2022 and December 31, 2021, the Company recorded $6.9 million and $9.6 million, respectively, as deferred revenue in its condensed consolidated balance sheets. In the three and six months ended~~ ~~June 30~~, 2022, the Company recognized $1.7 million and $5.6 million, respectively, of revenue in its condensed consolidated statements of operations that was included in deferred revenue as of December 31, 2021.

In general, revenue disaggregated by geography is aligned according to the nature and economic characteristics of the Company’s business and provides meaningful disaggregation of the Company’s results of operations. See Note 12 – Geographic Information – for details of revenue by geographic area.

~~On July 28, 2022, Kaleyra entered into a new unsecured loan agreement with Banco Popolare di Milano S.p.A. for a total principal amount of $~~

~~2.5 million (€2.5 million at the July 28, 2022 exchange rate) with a duration of 36 months and bearing interest rate equal to Euribor 3 months + 1.95%.~~

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

~~You should read the following management’s discussion and analysis in conjunction with the condensed consolidated financial statements of Kaleyra, Inc.~~ ~~(“Kaleyra,” the “Company,” “we,” “us,” and “our” refer to Kaleyra, Inc. and all of its consolidated subsidiaries)~~ and the related notes included elsewhere in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022. The discussion below includes forward-looking statements about Kaleyra’s business, operations and industry that are based on current expectations that are subject to uncertainties and unknown or changed circumstances. Kaleyra’s actual results may differ materially from these expectations as a result of many factors, including, but not limited to, those risks and uncertainties described under “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2021 and this Quarterly Report on Form 10-Q. We assume no obligation to update the forward-looking statements or such risk factors.

Kaleyra is a result of the expansion of the former Ubiquity, which was founded in Milan, Italy in 1999. Ubiquity secured a leading market position in mobile messaging on behalf of the Italian financial services industry and then sought to expand its products and geographic offerings. Ubiquity acquired Solutions Infini of Bangalore, India in 2017 and Buc Mobile of Vienna, Virginia in 2018. It was rebranded as Kaleyra S.p.A. in February 2018. Following the integration of the acquired entities, the combined company is collectively engaged in the operation of the Platforms on behalf of Kaleyra’s customers.

On February 22, 2019, the Company (f/k/a GigCapital, Inc.) entered into a stock purchase agreement (the “Stock Purchase Agreement”) by and among the Company, Kaleyra S.p.A., Shareholder Representative Services LLC, as representative for the holders of the ordinary shares of Kaleyra S.p.A. immediately prior to the closing of 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.. GigCapital Inc. was incorporated in Delaware on October 9, 2017 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

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

Kaleyra provides mobile communication 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 as the “Platforms”), Kaleyra manages multi-channel integrated communication 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 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 (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 1,600,000 shares of Kaleyra common stock at the $11.77 per share closing price of Kaleyra common stock on the date of issuance, equal to $18.8 million in value. 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 8,400,000 shares of Kaleyra common stock to the PIPE Investors at $12.50 per share. 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 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 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.

The demand for cloud communications is increasingly driven by the growing, and often mandated, need for enterprises to undertake a digital transformation that includes omnichannel, mobile-first and interactive customer communications. Mobile network operators and OTTs typically are the gateway to reach end-user consumers’ mobile devices. Kaleyra enables its customers and business partners to connect enterprise software and applications to mobile network operators by providing carefully documented Application Programming Interfaces (“APIs”). APIs allow building omnichannel journeys in a seamless way, with failover capabilities from one channel to another. In addition, Kaleyra also offers an extensive set of no-coding cloud-based visual interfaces to programme communications to the customers across multiple channels. Kaleyra’s Platforms couple the possibility of sending communications to end-user customers to a “Software as a Service” or SaaS business model, creating what is generally referred to as a “Communications Platform as a Service”, or simply CPaaS.

Kaleyra’s vision is to be the CPaaS provider which best aligns with its customers’ and business partners’ communication requirements, and the most trusted provider, in the world. This requires a combination of security, compliance and integration capabilities that protects the integrity and privacy of Kaleyra’s customers’ transactions and includes other key features such as ease of provisioning, reliable network connectivity, high availability for scaling, redundancy, embedded regulatory compliance, configurable monitoring and reporting. Kaleyra believes the percentage of CPaaS customers that will require security, compliance and integration

will represent an increasingly larger portion of the market, particularly with the expected exponential growth of transactional-by-nature cloud communications applications, better enabling Kaleyra to set itself apart from its competition.

Kaleyra’s customers are primarily enterprises which use digital mobile communications in the conduct of their business. Kaleyra provides multiple levels of global customer support 24x7, SLAs and network reliability to meet the expectations and requirements of its customers. Customers and business partners which use the Platforms value the Platforms’ network reliability, and Kaleyra’s responsive customer support, competitive pricing, and collaborative approach. In particular, Kaleyra is listed by Gartner (Gartner, Market Guide for Communications Platform as a Service, Worldwide, Daniel O’Connell, Lisa Under-Farboud, October 2021) as a co-creator, in other words, a CPaaS focused on a consultative business model that charges customers charge through a combination of CPaaS usage, platform fee and professional service fees. Kaleyra also partners with consulting companies and digital transformation players worldwide to go-to-market together. Also, Kaleyra was given the Gold award for “CPaaS Provider of the Year” by Juniper Research in February 2022.

Kaleyra services a broad base of customers and business partners throughout the world operating in diverse sectors and regions. Kaleyra’s key customers are large Business to Consumer (“B2C”) and Business to Business to Consumer (“B2B2C”) enterprises that use digital and mobile communications in the conduct of their business. Kaleyra has a concentration of business within the financial services industry that serves its major European banking end-user customers. With each relationship, Kaleyra is the link between the financial institutions and their end-user customers. In linking these two parties, Kaleyra’s Platforms leverage the telecommunications provider to transmit critical message data to these end-user customers.

During the three and six months ended June 30, 2022, Kaleyra processed nearly 13.4 billion and 27.9 billion billable messages, respectively, and 1.8 billion and 3.4 billion voice calls, respectively. Kaleyra organizes its efforts in four regions, Americas, Europe, APAC and MEA. Its workforce is spread across the globe either in full-remote or office-based mode, in one of its principal offices based in New York, New York, Vienna, Virginia, Los Angeles, California, Atlanta, Georgia, Milan, Italy, Munich, Germany, London, United Kingdom, and Bangalore, India. Kaleyra has over 600 employees across the four regions.

Kaleyra has more than 3,800 customers and business partners worldwide across industry verticals such as financial services, e-commerce and transportation. In both the three and six months ended June 30, 2022 and 2021, Kaleyra had no indivual customer which accounted for more than 10% of Kaleyra’s revenues.

For the three and six months ended June 30, 2022, 94.9% and 95.6% of revenues, respectively, came from customers which have been on the Platforms for at least one year. Although Kaleyra continues to expand by introducing new customers to the Platforms, the breadth and stability of its existing customers provide it with a solid base of revenue upon which it can continue to innovate and make investment to strengthen its product portfolio, expand its global presence, and in particular into the North America markets following the recent acquisition of mGage, recruit world-class talent and target accretive acquisitions to capitalize on its growing market penetration opportunities and value creation.

~~For the three and six months ended June 30, 2022 and 2021, the majority of Kaleyra’s revenue was derived from its multi-channel CPaaS product offering market.~~

Kaleyra’s revenue is primarily driven by the number of messages delivered and voice calls connected to its customers and business partners. Kaleyra’s fees vary depending on the contract. In the three months ended June 30, 2022, the number of messages delivered to customers increased by 58.4%, compared to the three months ended June 30, 2021, and the number of voice calls connected to customers increased by 31.7%, compared to the three months ended June 30, 2021. In the six months ended June 30, 2022, the number of messages delivered to customers increased by 79.9%, compared to the six months ended June 30, 2021, and the number of voice calls connected to customers increased by 32.3%, compared to the six months ended June 30, 2021. The increase in the number of messages delivered to customers is mainly driven by the volume additions following the business combination with mGage. The increase in voice calls connected to its customers was mainly the result of higher voice activities in India, as compared to the same period of prior year. The number of messages delivered and voice calls connected to customers is still affected by the spread of the COVID-19 pandemic, including the most recent surge in the Omicron variant strains, which resulted in significant fluctuations in Kaleyra’s services carrying less revenue-generating traffic in areas subject to government orders and restrictions.

Volume increase has been driven by the increased number of digital payments transactions made by the end-user customers (such as credit card transactions and other digital payments), by the increasing usage of mobile banking features, and by the increasing penetration rate of digital payments in the underlying payments markets. Kaleyra is exposed to fluctuations of the currencies in which its transactions are denominated. Specifically, a material portion of Kaleyra’s revenues and purchases are denominated in Euro, Indian Rupees and United Arab Emirates Dirham.

On June 1, 2021, Kaleyra completed its Merger with Vivial, and the resulting acquisition of the business owned by Vivial known as mGage, a leading global mobile messaging provider. The acquisition of mGage, subsequently renamed Kaleyra US Inc. following its reorganization, provided an opportunity for Kaleyra to expand its network operator connections and become one of only four companies providing direct connectivity to all tier-1 US carriers.

The purchase consideration amounting to $217.0 million consisted of cash consideration and common stock consideration. 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, pursuant to the terms of the Merger Agreement. The common stock consideration was paid with the issuance to Vivial’s former equity holders of a total of 1,600,000 shares of Kaleyra common stock. The resulting value of the common stock consideration, which was based upon the $11.77 per share closing price of Kaleyra common stock as of June 1, 2021, was equal to $18.8 million and has been recognized as part of the consideration transferred.

Kaleyra US Inc. contributed $30.2 million and $62.3 million, respectively, to the consolidated total revenues in the three and six months ended June 30, 2022 after it was consolidated and represented 37.2% and 38.5% of the consolidated revenues, respectively, for the three and six months ended June 30, 2022.

~~In 2021, the Company incurred costs related to the acquisition of mGage of $5.5 million that were expensed in General and Administrative expenses in the condensed consolidated statement of operations.~~

On July 8, 2021, the Company announced the acquisition of Bandyer for cash consideration of $15.4 million. Bandyer offers cloud-based audio/video communications services via WebRTC technology to financial institutions, retail companies, utilities, industries, insurance, human resources and digital healthcare organizations. Bandyer provides customers with programmable audio/video APIs and SDKs based on WebRTC technology for a variety of use cases, including Augmented Reality (“AR”) applications for smart glasses. The acquisition of Bandyer adds video capabilities to Kaleyra’s already wide offering of communication channels. With the addition of Bandyer’s video offering, Kaleyra’s offerings become a complete suite of tools for omnichannel customer engagement designed for cross-channel customer experiences.

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.

The current COVID-19 pandemic has affected and will continue to affect economies and businesses around the world. Notwithstanding the recent improvements in the spread of the pandemic, mostly as a result of the worldwide vaccine campaigns and the numerous measures implemented by various governmental authorities and private enterprises to contain the pandemic, disruptions to the global economies caused by COVID-19 may continue to trigger an extended period of economic uncertainties. The magnitude and duration of the disruptive effects of the pandemic in business activity and operations cannot be measured with any degree of certainty, also considering the severity of the recent surge in the Omicron variant strains, and the resulting fluctuations in Kaleyra’s services carrying less revenue generating traffic in areas subject to government orders and restrictions. Kaleyra is actively monitoring and managing its response and assessing actual and potential impacts to its operating results and financial condition, which could also impact trends and expectations.

Our critical accounting policies and significant estimates are detailed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Our critical accounting policies and significant estimates have not changed substantially from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment due to t~~he disruptive effects of global inflation,~~ ~~the outbreak of a novel strain of the coronavirus and the armed conflict between Russia and Ukraine.~~

Kaleyra’s revenue is generated primarily from usage-based fees earned from the sale of communication services offered through access to the Company’s Platforms to large enterprises as well as small and medium-sized customers. Revenue can be billed in advance or in arrears depending on the terms of the agreement; for the majority of customers, revenue is invoiced on a monthly basis in arrears.

~~Gross profit is equal to the revenue less cost of revenue associated with delivering the communication services to Kaleyra’s customers.~~

In the three months ended June 30, 2022, revenue increased by $27.1 million, or 50%, compared to the three months ended June 30, 2021. This increase was mainly driven by the effects of the business combination with mGage, which contributed $30.2 million ~~for the three months ended June 30, 2022 as compared to $10.2 million from the date of the business combination through June 30, 2021, and the organic growth of the Kaleyra legacy businesses, representing 16% of the aggregate growth period over period.~~

In the three months ended June 30, 2022, cost of revenue increased by $18.9 million, or 43%, compared to the three months ended June 30, 2021. The increase in cost of revenue was primarily attributable to the consolidation of the newly acquired business of mGage and the amortization of acquired intangible assets. In the three months ended June 30, 2022, gross profit increased by 78% compared to the three months ended June 30, 2021, mainly driven by the effects of the business combination with mGage.

In the three months ended June 30, 2022, research and development expenses increased by $2.0 million, or 46%, compared to the three months ended June 30, 2021. Research and development expenses included the allocation of $1.6 million of stock-based compensation in the three months ended June 30, 2022, compared to $806,000 in the three months ended June 30, 2021. Excluding such costs and $2.2 million in capitalized software development costs, compared to $865,000 capitalized costs in the three months ended June 30, 2021, research and development expenses would have increased by $2.5 million mainly due to Kaleyra US Inc. research and development expenses of the period equal to $3.1 million, compared to $1.3 million, which are referred to the period starting from the business combination through June 30, 2021, and to an increase in headcount compared to the prior period.

In the three months ended June 30, 2022, sales and marketing expenses increased by $2.6 million, or 55%, compared to the three months ended June 30, 2021. Sales and marketing expenses included the allocation of $1.2 million of stock-based compensation in the three months ended June 30, 2022, compared to $866,000 in the three months ended June 30, 2021. Excluding such costs, sales and marketing expenses would have increased by $2.3 million. Such increase was primarily driven by Kaleyra US Inc. sales and marketing expenses of the period equal to $4.2 million, compared to $1.4 million, which are referred to the period starting from the business combination through June 30, 2021.

In the three months ended June 30, 2022, general and administrative expenses increased by $4.2 million, or 34%, compared to the three months ended June 30, 2021. General and administrative expenses included (i) $5.7 million of stock-based compensation in the three months ended June 30, 2022, compared to $3.0 million in the three months ended June 30, 2021; and (ii) $75,000 of mGage acquisition transaction costs and $3.7 million of transaction costs in the three months ended June 30, 2022 and 2021, respectively. Excluding such costs, general and administrative expenses would have increased by $5.1 million, mainly due to Kaleyra US Inc.

general and administrative expenses of the period equal to $3.1 million, compared to $398,000, which are referred to the period starting from the business combination through June 30, 2021, and to an increase in headcount compared to the prior period.

In the three months ended June 30, 2022, financial expense, net increased by $2.5 million, compared to the same period last year. Such increase in financial expense is mainly attributable to the accrued contractual interest expense and amortization of issuance costs amounting to $3.1 million and $513,000, respectively, partially offset by the decrease in the fair value of the private warrant liability of $276,000. The same period last year accounted for the accrued contractual interest expense and amortization of issuance costs amounting to $973,000 and $196,000, respectively, partially offset by $433,000 in change in fair value of the private warrant liability. Excluding the net change in fair value of the warrant of $276,000 and the interest expense on convertible notes of $3.6 million, financial expense, net would have decreased by $46,000.

In the three months ended June 30, 2022, foreign currency loss increased by $926,000, compared to the three months ended June 30, 2021. Such change was mainly attributable to the effects of the fluctuation of the Indian Rupee and Euro against the U.S. dollar.

In the three months ended June 30, 2022, income tax benefit decreased by $7.3 million, from an income tax benefit of $7.4 million to an income tax benefit of $95,000. The material amount of income tax benefit from the prior period is mainly driven by the $5.8 million release of the valuation allowance related to previously reserved deferred tax assets which the Company has determined will be utilized in the future to offset net deferred tax liabilities related to the mGage acquisition.

In the six months ended June 30, 2022, revenue increased by $67.9 million, or 72%, compared to the six months ended June 30, 2021. This increase was mainly driven by the effects of the business combination with mGage, which contributed $62.3 million ~~in the three months ended June 30, 2022 as compared to $10.2 million from the date of the business combination through June 30, 2021, and the organic growth of the Kaleyra legacy businesses, representing 19% of the aggregate growth period over period.~~

In the six months ended June 30, 2022, cost of revenue increased by $48.3 million, or 63%, compared to the six months ended June 30, 2021. The increase in cost of revenue was primarily attributable to the consolidation of the newly acquired business of mGage and the amortization of acquired intangible assets. In the six months ended June 30, 2022, gross profit increased by 117% compared to the six months ended June 30, 2021, mainly driven by the effects of the business combination with mGage.

In the six months ended June 30, 2022, research and development expenses increased by $4.0 million, or 56%, compared to the six months ended June 30, 2021. Research and development expenses included the allocation of $2.6 million of stock-based compensation in the six months ended June 30, 2022, compared to $1.8 million of stock-based compensation in the six months ended June 30, 2021. Excluding such costs and $4.5 million in capitalized software development costs, compared to $1.6 capitalized costs in the six months ended June 30, 2021, research and development expenses would have increased by $6.0 million. This increase was primarily due to Kaleyra US Inc. research and development expenses of the period equal to $5.9 million, compared to $1.3 million, which are referred to the period starting from the business combination through June 30, 2021, and to an increase in headcount compared to the prior period.

In the six months ended June 30, 2022, sales and marketing expenses increased by $6.8 million, or 91%, compared to the six months ended June 30, 2021. Sales and marketing expenses included the allocation of $1.9 million of stock-based compensation in the six months ended June 30, 2022, compared to $1.4 million in the six months ended June 30, 2021. Excluding such costs, sales and marketing expenses would have increased by $6.3 million. Such increase was primarily driven by Kaleyra US Inc. sales and marketing expenses of the period equal to $8.5 million, compared to $1.4 million, which are referred to the period starting from the business combination through June 30, 2021.

In the six months ended June 30, 2022, general and administrative expenses increased by $9.0 million, or 39%, compared to the six months ended June 30, 2021. General and administrative expenses included (i) $10.7 million of stock-based compensation in the six months ended June 30, 2022, compared to $6.1 million in the six months ended June 30, 2021; and (ii) $156,000 of mGage and Bandyer acquisition transaction costs and $5.5 million of transaction costs in the six months ended June 30, 2022 and 2021, respectively. Excluding such costs, general and administrative expenses would have increased by $9.8 million, mainly due to Kaleyra US Inc. general and administrative expenses of the period equal to $6.5 million, compared to $398,000, which are referred to the period starting from the business combination through June 30, 2021, and to an increase in headcount compared to the prior period.

In the six months ended June 30, 2022, financial expense, net increased by $4.9 million, compared to the same period last year. Such increase in financial expense is mainly attributable to the accrued contractual interest expense and amortization of issuance costs amounting to $6.1 million and $1.0 million, respectively, partially offset by the decrease in the fair value of the private warrant liability of $810,000. The same period last year accounted for the accrued contractual interest expense and amortization of issuance costs amounting to $973,000 and $196,000, respectively, and $830,000 in change in fair value of the private warrant liability, partially offset by the non-recurring reversal of interest expense on a forward share purchase agreement of $659,000. Excluding the net change in fair value of the warrant of $810,000 and the interest expense on convertible notes of $7.1 million, financial expense, net would have increased by $26,000.

In the six months ended June 30, 2022, foreign currency loss increased by $1.0 million, compared to the six months ended June 30, 2021. Such change was mainly attributable to the effects of the fluctuation of the Indian Rupee and Euro against the U.S. dollar.

In the six months ended June 30, 2022, income tax expense increased by $8.0 million, from an income tax benefit of $7.4 million to an income tax expense of $596,000. The material amount of income tax benefit from the prior period is mainly driven by the $5.8 million release of the valuation allowance related to previously reserved deferred tax assets which the Company has determined will be utilized in the future to offset net deferred tax liabilities related to the mGage acquisition.

As of June 30, 2022, the Company had $73.6 million of cash and cash equivalents, $468,000 of restricted cash and $680,000 of short-term investments with maturity terms between 4 and 12 months held in India. Of the $74.8 million in cash, restricted cash and short-term investments, $38.0 million was held in U.S. banks, $25.7 million was held in Italy, $9.1 million was held in India with the remainder held in other banks. As of December 31, 2021, the Company had $90.0 million of cash and cash equivalents, $1.7 million of restricted cash and $6.2 million of short-term investments.

The condensed consolidated balance sheets as of June 30, 2022 includes total current assets of $176.6 million and total current liabilities of $105.9 million, resulting in net current assets of $70.7 million and a short-term net financial position of $60.6 million.

On February 18, 2021, and for the purposes of raising the cash portion of the consideration for the Merger, Kaleyra entered into the PIPE Subscription Agreements with the PIPE Investors and the Convertible Note Subscription Agreements with the Convertible Note Investors. Pursuant to these agreements, and prior to the closing of the Merger on June 1, 2021, Kaleyra issued an aggregate of

~~$105 million or 8,400,000 shares of Kaleyra common stock to the PIPE Investors at $12.50 per share and $200 million aggregate principal amount of unsecured Merger Convertible Notes.~~

Management currently plans to retain the cash in the jurisdictions where these funds are currently held. Kaleyra believes its cash, cash flows from operations and availability of borrowings will be sufficient to support its planned operations for at least the next 12 months.

Kaleyra may also pursue strategic acquisition opportunities that may impact its future cash requirements. There are a number of factors that may negatively impact its available sources of funds in the future including the ability to generate cash from operations, obtain additional financing or refinance existing short-term debt obligations, including those related to acquisitions completed in prior periods. The amount of cash generated from operations is dependent upon factors such as the successful execution of Kaleyra’s business strategies and worldwide economic conditions. The amount of debt available under future financings is dependent on Kaleyra’s ability to maintain adequate cash flow for debt service and sufficient collateral, and general financial conditions in Kaleyra’s market.

As noted above, Kaleyra entered into the Convertible Note Subscription Agreements with the Convertible Note Investors pursuant to which Kaleyra agreed to issue $200 million in aggregate principal of Merger Convertible Notes. Subject to the terms of the Merger Convertible Notes, Kaleyra may opportunistically raise debt capital, subject to market and other conditions, to refinance its existing capital structure at a lower cost of capital and extend the maturity period of certain debt. Additionally, Kaleyra may also raise debt capital for strategic opportunities which may include acquisitions of additional companies, and general corporate purposes. If additional financing is required from outside sources, Kaleyra may not be able to raise it on terms acceptable to it or at all. If Kaleyra is unable to raise additional capital when desired, Kaleyra’s business, operating results and financial condition may be adversely affected.

Kaleyra has a number of long-standing business and banking relationships with major Italian commercial banks where it maintains both cash accounts and a credit relationship. Historically, Kaleyra has used cash generated from operations and other sources to fund its growth and investment opportunities. As Kaleyra’s management made the decision to expand its operations outside of Italy and acquire additional companies, it took on certain additional financing in order to fund cash payments due on the acquisitions. As of June 30, 2022, Kaleyra’s total bank and other borrowings, including amounts drawn under the revolving credit line facilities was $29.7 million ($38.7 million as of December 31, 2021).

Kaleyra has credit line facilities of $5.2 million as of June 30, 2022, of which $3.2 million has been used. As of December 31, 2021, Kaleyra had credit line facilities of $6.7 million, of which $5.3 million had been used. Amounts drawn under the credit line facilities are collateralized by specific customer trade receivables and funds available under the line are limited based on eligible receivables.

On April 16, 2020, in connection with the Business Combination, Kaleyra entered into a Settlement Agreement and Release (the “Settlement Agreement”) with its financial advisory service firms, Cowen and Company, LLC (“Cowen”) and Chardan Capital Markets, LLC, (“Chardan” and collectively the “Service Firms”), pursuant to which it agreed to pay an affiliate of Cowen, Cowen Investments II LLC (“Cowen Investments”), and Chardan, in full satisfaction of all amounts owed to the Service Firms as of December 31, 2019, $5.4 million in the aggregate, as follows: (i) $2.7 million in the aggregate in common stock of Kaleyra (the “Settlement Shares”) to be issued the business day prior to the filing of a resale registration statement for such Settlement Shares (the “Resale Registration Statement”), (ii) convertible notes totaling $2.7 million in the aggregate with a maturity date three years after issuance and bearing interest at five percent (5%) per annum (but with lower interest rates if the notes are repaid earlier than one year or two years after issuance) and with interest paid in arrears to the payee on March 15, June 15, September 15 and December 15 of each year, with such convertible notes to also be issued the business day prior to the filing of the Resale Registration Statement and (iii) in the event that the Beneficial Ownership Limitation (as defined below) would otherwise be exceeded upon delivery of the Settlement Shares above, a warrant agreement also to be entered into with and issued to the Services Firms the business day prior to the filing of the Resale Registration Statement, whereby the amount of common stock of Kaleyra by which the Beneficial Ownership Limitation would otherwise have been exceeded upon delivery of the Settlement Shares will be substituted for by warrants with an exercise price of $0.01 per share issued pursuant to a Warrant Agreement (the “Warrant Agreement”) and the common stock underlying the Warrant Agreement (the “Warrant Shares”). The Beneficial Ownership Limitation shall initially be 4.99% of the number of shares of the common stock outstanding of Kaleyra immediately after giving effect to the issuance of these shares of common stock. The number of Settlement Shares was calculated using as the price per Settlement Share an amount equal to a fifteen percent (15%) discount to the ten-day (10-day) trailing dollar volume-weighted average price for the common stock of Kaleyra on the NYSE American LLC stock

exchange (the “VWAP”) on the business day immediately prior to the date on which Kaleyra files the Resale Registration Statement. In addition, the price per share for determining the number of shares of common stock of Kaleyra to be issued upon the conversion of the convertible notes shall be a five percent (5%) premium to the ten-day (10-day) trailing VWAP as of the date immediately prior to the issuance date of the convertible notes, rounded down to the nearest whole number.

On May 1, 2020, in connection with the Settlement Agreement, Kaleyra issued: (i) an aggregate of 440,595 Settlement Shares to Cowen Investments and Chardan, consisting of 374,506 Settlement Shares issued to Cowen Investments, and 66,089 Settlement Shares issued to Chardan; and (ii) convertible promissory notes in the aggregate principal amount of $2.7 million to Cowen Investments and Chardan, consisting of a convertible promissory note in the principal amount of $2.3 million issued to Cowen Investments (the “Cowen Note”) and a convertible promissory note in the principal amount of $405,000 issued to Chardan (the “Chardan Note”). The unpaid principal of the Cowen Note is convertible at the option of Cowen Investments into 303,171 shares of common stock of Kaleyra, if there has been no principal reduction, and the unpaid principal of the Chardan Note is convertible at the option of Chardan into 53,501 shares of common stock of Kaleyra, if there has been no principal reduction. As the Beneficial Ownership Limitation was not triggered by the issuance of the Settlement Shares, no Warrant Agreement was necessary and no warrants were issued.

On February 4, 2021, Cowen Investments elected to convert the outstanding amount of the Cowen Note into 303,171 shares of common stock pursuant to the terms of the Cowen Note, and as a result the Company has no further obligations with respect to the Cowen Note.

~~As of June 30, 2022, the outstanding amount of the Chardan Note was $405,000 and accrued interest was $44,000.~~

As mentioned above, at the Closing of the Business Combination, Kaleyra issued unsecured convertible promissory notes to each of Esse Effe and Maya in the amount of $6.0 million and $1.5 million, respectively, and also issued other unsecured promissory notes to each of Esse Effe and Maya in the identical respective amounts (the “Notes payable to the Sellers”). Interest on the Notes Payable to the Sellers shall accrue at a fixed interest rate equal to the one-year U.S. dollar LIBOR interest rate published in The Wall Street Journal on the date of the Business Combination, plus a margin of one percent (1%) per annum. The unsecured promissory notes held by Esse Effe and Maya were paid in full during fiscal year 2020 and no amount remains outstanding for such notes as of June 30, 2022.

On the fifteen-month anniversary of the Business Combination date, or February 25, 2021, fifty percent (50%) of the previously outstanding amount of the unsecured convertible promissory notes held by Esse Effe and Maya was repaid, with a total of $3.0 million and $750,000 in principal and $176,000 and $44,000 in accrued interest being paid to Esse Effe and Maya, respectively, pursuant to the terms of the unsecured convertible promissory notes.

Under the terms of the unsecured convertible promissory notes, the outstanding principal balance of the notes, plus all accrued and unpaid interest and fees due under these notes, became due and payable, upon the receipt by the Company of cash proceeds of an equity financing in an aggregate gross amount of $105.0 million or 8,400,000 shares of Kaleyra common stock at $12.50 per share issued to the PIPE Investors in the private placement equity financing event immediately prior to the closing of the Merger Agreement of June 1, 2021. The principal amount of $3.8 million plus accrued interest of $84,000 for the unsecured convertible promissory notes held by Esse Effe and Maya was paid in full on June 2, 2021. Following the payment of the previously outstanding amount of convertible notes, the Notes Payable to the Sellers terminated pursuant to their terms and no further amounts were due.

On February 18, 2021, in support of the consummation of the Merger, Kaleyra entered into Convertible Note Subscription Agreements, each dated February 18, 2021, with the Convertible Note Investors. In June 2021, the Company issued the Merger Convertible Notes with an aggregate principal amount of $200 million. The Company incurred $11.4 million of issuance costs as a result of the issuance of the Merger Convertible Notes.

In connection with the issuance of the Merger Convertible Notes pursuant to the terms of the Convertible Note Subscription Agreements, the Company entered into an indenture (the “Indenture”) with Wilmington Trust, National Association, a national banking association, in its capacity as trustee thereunder (the “Indenture Trustee”), in respect of the $200 million of Merger Convertible Notes that were issued to the Convertible Note Investors.

Kaleyra common stock exceeds 130% of the conversion price for at least 20 trading days during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter. Following certain corporate events that occur prior to the maturity date or if the Company forces a mandatory conversion, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Merger Convertible Notes in connection with such a corporate event or has its Merger Convertible Notes mandatorily converted, as the case may be. In addition, in the event that a holder of the Merger Convertible Notes elects to convert its Merger Convertible Notes prior to the third anniversary of the issuance of the Merger Convertible Notes, the Company will be obligated to pay an amount equal to twelve months of interest, or if on or after such third anniversary of the issuance of the Merger Convertible Notes, any remaining amounts that would be owed to, but excluding, the fourth anniversary of the issuance of the Merger Convertible Notes (the “Interest Make-Whole Payment”). The Interest Make-Whole Payment will be payable in cash or shares of Kaleyra common stock as set forth in the Indenture.

Upon the issuance of the Merger Convertible Notes management made the assessment whether the convertible instrument contained embedded conversion features for bifurcation and concluded that such embedded conversion features met the definition of a derivative but qualified for the scope exception under ASC 815-10-15-74(a) as they are indexed to the Company’s stock and qualify for classification within stockholders’ equity. Management determined that the Interest Make-Whole Payment feature met the definition of a derivative but did not fall within the above scope exception, nonetheless its value was de minimis and as such no amount was recorded at the time of the issuance of the Merger Convertible Notes nor at any subsequent reporting date. Management will continue to monitor the valuation of the Interest Make-Whole Payment provision and assess the need to record a liability in future periods.

As of June 30, ~~2022,~~2023, the outstanding amount of the Merger Convertible Notes was ~~$190.7~~$192.8 million, net of issuance costs. During the three ~~and six~~ months ended June 30, ~~2022,~~2023, contractual interest expense ~~on the Merger Convertible Notes~~ amounted to $3.1 million ~~and $6.1 million, respectively,~~ and amortization of the debt issuance costs amounted to ~~$513,000~~$551,000. During the six months ended June 30, 2023, contractual interest expense amounted to $6.1 million and ~~$1.0 million, respectively.~~amortization of the debt issuance costs amounted to $1.1 million. The liability is included in the condensed consolidated balance sheet line item “Long-term portion of notes payable” and the interest expense is included in “Financial expense, net” on the condensed consolidated statements of operations.

On April 3, 2023, the Company received the Market Cap Notice from the NYSE, informing Kaleyra that it was not in compliance with the continued listing criteria set forth in Section 802.01B of the NYSE’s Listed Company Manual with respect to the minimum market capitalization and shareholders’ equity requirement. Within forty-five days of receipt of the Market Cap Notice, the Company responded to the NYSE with a business plan to cure the deficiency and to regain compliance, subject to review, acceptance and monitoring by the NYSE, within the eighteen-month cure period following the receipt of the Market Cap Notice. On July 5, 2023, Kaleyra received written confirmation from the NYSE that the business plan was accepted by the Listings Operations Committee and the quarterly monitoring activities of the plan by the NYSE were scheduled to run throughout the eighteen-month cure period from the receipt of the Market Cap Notice. The Company will be required to achieve the minimum continued listing standards of either average global market capitalization over a consecutive 30 trading-day period of $50 million or total shareholders’ equity of $50 million at the completion of the eighteen-month plan period. Under Section 802.02, the NYSE will evaluate an accelerated cure and an early termination of the plan period prior to the end of the eighteen months if the Company is able to demonstrate returning to compliance with the applicable continued listing standards, or achieving the ability to qualify under an original listing standard, for a period of two consecutive quarters. Refer to Note 2 - Summary of Significant Accounting Policies and Note 21 - Subsequent Events in the

Company's condensed consolidated financial statements for more information relating Kaleyra’s considerations on going concern basis of accounting and the Market Cap Notice.

As of June 30, 2023, and through the date the financial statements are issued, no fundamental change was triggered under the Indenture for the Merger Convertible Notes.

Long-term financial obligations, excluding ~~the Notes Payable to the Sellers, Merger Convertible Notes and~~ credit line facilities, consisted of the following (in thousands):


									Interest Nominal Rate														Interest Nominal Rate
	As of June 30,		As of December 31,			Interest Contractual Rate			As of June 30,			As of December 31,			As of June 30,		As of December 31,			Interest Contractual Rate			As of June 30,			As of December 31,
	2022		2021		Maturity	as of June 30, 2022			2022			2021			2023		2022		Maturity	as of March 31, 2023			2023			2022
UniCredit S.p.A. (Line A Tranche 1)	$	1,534	$	2,330	July 2023	Euribor 3 months + 3.10%				2.80	%		2.80	%	$	320	$	943	July 2023	Euribor 3 months + 3.10%				2.80	%		2.80	%
UniCredit S.p.A. (Line A Tranche 2)		78		113	November 2023	Euribor 3 months + 3.10%				2.80	%		2.80	%		27		53	November 2023	Euribor 3 months + 3.10%				2.80	%		2.80	%
UniCredit S.p.A. (Line B)		1,723		2,337	May 2024	Euribor 3 months + 2.90%				2.60	%		2.60	%		898		1,324	May 2024	Euribor 3 months + 2.90%				2.60	%		2.60	%
UniCredit S.p.A. (Line C)		1,217		1,833	August 2023	Euribor 3 months + 3.90%				3.71	%		3.33	%		258		755	August 2023	Euribor 3 months + 3.90%				7.48	%		6.03	%
Intesa Sanpaolo S.p.A. (Line 1)		—		290	April 2022	Euribor 3 months + 2.30%				2.11	%		1.73	%
Intesa Sanpaolo S.p.A. (Line 2)		2,135		2,872	April 2024	Euribor 3 months + 3.10%				2.91	%		2.53	%		1,131		1,654	April 2024	Euribor 3 months + 3.10%				6.68	%		5.23	%
Intesa Sanpaolo S.p.A. (Line 3)		8,256		8,961	June 2026	Euribor 3 months + 2.15%				1.96	%		1.58	%		6,450		7,927	June 2026	Euribor 3 months + 2.15%				5.73	%		4.28	%
Intesa Sanpaolo S.p.A. (Line 4)		4,914		5,927	July 2026	Euribor 3 months + 2.20%				2.01	%		1.63	%		3,958		4,466	July 2026	Euribor 3 months + 2.20%				5.78	%		4.33	%
Monte dei Paschi di Siena S.p.A. (Line 1)		—		76	April 2022		0.95	%		0.95	%		0.95	%
Monte dei Paschi di Siena S.p.A. (Line 2)		696		1,132	June 2023		1.50	%		1.50	%		1.50	%		—		356	June 2023		1.50	%		1.50	%		1.50	%
Banco BPM S.p.A. (Line 1)		367		593	June 2023	Euribor 3 months + 2.00%				2.00	%		2.00	%		—		189	June 2023	Euribor 3 months + 2.00%				5.58	%		4.13	%
Banco BPM S.p.A. (Line 3)		3,802		5,014	September 2024	Euribor 3 months + 3.00%				2.81	%		2.43	%		2,255		3,059	September 2024	Euribor 3 months + 3.00%				6.58	%		5.13	%
Banco BPM S.p.A. (Line 4)																2,071		2,491	July 2025	Euribor 3 months + 1.95%				5.53	%		4.08	%
Simest 1		174		189	December 2023		0.50	%		0.50	%		0.50	%		91		134	December 2023		0.50	%		0.50	%		0.50	%
Simest 2		173		188	December 2023		0.50	%		0.50	%		0.50	%		90		133	December 2023		0.50	%		0.50	%		0.50	%
Simest 3		318		345	December 2023		0.50	%		0.50	%		0.50	%		166		244	December 2023		0.50	%		0.50	%		0.50	%
Simest 4		1,122		1,218	April 2027		0.50	%		0.50	%		0.50	%		1,168		1,150	April 2027		0.50	%		0.50	%		0.50	%
Total bank and other borrowings		26,509		33,418												18,883		24,878
Less: current portion		10,581		10,508												9,389		11,419
Total long-term portion	$	15,928	$	22,910											$	9,494	$	13,459

The following table summarizes cash flows for the periods indicated (in thousands):

In the six months ended June 30, 2023, cash used in operating activities was $2.6 million, primarily consisting of $2.7 million of changes in operating assets and liabilities, mainly attributable to changes in accounts payable of $9.9 million, partially offset by $8.1 million of changes in trade receivables.

In the six months ended June 30, 2022, cash used in operating activities was $7.9 million, primarily consisting of $8.0 million of changes in operating assets and liabilities, partially offset by non-cash items, mainly $15.2 million of stock-based compensation, $11.8 million of depreciation and amortization expense, $1.0 million of non-cash interest expense, $925,000 of provision for doubtful

accounts and $752,000 of employee benefit obligation, and net loss of $29.0 million, partially offset by $810,000 of change in the fair

In the six months ended June 30, ~~2021,~~2023, cash used in ~~operating~~investing activities was ~~$13.1~~$4.2 million, primarily consisting of ~~net loss~~$3.3 million to fund the cost of ~~$14.8 million~~internally developed software and ~~$5.6 million~~$888,000 of ~~net changes in operating assets~~purchases of property and liabilities, partially offset by non-cash items, mainly $9.3 million of stock-based compensation, $830,000 of change in the fair value of the warrant liability, $3.5 million of depreciation and amortization expense and $325,000 of non-cash interest expense, partially offset by $6.8 million of deferred tax benefit.equipment.

In the six months ended June 30, 2022, cash used in investing activities was $1.2 million, primarily consisting of $4.5 million to fund the cost of internally developed software, $1.2 million of purchases in short-term investments, $1.0 million of consideration paid for the Bandyer Acquisition and $966,000 of purchases of property and equipment, partially offset by $6.5 million of sale in short-term investments.

In the six months ended June 30, ~~2021,~~2023, cash used in ~~investing~~financing activities was ~~$198.9~~$7.4 million, primarily consisting of ~~$195.7~~$6.4 million of ~~cash consideration paid for~~repayments on term loans, $539,000 of repayments on lines of credit and $405,000 of repayments on the acquisition of mGage, $1.9 million of purchases in short-term investments, $1.6 million to fund the cost of internally developed software and $177,000 of purchases in property and equipment, partially offset by $546,000 of proceeds from sale of short-term investments.Chardan Note.

In the six months ended June 30, 2022, cash used in financing activities was $6.3 million, primarily consisting of $4.5 million of repayments on term loans and $1.8 million of repayments on lines of credit.

In the six months ended June 30, 2021, cash provided by financing activities was $298.0 million, primarily consisting of $188.6 million of proceeds from issuance of convertible notes, net of issuance costs, $99.1 million of proceeds from issuance of common stock in Private Investment in Public Equity offering, net of issuance costs, $17.0 million of receipts related to forward share purchase agreements, $2.9 million in proceeds received from the exercise of warrants, $1.2 million in proceeds related to the settlement of non-forfeited 2020 Sponsor Earnout Shares, partially offset by $7.5 million of repayments on notes and $3.5 million of repayments on term loans.Seasonality

Historically, Kaleyra has experienced clear seasonality in its revenue generation, with slower traction in the first calendar quarter, and increasing revenues as the year progresses. Kaleyra typically experiences higher revenues in messaging and notification services during the fourth calendar quarter. This patterned revenue generation behavior takes place due to Kaleyra’s customers sending more messages to their ~~end-user customers~~end-users who are engaged in consumer transactions at the end of the calendar year, resulting in an increase in notifications of electronic payments, credit card transactions and e-commerce.

The Company files income tax returns in the United States and in foreign jurisdictions including Italy, Germany, United Kingdom, Dominican Republic, Greece and India. As of June 30, ~~2022,~~2023, the tax years 2016 through the current period remain open to examination in ~~each~~certain of the major jurisdictions in which the Company is subject to tax.

~~The Company recorded an income tax benefit of $95,000 and an income tax benefit of $7.4 million for the three months ended June 30, 2022 and 2021, respectively.~~

The Company recorded an income tax expense of ~~$596,000~~$397,000 and an income tax benefit of ~~$7.4~~$95,000 for the three months ended June 30, 2023 and 2022, respectively.

The Company recorded an income tax expense of $1.4 million and $596,000 for the six months ended June 30, 2023 and 2022, ~~and 2021,~~ respectively.

See Note 2 - Summary of Significant Accounting Policies – to the condensed consolidated financial statements included in Part I of this Quarterly Report on Form 10-Q for more information on new accounting pronouncements.

We are exposed to certain market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.

As of June 30, 2023, the Company had $63.9 million of cash and cash equivalents, $488,000 of restricted cash and $630,000 of short-term investments with maturity terms between 4 and 12 months held in India. Our cash and cash equivalents consist of funds deposited into saving accounts. Short-term investments primarily consist of mutual funds and certificates of deposit. Kaleyra also entered into a limited number of derivative financial instruments to manage its interest rate risk exposure with respect to the bank borrowing held by Italian commercial banks.

Interest rates are highly sensitive to many factors including the current international economic and political ~~considerations,~~scenario, as well as other factors beyond Kaleyra’s control. Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. Kaleyra’s interest rates on the bank borrowing held by Italian commercial banks isare at market in Italy and well below market in other geographical locations. The Merger Convertible Notes bear interest at a fixed coupon rate of 6.125% per annum, and for this reason Kaleyra has no financial or economic interest exposure associated with changes in interest rates. Therefore, Kaleyra does not believe there is material exposure to market risk from changes in interest rates on debt.

Kaleyra’s condensed consolidated financial statements are presented in U.S. dollars while the functional ~~currency~~currencies of foreign subsidiaries are other than U.S. dollar. The main functional currencies of foreign subsidiaries include: Euro for Kaleyra S.p.A. ~~is the Euro. The functional currency of~~, Indian Rupee for Solutions Infini ~~is the Indian Rupee, the functional currency of Kaleyra Inc., Buc Mobile, Campaign Registry and Kaleyra US Inc. is the U.S. Dollar, the functional currency of mGage Europe~~Technologies Private Limited, ~~is the~~ Great Britain Pound ~~and the functional currency of Solutions Infini FZE is the~~for Kaleyra UK Limited, United Arab Emirates ~~Dirham.~~Dirham for Solutions Infini FZE.

More than 45% of our total revenue was generated outside the United States for the six months ended June 30, 2023. The Company's revenue and operating expenses denominated in currency other than U.S. dollars are currently subject to significant foreign currency risk. To the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currencies result in increased revenue and operating expenses for our non-U.S. operations. Similarly, our revenue and operating expenses for our non-U.S. operations decrease if the U.S. dollar strengthens against foreign currencies.

Each company remeasures monetary assets and liabilities denominated in currencies other than its functional currency at period-end exchange rates and non-monetary items are remeasured at historical rates.

Remeasurement adjustments are recognized in the condensed consolidated statement of operations as foreign currency income (loss) in the period of occurrence.

For legal entities where the functional currency is a currency other than the U.S. dollar, including Kaleyra S.p.A., adjustments resulting from translating the financial statements into U.S. dollar are recorded as a component of accumulated other comprehensive income (loss) in stockholders’ equity (deficit). Monetary assets and liabilities denominated in a currency that is other than the U.S. dollar are translated into U.S. dollar at the exchange rate on the balance sheet date. Revenue and expenses are translated at the weighted average exchange rates during the period. Equity transactions are translated using historical exchange rates. Kaleyra does not engage on a regular basis in any hedging activity to reduce Kaleyra’s potential exposure to currency fluctuations, although Kaleyra may elect to do so in the future if use of derivatives would be beneficial to Kaleyra.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, ~~2022.~~2023. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of June 30, ~~2022.~~2023.

There were no changes in our internal control over financial reporting during the ~~quarter~~three-month period ended June 30, ~~2022,~~2023, which were identified in connection with our evaluation required pursuant to Rules 13a-15 or 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

From time to time, Kaleyra may be involved in litigation relating to claims arising out of its operations in the normal course of business. Kaleyra is not currently involved in any material legal proceedings as a defendant.

On October 17, 2018, Kaleyra filed a claim against Vodafone Italia S.p.A. (“Vodafone”) before the Court of Milan seeking compensation in the amount of €6.1 million ($6.9 million at the December 31, 2021 exchange rate) for all the damages suffered as a consequence of the illicit and anticompetitive conduct of Vodafone, as previously determined by the Italian Antitrust Authority (namely, Autorità Garante della Concorrenza e del Mercato or AGCM) in their decisions issued on December 13, 2017; Vodafone has appealed that sanctioning resolution before the Italian Regional Administrative Court.

The deadline for filing a counterclaim by Vodafone has passed and according to Italian Law, Vodafone is no longer entitled to file a counterclaim against Kaleyra in these proceedings. Both Kaleyra and Vodafone filed their final pleadings on October 1, 2019 and October 21, 2019.

The Court of Milan has decided to suspend the procedure, through order no. 1570 on May 18, 2020. The decision of the Court of Milan is based on procedural reasons only (concerning the unprecedented definition of the relationship between administrative and civil proceedings in the case at hand) and does not analyze or take into any consideration the merits of the action brought by Kaleyra. The procedural suspension ordered by the Court of Milan shall last until the appeal brought by Vodafone before the Italian Regional Administrative Court against the decision of the Italian Antitrust Authority (the “ICA”) is concluded with a definitive judgment. Accordingly, following the order of suspension issued by the Civil Court of Milan, on August 10, 2020, Kaleyra filed a request to speed up the scheduling of the hearing in relation to the pending appeal before the Italian Regional Administrative Court brought by Vodafone Italia. The Court upheld Kaleyra’s request and the hearing took place on February 24, 2021. Accordingly, the parties submitted their final defenses. On September 15, 2021, the Administrative Court issued its first instance decision that upheld Vodafone’s appeal and annulled the sanctioning resolution issued by the Italian Competition Authority (decision no. 9803/2021). On December 10, 2021, the ICA filed its appeal to the second instance Court (Council of State) against the Administrative Court first instance decision no. 9803/2021 asking to overrule it. Both Vodafone and Kaleyra submitted their appearances in the judicial ~~proceeding, but no~~proceeding. The public hearing ~~has been scheduled yet by~~to discuss the appeal was held before the Council of ~~State.~~State on March 16, 2023. The Council of State on April 14, 2023 overruled the TAR Lazio decision and, accordingly, confirmed Vodafone's abuse of a dominant position ascertained by the ICA (decision number 03793/2023). Vodafone subsequently filed a demand to appeal the decision before the Civil Supreme Court (Corte di Cassazione) on June 20, 2023. Kaleyra timely submitted its appearances on July 31, 2023. Until a final decision is reached by the ~~Council of State~~Supreme Court there will be no effect on the civil proceeding that will therefore remain suspended.

The outcome of such action cannot be determined at this time. Therefore, no recognition of these actions has been made in the condensed consolidated financial statements of the Company.

On April 16, 2019, Kaleyra filed a claim against Telecom Italia S.p.A. (“Telecom”) and Telecom Italia Sparkle S.p.A. (“Sparkle”, jointly with Telecom “Defendants”) before the Court of Milan seeking compensation in the amount of €8.3 million ($10.2 million at the December 31, 2020 exchange rate) for damages suffered after the illicit conduct of both counterparts, determined by the Italian Antitrust Authority in the decision issued on December 13, 2017.

At the first hearing before the Court of Milan held for the appearance of the parties on December 11, 2019, the judge reserved the decision on the possible suspension of the case in consideration of the appeal brought by Telecom Italia S.p.A and Telecom Italia Sparkle S.p.A. against the Italian Antitrust Authority’s decision of December 13, 2017 before the Regional Administrative Court, which is currently pending.

By order issued on December 14, 2019, the judge released his reserve and referred the issue concerning the relation between the assessment of the pending administrative case and the one to be carried out in the civil case to a panel composed of three judges. The case was therefore adjourned for a hearing on April 29, 2020 where the parties had to file their final pleadings.

On April 9, 2020, following the measures taken by the Italian legislator for the COVID-19 pandemic, the above-mentioned hearing was postponed to and then held on October 7, 2020. At the hearing of October 7, 2020, the parties exposed their closing arguments and the decision on the preliminary question as to the suspension of the civil proceedings has been reserved to a panel composed of three judges. The parties also submitted written observations concerning the preliminary question.

On January 7, 2021, the Court issued an order by which the civil proceedings have been suspended until the decision in the pending administrative case – which was deemed to be prejudicial to the civil one – becomes final (i.e., it is no longer subject to appeal). The order was communicated to the parties via certified electronic mail on January 11, 2021.

In light of the average duration of cases before the Italian Administrative Courts and the Defendants’ interest in both having the Italian Competition Authority’s decision annulled and procrastinating the administrative case (on which the civil proceedings now depend pursuant to the above-mentioned order) for dilatory purposes, the civil case is unlikely to proceed in the short term. In order to speed up the administrative proceedings (and thus the civil case), on February 9, 2021, Kaleyra filed an application with the Administrative Court of Latium requesting that the hearing on the merits of the case be held as soon as possible (“istanza di prelievo”). On September 23, 2021, the Defendants filed with the Administrative Court of Latium their “istanza di prelievo” aimed at requesting a

prompt schedule of the hearing on the merits of the case. The request is motivated taking into consideration, inter alia, the decision, dated September 15, 2021, by which – in a parallel case – the same Administrative Court annulled the decision by which the Italian Competition Authority (decision no. 9803/2021) ascertained that Vodafone Italia S.p.A. committed an abuse of a dominant position in violation of art. 102 TFEU for margin squeeze (i.e., for behaviors similar to those attributed to the Defendants in the decision). The hearing ~~has taken~~took place on March 23, 2022. On April 11, 2022, the Administrative Court issued its first instance decision that upheld Telecom and Sparkle’s appeal and annulled the sanctioning resolution issued by the Italian Competition Authority (decision no. 4333/2022). The decision was notified to Kaleyra on April 12, 2022. All the Parties that took part in the proceeding have respectively filed their appeal or cross appeal to the second instance Court (Council of State). The public hearing to discuss the appeal ~~has been scheduled~~was held before the Council of State on May ~~5th,~~4, 2023. Until a final decision is reached ~~by the Council of State~~ there will be no effect on the civil proceeding that will therefore remain suspended.

Also, in light of the above, neither the outcome of Kaleyra’s civil action nor its duration is predictable at this time.

~~The outcome of such civil action cannot be determined at this time.~~ Therefore, no recognition of these actions has been made in the condensed consolidated financial statements of the Company.

In addition to the above, Kaleyra appealed the resolutions issued by the Italian Communications Authority (namely, Autorità per le Garanzie nelle Comunicazioni or AGCom) concerning their request for the annual fee to AGCom for years 2016, 2017, 2018, 2019 and 2020.

The first instance proceeding against AGCom’s resolutions for the 2016 contribution was successful for Kaleyra and the Italian Regional Administrative Court annulled the resolutions Kaleyra had appealed (judgement no. 2161/2019). However, AGCom filed its second instance appeal before the Council of State seeking the overruling of the Court’s decision. The appeal has been regularly discussed at the hearing of September 17, 2020 and the Council of State issued its decision number 6175/2020 on October 13, 2020, overruling in part the Regional Court decision. AGCom will have to recalculate the annual contribution due from Kaleyra for year 2016. However, the annual contribution is not considered material to Kaleyra’s consolidated financial statements.

For the annual contribution to AGCom relating the years 2017, 2018, 2019 and 2020 the legal proceedings are currently pending before the Italian Regional Administrative Court and no hearing has been scheduled yet. However, the European Court of Justice (“ECJ”) has already delivered its decision on the request for a preliminary ruling submitted by the Council of State on the relevant EU law (case C-399/18). Such decision was delivered on April 29, 2020, in accordance with a simplified procedure due to the previous issuance by the ECJ of a number of judgements on the matter.

Finally, Kaleyra took part in two appeals brought before the Regional Administrative Court of Lazio (TAR Lazio) by, respectively, an Association of Content Service Providers (“CSP”) for Value Added Services on mobile network (“VAS”), and one singular CSP, against a specific resolution of the Italian Communications Authority regarding the rules for applying a barring mechanism on the SIM of the final users of VAS (resolution no. 10/21/CONS). Kaleyra filed its interventions in both the judicial proceedings to support the measures issued by AGCom.

Specifically, following the hearing before TAR Lazio that took place on March 17, 2021, the Court has issued two orders (no. 1748 and no. 1751, dated March 18, 2021) that rejected the precautionary measures requested by both the plaintiffs, upholding the position represented by Kaleyra to support the legitimacy of the abovementioned resolution. Following the definition of the precautionary phase, both appeals are likely to be discussed on the merits in the next months. As of today, TAR Lazio has not scheduled any further hearing, hence there is no imminent deadline with regard to those judicial proceedings. For the sake of completeness, the final judgments of TAR Lazio on the two appeals above shall not result in any economic direct impact on Kaleyra.

~~There~~Aside from the below listed items, there have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022, as updated in the Form 10-Q for the quarter ended March 31, 2023. We encourage investors to review the risk factors and uncertainties relating to our business disclosed in that Form 10-K, as well as those contained in Part 1, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, above.

The announcement and pendency of the Tata Merger could cause disruptions in our business, which could have an adverse effect on our business and financial results.

Kaleyra and Tata Communications have operated and, until the completion of the Tata Merger, will continue to operate independently. Uncertainty about the effect of the Merger on employees, customers, distributors and suppliers may have an adverse effect on Kaleyra and consequently on our business and financial results. These uncertainties may impair Kaleyra’s ability to retain and motivate key personnel and could cause customers, distributors, suppliers and others with whom Kaleyra deals to seek to change existing business relationships which may materially and adversely affect our business. Furthermore, this disruption could adversely affect Kaleyra’s ability to maintain relationships with customers, distributors, suppliers and employees prior to the consummation of the Tata Merger. Each of these events could adversely affect Kaleyra in the near term and, if the Tata Merger is not completed, in the long term.

Failure to complete the Tata Merger could negatively impact the stock prices and the future business and financial results of Kaleyra.

If the Tata Merger is not completed, the ongoing business of Kaleyra may be adversely affected and Kaleyra will be subject to a number of risks, including the following:

in each case, without realizing any of the benefits of having completed the Tata Merger. If the Tata Merger is not completed, these risks may materialize and may adversely affect Kaleyra’s business, financial results and stock price.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


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


~~17 State~~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 ~~$11.50~~$40.25 per share of Common Stock	KLR WS	NYSE American LLC


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


PART I – FINANCIAL INFORMATION		Page

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

	Condensed Consolidated Balance Sheets	1
	1

	Condensed Consolidated Statements of Operations	2
	2

	Condensed Consolidated Statements of Comprehensive Loss	3

	Condensed Consolidated Statements of Stockholders’ Equity (Deficit)	4

	Condensed Consolidated Statements of Cash Flows	6
	6

	Notes to Condensed Consolidated Financial Statements	8
	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
	30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
	43

Item 4.	Controls and Procedures	45
	43

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	46
	44

Item 1A.	Risk Factors	47
	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
	45

Item 3.	Defaults Upon Senior Securities	48
	45

Item 4.	Mine Safety Disclosures	48
	46

Item 5.	Other Information	48
	46

Item 6.	Exhibits	49
	47

Signatures		4850


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
Revenue	$	81,109		$	53,992		$	161,590		$	93,706		$	86,752		$	81,109		$	170,370		$	161,590
Cost of revenue		62,459			43,529			125,202			76,919			64,981			62,459			127,499			125,202
Gross profit		18,650			10,463			36,388			16,787			21,771			18,650			42,871			36,388
Operating expenses:
Research and development		6,265			4,282			11,155			7,150			5,314			6,265			10,716			11,155
Sales and marketing		7,226			4,660			14,326			7,519			5,459			7,226			11,473			14,326
General and administrative		16,594			12,364			31,974			22,966			15,192			16,594			29,228			31,974
Intangible asset impairment														321			—			321			—
Total operating expenses		30,085			21,306			57,455			37,635			26,286			30,085			51,738			57,455
Loss from operations		(11,435	)		(10,843	)		(21,067	)		(20,848	)		(4,515	)		(11,435	)		(8,867	)		(21,067	)
Other income, net		37			47			83			92
Other income (expense), net														(200	)		37			(185	)		83
Financial expense, net		(3,417	)		(908	)		(6,569	)		(1,627	)		(3,821	)		(3,417	)		(7,455	)		(6,569	)
Foreign currency income (loss)		(1,117	)		(191	)		(860	)		164
Loss before income tax expense (benefit)		(15,932	)		(11,895	)		(28,413	)		(22,219	)
Foreign currency loss														(156	)		(1,117	)		(1,125	)		(860	)
Loss before income tax expense														(8,692	)		(15,932	)		(17,632	)		(28,413	)
Income tax expense (benefit)		(95	)		(7,408	)		596			(7,374	)		397			(95	)		1,421			596
Net loss	$	(15,837	)	$	(4,487	)	$	(29,009	)	$	(14,845	)	$	(9,089	)	$	(15,837	)	$	(19,053	)	$	(29,009	)
Net loss per common share, basic and diluted	$	(0.36	)	$	(0.13	)	$	(0.68	)	$	(0.46	)	$	(0.69	)	$	(1.28	)	$	(1.45	)	$	(2.37	)
Weighted-average shares used in computing net loss per common share, basic and diluted		43,410,858			34,292,874			42,829,188			32,328,909			13,256,071			12,403,102			13,150,321			12,236,911


	Three Months Ended June 30, 2023
	Common Stock				Additional Paid-in		Treasury Stock					Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Capital		Shares		Amount			Loss			Deficit			Equity
Balance as of March 31, 2023 (1)		13,998,241	$	1	$	280,486		799,446	$	(30,431	)	$	(4,584	)	$	(211,852	)	$	33,620
Stock-based compensation (RSUs)		127,125		—		1,973		—		—			—			—			1,973
Net loss		—		—		—		—		—			—			(9,089	)		(9,089	)
Other comprehensive income		—		—		—		—		—			(126	)		—			(126	)
Balance as of June 30, 2023		14,125,366	$	1	$	282,459		799,446	$	(30,431	)	$	(4,710	)	$	(220,941	)	$	26,378


	Three Months Ended June 30, 2022
	Common Stock				Additional Paid-in		Treasury Stock					Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Capital		Shares		Amount			Loss			Deficit			Equity
Balance as of March 31, 2022 (1)		13,002,097	$	1	$	258,421		799,446	$	(30,431	)	$	(2,639	)	$	(114,972	)	$	110,380
Stock-based compensation (RSUs)		566,437		—		12,255		—		—			—			—			12,255
Net loss		—		—		—		—		—			—			(15,837	)		(15,837	)
Other comprehensive loss		—		—		—		—		—			(1,896	)		—			(1,896	)
Balance as of June 30, 2022 (1)		13,568,534	$	1	$	270,676		799,446	$	(30,431	)	$	(4,535	)	$	(130,809	)	$	104,902


	Six Months Ended June 30, 2023
	Common Stock				Additional Paid-in		Treasury Stock					Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Capital		Shares		Amount			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)		266,926		—		3,986		—		—			—			—			3,986
Net loss		—		—		—		—		—			—			(19,053	)		(19,053	)
Other comprehensive loss		—		—		—		—		—			502			—			502
Balance as of June 30, 2023		14,125,366	$	1	$	282,459		799,446	$	(30,431	)	$	(4,710	)	$	(220,941	)	$	26,378


	Six Months Ended June 30, 2022
	Common Stock				Additional Paid-in		Treasury Stock					Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Capital		Shares		Amount			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)		660,207		—		19,014		—		—			—			—			19,014
Net loss		—		—		—		—		—			—			(29,009	)		(29,009	)
Other comprehensive income		—		—		—		—		—			(2,525	)		—			(2,525	)
Balance as of June 30, 2022 (1)		13,568,534	$	1	$	270,676		799,446	$	(30,431	)	$	(4,535	)	$	(130,809	)	$	104,902

	Three Months Ended June 30, 2021
	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, 2021		30,930,617	$	3	$	122,252		2,798,058	$	(30,431	)	$	(1,725	)	$	(78,161	)	$	11,938
Stock-based compensation (RSUs)		376,719		—		5,318		—		—			—			—			5,318
Proceeds from issuance of common stock in Private Investment in Public Equity offering, net of issuance costs		8,400,000		1		99,050		—		—			—			—			99,051
Common stock issued to Vivial equity holders (mGage acquisition) (2)		1,600,000		—		18,832		—		—			—			—			18,832
Net loss		—		—		—		—		—			—			(4,487	)		(4,487	)
Other comprehensive income		—		—		—		—		—			(579	)		—			(579	)
Balance as of June 30, 2021		41,307,336	$	4	$	245,452		2,798,058	$	(30,431	)	$	(2,304	)	$	(82,648	)	$	130,073

	Six Months Ended June 30, 2021
	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, 2020		30,288,687		$	3	$	93,628			2,798,058	$	(30,431	)	$	(2,826	)	$	(67,803	)	$	(7,429	)
Conversion of Cowen Note		303,171			—		2,295			—		—			—			—			2,295
Forfeiture of 2020 Sponsors' Earnout Shares (1)		(469,343	)		—		1,244			—		—			—			—			1,244
Forward share purchase agreement transactions		—			—		17,528			—		—			—			—			17,528
Stock-based compensation (RSUs)		935,115			—		10,329			—		—			—			—			10,329
Warrants exercised for common stock		249,706			—		2,872			—		—			—			—			2,872
Fair value of warrants		—			—		(326	)		—		—			—			—			(326	)
Proceeds from issuance of common stock in Private Investment in Public Equity offering, net of issuance costs		8,400,000			1		99,050			—		—			—			—			99,051
Common stock issued to Vivial equity holders (mGage acquisition) (2)		1,600,000			—		18,832			—		—			—			—			18,832
Net loss		—			—		—			—		—			—			(14,845	)		(14,845	)
Other comprehensive loss		—			—		—			—		—			522			—			522
Balance as of June 30, 2021		41,307,336		$	4	$	245,452			2,798,058	$	(30,431	)	$	(2,304	)	$	(82,648	)	$	130,073

Change in value of forward share purchase agreements	$	—	$	(483	)
Common stock issued to Vivial equity holders (mGage acquisition)	$	—	$	18,832
Stock-based compensation capitalized as software development costs	$	—	$	363
Conversion of convertible note to common stock	$	—	$	2,295
Restricted stock units granted to employees for bonuses	$	3,764	$	—
Fair value of warrant liability	$	—	$	344
Reclassification of warrant liability to additional paid-in capital upon exercise of warrants	$	—	$	(18	)
Consideration payable	$	468	$	633

Customer relationships (1)	$	76,256
Developed technology (1)		30,033
Trade names (1)		13,060
Deferred tax assets on loss carryforward		19,899
Goodwill (2)		89,391
Accounts receivable and other current assets		29,996
Property and equipment		8,450
Cash and cash equivalents		2,856
Total assets acquired		269,941
Deferred tax liabilities		30,242
Accounts payable and other current liabilities		22,665
Total liabilities assumed		52,907
Net assets acquired	$	217,034

Property and equipment, net	$	116
Developed technology (1)		7,999
Customer relationship (1)		1,798
Goodwill (2)		8,146
Cash and cash equivalents		349
Trade receivables and other current assets		671
Other non current assets		21
Total assets acquired		19,100
Deferred tax liabilities		2,616
Accounts payable and other current liabilities		986
Long term portion of employee benefit obligation		126
Current portion of bank and other borrowings		39
Total liabilities assumed		3,767
Net assets acquired	$	15,333

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except share and per share amounts)	2022			2021			2022			2021
Revenue	$	81,109		$	76,552		$	161,590		$	148,892
Net loss		(15,837	)		(5,792	)		(29,009	)		(19,772	)
Net loss per common share, basic and diluted	$	(0.36	)	$	(0.14	)	$	(0.68	)	$	(0.48	)
Weighted-average shares used in computing net loss per common share, basic and diluted		43,410,858			41,181,763			42,829,188			40,773,353


		Three Months Ended June 30,				Six Months Ended June 30,
Derivatives Not Designed As Hedging Instruments	Line Items	2023		2022		2023			2022
Interest rate swap	Financial income (expense), net	$	—	$	20	$	(21	)	$	42


		As of June 30,		As of December 31,
Derivatives Not Designed As Hedging Instruments	Line Items	2023		2022
Interest rate swap	Other long-term assets		46		66

Balance as of December 31, 2021	$	110,465
Purchase price adjustment in the period		3,161
Effect of exchange rate		(1,733	)
Balance as of June 30, 2022	$	111,893


Balance as of December 31, 2022	$	111,526
Effect of exchange rate		379
Balance as of June 30, 2023	$	111,905


	Developed technology			Customer relationships			Trade names			Patent			Total
December 31, 2022	$	12,733		$	38,510		$	6,090		$	67		$	57,400
Additions		—			—			—			—			—
Amortizations		(1,354	)		(2,694	)		(475	)		(9	)		(4,532	)
Impairments		(234	)		—			(87	)		—			(321	)
Foreign exchange		67			43			20			1			131
June 30, 2023	$	11,212		$	35,859		$	5,548		$	59		$	52,678


	As of June 30, 2023
2023 (remaining six months)	$	4,414
2024		8,857
2025		8,788
2026		8,719
2027		7,239
2028 and thereafter		14,661
Total	$	52,678

	As of June 30, 2022
2022 (remaining six months)	$	8,333
2023		16,587
2024		16,488
2025		16,416
2026		16,345
2027 and thereafter		40,977
Total	$	115,146


	Three Months Ended June 30, 2023		Six Months Ended June 30, 2023
Operating lease cost	$	228	$	500
Finance lease cost
Amortization of assets		48		96
Interest on lease liabilities		3		7
Short-term lease cost		43		86
Variable lease cost		43		76
Total net lease cost	$	365	$	765


	Three Months Ended June 30, 2023		Six Months Ended June 30, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	242	$	504
Operating cash flows from finance leases (interest)		3		7
Financing cash flows from finance leases		50		98


	As of June 30, 2023			As of December 31, 2022
Weighted average remaining lease term (in years):
Operating leases		3.5			3.8
Finance leases		2.0			2.1

Weighted average discount rate:
Operating leases		4.27	%		4.27	%
Finance leases		4.27	%		4.27	%


	As of June 30, 2023
2023 (remaining six months)	$	5,129
2024		7,026
2025		4,277
2026		2,307
2027		144
2028 and thereafter		—
Total	$	18,883

	As of June 30, 2022
2022 (remaining six months)	$	5,334
2023		9,522
2024		5,776
2025		3,523
2026		2,214
2027 and thereafter		140
Total	$	26,509


	Cumulative Foreign Currency Translation Adjustment			Cumulative Net Unrealized Gain (Loss) on Marketable Securities, Net of Tax		Accumulated Other Comprehensive Income (Loss)
As of December 31, 2022	$	(5,270	)	$	58	$	(5,212	)
Other comprehensive income (loss)		620			8		628
As of March 31, 2023	$	(4,650	)	$	66	$	(4,584	)
Other comprehensive income (loss)		(134	)		8		(126	)
As of June 30, 2023	$	(4,784	)	$	74	$	(4,710	)


	Number of shares			Weighted- average grant date fair value (per share)
Non-vested as of December 31, 2022		1,001,396		$	30.57
Vested		(324,284	)	$	24.30
Granted		560,930		$	2.29
Cancelled		(73,906	)	$	30.33
Non-vested as of June 30, 2023		1,164,136		$	18.71

	As of June 30, 2022
	Operating Leases		Capital Leases		Total
2022 (remaining six months)	$	1,081	$	27	$	1,108
2023		888		55		943
2024		767		55		822
2025		735		16		751
2026		563		—		563
2027 and thereafter		576		—		576
Total minimum lease payments	$	4,610	$	153	$	4,763

	As of June 30, 2022
	Capital Leases
Total payments	$	153
Less: interest portion		10
Net capital lease obligation	$	143
Less: current portion		49
Long term portion	$	94

	Number of shares			Weighted- average grant date fair value (per share)
Non-vested as of December 31, 2021		4,374,021		$	10.33
Vested		(2,311,039	)	$	7.04
Granted		2,927,186		$	5.66
Cancelled		(191,818	)	$	9.97
Non-vested as of June 30, 2022		4,798,350		$	9.08


Exhibit No.		Description

31.1*		Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)


	KALEYRA, INC.

Dated: August ~~8, 2022~~7, 2023	By:	/s/ Dario Calogero
	Name:	Dario Calogero
	~~Name:~~Title:	~~Dario Calogero~~
	~~Title:~~	Chief Executive Officer, and President (Principal Executive Officer)