What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-05 compared with 2021-05-06 · 146 added, 67 removed, 209 unchanged (50% of the section changed)

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• the pace of 5G wireless network rollouts globally and their adoption by customers;

• our ability to be successful in divesting assets or businesses we wish to sell, including the divestiture of Ctrack South Africa operations;

• our ability to be successful in divesting assets or businesses we wish to sell;

• our ability to make focused investments in research and development;

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It is this proven expertise, commitment to quality, obsession with innovation and a relentless focus on execution that makes us a preferred global partner of service providers, distributors, value-added resellers, system integrators, and enterprises worldwide.

On February 24, 2021, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”) with an affiliate of Convergence Partners (“Convergence”), an investment management firm in South Africa, to sell the Company’s Ctrack business operations in Africa, Pakistan and the Middle East (together, “Ctrack South Africa”), in an all-cash transaction for 528.9 million South African Rand (“ZAR”) (approximately $35.4 million United States Dollar (“USD”) based on an exchange rate on March 31, 2021 of 14.92 ZAR to 1 USD).

The consummation of the sale is subject to usual and customary closing conditions, including receipt of South African anti-trust approval.

Additionally, the consummation of the sale is subject to Convergence closing an investment fund.

The sale is expected to be completed in the second quarter of fiscal 2021.

On February 24, 2021, we entered into a Share Purchase Agreement (the “Purchase Agreement”) with an affiliate of Convergence Partners (“Convergence”), an investment management firm in South Africa, to sell our Ctrack business operations in Africa, Pakistan and the Middle East (together, “Ctrack South Africa”), in an all-cash transaction for 528.9 million South African Rand (“ZAR”) (approximately $36.6 million United States Dollars (“USD”)) based on an exchange rate on June 30, 2021 of 14.32 ZAR to 1 USD).

The Purchase Agreement provides for an adjustment to the purchase price based on a normalized level of net working capital.

The consummation of the sale was subject to a number of customary conditions precedent.

Additionally, the consummation of the sale was subject to Convergence closing an investment fund.

On July 30, 2021, we completed the sale of Ctrack South Africa.

Initial cash proceeds of approximately $36600000.0 million were received.

Final cash proceeds net of transaction cost are subject to foreign exchange rates as well as certain post-closing working capital adjustments that will be provided by Convergence and agreed upon by us no later than 35 business days after completion of the sale.

The estimated gain upon sale is approximately $4.4 million, calculated based on the foreign exchange rate as of July 30, 2021.

The actual gain may differ from this estimate, by up to $1 million to $2 million, as a result of post-closing working capital adjustments and related foreign exchange fluctuations.

Our Sources of Revenue

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We sell our wireless routers for IIoT, integrated telematics and mobile tracking hardware devices through our direct sales force, value-added resellers and through distributors.

The customer base for our IIoT products is comprised of transportation companies, industrial enterprises, manufacturers, application service providers, system integrators and distributors in various industries, including fleet and vehicle transportation, aviation ground service management, energy and industrial automation, security and safety, medical monitoring and government.

The customer base for our IIoT products is comprised of transportation companies, industrial enterprises, manufacturers, application service providers, system integrators and distributors in various

industries, including fleet and vehicle transportation, aviation ground service management, energy and industrial automation, security and safety, medical monitoring and government.

Integrated telematics and asset tracking devices are also sold under our Ctrack brand and provided as part of our integrated SaaS solutions.

We sell SaaS, software and services solutions across multiple mobile and IIoT vertical markets, including fleet management, vehicle telematics, stolen vehicle recovery, asset tracking, monitoring, business connectivity and subscription

Our SaaS platforms are device-agnostic and provide a standardized, scalable way to order, connect and manage remote assets and to improve business operations.

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Our SaaS delivery platforms include our Ctrack platforms, which provide fleet, vehicle, aviation, asset and other telematics applications.

Once the sale of our Ctrack South Africa operations is complete, certain portions of our SaaS revenue will no longer be generated, but Inseego will continue to provide telematics solutions in the rest of the world, including in North America, Europe and Australia.

Since the sale of our Ctrack South Africa operations was completed on July 30, 2021, certain portions of our SaaS revenue will no longer be generated, but Inseego will continue to provide telematics solutions in the rest of the world, including in North America, Europe and Australia.

Factors Which May Influence Future Results of Operations

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• the impact of the COVID-19 pandemic on our business;

• the announced sale of our Ctrack South Africa operations;

• the sale of our Ctrack South Africa operations;

• changes in technologies.

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In December 2019, COVID-19 was reported to have surfaced in Wuhan, China, resulting in shutdowns of manufacturing and commerce globally in the months that followed.

Since then, the COVID-19 pandemic has spread to multiple countries worldwide, including the United States, and has resulted in authorities implementing numerous measures to try to contain the disease or slow its spread, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns.

The demand environment for our 5G products during the three months ended March 31, 2021 was consistent with our expectations, with continued demand for our products due to a dramatic increase around the world in remote or tele-work and learning due to the COVID-19 pandemic.

Since then, the COVID-19 pandemic has spread worldwide, and has resulted in authorities implementing numerous measures to try to contain the disease or slow its spread, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns.

The demand environment for our 5G products during the three months ended June 30, 2021 was consistent with our expectations, with continued demand for our products due to a dramatic increase around the world in remote or tele-work and

learning due to the COVID-19 pandemic.

Recently, our IoT & Mobile Solutions have experienced lower sales of LTE gigabit hotspots as COVID-19 pandemic demand have eased.

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Cost of Net Revenues.

overhead, costs associated with cancellation of purchase orders and costs related to outside services.

Cost of net revenues includes all costs associated with our contract manufacturers, distribution, fulfillment and repair services, delivery of SaaS services, warranty costs, amortization of intangible assets, royalties, operations overhead, costs associated with cancellation of purchase orders and costs related to outside services.

Also included in cost of net revenues are costs related to inventory adjustments, including acquisition-related amortization of the fair value of inventory, as well as any write downs for excess and obsolete inventory and abandoned product lines.

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Results of Operations

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Net revenues .

Net revenues for the three months ended March 31, 2021 were $57.6 million, compared to $56.8 million for the same period in 2020.

Net revenues for the three months ended June 30, 2021 were $65.7 million, compared to $80.7 million for the same period in 2020.

The following table summarizes net revenues by our two product categories (in thousands):

Three Months Ended

March 31, Change

June 30, Change

Product Category 2021 2020 $ %

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IoT & Mobile Solutions.

The slight increase in IoT & Mobile Solutions net revenues is primarily a result of increased sales of our second-generation 5G hotspot related to our MiFi business and increased revenues in our Inseego Subscribe business due to subscriber growth, offset by decrease in our Enterprise and Carrier offerings within our IoT & Mobile Solutions, and lower sales of LTE gigabit hotspots as COVID-19 pandemic demand eased.

The decrease in IoT & Mobile Solutions net revenues is primarily due to decreases in our enterprise and carrier offerings within IoT & Mobile Solutions, and lower sales of LTE gigabit hotspots as COVID-19 pandemic demand eased, partially offset by increased sales of our second-generation 5G hotspot related to our MiFi business and increased revenues in our Inseego Subscribe business due to subscriber growth.

Enterprise SaaS Solutions.

Enterprise SaaS Solutions net revenues increased year-over-year due to the effects of weakening U.S.

Dollar to South Africa Rand foreign exchange rates on international sales.

Enterprise SaaS Solutions net revenues increased year-over-year as we experienced COVID-19 related installation restrictions in fiscal 2020 and such imposed restrictions were lifted in fiscal 2021.

The effect of the weakening U.S.

Dollar to South Africa Rand foreign exchange rates on international sales also contributed to the increase in net revenues.

Cost of net revenues.

Cost of net revenues for the three months ended March 31, 2021 was $39.1 million, or 67.9% of net revenues, compared to $39.6 million, or 69.7% of net revenues, for the same period in 2020.

Cost of net revenues for the three months ended June 30, 2021 was $45.3 million, or 69.0% of net revenues, compared to $58.7 million, or 72.7% of net revenues, for the same period in 2020.

The following table summarizes cost of net revenues by our two product categories (in thousands):

Three Months Ended

March 31, Change

June 30, Change

Product Category 2021 2020 $ %

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IoT & Mobile Solutions.

The decrease in IoT & Mobile Solutions cost of net revenues is primarily a result of lower sales of LTE gigabit hotspots, partially offset by additional cost of revenue due to subscriber growth in our Inseego Subscribe business.

The decrease in IoT & Mobile Solutions cost of net revenues is primarily a result of lower sales of LTE gigabit hotspots.

Enterprise SaaS Solutions.

Enterprise SaaS Solutions cost of net revenues increased by 1.9% compared to the same period in 2020 mainly due to weakening U.S.

Enterprise SaaS Solutions cost of net revenues increased by 26.0% compared to the same period in 2020 primarily due to increased sales, and the weakening U.S.

Dollar to South Africa Rand foreign exchange rates on international costs.

Gross profit.

Gross profit for the three months ended March 31, 2021 was $18.5 million, or a gross margin of 32.1%, compared to $17.2 million, or a gross margin of 30.3%, for the same period in 2020.

The increase in gross margin was primarily attributable to the favorable mix of Inseego Subscribe revenue.

Gross profit for the three months ended June 30, 2021 was $20.3 million, or a gross margin of 31.0%, compared to $22.0 million, or a gross margin of 27.3%, for the same period in 2020.

The increase in gross margin was primarily attributable to the more favorable mix of our product offerings, as well as favorable margins on our Inseego Subscribe revenue.

Research and development expenses.

Research and development expenses for the three months ended March 31, 2021 were $14.6 million, or 25.3% of net revenues, compared to $8.2 million, or 14.5% of net revenues, for the same period in 2020.

The increase was primarily a result of staffing, test units, and other development spending related to our 5G product programs.

Additionally, the increase was primarily a result of timing of payout of bonus grants to eligible employees during the current quarter, compared to bonus grants awarded to employees during the second quarter of fiscal 2020.

Research and development expenses for the three months ended June 30, 2021 were $11.8 million, or 17.9% of net revenues, compared to $10.5 million, or 13.1% of net revenues, for the same period in 2020.

The increase was primarily a result of staffing, test units, and other development spending related to our 5G product programs, partially offset by the timing and amount of bonus grants to eligible employees during the first quarter of fiscal 2021, compared to bonus grants awarded to employees during the second quarter of fiscal 2020.

Share-based Compensation in the accompanying unaudited condensed consolidated financial statements for further information.

Sales and marketing expenses.

Sales and marketing expenses for the three months ended March 31, 2021 were $11.0 million, or 19.1% of net revenues, compared to $8.8 million, or 15.4% of net revenues, for the same period in 2020.

The increase was primarily a result of timing of payout of bonus grants to eligible employees during the current quarter, compared to bonus grants awarded to employees during the second quarter of fiscal 2020.

Sales and marketing expenses for the three months ended June 30, 2021 were $9.8 million, or 14.9% of net revenues, compared to $8.6 million, or 10.7% of net revenues, for the same period in 2020.

The increase was primarily a result of higher spend on marketing 5G products, partially offset by the timing and amount of bonus grants to eligible employees during the first quarter of fiscal 2021, compared to bonus grants awarded to employees during the

second quarter of fiscal 2020.

Share-based Compensation in the accompanying unaudited condensed consolidated financial statements for further information.

General and administrative expenses.

General and administrative expenses for the three months ended March 31, 2021 were $8.6 million, or 15.0% of net revenues, compared to $7.2 million, or 12.6% of net revenues, for the same period in 2020.

General and administrative expenses for the three months ended June 30, 2021 were $7.4 million, or 11.3% of net revenues, compared to $7.4 million, or 9.2% of net revenues, for the same period in 2020.

The increase was primarily a res ult of higher legal expenses, p artially offset by the timing and amount of bonus grants to eligible employees during the first quarter of 2021, compared to bonus grants awarded to employees during the second quarter of fiscal 2020.

Share-based Compensation in the accompanying unaudited condensed consolidated financial statements for further information.

Amortization of purchased intangible assets .

Amortization of purchased intangible assets for each of the three months ended March 31, 2021 and 2020 was $0.5 million and $0.8 million, respectively.

Amortization of purchased intangible assets for each of the three months ended June 30, 2021 and 2020 was $0.7 million and $0.8 million, respectively.

The decrease was primarily as a result of certain purchased intangible assets being fully amortized as of the fourth quarter of 2020.

Impairment of capitalized software .

During the three months ended June 30, 2021, we recorded a loss of $1.2 million on capitalized software development costs.

There was no such expense for the same period in 2020.

Loss on debt conversion and extinguishment, net.

The loss on debt conversion of $0.4 million for the three months ended March 31, 2021 primarily represents the loss on debt conversion of 2025 Notes.

The loss on debt conversion and extinguishment, net during the three months ended March 31, 2020 was related to the fair value of inducement

shares issued in the privately-negotiated exchange transactions with certain holders of the 2022 Notes.

The loss on debt conversion and extinguishment, net of $67.2 million during the three months ended June 30, 2020 was primarily related to the extinguishment of the 2022 Notes, while there was no such expense for the same period in fiscal 2021.

Interest expense, net.

Interest expense, net, for the three months ended March 31, 2021 and 2020 was $1.8 million and $3.4 million, respectively.

The decrease in interest expense was due to the lower interest rate on the 2025 Notes, as compared to the 2022 Notes and our previous term loan.

Other income, net.

Other income, net, for the three months ended March 31, 2021 was $1.7 million, which primarily includes the fair value adjustment related to our interest make-whole payment.

For the same period in 2020, other income, net, was $1.0 million, which primarily included foreign currency transaction gains and losses.

Income tax provision.

The income tax provision of $0.2 million and $0.1 million for the three months ended March 31, 2021 and 2020, respectively, primarily related to certain of our entities in foreign jurisdictions.

Net income attributable to noncontrolling interests.

Net income attributable to noncontrolling interests for the three months ended March 31, 2021 was $0.2 million, compared to a net income attributable to noncontrolling interests of $0.1 million for the same period in 2020.

Interest expense, net, for the three months ended June 30, 2021 and 2020 was $1.7 million and $3.2 million, respectively.

The decrease in interest expense was primarily due to the lower interest rate on the 2025 Notes, as compared to the 2022 Notes and our previous term loan , partially offset by the higher principal amount of 2025 Notes.

Other income (expense), net.

Other expense, net, for the three months ended June 30, 2021 was $0.6 million, which primarily includes the fair value adjustment related to our interest make-whole arrangement, as well as transaction costs incurred related to the sale of Ctrack South Africa.

For the same period in 2020, other income, net, was $0.8 million, which primarily includes the fair value adjustment related to our interest make-whole arrangement.

Income tax provision (benefit).

The income tax provision of $0.2 million for the three months ended June 30, 2021 and the income tax benefit of $0.1 million for the same period in 2020, respectively, primarily relate to provision in fiscal 2021 or benefits in fiscal 2020 from certain of our entities in foreign jurisdictions.

Net loss (income) attributable to noncontrolling interests.

Net income attributable to noncontrolling interests for the three months ended June 30, 2021 was nil, compared to a net loss attributable to noncontrolling interests of $6,000 for the same period in 2020.

Series E preferred stock dividends.

During the three months ended March 31, 2021 and 2020, we recorded dividends of $0.9 million and $0.4 million, respectively, on our Fixed-Rate Cumulative Perpetual Preferred Stock, Series E, par value $0.001 per share (the “Series E Preferred Stock”).

During the three months ended June 30, 2021 and 2020, we recorded dividends of $0.9 million and $0.8 million, respectively, on our Fixed-Rate Cumulative Perpetual Preferred Stock, Series E, par value $0.001 per share (the “Series E Preferred Stock”).

The increase was primarily attributable to the additional shares of Series E Preferred Stock issued in March 2020.

Private Placements and Public Offering .

Private Placements and Public Offering in the accompanying unaudited condensed consolidated financial statements for further information.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Net revenues .

Net revenues for the six months ended June 30, 2021 were $123.3 million, compared to $137.5 million for the same period in 2020.

The following table summarizes net revenues by our two product categories (in thousands):

Six Months Ended

June 30, Change

Product Category 2021 2020 $ %

IoT & Mobile Solutions 94,795 $ 111,729 $ (16,934) (15.2) %

Enterprise SaaS Solutions 28,495 25,800 2,695 10.4 %

Total $ 123,290 $ 137,529 $ (14,239) (10.4) %

IoT & Mobile Solutions.

Enterprise SaaS Solutions.

Enterprise SaaS Solutions net revenues increased year-over-year as we experienced COVID-19 related installation restrictions in fiscal 2020 and such imposed restrictions were lifted in fiscal 2021.

The effect of the weakening U.S.

Dollar to South Africa Rand foreign exchange rates on international sales also contributed to the increase in net revenues.

Cost of net revenues.

Cost of net revenues for the six months ended June 30, 2021 was $84.5 million or 68.5% of net revenues, compared to $98.3 million or 71.5% of net revenues, for the six months ended June 30, 2020.

The following table summarizes cost of net revenues by our two product categories (in thousands):

Six Months Ended

June 30, Change

Product Category 2021 2020 $ %

IoT & Mobile Solutions 73,178 88,279 (15,101) (17.1) %

Enterprise SaaS Solutions 11,288 10,023 1,265 12.6 %

Total $ 84,466 $ 98,302 $ (13,836) (14.1) %

IoT & Mobile Solutions.

The decrease in IoT & Mobile Solutions cost of net revenues is primarily a result of the decreased sales in our LTE gigabit hotspots.

Enterprise SaaS Solutions.

Enterprise SaaS Solutions cost of net revenues increased by 12.6% compared to the same period in 2020 primarily due to increased sales, and the weakening U.S.

Dollar to South Africa Rand foreign exchange rates on international costs.

Gross profit.

Gross profit for the six months ended June 30, 2021 was $38.8 million, or a gross margin of 31.5%, compared to $39.2 million, or a gross margin of 28.5%, for the same period in 2020.

The increase in gross margin was primarily attributable to the favorable mix of our product offerings, as well as favorable margins on our Inseego Subscribe revenue.

Research and development expenses.

Research and development expenses for the six months ended June 30, 2021 were $26.3 million, or 21.4% of net revenues, compared to $18.8 million, or 13.6% of net revenues, for the same period in 2020.

The increase was primarily a result of staffing, test units, other development spending related to 5G product programs, and the amount of bonus grants to eligible employees during the six months ended June 30, 2021 compared to the amount of bonus

grants awarded to eligible employees during the six months ended June 30, 2020.

Share-based Compensation in the accompanying unaudited condensed consolidated financial statements for further information.

Sales and marketing expenses.

Sales and marketing expenses for the six months ended June 30, 2021 were $20.8 million, or 16.9% of net revenues, compared to $17.4 million, or 12.7% of net revenues, for the same period in 2020.

The increase was primarily a result of higher spend on marketing 5G products, and the amount of bonus grants to eligible employees during the six months ended June 30, 2021 compared to the amount of bonus grants awarded to eligible employees during the six months ended June 30, 2020.

Share-based Compensation in the accompanying unaudited condensed consolidated financial statements for further information.

General and administrative expenses.

General and administrative expenses for the six months ended June 30, 2021 were $16.1 million, or 13.0% of net revenues, compared to $14.6 million, or 10.6% of net revenues, for the same period in 2020.

The increase was primarily a result of the amount of bonus grants to eligible employees during the six months ended June 30, 2021 compared to the amount of bonus grants awarded to eligible employees during the six months ended June 30, 2020.

Share-based Compensation in the accompanying unaudited condensed consolidated financial statements for further information.

Amortization of purchased intangible assets .

Amortization of purchased intangible assets for each of the six months ended June 30, 2021 and 2020 was $1.1 million and $1.6 million, respectively.

The decrease was primarily as a result of certain purchased intangible assets being fully amortized as of the fourth quarter of 2020.

Impairment of capitalized software .

During the six months ended June 30, 2021, we recorded a loss of $1.2 million on capitalized software development costs.

There was no such expense for the same period in 2020.

Loss on debt conversion and extinguishment.

The loss on debt conversion and extinguishment, net for each of the six months ended June 30, 2021 and 2020 was $0.4 million and $75.2 million, respectively, and primarily represents the loss on debt conversion of the 2025 Notes and debt conversion and extinguishment of the 2022 Notes, respectively.

Interest expense, net.

Interest expense, net for each of the six months ended June 30, 2021 and 2020 was $3.5 million and $6.5 million, respectively.

The decrease in interest expense was primarily due to the lower interest rate on the 2025 Notes, as compared to the 2022 Notes and our previous term loan, partially offset by the higher principal amount of the 2025 Notes.

Other income (expense), net.

Other income, net, for each of the six months ended June 30, 2021 and 2020 was $1.1 million and $1.8 million, respectively, which primarily includes the fair value adjustment related to our interest make-whole arrangement as well as foreign currency transaction gains and losses.

Income tax provision (benefit).

The income tax provision of $0.4 million for the six months ended June 30, 2021 and the income tax benefit of $24,000 for the six months ended June 30, 2020, respectively, primarily relate to provision in fiscal 2021 or benefits in fiscal 2020 from certain of our entities in foreign jurisdictions.

Net loss (income) attributable to noncontrolling interests.

Net income attributable to noncontrolling interests for the six months ended June 30, 2021 was $0.2 million, compared to a net income attributable to noncontrolling interests of $26,000 for the same period in 2020.

Series E preferred stock dividends.

During the six months ended June 30, 2021, and 2020 we recorded dividends of $1.8 million and $1.2 million, respectively, on our Series E Preferred Stock.

The increase was primarily attributable to the additional shares of Series E Preferred Stock issued in March 2020.

Private Placements and Public Offering in the accompanying unaudited condensed consolidated financial statements for further information.

Liquidity and Capital Resources

As of March 31, 2021, the Company had available cash and cash equivalents totaling $59.6 million, including $5.5 million cash and cash equivalents classified as held-for-sale, and working capital of $46.1 million, excluding assets and liabilities classified as held-for-sale.

On March 6, 2020, we issued and sold 25,000 shares of Fixed-Rate Cumulative Perpetual Preferred Stock, Series E, par value $0.001 per share (the “Series E Preferred Stock”), for an aggregate purchase price of $25.0 million.

As of June 30, 2021, the Company had available cash and cash equivalents totaling $36.7 million, including $5.8 million cash and cash equivalents classified as held-for-sale, and working capital of $32.4 million, excluding assets and liabilities classified as held-for-sale.

On March 6, 2020, we issued and sold 25,000 shares of Series E Preferred Stock for an aggregate purchase price of $25.0 million.

In the first quarter of 2020, $59.9 million of our 5.5% convertible senior notes due 2022 (the “2022 Notes” formerly referred to as the “Inseego Notes”) were exchanged for common stock in private exchange transactions.

Additionally, in the second quarter of 2020, we restructured our outstanding debt by completing a $100.0 million registered public offering (the “Offering”) of 3.25% convertible senior notes due 2025 (the “2025 Notes”) and also entered into privately-negotiated Exchange Agreements, pursuant to which an aggregate of $45.0 million in principal amount of the 2022 Notes were exchanged for an aggregate of $32.0 million in cash and $80.4 million in principal amount of the 2025 Notes (the “Private Exchange Transactions”).

Transactions”).

We also used a portion of the proceeds from the Offering to repay in full our previous term loan.

In the third quarter of 2020, we redeemed the remaining $2,000 principal amount of the 2022 Notes.

As of March 31, 2021, our outstanding debt primarily consisted of $161.9 million in principal amount of 2025 Notes.

During the three months ended March 31, 2021, certain holders of the 2025 Notes converted an aggregate of approximately $5.0 million in principal amount of the 2025 Notes into 428,669 shares of our common stock, including 32,221 shares of common stock issued in satisfaction of the interest make-whole payment.

In connection therewith, we recorded a loss of $0.4 million on debt conversion, net in the condensed consolidated statement of operations included in the accompanying unaudited condensed consolidated financial statements.

As of June 30, 2021, our outstanding debt primarily consisted of $161.9 million in principal amount of 2025 Notes.

On January 25, 2021, we entered into an Equity Distribution Agreement with Canaccord Genuity LLC (the “Agent”), pursuant to which we may offer and sell, from time to time, through or to the Agent, up to $40.0 million of shares of our common stock (the “ATM Offering”).

In January 2021, we sold 1,516,073 shares of common stock, at an average price of $20.11 per share, for net proceeds of $29.4 million, after deducting underwriter fees and discounts of $0.9 million, and other offering fees, pursuant to the ATM Offering.

On July 30, 2021, the Company completed the sale of Ctrack South Africa.

Initial cash proceeds of approximately $36600000.0 million were received.

Final cash proceeds net of transaction cost will be subject to foreign exchange rates as well as certain post-closing working capital adjustments that will be provided by Convergence and agreed upon by the Company no later than 35 business days after completion of the sale.

We have a history of operating and net losses and overall usage of cash from operating and investing activities.

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Contractual Obligations and Commitments

There have been no material changes in our contractual obligations in the first quarter of 2021.

There were no material changes in our contractual obligations in the second quarter of 2021.

Convertible Notes

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Upon conversion of the 2025 Notes, we will deliver for each $1,000 principal amount of 2025 Notes converted a number of shares of common stock (together with cash in lieu of any fractional share), equal to the conversion rate.

The initial conversion rate for the 2025 Notes is 79.2896 shares of common stock per $1,000 principal amount of 2025 Notes, which represents an initial conversion price of approximately $12.61 per share, and is subject to adjustment upon the occurrence of certain events, including, but not limited to, certain stock dividends, splits and combinations, the issuance of certain rights, options or warrants to holders of the common stock, certain distributions of assets, debt securities, capital stock or other property to holders of the common stock, cash dividends on the common stock and certain Company tender or exchange offers.

certain rights, options or warrants to holders of the common stock, certain distributions of assets, debt securities, capital stock or other property to holders of the common stock, cash dividends on the common stock and certain Company tender or exchange offers.

Holders of the 2025 Notes who convert their 2025 Notes may also be entitled to receive, under certain circumstances, an interest make-whole payment payable in, at the Company’s election, either cash or shares of the Common Stock (together with cash in lieu of any fractional share).

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The following table summarizes our unaudited condensed consolidated statements of cash flows for the periods indicated (in thousands):

Three Months Ended

Net cash provided by operating activities $ 973 $ 328

Six Months Ended

Net cash (used in) provided by operating activities $ (12,030) $ 4,662

Net cash used in investing activities (17,434) (13,233)

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Cash, cash equivalents and restricted cash, beginning of period 40,015 12,074

Cash, and cash equivalents, end of period 1

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

$ 40,383 $ 42,100

1 Cash and cash equivalents balance includes cash and cash equivalents classified as held for sale as of March 31, 2021.

1 Cash, cash equivalents and restricted cash balance includes cash, cash equivalents and restricted cash classified as held for sale as of June 30, 2021.

Operating activities.

Net cash provided by operating activities was $1.0 million for the three months ended March 31, 2021, compared to net cash provided by operating activities of $0.3 million for the same period in 2020.

Net cash provided by operating activities for the three months ended March 31, 2021 was primarily attributable to net cash provided by working capital, depreciation and amortization, including the amortization of debt discount and debt issuance costs, loss on debt conversion, and share-based compensation expense, offset by the net loss incurred during the period, and a non-cash gain as a result of the fair value adjustment on derivative instruments.

Net cash provided by operating activities for the three months ended March 31, 2020 was primarily attributable to net cash provided by working capital, non-cash charges for the fair value of inducement shares issued in the privately-negotiated exchange transactions with certain holders of the 2022 Notes, depreciation and amortization, including the amortization of debt discount and debt issuance costs, and share-based compensation expense, partially offset by the net loss in the period.

Net cash used in operating activities was $12.0 million for the six months ended June 30, 2021, compared to net cash provided by operating activities of $4.7 million for the same period in 2020.

Net cash used in operating activities for the six months ended June 30, 2021 was primarily attributable to net loss incurred during the period, net cash used by working capital, and fair value adjustment on derivative instrument, partially offset by depreciation and amortization, share-based compensation expense, and the amortization of debt discount and debt issuance costs.

Net cash provided by operating activities for the six months ended June 30, 2020 was primarily attributable to net cash provided by working capital, non-cash charges for the debt conversion and extinguishment of the 2022 Notes, depreciation and amortization, including the

amortization of debt discount and debt issuance costs, and share-based compensation expense, partially offset by the net loss in the period.

Investing activities.

Net cash used in investing activities during the three months ended March 31, 2021 was $9.4 million, compared to net cash used in investing activities of $4.9 million for the same period in 2020.

Cash used in investing activities during the three months ended March 31, 2021 was primarily related to the purchases of property, plant and equipment and capitalization of certain costs related to the research and development of software to be sold in our products, in large part due to the increase in development in support of 5G products and services.

Net cash used in investing activities during the six months ended June 30, 2021 was $17.4 million, compared to net cash used in investing activities of $13.2 million for the same period in 2020.

Cash used in investing activities during the six months ended June 30, 2021 was primarily related to the purchases of property, plant and equipment and capitalization of certain costs related to the research and development of software to be sold in our products, in large part due to the increase in development in support of 5G products and services.

Cash used in investing activities during the same period in 2020 was primarily related to the purchases of property, plant and equipment and capitalization of certain costs related to the research and development of software to be sold in our products, in large part due to the increase in development in support of 5G products and services.

Financing activities.

Net cash provided by financing activities during the three months ended March 31, 2021 was $29.5 million, compared to net cash provided by financing activities of $26.3 million for the same period in 2020.

Net cash provided by financing activities during the three months ended March 31, 2021 was primarily related to net proceeds received from the ATM Offering, proceeds from stock option exercises and purchases through our employee stock purchase plan, partially offset by the principal payments under finance lease obligations and taxes paid on vested restricted stock units.

Net cash provided by financing activities for the same period in 2020 was primarily related to proceeds received from the issuance and sale of Series E Preferred Stock, the exercise of warrants to purchase common stock, and net borrowings of bank and overdraft facilities, partially offset by principal payments under finance lease obligations and taxes paid on vested restricted stock units.

Net cash provided by financing activities during the six months ended June 30, 2021 was $29.5 million, compared to net cash provided by financing activities of $41.1 million for the same period in 2020.

Net cash provided by financing activities during the six months ended June 30, 2021 was primarily related to net proceeds received from the ATM Offering, proceeds from stock option exercises and purchases through our employee stock purchase plan, partially offset by the principal payments under finance lease obligations and taxes paid on vested restricted stock units.

Net cash provided by financing activities for the same period in 2020 was primarily related to proceeds received from the registered Offering of 2025 Notes, the sale of Series E Preferred Stock, the exercise of warrants to purchase common stock, and stock option exercises, partially offset by payoff of the Term Loan and related expenses, cash paid to investors in the Private Exchange Transactions, payment of debt issuance costs, repurchase of Series E Preferred Stock, principal payments under finance lease obligations, and taxes paid on vested restricted stock units.

Off-Balance Sheet Arrangements

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Item 2. Management’s Discussion and Analysis