What changed in this filing

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Item 1A. Risk Factors

2022-03-01 compared with 2021-03-01 · 149 added, 144 removed, 609 unchanged (32% of the section changed)

11 unchanged sentences

• The 5G market may take longer to materialize than we expect or, if it does materialize rapidly, we may not be able to meet the development schedule and other customer demands.

• Our plan to position the Company as a leading provider of industrial IoT products and services to its customer base could subject us to increased costs and related risks and may not achieve the intended results.

• Our plan to position ourselves as a leading provider of industrial IoT products and services to our customer base could subject us to increased costs and related risks and may not achieve the intended results.

• If we fail to develop and timely introduce new products and services or enter new markets for our products and services successfully, we may not achieve our revenue targets, or we may lose key customers or sales and our business could be harmed.

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• The mobile hotspot business is subject to a number of challenges that are difficult to overcome.

• Our future capital needs are uncertain, and we may need to raise additional funds in the future.

We may not be able to raise such additional funds on acceptable terms or at all.

• Our debt service requirements are significant, and we may not have sufficient cash flow from our business to pay our substantial debt.

1 unchanged sentence

Risks Related to Corporate Development Activities

• If we do not properly manage the development of our business, we may experience significant strains on our management and operations and disruptions in our business.

• We may, as part of our growth strategy, acquire companies and businesses, and/or divest assets or businesses.

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• Following acquisitions and/or divestitures, our reorganized business may not perform as we or the market expects, which could have an adverse effect on the price of our common stock.

• We cannot provide any assurance that we will be successful in divesting assets we wish to sell, including the divestiture of our Ctrack South African Operations.

• If our goodwill and acquired intangible assets become impaired, we may be required to record a significant charge to earnings.

Risks Related to Competition

1 unchanged sentence

We may be unable to compete effectively.

• The 5G fixed wireless access gateway business is subject to a number of challenges that will be difficult to overcome.

• The market for asset management and fleet management solutions and the markets for telemetry and tracking solutions are all highly fragmented and competitive, with low barriers to entry.

If we do not compete effectively, our operating results may be harmed.

• Industry consolidation may result in increased competition, which could result in a loss of customers or a reduction in revenue.

Risks Related to Our Customers and Demand for Our Solutions

• Our inability to adapt to rapid technological change in our markets could impair our ability to remain competitive and adversely affect our results of operations.

• We depend upon Verizon Wireless for a substantial portion of our revenues, and our business would be negatively affected by an adverse change in our dealings with this customer.

• If we fail to develop and maintain strategic relationships, we may not be able to penetrate new markets.

• We depend upon Verizon Wireless and T-Mobile for a substantial portion of our revenues, and our business would be negatively affected by an adverse change in our dealings with either of these customers.

• We may not be able to retain and increase sales to our existing customers, which could negatively impact our financial results.

• Loss of, or a significant reduction in business from, one or more enterprise or government customers could adversely affect our revenue and profitability.

• Adverse economic conditions or reduced spending on information technology solutions may adversely impact our revenue and profitability.

• The marketability of our products may suffer if wireless telecommunications operators do not deliver acceptable wireless services.

• Changes in practices of insurance companies in the markets in which we provide our solutions could materially and adversely affect demand for products and services.

• Reduction in regulation in certain markets may adversely impact demand for certain of our solutions by reducing the necessity for, or desirability of, our solutions.

Risks Related to Developing, Manufacturing and Delivering Our Solutions

• We currently rely on third parties to manufacture and warehouse many of our products, which exposes us to a number of risks and uncertainties outside our control.

• We have been moving production to one or more new contract manufacturers, which exposes us to a number of risks and uncertainties outside our control.

• We depend on sole source suppliers for some products used in our services.

The availability and sale of those services would be harmed if any of these suppliers is not able to meet our demand and alternative suitable products are not available on acceptable terms, or at all.

• Natural disasters, public health crises, political crises and other catastrophic events or other events outside of our control could damage our facilities or the facilities of third parties on which we depend, and could impact consumer spending.

• The effects of COVID-19 and other potential future public health crises, epidemics, pandemics or similar events on our business, operating results and cash flows are uncertain.

• We rely on third-party software and other intellectual property to develop and provide our solutions and significant increases in licensing costs or defects in third-party software could harm our business.

• If disruptions in our transportation network occur or our shipping costs substantially increase, we may be unable to sell or timely deliver our products, and our operating expenses could increase.

• We may be unable to adequately control the costs or maintain adequate supply of components and raw materials associated with our operations.

• If we do not effectively manage our sales channel inventory and product mix, we may incur costs associated with excess inventory or lose sales from having too few products.

• Product liability, product replacement or recall costs could adversely affect our business and financial performance.

• Our solutions integrate with third-party technologies and if our solutions become incompatible with these technologies, our solutions would lose functionality and our customer acquisition and retention could be adversely affected.

1 unchanged sentence

• Our “over-the-air” transmission of firmware updates could permit a third party to disable our customers’ in-vehicle devices or introduce malware into our customers’ in-vehicle devices, which could expose us to widespread loss of service and customer claims.

• Our solutions rely on cellular and GPS networks and any disruption, failure or increase in costs could impede our profitability and harm our financial results.

• Any significant disruption in service on our websites or in our computer systems could damage our reputation and result in a loss of customers, which would harm our business and operating results.

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• Due to the global nature of our operations, we are subject to political and economic risks of doing business internationally.

• Fluctuations in foreign currency exchange rates, especially the South African Rand against the U.S.

Dollar, could adversely affect our results of operations.

• Unionization efforts in certain countries in which we operate could materially increase our costs or limit our flexibility.

• Weakness or deterioration in global economic or political conditions in jurisdictions where we have significant foreign operations could have a material adverse effect on our results of operations and financial condition.

• Fluctuations in foreign currency exchange rates could adversely affect our results of operations.

Risks Related to Regulations, Taxation and Accounting Matters

• A governmental challenge to our transfer pricing policies or practices could impose significant costs on us.

• If we do not achieve applicable black economic empowerment objectives in our South African businesses, we risk not being able to renew certain of our existing contracts which service South African government and quasi-governmental customers, as well as not being awarded future corporate and governmental contracts which would result in the loss of revenue.

• We are required to comply with South African labor laws with respect to certain of our employees and face the risk of disruption from labor disputes in South Africa, which could result in additional operating costs.

• A lack of growth, high inflation or increased interest rates in the South Africa economy could reduce our anticipated revenue and increase our operating costs.

• Evolving regulations and changes in applicable laws relating to data privacy may increase our expenditures related to compliance efforts or otherwise limit the solutions we can offer, which may harm our business and adversely affect our financial condition.

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• Our share price has been highly volatile in the past and could be highly volatile in the future.

• The price of our stock may be vulnerable to manipulation, including through short sales.

• Future settlements of any conversion obligations with respect to the 2025 Notes may result in dilution to existing stockholders, lower prevailing market prices for our common stock or require a significant cash outlay.

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• our ability to effectively manage our growth;

• our ability to attract and retain key employees;

• our ability to attract and retain key employees, given intense competition for qualified personnel;

• our ability to successfully manage and realize the anticipated benefits of any future divestitures or acquisitions of businesses, solutions or technologies;

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• the emergence of global public health emergencies, such as the outbreak of COVID-19, which could extend lead times in our supply chain and lengthen sales cycles with our customers;

• fluctuations in currency exchange rates, particularly the South African Rand to U.S.

Dollar exchange rate;

• fluctuations in currency exchange rates;

• trade protection measures (such as tariffs and duties) and import or export licensing requirements;

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Failure to manage challenges related to 5G markets and opportunities could have a material adverse effect on our financial condition and results of operations.

Our plan to position the Company as a leading provider of industrial IoT products and services to its customer base could subject us to increased costs and related risks and may not achieve the intended results.

Our strategic plan to position the Company as a leading provider of high value industrial IoT products and services could subject us to unexpected costs and risks.

Our plan to position ourselves as a leading provider of industrial IoT products and services to our customer base could subject us to increased costs and related risks and may not achieve the intended results.

Our strategic plan to position ourselves as a leading provider of high value industrial IoT products and services could subject us to unexpected costs and risks.

Such activities could subject us to increased operating costs, product liability, regulatory requirements and reputational risks.

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To the extent we are reliant upon expansion into new product markets and implementation of our strategic plan for growth and do not meet the new challenges posed by such expansion and implementation, our future sales growth could be negatively impacted, our operating costs could increase, and our business operations and financial results could be negatively affected.

Implementing our plan to position the Company as a leading provider of industrial IoT products and solutions has required, and is expected to continue to require, additional investments by the Company in both product development and go-to-market resources and additional attention from management, and if not successful, we may not realize the return on our investments as anticipated or our operating results could be adversely affected by slower than expected sales growth or additional costs.

Implementing our plan to position the Company as a leading provider of industrial IoT products and solutions has required, and is expected to continue to require, additional investments by us in both product development and go-to-market resources and additional attention from management, and if not successful, we may not realize the return on our investments as anticipated or our operating results could be adversely affected by slower than expected sales growth or additional costs.

If we fail to develop and timely introduce new products and services or enter new markets for our products and services successfully, we may not achieve our revenue targets, or we may lose key customers or sales and our business could be harmed.

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As we introduce new products or solutions, our current customers may not require or desire the features of these new offerings and may not purchase them or might purchase them in smaller quantities than we had expected.

We may face similar

risks that our products or solutions will not be accepted by customers as we enter new markets for our solutions, both in the United States and international markets.

We may face similar risks that our products or solutions will not be accepted by customers as we enter new markets for our solutions, both in the United States and international markets.

Further, as part of our business, we may enter into contracts with some customers in which we would agree to develop products or solutions that we would sell to such customers.

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An assertion by a third party that we are infringing its intellectual property could subject us to costly and time-consuming litigation or expensive licenses and our business could be harmed.

The technology industries involving mobile data communications, IoT devices, software and services are characterized by the existence of a large number of patents, copyrights, trademarks and trade secrets and by frequent litigation based on allegations of infringement or other violations of intellectual property rights.

allegations of infringement or other violations of intellectual property rights.

Much of this litigation involves patent holding companies or other adverse patent owners who have no relevant product revenues of their own, and against whom our own patent portfolio may provide little or no deterrence.

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During the second quarter of 2020, we issued $180.4 million of 3.25% convertible senior notes due 2025 (the “2025 Notes”) and used a portion of the proceeds to repay our previous term loan in full and retire the 5.5% convertible senior notes due 2022 (the “2022 Notes” formerly referred to as the “Inseego Notes”).

The principal amount of 2025 Notes outstanding at December 31, 2021 is $161.9 million.

Our ability to make scheduled payments on, or to refinance our indebtedness, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.

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While we expect to engage in an orderly transition process as we integrate newly appointed officers and managers, we face a variety of risks and uncertainties relating to the lack of management continuity, including diversion of management attention from business concerns, failure to retain other key personnel or inability to hire new key personnel.

These risks and uncertainties

could result in operational and administrative inefficiencies and added costs, which could adversely impact our results of operations, stock price and customer relationships.

These risks and uncertainties could result in operational and administrative inefficiencies and added costs, which could adversely impact our results of operations, stock price and customer relationships.

RISKS RELATED TO CORPORATE DEVELOPMENT ACTIVITIES

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We may also experience development, certification or production delays as we seek to meet demand for our products or unanticipated product requirements.

Our failure to properly manage the developments that we or our industry might experience could negatively impact our ability to execute on our operating plan and, accordingly, could have an adverse impact on our business, our cash flow and results of operations and our reputation with our current or potential customers.

Our failure to properly manage the developments that we or our industry might experience could

negatively impact our ability to execute on our operating plan and, accordingly, could have an adverse impact on our business, our cash flow and results of operations and our reputation with our current or potential customers.

We may, as part of our growth strategy, acquire companies and businesses, and/or divest assets or businesses.

The completion of acquisition or divestiture transactions could have an adverse effect on our financial condition.

As part of our business strategy, we may review acquisition and divestiture opportunities that we believe would be advantageous or complementary to the development of our business, including the Ctrack Transaction (defined and discussed

As part of our business strategy, we may review acquisition and divestiture opportunities that we believe would be advantageous or complementary to the development of our business.

Based on these opportunities, we may acquire additional businesses, assets or technologies in the future.

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As a result, if we fail to properly evaluate or implement acquisitions or divestitures, we may not achieve the anticipated benefits of any such transactions, and we may incur unanticipated costs, either of which could harm our business and operating results.

We cannot provide any assurance that we will be successful in divesting assets we wish to sell, including the divestiture of our Ctrack South African Operations.

On February 24, 2021, we entered into a Share Purchase Agreement pursuant to which an affiliate of Convergence Partners (“Convergence”), an investment management firm in South Africa, has agreed to acquire the South African operations of Ctrack, in an all-cash transaction for 528.9 million South African Rand (ZAR) (approximately $36.2 million United States Dollar (“USD”) based on an exchange rate on February 24, 2021 of 14.62 ZAR to 1 USD) (the “Ctrack Transaction”).

The Ctrack Transaction is subject to certain closing conditions, including, among other things, regulatory approvals and Convergence closing a new $100 million investment fund.

There can be no assurance that the conditions to the closing of the Ctrack Transaction will ever be satisfied or waived, and, therefore, the Ctrack Transaction may never be consummated.

If the Ctrack Transaction with Convergence is not consummated, our business may be materially affected.

In addition to not realizing any of the benefits of completing the Ctrack Transaction, our business may be subject to several additional risks, including reputational risks and negative publicity, difficulties in finding other acquirors or alternative exit strategies for the Ctrack business on terms that are favorable to us, additional expenses, such as legal, accounting and financial advisory fees, and negative reactions from our customers, suppliers or employees.

Each of these risks could harm our ability to achieve our planned strategic objectives, which, in turn, could adversely impact our ongoing business, financial condition, results of operations and the market price of our common stock.

Even if the Ctrack Transaction is consummated, the Ctrack Transaction may never achieve some or all of its anticipated benefits.

It is anticipated that the Company would provide transition services for at least a six month period following the consummation of the Ctrack Transaction, which could create additional and ongoing operational risks.

In addition, the Ctrack Transaction only involves the sale of Ctrack’s South African operations, and portions of the Ctrack operations would remain with the Company following the consummation of the Ctrack Transaction.

These remaining Ctrack operations would need to be rebranded, which could create operational and reputational risks for the Company.

See “Item 15.

Subsequent Events–Sale of Ctrack South Africa Operations” for further information.

If our goodwill and acquired intangible assets become impaired, we may be required to record a significant charge to earnings.

Goodwill is required to be tested for impairment at least annually.

Factors that may be considered when determining if the carrying value of our goodwill or intangible assets may not be recoverable include a significant decline in our expected future cash flows or a sustained, significant decline in our stock price and market capitalization.

As a result of our acquisition strategy, we may have significant goodwill and intangible assets recorded on our balance sheets.

In addition, significant negative industry or economic trends, such as those that have occurred as a result of the recent economic downturn, including reduced estimates of future cash flows or disruptions to our business could indicate that goodwill and intangible assets might be impaired.

If, in any period our stock price decreases to the point where our market capitalization is less than our book value, this too could indicate a potential impairment and we may be required to record an impairment charge in that period.

Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on projections of future operating performance.

The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results and market conditions.

Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit.

We operate in highly competitive environments and projections of future operating results and cash flows may vary significantly from actual results.

As a result, we may incur substantial impairment charges to earnings in our financial statements should an impairment of our goodwill and intangible assets be determined resulting in an adverse impact on our results of operations.

RISKS RELATED TO COMPETITION

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Our current competitors include:

• fleet management SaaS and services providers, such as Fleetmatics, Masternaut, TomTom, Telogis, MiX Telematics and Cartrack;

• fleet management SaaS and services providers, such as Fleetmatics, Masternaut, Telogis, MiX Telematics and Cartrack;

• mobile hotspot providers, such as NETGEAR, Franklin Wireless, WNC, Sierra Wireless, Nokia, TCL, ZTE and Huawei;

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We believe that our success in penetrating new markets for our products will depend, in part, on our ability to develop and maintain these relationships and to cultivate additional or alternative relationships.

There can be no assurance, however, that we will be able to develop additional strategic relationships, that existing relationships will survive and successfully achieve their purposes or that the companies with whom we have strategic relationships will not form competing arrangements with others or determine to compete with us.

We depend upon Verizon Wireless for a substantial portion of our revenues, and our business would be negatively affected by an adverse change in our dealings with this customer.

As a result of the significant revenues associated with our MiFi business, sales to Verizon Wireless accounted for 55% and 53% of our consolidated net revenues for each of the years ended December 31, 2020 and 2019, respectively.

While we have accelerated our engagements with prospective new MiFi customers and continue to focus on growing revenue in other parts of our business, we expect that Verizon Wireless will continue to account for a substantial portion of our net revenues, and any impairment of our relationship with Verizon Wireless would adversely affect our business.

Additionally, any change in the forecasted or actual product sell-through of Verizon Wireless could have a detrimental impact on our revenue, bottom line and cash position.

There can be no assurance, however, that we will be able to develop additional strategic relationships, that existing relationships will survive and

successfully achieve their purposes or that the companies with whom we have strategic relationships will not form competing arrangements with others or determine to compete with us.

We depend upon Verizon Wireless and T-Mobile for a substantial portion of our revenues, and our business would be negatively affected by an adverse change in our dealings with either of these customers.

As a result of the significant revenues associated with our MiFi business, sales to Verizon Wireless and T-Mobile collectively accounted for 70%, 55% and 53% of our consolidated net revenues for each of the years ended December 31, 2021, 2020 and 2019, respectively.

While we have accelerated our engagements with prospective new MiFi customers and continue to focus on growing revenue in other parts of our business, we expect that Verizon Wireless and T-Mobile will continue to account for a substantial portion of our net revenues, and any impairment of our relationship with Verizon Wireless or T-Mobile would adversely affect our business.

Additionally, any change in the forecasted or actual product sell-through of Verizon Wireless or T-Mobile could have a detrimental impact on our revenue, bottom line and cash position.

We may not be able to retain and increase sales to our existing customers, which could negatively impact our financial results.

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If any of our competitors implement new technologies before we are able to implement them or better anticipate the innovation and integration opportunities in related industries, those competitors may be able to provide more effective or cheaper solutions than ours.

Another part of our growth strategy is to sell additional subscriptions to existing customers as their fleet sizes or asset

portfolios increase.

Another part of our growth strategy is to sell additional subscriptions to existing customers as their fleet sizes or asset portfolios increase.

We cannot be assured that our customers’ fleet sizes or asset portfolios will continue to increase.

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Uncertainty about future economic conditions makes it difficult for us to forecast operating results and to make decisions about future investments.

We are unable to predict the likely duration and severity of adverse economic conditions in the United States and other countries, but the longer the duration, the greater risks we face in operating our business.

We are unable to predict the likely duration and severity of adverse economic conditions in the United

States and other countries, but the longer the duration, the greater risks we face in operating our business.

We cannot assure you that current economic conditions, worsening economic conditions or prolonged poor economic conditions will not have a significant adverse impact on the demand for our solutions, and consequently on our results of operations and prospects.

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We depend in part on the practices of insurance companies in some of our markets to support demand for certain of our products and services.

For example, in South Africa, which is currently the largest market for our Ctrack products and services, insurance companies either mandate the installation of tracking devices as a prerequisite for providing insurance coverage to owners of certain vehicles, or provide insurance premium discounts to encourage vehicle owners to subscribe to vehicle tracking and mobile asset recovery solutions such as ours.

We benefit from this continued practice in the South African and certain other markets of:

• accepting mobile asset location technologies such as ours as a preferred security product;

• providing premium discounts for using location and recovery products and services such as ours;

• mandating the use of our products and services, or similar products and services, for certain vehicles.

In certain markets, these practices include:

(i) accepting mobile asset location technologies such as ours as a preferred security product;

(ii) providing premium discounts for using location and recovery products and services such as ours;

and/or (iii) mandating the use of our products and services, or similar products and services, for certain vehicles.

If any of these policies or practices change, revenues from sale of our products and services could decline, which would materially and adversely affect our business, results of operations and financial condition.

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We currently outsource the manufacturing of many of our products to companies including Foxconn and AsiaTelco Technologies Co.

In addition, in 2016 we sold portions of our IoT modules business to Telit Wireless Solutions, Inc.

(“Telit”), and we now rely on Telit to supply us with modules that are critical to the functionality of some of our telematics hardware devices, including devices sold or deployed by Ctrack.

If one of these third-party manufacturers were to experience delays, disruptions, capacity constraints or quality control problems in its manufacturing operations, product shipments to our customers could be delayed or rejected or our customers could consequently elect to change product demand or cancel the underlying subscription or service.

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The effects of these factors could render the conduct of our business in a particular country undesirable or impractical and have a negative impact on our operating results.

We have been moving production to one or more new contract manufacturers, which exposes us to a number of risks and uncertainties outside our control.

We have been moving some production to new contract manufacturers, some of whom we have not contracted with in the past.

If our new contract manufacturers are not able to produce our products in the quantities needed prior to the agreed upon delivery dates, or are not able to produce our products in conformity with our quality standards, product shipments to our customers could be delayed or rejected.

As a result, our customers may elect to cancel orders or place fewer orders in the future.

Such delays, rejections, cancellation or reductions in orders would negatively impact our revenues, competitive position and reputation.

Further, if we are unable to successfully manage our relationship with a contract manufacturer, the quality and availability of our products may be harmed.

We depend on sole source suppliers for some products used in our services.

1 unchanged sentence

Our services use hardware and software from various third parties, some of which are procured from single suppliers.

For example, some of our vehicle tracking and fleet management solutions rely on telecommunications modules procured from Telit and our MiFi mobile hotspots rely substantially on chipsets from Qualcomm.

For example our MiFi mobile hotspots rely substantially on chipsets from Qualcomm.

From time to time, certain components used in our products or solutions have been in short supply or their anticipated commercial introduction has been delayed or their availability has been interrupted for reasons outside our control.

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While most of our global operations have continued to operate, facility closures or work slowdowns or temporary stoppages could occur.

In addition, different countries have different practices and policies that can affect our international operations and the operations of our suppliers and customers.

For example, our business in South Africa has not been able to perform new domestic installations or installations in other jurisdictions in observance of such countries’ COVID-19 policies, which we believe may adversely impact revenues from Ctrack.

Any impact is dependent on the length of the closure.

Logistics has emerged as a new challenge, as globally the transportation industry restricted the frequency of departures and increased logistics costs.

We have experienced increased costs in freight as well as direct labor costs as we continue to work in serving our customers.

We expect this trend to continue for the duration of the COVID-19 pandemic.

In addition, we rely on contract manufacturers and other companies to provide materials, components and products that we sell to our customers.

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If we are not able to implement alternatives or other mitigations with respect to suppliers that may have potential delivery impacts due to COVID-19, our sales and financial results could be adversely impacted.

The effects of COVID-19 have increased competition for qualified personnel in the industries in which we operate.

Additionally, changes we make to our current and future work environments may not meet the needs or expectations of our employees or may be perceived as less favorable compared to other companies’ policies, which could negatively impact our ability to hire and retain qualified personnel.

The COVID-19 outbreak is a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect longer-term demand for our products and likely impact our operating results.

The impact of COVID-19 could worsen if there is an extended duration of any COVID-19 outbreak or a resurgence of COVID-19 infection in affected regions after they have begun to experience improvement.

Prolonged impacts of

COVID-19 could result in delays in payment by customers, the speed of regulatory approvals such as FCC and other licenses that are needed for releases of new products, and delays in new 5G network rollouts.

Prolonged impacts of COVID-19 could result in delays in payment by customers, the speed of regulatory approvals such as FCC and other licenses that are needed for releases of new products, and delays in new 5G network rollouts.

Current limitations on travel to customer locations could impact international orders.

Accordingly, recent growth in our business may not continue into the future, and you should not rely on our revenue or key business metrics for any previous quarterly or annual period as any indication of our revenue, revenue growth, key business metrics, or key business metrics growth in future periods.

If disruptions in our transportation network occur or our shipping costs substantially increase, we may be unable to sell or timely deliver our products, and our operating expenses could increase.

We are highly dependent upon the transportation systems we use to ship our products, including surface and air freight.

Our attempts to closely match our inventory levels to our product demand intensify the need for our transportation systems to function effectively and without delay.

For example, the outbreak of the COVID-19 pandemic has led to significant limitations on the availability of key transportation resources and an increase in the cost of air and ocean freight.

These developments negatively impact our profitability as we seek to transport an increased number of products from manufacturing locations in Asia to other markets around the world as quickly as possible.

The transportation network is subject to disruption or congestion from a variety of causes, including labor disputes or port strikes, acts of war or terrorism, natural disasters, pandemics like COVID-19 and congestion resulting from higher shipping volumes.

Labor disputes among freight carriers and at ports of entry are common, particularly in Europe, and we expect labor unrest and its effects on shipping our products to be a continuing challenge for us.

A port worker strike, work slow-down or other transportation disruption in the ports of Los Angeles or Long Beach, California, could significantly disrupt our business.

Additionally, our international freight is regularly subjected to inspection by governmental entities.

If our delivery times increase unexpectedly for these or any other reasons, our ability to deliver products on time would be materially adversely affected and result in delayed or lost revenue as well as customer imposed penalties.

In addition, if increases in fuel prices continue to occur, our transportation costs would likely increase.

Moreover, the cost of shipping our products by air freight is greater than other methods.

From time to time in the past, we have shipped products using extensive air freight to meet unexpected spikes in demand, shifts in demand between product categories, to bring new product introductions to market quickly and to timely ship products previously ordered.

If we rely more heavily upon air freight to deliver our products, our overall shipping costs will increase.

A prolonged transportation disruption or a significant increase in the cost of freight could severely disrupt our business and harm our operating results.

We may be unable to adequately control the costs or maintain adequate supply of components and raw materials associated with our operations.

From time to time, we may experience increases in the cost or a sustained interruption in the supply or shortage of components or raw materials associated with our operations.

We expect to incur significant costs related to procuring raw materials required to manufacture and assemble our products.

The prices for and availability of these raw materials fluctuate depending on factors beyond our control.

For example, our business depends on the continued supply of semiconductor chips, which are integral components for our 5G and 4G products.

A global semiconductor supply shortage is having wide-ranging

effects across the technology industry and may negatively impact the supply of semiconductors needed for our testing and production timeline.

Any reduced availability of these raw materials or substantial increases in the prices for such materials may increase the cost of our components and consequently, the cost of our products.

There can be no assurance that we will be able to recoup increasing costs of our components by increasing prices, which in turn could have a material adverse impact on our financial condition, results of operations and cash flows.

We continue to work closely with suppliers and customers to minimize the potential adverse impact of the semiconductor supply shortage and monitor the availability of semiconductor chips and other component parts and raw materials.

However, if we are not able to mitigate the semiconductor shortage impact, any direct or indirect supply chain disruptions may have a material adverse impact on our financial condition, results of operations and cash flows.

If we do not effectively manage our sales channel inventory and product mix, we may incur costs associated with excess inventory, or lose sales from having too few products.

If we are unable to properly monitor and manage our sales channel inventory and maintain an appropriate level and mix of products with our distributors and within our sales channels, we may incur increased and unexpected costs associated with this inventory.

We determine production levels based on our forecasts of demand for our products.

Actual demand for our products depends on many factors, which makes it difficult to forecast.

We have experienced differences between our actual and our forecasted demand in the past and expect differences to arise in the future.

If we improperly forecast demand for our products, we could end up with too many products and be unable to sell the excess inventory in a timely manner, if at all, or, alternatively we could end up with too few products and not be able to satisfy demand.

This problem is exacerbated because we attempt to closely match inventory levels with product demand leaving limited margin for error.

If these events occur, we could incur increased expenses associated with writing off excessive or obsolete inventory, lose sales, incur penalties for late delivery or have to ship products by air freight to meet immediate demand incurring incremental freight costs above the sea freight costs, a preferred method, and suffering a corresponding decline in gross margins.

Product liability, product replacement or recall costs could adversely affect our business and financial performance.

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Any event that significantly disrupts our service or exposes our data to misuse could damage our reputation and harm our business and operating results, including reducing our revenue, causing us to issue credits to customers, subjecting us to potential liability, harming our churn rates, or increasing our cost of acquiring new customers.

We host our solutions and serve our South African customers from our network servers, which are located at our data center facilities in South Africa.

In other geographies, we host our solutions and serve our customers from network servers hosted by third parties, which are located at data center facilities in the United States, Europe and Australia.

We host our solutions and serve our customers from network servers hosted by third parties, which are located at data

center facilities in the United States, Europe and Australia.

If these data centers are unable to keep up with our growing needs for capacity, this could have an adverse effect on our business.

Our disaster recovery systems are located at third-party hosting facilities, except in South Africa where we manage our own disaster recovery system at an offsite facility.

Our disaster recovery systems are located at third-party hosting facilities.

While we are increasing redundancy, our systems have not been tested under actual disaster conditions and may not have sufficient capacity to recover all data and services in the event of an outage.

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We may not have adequate insurance coverages for a cybersecurity breach or may realize increased insurance premiums as a result of a security breach.

Ultimately, a security breach exposes the Company to potential reputational harm among its customers and investors, along with uncertain damages to our competitiveness, stock price, and long-term shareholder value.

Ultimately, a security breach exposes us to potential reputational harm among our customers and investors, along with uncertain damages to our competitiveness, stock price, and long-term shareholder value.

RISKS RELATED TO INTERNATIONAL OPERATIONS

Due to the global nature of our operations, we are subject to political and economic risks of doing business internationally.

Our largest subsidiary, Ctrack, is headquartered in South Africa and conducts business in over 50 countries.

Most of our employees are located outside the United States, and international revenue represents a significant percentage of our worldwide revenue.

International revenue represents a significant percentage of our worldwide revenue.

The risks inherent in global operations include:

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Weakness or deterioration in global economic conditions or jurisdictions where we have significant foreign operations could have a material adverse effect on our results of operations and financial condition.

As a result of weak or deteriorating economic conditions globally, or in certain jurisdictions where we have significant foreign operations such as South Africa, we could experience lower demand for our products, which could adversely impact our results of operations.

As a result of weak or deteriorating economic conditions globally, or in certain jurisdictions where we have significant foreign operations, we could experience lower demand for our products, which could adversely impact our results of operations.

Additionally, there could be a number of related effects on our business resulting from weak economic conditions, including the insolvency of one or more of our suppliers resulting in product launch or product delivery delays, customer insolvencies resulting in that customer’s inability to order products from us or pay for already delivered products, and reduced demand by the ultimate end-users of our products.

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Weakness or deterioration in global political conditions where we have significant business interests could have a material adverse effect on our business, results of operations and financial condition.

We sell to customers throughout the world and we currently have operations and activities in South Africa, Europe, China and other Asian countries.

The political risks associated with the Company’s global operations include:

We sell to customers throughout the world and we currently have operations and activities in Europe, China and other Asian countries.

The political risks associated with the our global operations include:

• economic and commercial instability risks, corruption and changes in local government laws, regulations and policies, such as those related to tariffs and trade barriers, taxation, exchange controls, employment regulations and repatriation of earnings;

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Existing insurance arrangements may not provide protection for the costs that may arise from such events.

Fluctuations in foreign currency exchange rates, especially the South African Rand against the U.S.

Dollar, could adversely affect our results of operations.

Fluctuations in foreign currency exchange rates could adversely affect our results of operations.

A significant portion of our revenues are generated from sales agreements denominated in foreign currencies, and we expect to enter into additional such agreements as we expand our international customer base.

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As a result, we are exposed to changes in foreign currency exchange rates.

We have particularly large exposure in South Africa where our Ctrack subsidiary is headquartered and the costs of operating in South Africa are subject to the effects of exchange fluctuations of the South African Rand against the U.S.

Fluctuations in the value of foreign currencies, particularly the South African Rand against the U.S.

Dollar, will create greater uncertainty in our revenues and can significantly and adversely affect our operating results.

The South African Rand exchange rate is affected by various international and South African economic and political factors.

Fluctuations in the value of foreign currencies will create greater uncertainty in our revenues and can significantly and adversely affect our operating results.

We do not currently employ any vehicles as a hedge against currency fluctuations, however, we may decide to use hedging vehicles in the future.

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Unionization efforts in certain countries in which we operate could materially increase our costs or limit our flexibility.

Certain of our employees and contractors in South Africa are represented by labor unions or work under collective bargaining or similar agreements, which are subject to periodic renegotiation.

Efforts may also be made from time to time to unionize other portions of our global workforce.

Efforts may be made from time to time to unionize portions of our global workforce.

In addition, we may be subject to strikes or work stoppages and other labor disruptions in the future.

Additional unionization efforts, new or renegotiated collective bargaining agreements or work stoppages could materially increase our costs, reduce our net revenues or limit our operational flexibility.

Unionization efforts, collective bargaining agreements or work stoppages could materially increase our costs, reduce our net revenues or limit our operational flexibility.

RISKS RELATED TO REGULATIONS, TAXATION AND ACCOUNTING MATTERS

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A governmental challenge to our transfer pricing policies or practices could impose significant costs on us.

Our company has intercompany transactions with its subsidiaries and consequently closely monitors the appropriateness of our transfer pricing policies and compliance therewith.

Our company has intercompany transactions with our subsidiaries and consequently closely monitors the appropriateness of our transfer pricing policies and compliance therewith.

The global transfer pricing environment, including with respect to operational and reporting requirements, is continuously evolving and subject to input from multiple sources and jurisdictions.

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We could suffer costs related to one or more challenges to our transfer pricing policies.

If we do not achieve applicable black economic empowerment objectives in our South African businesses, we risk not being able to renew certain of our existing contracts which service South African government and quasi-governmental customers, as well as not being awarded future corporate and governmental contracts which would result in the loss of revenue.

The South African government, through the Broad-Based Black Economic Empowerment Act, No.

53 of 2003, and the codes of good practice and industry charters published pursuant thereto (collectively “BBBEE”), has established a legislative framework for the promotion of broad-based black economic empowerment.

Achievement of BBBEE objectives is measured by a scorecard which establishes a weighting for the various components of BBBEE.

BBBEE objectives are pursued in significant part by requiring parties who contract with corporate, governmental or quasi-governmental entities in South Africa to achieve BBBEE compliance through satisfaction of an applicable scorecard.

Parties improve their BBBEE score when contracting with businesses that have earned good BBBEE ratings in relation to their scorecards (this includes black-owned businesses).

Ctrack has material contracts with governmental entities that require it to maintain minimum BBBEE rating levels as measured under the BBBEE scorecard.

Failure to achieve applicable BBBEE objectives could jeopardize our ability to maintain existing business or to secure future business from these and other corporate, governmental or quasi-governmental customers that could materially and adversely affect our business, financial condition and results of operations.

We are required to comply with South African labor laws with respect to certain of our employees and face the risk of disruption from labor disputes in South Africa, which could result in additional operating costs.

South African laws relating to labor that regulate work time, provide for mandatory compensation in the event of termination of employment for operational reasons, and impose monetary penalties for non-compliance with administrative and reporting requirements in respect of affirmative action policies, could result in additional operating costs.

In addition, future changes to South African legislation and regulations relating to labor may increase our costs or alter our relationship with our employees and result in labor disruptions.

Resulting disruptions could materially and adversely affect our business, results of operations and financial condition.

Socio-economic inequality in South Africa or regionally may subject us to political and economic risks which may affect the ownership or operation of our business.

We maintain significant operations in South Africa.

As a result, we are subject to political and economic risks relating to South Africa.

While South Africa features highly developed and sophisticated business sectors and financial and legal infrastructure at the core of its economy, large parts of the country’s population, particularly in rural areas, do not have access to adequate education, health care, housing and other services, including water and electricity.

In addition, South Africa also has higher levels of crime and unemployment than the United States.

It is difficult to predict the future political, social and economic direction of South Africa or the manner in which any future government will attempt to address the country’s inequalities.

It is also difficult to predict the impact that addressing these inequalities will have on our business.

Furthermore, there has been regional, political and economic instability in countries neighboring South Africa, which could materially and adversely affect our business, results of operations and financial condition.

Although political conditions in South Africa are generally stable, changes may occur in the composition of its ruling party or in its political, fiscal and legal systems which might affect the ownership or operation of our business.

These risks may include changes in legislation, arbitrary interference with private ownership of contract rights, and changes to exchange controls, taxation and other laws or policies affecting foreign trade or investment.

Any such changes, including changes in investment ratings, regulations and policies or a shift in political attitudes both within and towards South Africa are beyond our control and could materially and adversely affect our business, financial condition and results of operations.

A lack of growth, high inflation or increased interest rates in the South Africa economy could reduce our anticipated revenue and increase our operating costs.

The economy of South Africa has in the past and may in the future continue to be characterized by rates of inflation and interest rates that are substantially higher than those prevailing in the United States and other highly developed economies.

Economic conditions in South Africa could reduce our anticipated revenue growth, increase our South African-based costs, decrease our operating margins and adversely affect our ability to obtain cost-effective debt financing in South Africa.

Evolving regulations and changes in applicable laws relating to data privacy may increase our expenditures related to compliance efforts or otherwise limit the solutions we can offer, which may harm our business and adversely affect our financial condition.

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Furthermore, there can be no assurance that our employees, contractors and agents will comply with the policies and procedures we establish regarding data privacy and data security, particularly as we expand our operations through organic growth and acquisitions.

While our employees may violate our policies and procedures, the Company remains responsible for, and obligated to implement, policies and procedures and enter into contracts with service providers that require appropriate protection.

While our employees may violate our policies and procedures, we remain responsible for, and obligated to implement, policies and procedures and enter into contracts with service providers that require appropriate protection.

Any violations could subject us to civil or criminal penalties, including substantial fines or prohibitions on our ability to offer our products in one or more countries, and could also materially damage our reputation, our brand, our international expansion efforts, our business, results of operations and financial condition.

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The European Union and the United Kingdom have adopted legislation (including directives, national laws and regulations) that increase or change the requirements governing data collection, use, storage and disclosure of personal data in these jurisdictions.

The current European Union legislation related to data protection is the General Data Protection Regulation (“GDPR”), which came into effect on May 25, 2018.

We have updated and will continue to evaluate our group data protection and security policies, charters, and procedures to assist in maintaining data privacy and data security in line with international practices.

The Protection of Personal Information Act, No.

4 of 2013 (the “POPI Act”) was promulgated into law in November 2013 in South Africa.

Certain sections of the POPI Act, came into effect on April 11, 2014.

The remaining sections of the POPI Act came into effect on July 1, 2020.

The POPI Act allows for a one year transition period from its commencement for all persons to comply with its requirements.

A failure to comply with the POPI Act may result in a fine not exceeding R10 million and/or imprisonment of up to 10 years, depending on the severity of the contravention.

The current European Union legislation related to data protection is the GDPR, which came into effect on May 25, 2018.

We have updated and will continue to evaluate our group data protection and security policies, charters, and

procedures to assist in maintaining data privacy and data security in line with international practices.

We may also be subject to costly notification and remediation requirements if we, or a third party, determines that we have been the subject of a data breach involving personal data of individuals.

Data breach notification regulations vary among the countries where we conduct business, and also vary among the states of the United States, and any breach of personal data

could be subject to any number of these requirements.

Data breach notification regulations vary among the countries where we conduct business, and also vary among the states of the United States, and any breach of personal data could be subject to any number of these requirements.

As noted above, we have sought to implement internationally recognized practices regarding data privacy and data security.

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There is currently significant uncertainty about the future relationship between the United States and various other countries, most significantly China, with respect to trade policies, treaties, tariffs and taxes.

The current U.S.

administration has called for substantial changes to U.S.

The current and former U.S.

administrations have called for substantial changes to U.S.

foreign trade policy with respect to China and other countries, including significant new and increased tariffs on goods imported into the United States.

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from China, including communications equipment products and components manufactured and imported from China.

The tariff became effective in September 2018, with an initial rate of 10% and was scheduled to increase from 10% to 25% on January 1, 2019.

The scheduled increase was delayed until March 2, 2019, however trade negotiations between the U.S.

and China continue and the scheduled increase has been further delayed indefinitely.

The tariff became effective in September 2018, with an initial rate of 10% that increased to 25% in May 2019.

The current U.S.

administration has kept the tariffs in place, however trade negotiations between the U.S.

and China continue and there is a possibility that certain product exclusions from the tariffs may be reinstated at some point in the future.

Our business may also be affected by tariffs set by countries into which we sell our products, whether as a response to U.S.

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Customs and Border Protection (“CBP”) to address the harmonized tariff codes used for our products.

The majority of the move out of mainland China has been completed, and we expect the balance to be completed by the end of the first quarter 2020.

The majority of our move out of mainland China has been completed in prior years.

The inability to mitigate the impact of the recently enacted tariffs, including the inability to obtain favorable results from our efforts with CBP, or any similar future increases in tariffs would increase our costs, and our business, financial condition and results of operations could be adversely affected.

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government’s imposition of trade restrictions involving products sold by certain Chinese manufacturers has caused U.S.

wireless carriers to divert business from international providers to the Company, and accordingly, the Company has invested resources in satisfying the needs of such customers.

government were to remove or reduce such trade restrictions, it could cause such carriers to reduce their business with the Company and we may be unable to recoup or attain a return on such investments.

wireless carriers to divert business from international providers to us, and accordingly, we have invested resources in satisfying the needs of such customers.

government were to remove or reduce such trade restrictions, it could cause such carriers to reduce their business with us and we may be unable to recoup or attain a return on such investments.

On October 28, 2021, the House Rules Committee, under the Biden Administration released new proposed tax legislation under the “Build Back Better Act” (“BBBA”) which contains potential reversals and revisions of key provisions of the 2017 Tax Cuts and Jobs Act.

As the BBBA, which was passed by the U.S.

House of Representatives in November 2021, is proposed legislation that has not yet been enacted into law, we have not yet determined the impact on our effective tax rate, though we continue to monitor the Biden Administration’s proposals.

We are currently unable to predict whether any future changes will occur or the impact of such changes if the legislation is passed into law, including on the U.S.

federal income tax considerations relating to the purchase, ownership, and disposition of our common stock.

RISKS RELATED TO OWNING OUR SECURITIES

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comments by securities analysts;

announcements by us or others regarding, among other things, operating results, additions or departures of key personnel, and acquisitions or divestitures;

announcements by us or others regarding, among other things,

operating results, additions or departures of key personnel, and acquisitions or divestitures;

additional equity or debt financing;

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The price of our stock may be vulnerable to manipulation, including through short sales.

We believe there has been and may continue to be substantial off-market transactions in derivatives of our stock, including short selling activity or related similar activities, which are beyond our control and which may be beyond the full

control of the SEC and Financial Institutions Regulatory Authority (“FINRA”).

Short sales are transactions in which a market participant sells a security that it does not own.

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Holders of the 2025 Notes who convert may also be entitled to receive, under certain circumstances, an interest make-whole payment payable in, at our election, either cash or shares of common stock.

If holders of the 2025 Notes elect to convert their 2025 Notes into common stock, or if we elect to settle any interest make-whole payments due upon conversion of the 2025 Notes with shares of common stock, this may cause significant dilution to our existing stockholders.

Approximately $18.5 million of 2025 Notes have been converted as of December 31, 2021.

If additional holders of the 2025 Notes elect to convert their 2025 Notes into common stock, or if we elect to settle any interest make-whole payments due upon conversion of the 2025 Notes with shares of common stock, this may cause significant dilution to our existing stockholders.

Any sales in the public market of the common stock issued upon such conversion could adversely affect prevailing market prices of our common stock.

If we do elect to settle any interest make-whole payments due upon conversion of the 2025 Notes with cash, such payments could adversely affect our liquidity.

Certain provisions in the indenture governing the 2025 Notes (as amended or supplemented, the “Indenture”) could delay or prevent an otherwise beneficial takeover or takeover attempt of us.

Certain provisions in the Indenture relating to the 2025 Notes could make it more difficult or more expensive for a third party to acquire us.

Certain provisions in the indenture governing the 2025 Notes (as amended or supplemented, the “Indenture”) could make it more difficult or more expensive for a third party to acquire us and could delay or prevent an otherwise beneficial takeover or takeover attempt.

For example, if a takeover would constitute a fundamental change (as defined in the Indenture), holders of the 2025 Notes will have the right to require us to repurchase their notes in cash.

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The Investors and their affiliates also hold approximately $80.4 million of the 2025 Notes (49.7% of the outstanding principal amount).

The Indenture relating to the 2025 Notes includes a Section 382 conversion blocker that may prevent the Investors from converting their 2025

Notes unless they receive the prior written approval of our Board of Directors.

The Indenture relating to the 2025 Notes includes a Section 382 conversion blocker that may prevent the Investors from converting their 2025 Notes unless they receive the prior written approval of our Board of Directors.

Assuming the conversion of the 2025 Notes owned by the Investors and their affiliates and the exercise of the warrants also owned by the Investors and their affiliates, the Investors and their affiliates would own approximately 31.4% of the outstanding shares of our common stock.

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Our outstanding Series E Preferred Stock or future equity offerings could adversely affect the holders of our common stock in some circumstances.

There are currently 35,000 shares of Series E Fixed-Rate Cumulative Perpetual Preferred Stock, par value $0.001 per share (the “Series E Preferred Stock”) outstanding with an aggregate liquidation preference of $35 million.

As of December 31, 2021, there were 25,000 shares of Series E Fixed-Rate Cumulative Perpetual Preferred Stock, par value $0.001 per share (the “Series E Preferred Stock”) outstanding with an aggregate liquidation preference of $25 million.

The Series E Preferred Stock is senior to our shares of common stock in right of payment of dividends and other distributions.

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If one or more of the analysts who cover us cease coverage of our Company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to report our financial results timely and accurately, which could adversely affect investor confidence in the Company, and in turn, our results of operations and our stock price.

If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to report our financial results timely and accurately, which could adversely affect investor confidence in us, and in turn, our results of operations and our stock price.

Effective internal controls are necessary for us to provide reliable financial reports and operate successfully as a public company.

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Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these financial statements requires us to make estimates and judgments about, among other things, allowance for doubtful accounts receivable, provision for excess and obsolete inventory, valuation of intangible and long-lived assets, valuation of goodwill, royalty costs, accruals relating to litigation and restructuring, income taxes, share-based compensation expense and the Company’s ability to continue as a going concern.

The preparation of these financial statements requires us to make estimates and judgments about, among other things, allowance for credit losses, provision for excess and obsolete inventory, valuation of intangible and long-lived assets, valuation of goodwill, royalty costs, accruals relating to litigation and restructuring, income taxes, share-based compensation expense and our ability to continue as a going concern.

These estimates and judgments affect the reported amounts of our assets, liabilities, revenues and expenses, the amounts of charges accrued by us, and related disclosure of contingent assets and liabilities.

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Any changes to the accounting systems or new accounting system implementations may be ineffective or cause delays in our ability to provide timely financial results.

A change in the Company’s accounting systems or new accounting system implementations could cause trial balances to be out of balance or hinder the reconciliation of items which are time consuming to diagnose, impacting our ability to provide timely audited and unaudited financial results.

A change in our accounting systems or new accounting system implementations could cause trial balances to be out of balance or hinder the reconciliation of items which are time consuming to diagnose, impacting our ability to provide timely audited and unaudited financial results.

Any such change could have a significant impact on the effectiveness of our system of internal controls and could cause a delay in compliance with our reporting obligations, which could adversely affect our business and the trading price of our common stock.

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The change to existing rules, future changes, if any, or the need for us to modify a current tax position may adversely affect our reported financial results or the way we conduct our business.

We may be exposed to risks related to litigation and administrative proceedings that could materially and adversely affect our business, results of operations and financial condition.

In addition to intellectual property and other claims mentioned above, our business may expose us to litigation and administrative proceedings relating to labor, regulatory, tax proceedings, governmental investigations, tort claims, contractual

disputes and criminal prosecution, among other matters, that could materially and adversely affect our business, results of operations, and financial condition.

In the context of these proceedings, we may not only be required to pay fines or monetary damages but also be subject to sanctions or injunctions affecting our ability to continue our operations.

While we may contest these matters vigorously and make insurance claims when appropriate, litigation and other proceedings are inherently costly and unpredictable, making it difficult to accurately estimate the outcome of actual or potential litigation or proceedings.

Although we will establish provisions in accordance with the requirements of GAAP, the amounts that we reserve could vary significantly from any amounts we actually pay due to the inherent uncertainties in the estimation process.

In addition, litigation and administrative proceedings can involve significant management time and attention and be expensive, regardless of outcome.

During the course of any litigation and administrative proceedings, there may be announcements of the results of hearings and motions and other interim developments.

If securities analysts or investors regard these announcements as negative, the trading price of our common stock may decline.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors