What changed in this filing

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Item 9A. Controls and Procedures

2022-03-01 compared with 2021-03-01 · 547 added, 383 removed, 901 unchanged (51% of the section changed)

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Based on our evaluation under the framework in Internal Control—Integrated Framework , our management concluded that our internal control over financial reporting was effective as of December 31, 2021.

Marcum LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this Annual Report on Form 10-K, has also audited our internal control over financial reporting as of December 31, 2020, as stated in their report which is included herein.

Their report on the effectiveness of the Company’s internal control over financial reporting is included below.

Changes in Internal Control over Financial Reporting

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The evaluation did not identify any change in our internal control over financial reporting that occurred during our latest fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Other Information

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Shareholders and Board of Directors of

Inseego Corp.

To the Stockholders and Board of Directors of Inseego Corp.

Opinion on Internal Control over Financial Reporting

We have audited Inseego Corp.'s (the “Company”) internal control over financial reporting as of December 31, 2021 based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over

financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets as of December 31, 2020 and 2019 and the related consolidated statements of operations, comprehensive loss, stockholders’ deficit, and cash flows and the related notes for each of the two years in the period ended December 31, 2020 of the Company, and our report dated March 1, 2021 expressed an unqualified opinion on those financial statements.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets as of December 31, 2021 and 2020 and the related consolidated statements of operations, comprehensive loss, stockholders’ deficit, and cash flows and the related notes for each of the three years in the period ended December 31, 2021 of the Company, and our report dated March 1, 2022 expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Annual Report on Internal Control over Financial Reporting.

The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

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March 1, 2022

Other Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

Items 10, 11, 12, 13 and 14.

The information required by Items 10, 11, 12, 13 and 14 is incorporated by reference from the Company’s definitive proxy statement for the 2021 Annual Meeting of Stockholders, which the Company intends to file with the SEC within 120 days of the end of the fiscal year end to which this report relates.

The information required by Items 10, 11, 12, 13 and 14 is incorporated by reference from the Company’s definitive proxy statement for the 2022 Annual Meeting of Stockholders or an amendment to this report, which the Company intends to file with the SEC within 120 days of the end of the fiscal year end to which this report relates.

Exhibit and Financial Statement Schedules

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(a)(2) Schedules have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the consolidated financial statements or related notes thereto.

(a)(3) Exhibits

The following Exhibits are filed as part of, or incorporated by reference into this report:

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and Main Street 1816 Proprietary Limited (in the process of being renamed Convergence CTSA Proprietary Limited)(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed February 25, 2021).

2.2 First Addendum dated March 17, 2021 to the Share Purchase Agreement dated February 24, 2021 between Main Street 1816 Proprietary Limited (in the process of being renamed Convergence CTSA Proprietary Limited) and Inseego Corp.

(incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed June 30, 2021.)

2.3 Second Addendum dated April 30, 2021 to the Share Purchase Agreement dated February 24, 2021 between Main Street 1816 Proprietary Limited (in the process of being renamed Convergence CTSA Proprietary Limited) and Inseego Corp.

(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed June 30, 2021).

2.4 Third Addendum dated June 30, 2021 to the Share Purchase Agreement dated February 24, 2021 between Main Street 1816 Proprietary Limited (in the process of being renamed Convergence CTSA Proprietary Limited) and Inseego Corp.

(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 30, 2021.)

3.1 Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed November 9, 2016).

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4.2 Description of Equity Securities Registered under Section 12 of the Exchange Act.

(incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K filed on March 1, 2021).

4.3 Base Indenture, dated May 12, 2020, between Inseego Corp.

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and Dan Mondor (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed June 9, 2017).

10.6* Change in Control and Severance Agreement, dated June 6, 2018, between Inseego Corp.

and Dan Mondor (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed June 8, 2018).

10.6* Indemnification Agreement, dated June 6, 2017, between Inseego Corp.

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Ctrack Holdings (Pty) Limited, and certain entities that will be acquired by Purchaser in the Sale Transaction (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed February 25, 2021).

10.17 Equity Distribution Agreement, dated as of January 25, 2021, by and between Inseego Corp.

and Canaccord Genuity LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed January 26, 2021).

10.18* Amended and Restated Change in Control and Severance Agreement, dated June 7, 2021, by and between the Company and Dan Mondor (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed June 10, 2021).

10.19* Independent Contractor Services Agreement, dated as of August 5, 2021, by and between the Company and TechCXO, LLC (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed August 5 , 2021 ).

10.20* Offer Letter dated October 13, 2021 between Inseego Corp.

and Robert G.

(incorporated by reference to Exhibit 10.1 to the Company’s Current on Form 8-K/A, filed October 26, 2021).

10.21* Form of Inducement Stock Option Agreement, by and between Inseego Corp.

and Robert G.

Barbieri (incorporated by reference to Exhibit 10.2 to the Company’s Current on Form 8-K/A, filed October 26, 2021).

10.22* Change in Control Agreement dated October 25, 2021 between Inseego Corp.

and Robert G.

Barbieri (incorporated by reference to Exhibit 10.3 to the Company’s Current on Form 8-K/A, filed October 26, 2021).

10.23 Form of Exchange Agreement, dated September 3, between Inseego Corp.

and certain investors holding the Company’s Series E Fixed-Rate Cumulative Perpetual Preferred Stock (incorporated by reference to Exhibit 1.2 to the Company’s Current Report on Form 8-K, filed September 3, 2021).

21** Subsidiaries of Inseego Corp.

(incorpor ated by reference to the Company ’ s Annual Report on Form 10-K .

filed on March 16, 2020) .

23.1** Consent of Independent Registered Public Accounting Firm (Marcum LLP).

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB XBRL Taxonomy Extension Label Linkbase Document.

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.

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101.SCH Inline XBRL Taxonomy Extension Schema Document.

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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** Filed herewith

(b) See Item 15(a)(3) above.

Form 10-K Summary

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(Principal Executive Officer and Director) March 1, 2022

/s/ Craig Foster Chief Financial Officer

/s/ Robert G.

Barbieri Chief Financial Officer

(Principal Financial and Accounting Officer) March 1, 2022

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Avery Director March 1, 2022

/s/ Stephanie Bowers Director March 1, 2022

Stephanie Bowers

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID # 688 )

Consolidated Balance Sheets

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Inseego Corp.

To the Stockholders and Board of Directors of Inseego Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Inseego Corp.

(the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, stockholders’ deficit and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

(the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2021, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated March 1, 2022, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to an account or disclosure that is material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

As described in Note 3 to the consolidated financial statements, the Company’s consolidated capitalized software development costs, net of accumulated amortization, and consolidated in-process capitalized software development costs balances totaled $37.2 million as of December 31, 2020.

The Company capitalizes certain software development costs for new offerings as well as upgrades to existing software platforms.

Management determines the amount of internal software costs to be capitalized principally based on the amount of time spent by developers, both employees and external consultants, on projects in the application stage of development.

There is judgment in the determination for which costs are eligible for capitalization as well as the recoverability of such costs.

The principal considerations in our determination of performing procedures relating to the amount of costs eligible for capitalization, together with assessment of the capitalized cost recoverability, is a critical audit matter, and are the significant judgments made by management when determining the costs eligible for capitalization as well as assessing the recoverability of such costs over time;

this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s determination of capitalized costs and management’s judgment related to the recognition of costs for projects in the application stage as well as recoverability of such costs.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls related to capitalized software development costs, including controls over management’s determination of time and related costs eligible

for capitalization.

These procedures also included, among others (i) testing management’s process for determining the time and related costs eligible for capitalization in the current year, (ii) evaluating whether the time and related costs were eligible for capitalization, and (iii) testing the completeness and accuracy of underlying data used in management’s estimate of eligible time and related costs.

Evaluating management’s assumptions related to eligible software development cost for capitalization and the recoverability of such costs recorded involved evaluating whether the assumptions used by management were reasonable considering (i) inquiries with management and the director of program management in evaluating the software development costs capitalized for a sample of capitalized projects, and (ii) assessing current sales data along with sales forecasts to determine whether the costs of the capitalized projects are recoverable.

/s/ Marcum LLP

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Cash and cash equivalents $ 46,474 $ 40,015

Accounts receivable, net of allowance for doubtful accounts of $ 1,384 and $ 2,133 , respectively

Restricted cash 3,338 —

Accounts receivable, net of allowances of $ 408 and $ 1,384 , respectively

26,781 29,940

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Total current assets 127,619 114,108

Property, plant and equipment, net 13,699 10,756

Rental assets, net

Intangible assets, net

Property, plant and equipment, net of accumulated depreciation of $ 26,692 and $ 21,715 , respectively

Rental assets, net of accumulated depreciation of $ 5,392 and $ 15,754 , respectively

Intangible assets, net of accumulated amortization of $ 48,404 and $ 63,020 , respectively

46,995 51,487

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2025 Notes, net 157,866 165,147

2022 Notes, net — 101,334

Term loan, net — 46,538

Deferred tax liabilities, net 852 4,505

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Series E Preferred stock, par value $ 0.001 ;

39,500 and 10,000 shares designated, respectively, 35,000 and 10,000 shares issued and outstanding, respectively, liquidation preference of $ 1,000 per share (plus any accrued but unpaid dividends)

39,500 shares designated, respectively, 25,000 and 35,000 shares issued and outstanding, respectively, liquidation preference of $ 1,000 per share (plus any accrued but unpaid dividends)

Common stock, par value $ 0.001 ;

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Year Ended December 31,

2021 2020 2019

Net revenues:

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Other income (expense):

Gain on sale of Ctrack South Africa 5,262 — —

Loss on debt conversion and extinguishment, net ( 432 ) ( 76,354 ) —

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( 48,125 ) ( 111,215 ) ( 40,125 )

Series E preferred stock dividends ( 2,904 ) ( 361 )

Series E preferred stock dividends and deemed dividends from the preferred stock exchange ( 4,243 ) ( 2,904 ) ( 361 )

Net loss attributable to common stockholders $ ( 52,368 ) $ ( 114,119 ) $ ( 40,486 )

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Basic and diluted $ ( 0.51 ) $ ( 1.19 ) $ ( 0.52 )

Weighted-average common shares outstanding:

Weighted-average shares used in computation of net loss per common share:

Basic and diluted 103,246,308 96,111,547 78,322,496

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Year Ended December 31,

2021 2020 2019

Net loss $ ( 47,911 ) $ ( 111,186 ) $ ( 40,110 )

Foreign currency translation adjustment ( 3,167 ) ( 3,093 ) 998

Release of cumulative foreign currency translation adjustments as a result of the sale of Ctrack South Africa 1,608 — —

Total comprehensive loss ( 49,470 ) ( 114,279 ) ( 39,112 )

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INSEEGO CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

INSEEGO CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

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Balance, December 31, 2018 — $ — 73,980 $ 74 $ 546,230 $ ( 577,817 ) $ ( 4,877 ) $ ( 135 ) $ ( 36,525 )

— — — — — ( 40,125 ) — 15 ( 40,110 )

Net Loss — — — — — ( 40,125 ) — 15 ( 40,110 )

Foreign currency translation adjustment — — — — — — 998 — 998

Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan — — 2,254 2 3,263 — — — 3,265

— — 2,254 $ 2 3,263 — — — 3,265

Issuance of Series E preferred shares 10 — — — 10,000 — — — 10,000

Issuance of Series E preferred stock 10 — — — 10,000 — — — 10,000

Taxes withheld on net settled vesting of restricted stock units — — — — ( 1,269 ) — — — ( 1,269 )

— — — — ( 1,269 ) — — — ( 1,269 )

Exercise of warrants — — 5,477 6 17,536 — — — 17,542

Issuance of common shares — — 263 — 1,439 — — — 1,439

— — 263 $ — 1,439 1,439

Share-based compensation — — — — 7,302 — — — 7,302

Series E preferred stock dividends — — — — 361 ( 361 ) — — —

Balance, December 31, 2019 10 — 81,974 82 584,862 ( 618,303 ) ( 3,879 ) ( 120 ) ( 37,358 )

— — — — — ( 111,215 ) — 29 ( 111,186 )

Foreign currency translation adjustment — — — — — — ( 3,093 ) — ( 3,093 )

Exercise of stock options and vesting of restricted stock units — — 2,081 2 5,420 — — — 5,422

Issuance of Series E preferred stock 25 — — — 25,000 — — — 25,000

Issuance of Series E preferred stock in lieu of interest 2 — — — 2,330 — — — 2,330

Repurchase of Series E preferred stock ( 2 ) — — — ( 2,354 ) — — — ( 2,354 )

Issuance of common shares in connection with Notes Exchange — — 13,739 14 66,074 — — — 66,088

Issuance of common shares in connection with conversion of 2025 Notes — — 1,177 1 14,353 — — — 14,354

Taxes withheld on net settled vesting of restricted stock units — — — — ( 354 ) — — — ( 354 )

Exercise of warrants — — 338 — 1,861 — — — 1,861

Share-based compensation — — — — 10,419 — — — 10,419

Series E preferred stock dividends

— — — — 2,904 ( 2,904 ) — — —

Issuance of common shares under settlement agreement — — 90 — 972 — — — 972

Balance, December 31, 2020 35 — 99,399 99 711,487 ( 732,422 ) ( 6,972 ) ( 91 ) ( 27,899 )

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— — — — ( 1,279 ) — — — ( 1,279 )

Issuance of Series E preferred shares

25 — — — 25,000 — — — 25,000

Issuance of Series E preferred stock in lieu of interest 2 — — — 2,330 — — — 2,330

Repurchase of Series E preferred stock ( 2 ) — — — ( 2,354 ) — — — ( 2,354 )

Issuance of common shares in connection with the Notes Exchange — — 13,739 14 66,074 — — — 66,088

Divestiture of Ctrack South Africa — — — — 8 ( 2,497 ) 1,608 ( 8 ) ( 889 )

Issuance of common shares related to conversion of 2025 Notes — — 429 — 5,382 — — — 5,382

Exercise of warrants

— — 338 — 1,861 — — — 1,861

Issuance of common shares in connection with a public offering, net of issuance costs — — 1,516 2 29,368 — — — 29,370

Share-based compensation

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Series E preferred stock dividends — — — — 3,139 ( 3,139 ) — — —

Issuance of common shares under settlement agreement — 90 — 972 — — — 972

Series E preferred stock exchange ( 10 ) — 1,525 2 1,102 ( 1,104 ) — — —

Net noncontrolling interest acquired — — — — — 240 — ( 115 ) 125

Balance, December 31, 2021 25 — 105,381 105 770,619 ( 787,047 ) ( 8,531 ) — ( 24,854 )

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Year Ended December 31,

2021 2020 2019

Cash flows from operating activities:

Net loss $ ( 47,911 ) $ ( 111,186 ) $ ( 40,110 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization 25,330 27,946 18,426

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Loss on debt conversion and extinguishment, net 432 76,354 —

Gain on sale of Ctrack South Africa ( 5,262 ) — —

Deferred income taxes ( 53 ) 659 ( 598 )

Other 286 667 840

Changes in assets and liabilities:

Changes in assets and liabilities, net of effects of divestiture:

Accounts receivable ( 1,148 ) ( 10,797 ) 377

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Accrued expenses, income taxes, and other 2,987 8,234 1,271

Net cash provided by (used in) operating activities 20,050 ( 17,999 )

Net cash (used in) provided by operating activities ( 25,212 ) 20,050 ( 17,999 )

Cash flows from investing activities:

Acquisition of noncontrolling interest ( 116 ) — —

Purchases of property, plant and equipment ( 4,928 ) ( 5,736 ) ( 6,621 )

Proceeds from the sale of property, plant and equipment 1,338 392 517

Proceeds from sale of Ctrack South Africa, net of cash divested 1

Additions to capitalized software development costs and purchases of intangible assets ( 23,905 ) ( 29,369 ) ( 22,109 )

Net cash used in investing activities ( 34,713 ) ( 28,213 )

Net cash provided by (used in) investing activities 6,078 ( 34,713 ) ( 28,213 )

Cash flows from financing activities:

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Principal payments under finance lease obligations ( 3,200 ) ( 2,756 ) ( 1,022 )

Proceeds from a public offering, net of issuance costs 29,370 — —

Proceeds from stock option exercises and employee stock purchase plan, net of taxes paid on vested restricted stock units 3,486 5,066 1,996

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Cash, cash equivalents and restricted cash, beginning of period 40,015 12,074 31,076

Cash, and cash equivalents, end of period $ 40,015 $ 12,074

INSEEGO CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Cash, cash equivalents and restricted cash, end of period $ 49,812 $ 40,015 $ 12,074

Supplemental disclosures of cash flow information:

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Interest $ 5,387 $ 3,215 $ 9,296

Income taxes, net of tax refunds $ 142 $ 939

Income taxes $ 523 $ 142 $ 939

Supplemental disclosures of non-cash activities:

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Right-of-use assets obtained in exchange for operating leases liabilities $ 658 $ 7,931 $ 4,694

Proceeds related to divestiture of Ctrack South Africa in exchange for settlement of tax liabilities $ 421 $ — $ —

Exchange of Series E Preferred Stock for common stock $ 11,982 $ — $ —

Issuance of common stock in exchange for Series E Preferred Stock $ 13,086 $ — $ —

Deemed dividend on exchange of Series E Preferred Stock for common stock $ 1,104 $ — $ —

Capital expenditures financed through accounts payable or accrued liabilities $ 748 $ 5,710 $ 2,926

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2025 Notes conversion, including shares issued in satisfaction of interest-make-whole payment $ 5,382 $ 14,353 $ —

1 The amount for the year ended December 31, 2021 is net of cash divested of $ 5.0 million .

See accompanying notes to consolidated financial statements.

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Product portfolio consists of fixed and mobile device-to-cloud solutions that provide compelling, intelligent, reliable and secure end-to-end IoT services with deep business intelligence.

Inseego’s products and solutions, designed and developed in the U.S., power mission critical applications with a “zero unscheduled downtime” mandate, such as our 5G fixed wireless access (“FWA”) gateway solutions, 4G and 5G mobile broadband, IIoT applications such as SD WAN failover management, asset tracking and fleet management services.

Inseego’s products and solutions, designed and developed in the U.S., power mission critical applications with a “zero unscheduled downtime” mandate, such as 5G fixed wireless access (“FWA”) gateway solutions, 4G and 5G mobile broadband, IIoT applications such as SD WAN failover management, asset tracking and fleet management services.

Inseego’s solutions are powered by its key wireless innovations in mobile and FWA technologies, including a suite of products employing the 5G NR standards, and purpose-built SaaS cloud platforms.

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Inseego’s common stock trades on the NASDAQ Global Select Market under the trading symbol “INSG”.

Basis of Presentation

The Company had a net loss attributable to Inseego Corp.

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As of December 31, 2021, the Company had available cash and cash equivalents totaling $ 46.5 million and working capital of $ 52.8 million.

The Company has a history of operating and net losses and overall usage of cash from operating and investing activities.

On March 6, 2020, the Company 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.

On July 30, 2021, the Company completed the sale of its Ctrack business operations in Africa, Pakistan and the Middle East (together “Ctrack South Africa”).

Initial cash proceeds of approximately $ 36.6 million were received.

Net cash proceeds received were $ 31.5 million, net of cash divested of $ 5.0 million.

Final cash proceeds were subject to certain post-closing working capital adjustments which totaled $ 2.6 million, out of which $ 2.2 million was received on October 29, 2021, and the remaining $ 0.4 million was offset with the Company’s existing accounts payable balance to an affiliate of Convergence Partners (“Convergence”), an investment management firm in South Africa.

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

In January 2021, the Company 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.

During the quarter ended September 30, 2020, certain holders of the 2025 Notes converted approximately $ 13.5 million in principal amount of the 2025 Notes into 1,177,156 shares of the Company’s common stock in accordance with the terms of such notes.

As of December 31, 2021, the Company’s outstanding debt primarily consisted of $ 161.9 million in principal amount of 2025 Notes.

In the first quarter of 2020, $ 59.9 million of the Company’s 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.

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

As of December 31, 2020, the Company’s outstanding debt primarily consisted of $ 166.9 million in principal amount of 2025 Notes.

Additionally, in January 2021, the Company sold 1,516,073 shares of common stock, at a public offering price of $ 20.11 per share, for net proceeds of $ 29.6 million, pursuant to the ATM Offering.

See Note 15, Subsequent Events .

The Company has a history of operating and net losses and overall usage of cash from operating and investing activities.

The Company’s management believes that its cash and cash equivalents, together with anticipated cash flows from operations, will be sufficient to meet its cash flow needs for the next twelve months from the filing date of this report.

The Company believes that its cash and cash equivalents, together with anticipated cash flows from operations, will be

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

sufficient to meet its cash flow needs for the next twelve months from the filing date of this report.

The Company’s ability to attain more profitable operations and continue to generate positive cash flow is dependent upon achieving a level and mix of revenues adequate to support its evolving cost structure.

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There can be no assurance that any required or desired restructuring or financing will be available on terms favorable to the Company, or at all.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Additionally, the Company is uncertain of the full extent to which the COVID-19 pandemic will impact the Company’s business, operations and financial results.

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All intercompany transactions and balances have been eliminated in consolidation.

Segment Information

Management has determined that the Company has one reportable segment.

The Chief Executive Officer, who is also the Chief Operating Decision Maker, does not manage any part of the Company separately, and the allocation of resources and assessment of performance is based solely on the Company’s consolidated operations and operating results.

Use of Estimates

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Estimates are assessed each period and updated to reflect current information, such as the economic considerations related to the impact that the novel coronavirus pandemic ("COVID-19") could have on our significant accounting estimates.

Significant estimates include revenue recognition, capitalized software costs, allowance for doubtful accounts receivable, provision for excess and obsolete inventory, valuation of intangible and long-lived assets, valuation of goodwill, valuation of derivatives, accruals relating to litigation, income taxes, and share-based compensation expense.

Segment Information

Management has determined that the Company has one reportable segment.

Cash and Cash Equivalents

Significant estimates include revenue recognition, capitalized software costs, allowance for credit losses, provision for excess and obsolete inventory, valuation of intangible and long-lived assets, valuation of goodwill, valuation of derivatives, accruals relating to litigation, income taxes, and share-based compensation expense.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include highly liquid investments with original maturities of three months or less.

Cash and cash equivalents are recorded at market value, which approximates cost.

The Company’s cash and cash equivalents are generally held with large financial institutions worldwide to reduce the amount of exposure to any credit risk.

Restricted cash consists of Company funds in escrow with a financial institution as collateral for potential future uninsured warranty claims related to the divestiture of Ctrack South Africa.

Business Divestiture for additional information about the divestiture of Ctrack South Africa.

Cash, cash equivalents and restricted cash are recorded at market value, which approximates cost.

Gains and losses associated with the Company’s foreign currency denominated demand deposits are recorded as a component of other income, net, in the consolidated statements of operations.

Allowance for Doubtful Accounts Receivable

The Company provides an allowance for its accounts receivable for estimated losses that may result from its customers’ inability to pay.

The Company determines the amount of the allowance by analyzing known uncollectible accounts, aged receivables, economic conditions, historical losses, and changes in customer payment cycles and its customers’ creditworthiness.

Amounts later determined and specifically identified to be uncollectible are charged or written off against this allowance.

To minimize the likelihood of uncollectibility, the Company reviews its customers’ creditworthiness periodically based on credit scores generated by independent credit reporting services, its experience with its customers and the economic condition of its customers’ industries.

Material differences may result in the amount and timing of expense for any period if the Company were to make different judgments or utilize different estimates.

Inventories and Provision for Excess and Obsolete Inventory

Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value.

Shipping and handling costs are classified as a component of cost of net revenues in the consolidated statements of operations.

The Company reviews the components of its inventory and its inventory purchase commitments on a regular basis for excess and obsolete inventory based on estimated future usage and sales.

Write-downs in inventory value or losses on inventory purchase commitments depend on various items, including factors related to customer demand, economic and competitive conditions, technological advances or new product introductions by the Company or its customers that vary from its current expectations.

Whenever inventory is written down, a new cost basis is established and the inventory is not subsequently written up if market conditions improve.

The Company believes that, when made, the estimates used in calculating the inventory provision are reasonable and properly reflect the risk of excess and obsolete inventory.

If customer demand for the Company’s inventory is substantially less than its estimates, inventory write-downs may be required, which could have a material adverse effect on its consolidated financial statements.

Property, Plant and Equipment

Property, plant and equipment are initially stated at cost and depreciated using the straight-line method.

Land is not depreciated.

Buildings are depreciated over 50 years.

Leasehold improvements are depreciated over the shorter of the related

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

remaining lease period or useful life, not to exceed 5 years.

Product tooling is depreciated over 13 months.

Computer equipment, purchased software, vehicles, production equipment, and furniture and fixtures, are depreciated over lives ranging from 2 to 5 years.

Amortization of equipment under capital leases is included in depreciation expense.

Expenditures for repairs and maintenance are expensed as incurred.

Expenditures for major renewals and betterments that extend the useful lives of existing property, plant and equipment are capitalized and depreciated.

Upon retirement or disposition of property, plant and equipment, any resulting gain or loss is recognized in other income, net, in the consolidated statements of operations.

Rental Assets

The cost of rental assets, which represents fleet management and vehicle tracking hardware installed in customers’ vehicles where such hardware is provided as part of a fixed term contract with the customer, is capitalized and disclosed separately in the consolidated balance sheets.

The Company depreciates rental assets to costs of net revenues on a straight-line basis over the term of the contract, generally three to four years , commencing on installation of the rental asset.

Research and development

Research and development expense consists primarily of personnel costs for our engineers engaged in the design and development of our products, software and technologies, including salary, bonus and share‐based compensation expense, project material costs, services, depreciation and amortization.

Such costs are charged to research and development expense as they are incurred, to the extent not capitalized as software development costs for external or internal use.

Software Development Costs for External Use

Software development costs for external use are expensed as incurred until technological feasibility has been established, at which time those costs are capitalized as intangible assets until the software is implemented into products sold to customers.

Capitalized software development costs are amortized on a straight-line basis over the estimated useful life.

The straight-line recognition method approximates the manner in which the expected benefit will be derived.

Costs incurred to enhance existing software or after the implementation of the software into a product are expensed in the period they are incurred and included in research and development expense in the consolidated statements of operations.

Software Development Costs for Internal Use

Costs incurred in the preliminary stages of development are expensed as incurred and included in research and development expense in the consolidated statements of operations.

Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use.

Capitalization ceases upon completion of all substantial testing performed to ensure the product is ready for its intended use.

The Company also capitalizes costs related to specific upgrades and enhancements of internal-use software when it is probable that the expenditures will result in additional functionality.

Maintenance and training costs are expensed as incurred.

Capitalized internal-use software costs are recorded as part of intangible assets and are amortized on a straight-line basis over the estimated useful life of the software.

The Company tests these assets for impairment whenever events or circumstances occur that could impact their recoverability.

For the year ended December 31, 2020 and 2019, the Company recorded $ 1.4 million and $ 0 of impairment loss, respectively, related to software development costs for internal use.

Intangible Assets

Intangible assets include purchased finite-lived and indefinite-lived intangible assets resulting from the acquisitions of DigiCore Holdings Limited (“DigiCore” or “Ctrack”) and R.E.R.

Enterprises, Inc.

(“RER”) and its wholly owned subsidiary and principal operating asset, Feeney Wireless, LLC (which was renamed Inseego North America, LLC) (“INA”), along with the costs of non-exclusive and perpetual worldwide software technology licenses and capitalized software developments costs for both internal and external use.

Finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets (see Note 3, Goodwill and Other Intangible Assets ).

Indefinite-lived assets, including goodwill and in-process capitalized software development costs, are not amortized;

however, they are tested for impairment annually, and between annual tests, if certain events occur indicating that the carrying amounts may be impaired.

The Company performs an annual impairment review of indefinite-lived assets during the fourth fiscal quarter of each year, and more frequently if we believe indicators of impairment exist.

To review for impairment, we first assess qualitative factors to determine whether events or circumstances lead to a determination that it is more likely than not that the fair value of the Company’s reporting unit is less than its carrying amount.

The Company’s qualitative assessment of the recoverability of indefinite-lived assets was based on various macroeconomic, industry-specific, and company specific

The following table provides a reconciliation of cash, cash equivalents and restricted cash as reported within the consolidated balance sheets to “Cash, cash equivalents, and restricted cash, end of period” as reported within the consolidated statements of cash flows (in thousands):

Cash and cash equivalents $ 46,474 $ 40,015

Restricted cash 3,338 —

Cash, cash equivalents and restricted cash, end of period

$ 49,812 $ 40,015

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

These factors include:

(i) industry or economic trends;

(ii) current, historical, or projected financial performance, and;

(iii) the Company’s market capitalization.

After assessing the totality of events and circumstances, if the Company determines that it is not more likely than not that the fair value of the Company’s reporting unit is less than its carrying amount, no further assessment is performed.

If the Company determines that it is more likely than not that the fair value of the Company’s reporting unit is less than its carrying amount, the Company calculates the fair value of the reporting unit and compares the fair value to the reporting unit’s net book value.

For the years ended December 31, 2020 and 2019, the Company recorded no impairment loss related to indefinite-lived intangible assets.

Long-Lived Assets

The Company periodically evaluates the carrying value of the unamortized balances of its long-lived assets, including property, plant and equipment, rental assets and intangible assets, to determine whether impairment of these assets has occurred or whether a revision to the related amortization periods should be made.

When the carrying value of an asset exceeds the associated undiscounted expected future cash flows, it is considered to be impaired and is written down to fair value.

Fair value is determined based on an evaluation of the assets’ associated undiscounted future cash flows or appraised value .

This evaluation is based on management’s projections of the undiscounted future cash flows associated with each class of asset.

If management’s evaluation indicates that the carrying values of these assets are impaired, such impairment is recognized by a reduction of the applicable asset carrying value to its estimated fair value and the impairment is expensed as a part of continuing operations.

For the year ended December 31, 2020 and 2019, the Company had no impairment loss related to long-lived assets, except for the impairment of the capitalized software development costs for internal use, noted above.

Convertible Debt Instruments

The Company evaluates embedded features within convertible debt that will be settled in shares upon conversion under Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging (“ASC 815”) to determine whether the embedded feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings.

If an embedded derivative is bifurcated from share-settled convertible debt, the Company records the debt component at cost less a debt discount equal to the bifurcated derivative’s fair value.

The Company amortizes the debt discount over the life of the debt instrument as additional non-cash interest expense utilizing the effective interest method.

The convertible debt and the derivative liability are presented in total on the consolidated balance sheet.

The derivative liability will be remeasured at each reporting period with changes in fair value recorded in the consolidated statements of operations in other income, net.

Derivative Financial Instruments

The Company evaluates stock warrants, debt instruments and other contracts to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for under the relevant sections of the Financial Accounting Standards Board (the “FASB”) ASC.

The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative financial instrument and is marked-to-market at each balance sheet date and recorded as an asset or liability.

In the event that the fair value is recorded as an asset or liability, the change in fair value is recorded in the consolidated statements of operations as other income or other expense.

Upon conversion, exercise or expiration of a derivative financial instrument, the instrument is marked to fair value.

Revenue Recognition

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Both IoT & Mobile Solutions and Enterprise SaaS Solutions revenues include any hardware and software required for the respective solution.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net revenues by product grouping for the years ended December 31, 2021, 2020 and 2019 were as follows (in thousands):

2021 2020 2019

IoT & Mobile Solutions $ 217,984 $ 261,169 $ 160,873

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Total $ 262,399 $ 313,832 $ 219,496

See geographic disaggregation information in Note 12, Geographic Information and Concentrations of Risk .

See geographic disaggregation information in Note 13.

Geographic Information and Concentrations of Risk .

IoT & Mobile Solutions .

The IoT & Mobile Solutions portfolio is comprised of end-to-end edge to cloud solutions including 4G LTE mobile broadband gateways, routers, modems, hotspots, HD quality VoLTE based wireless home phones, cloud management software and an advanced 5G portfolio of products (currently in various stages of development).

The solutions are offered under the MiFi and MiFi TM brands for consumer and business markets, and under the Skyus brand for industrial IoT markets.

Effective in the third quarter ended on September 30, 2020, IoT & Mobile Solutions now also includes the Company’s Device Management System (“DMS”), rebranded as Inseego Subscribe TM , a hosted SaaS platform that helps organizations manage the selection, deployment and spend of their customer’s wireless assets, helping them save money on personnel and telecom expenses.

The Company reclassified its Inseego Subscribe revenue stream from Enterprise SaaS Solutions to better reflect the Company's end user delineation.

This reclassification had no impact on previously reported total net revenue, gross profit, or net loss.

The solutions are offered under the MiFi TM brand for consumer and business markets, and under the Skyus brand for industrial IoT markets.

IoT & Mobile Solutions also includes Inseego Subscribe TM , a hosted SaaS platform that helps organizations manage the selection, deployment and spend of their customer’s wireless assets, helping them save money on personnel and telecom expenses.

Enterprise SaaS Solutions .

The Enterprise SaaS Solutions consist of various subscription offerings to gain access to the Company’s Ctrack telematics platforms, which provide fleet vehicle, aviation ground vehicle and asset tracking and performance information, and other telematics applications.

The Enterprise SaaS Solutions portfolio consists of various subscription offerings to gain access to the Company’ s Ctrack tel ematics platforms, which provide fleet vehicle, aviation ground vehicle and asset tracking and performance information, and other telematics applications.

Contracts with Customers

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The Company has concluded, for the vast majority of its revenues, that its contracts with customers are either a purchase order or the combination of a purchase order with a master supply agreement.

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The Company determines revenue recognition through the following five steps:

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The Company generally recognizes revenue upon the satisfaction of these criteria when control of the product or service has been transferred to the customer at which time it has an unconditional right to receive payment.

The Company’s prices are fixed and have no history of being affected by contingent events that could

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

impact the transaction price.

The Company’s prices are fixed and have no history of being affected by contingent events that could impact the transaction price.

The Company does not offer price concessions and does not accept payment that is less than the price stated when it accepts the purchase order.

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If the customer purchases the hardware device, the Company recognizes the revenue at a point in time as discussed above in the hardware revenue recognition disclosure.

Because the Company’s rental asset lease contracts qualify as operating leases under ASC 842, Leases (“ASC 842”) , and the contracts also include services to operate the underlying asset, and to maintain the asset, the Company has elected the practical expedient to combine the lease and the non-lease components because the service is the predominant element in the eyes of the customer and the pattern of service delivery is the same for both elements.

Because the Company’s rental asset lease contracts qualify as operating leases under Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”) , and the contracts also include services to operate the underlying asset, and to maintain the asset, the Company has elected the practical expedient to combine the lease and the non-lease components because the service is the predominant element in the eyes of the customer and the pattern of service delivery is the same for both elements.

The Company recognizes revenue over time on a ratable basis over the term of the contract.

Maintenance and support services revenue.

Within cost of revenue, the Company records an estimate to reflect its standard warranty obligation to end users to provide for replacement of a defective product.

The standard obligation period for most regions is 12 months.

Factors that affect the warranty obligation include product failure rates, material usage, and service delivery costs incurred in correcting product failures.

The Company’s estimated allowances for product warranties can vary from actual results and the Company may have to record additional charges to cost of revenue.

Periodically, the Company sells separately-priced warranty contracts that extend beyond the Company’s base warranty period.

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The Company recognizes revenue based on the achievement of certain applicable milestones and the amount of payment the Company believes it is entitled to at the time.

With respect to revenue related to third party product sales or other arrangements that involve the services of another party, for which the Company does not control the sale or service and acts as an agent to the transaction, the Company recognizes revenue on a net basis.

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recognizes revenue on a net basis.

The portion of the gross amount billed to customers that is remitted by the Company to another party is not reflected as revenue.

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In instances where SSP is not directly observable, such as when the Company does not sell the product or service separately, it determines the SSP based on a cost-plus model as market and other observable inputs are seldom present based on the proprietary nature of the Company’s products.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contract Liabilities

Timing of revenue recognition may differ from the timing of invoicing to customers.

If customers are invoiced for subscription services in advance of the service period, deferred revenue liabilities, or contract liabilities, are recorded.

Deferred revenue liabilities, or contract liabilities, are also recorded when the Company collects payments in advance of performing the services.

Contract Assets

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These costs are deferred and then amortized over a period of benefit.

There were no significant amounts of assets recorded related to contract costs as of December 31, 2020.

There were no significant amounts of assets recorded related to contract costs as of December 31, 2021 or 2020.

Applying the practical expedient in paragraph 40-25-4 of ASC 340, Other Assets and Deferred Costs , the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less.

These costs are included in selling, general and administrative expenses.

Contract Liabilities

Timing of revenue recognition may differ from the timing of invoicing to customers.

If customers are invoiced for subscription services in advance of the service period, deferred revenue liabilities, or contract liabilities, are recorded.

Deferred revenue liabilities, or contract liabilities, are also recorded when the Company collects payments in advance of performing the services.

As of December 31, 2021 and 2020, the Company had $ 3.8 million and $ 3.0 million, respectively, of contract liabilities included within accrued expenses and other current liabilities, and other long-term liabilities on the consolidated balance sheets.

Significant Judgments in the Application of the Guidance in ASC 606

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Revenue from the Company’s subscription services is recognized over time on a ratable basis over the contract term beginning on the date that the service is made available to the customer.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Shipping and Handling Charges

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Taxes collected on the value of transaction revenue are excluded from product and services revenues and cost of sales and are accrued in current liabilities until remitted to governmental authorities.

Allowance for Credit Losses

The Company recognizes an allowance for credit loss at the time a receivable is recorded based on its estimate of expected credit losses and adjusts this estimate over the life of the receivable as needed.

The Company evaluates the aggregation and risk characteristics of a receivable pool and develops loss rates that reflect historical collections, current forecasts of future economic conditions over the time horizon the Company is exposed to credit risk, and payment terms or conditions that may materially affect future forecasts.

As of December 31, 2021 and 2020, the Company reported $ 26.8 million and $ 29.9 million, respectively, of accounts receivable, net of allowances of $ 0.4 million and $ 1.4 million, respectively.

The Company has not seen significant changes to the recovery rate of its accounts receivable as a result of the COVID-19 pandemic, but it is continuing to actively monitor the impact of the COVID-19 pandemic on its expected credit losses.

Inventories and Provision for Excess and Obsolete Inventory

Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value.

Shipping and handling costs are classified as a component of cost of net revenues in the consolidated statements of operations.

The Company reviews the components of its inventory and its inventory purchase commitments on a regular basis for excess and obsolete inventory based on estimated future usage and sales.

Whenever inventory is written down, a new cost basis is established and the inventory is not subsequently written up if market conditions improve.

The Company believes that, when made, the estimates used in calculating the inventory provision are reasonable and properly reflect the risk of excess and obsolete inventory.

Intangible Assets

Intangible assets include purchased finite-lived and indefinite-lived intangible assets resulting from the acquisitions of DigiCore Holdings Limited (“DigiCore” or “Ctrack”) and R.E.R.

Enterprises, Inc.

Finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets (see Note 3.

Goodwill and Other Intangible Assets ).

Software Development Costs for External Use

Capitalized software development costs are amortized on a straight-line basis over the estimated economic life.

The straight-line recognition method approximates the manner in which the expected benefit will be derived.

At each balance sheet date, the unamortized capitalized software development costs for external use is compared to the net realizable value of that product by analyzing critical inputs such as expected future lifetime revenue.

The amount by which unamortized software costs exceed the net realizable value, if any, is recognized as a charge to amortization expense in the period it is determined.

Costs incurred to enhance existing software or after the software is available for general release to customers are expensed in the period they are incurred and included in research and development expense in the consolidated statements of operations.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Software Development Costs for Internal Use

Costs incurred in the preliminary stages of development are expensed as incurred and included in research and development expense in the consolidated statements of operations.

Capitalization ceases upon completion of all substantial testing performed to ensure the product is ready for its intended use.

The Company also capitalizes costs related to specific upgrades and enhancements of internal-use software when it is probable that the expenditures will result in additional functionality.

Maintenance and training costs are expensed as incurred.

Capitalized internal-use software costs are recorded as part of intangible assets and are amortized on a straight-line basis over the estimated useful life of the software, and included in general and administrative expense in the consolidated statement of operations.

The Company tests these assets for impairment whenever events or circumstances occur that could impact their recoverability.

For the years ended December 31, 2021, 2020, and 2019 the Company recorded $ 1.2 million, $ 1.4 million and zero impairment loss, respectively, related to software development costs for internal use.

Valuation of Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets, including in-process capitalized software development costs, are not amortized;

however, they are tested for impairment annually, and between annual tests, if certain events occur indicating that the carrying amounts may be impaired.

The Company performs an annual impairment review of indefinite-lived assets during the fourth fiscal quarter of each year, and more frequently if the Company believes indicators of impairment exist.

To review for impairment, the Company first assesses qualitative factors to determine whether events or circumstances lead to a determination that it is more likely than not that the fair value of the Company’s reporting unit is less than its carrying amount.

The Company’s qualitative assessment of the recoverability of indefinite-lived assets is based on various macroeconomic, industry-specific, and company specific factors.

These factors include:

(i) industry or economic trends;

(ii) current, historical, or projected financial performance, and;

(iii) the Company’s market capitalization.

For the years ended December 31, 2021, 2020 and 2019 the Company recorded zero impairment loss related to indefinite-lived intangible assets.

Goodwill represents the excess purchase price over estimated fair value of net assets of businesses acquired in a business combination.

The Company’s goodwill results from the acquisitions of Ctrack and RER.

Valuation of Goodwill

Indefinite-lived intangible assets, including goodwill, are not amortized;

however, they are tested for impairment annually, and between annual tests, if certain events occur indicating that the carrying amounts may be impaired.

The Company performs an annual impairment review of indefinite-lived assets during the fourth fiscal quarter of each year, and more frequently if the Company believes indicators of impairment exist.

Goodwill is tested for impairment at the reporting unit level by first assessing qualitative factors to determine whether events or circumstances lead to a determination that it is more likely than not that the fair value of the Company’s reporting unit is less than its carrying amount.

The Company’s qualitative assessment of the recoverability of indefinite-lived assets is based on various macroeconomic, industry-specific, and company specific factors.

These factors include:

(i) industry or economic trends;

(ii) current, historical, or projected financial performance, and;

(iii) the Company’s market capitalization.

The Company identified two reporting units for the purpose of goodwill impairment testing, Ctrack and INA, and performed a qualitative test for goodwill impairment of the two reporting units during the fourth fiscal quarter.

Based upon the results of the qualitative testing, the Company believed that it was more-likely-than-not that the fair value of these reporting units were greater than their respective carrying values and therefore performing the next step of impairment test for these reporting units was unnecessary.

For the years ended December 31, 2021, 2020 and 2019 the Company recorded zero impairment loss related to goodwill.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Research and Development

Such costs are charged to research and development expense as they are incurred, to the extent not capitalized as software development costs for external or internal use.

Long-Lived Assets

When the carrying value of an asset exceeds the associated undiscounted expected future cash flows, it is considered to be impaired and is written down to fair value.

Fair value is determined based on an evaluation of the assets’ associated undiscounted future cash flows or appraised value .

This evaluation is based on management’s projections of the undiscounted future cash flows associated with each class of asset.

For the years ended December 31, 2021, 2020 and 2019 the Company had zero impairment loss related to long-lived assets, except for the impairment of the capitalized software development costs for internal use, noted above.

Property, Plant and Equipment

Property, plant and equipment are initially stated at cost and depreciated using the straight-line method.

Land is not depreciated.

Buildings are depreciated over 50 years.

Leasehold improvements are depreciated over the shorter of the related remaining lease period or useful life, not to exceed 5 years.

Product tooling is depreciated over 13 months.

Computer equipment, purchased software, vehicles, production equipment, and furniture and fixtures, are depreciated over lives ranging from 2 to 7 years.

Amortization of equipment under capital leases is included in depreciation expense.

Expenditures for repairs and maintenance are expensed as incurred.

Expenditures for major renewals and betterments that extend the useful lives of existing property, plant and equipment are capitalized and depreciated.

Upon retirement or disposition of property, plant and equipment, any resulting gain or loss is recognized in other income (expense), net, in the consolidated statements of operations.

Rental Assets

The Company depreciates rental assets to costs of net revenues on a straight-line basis over the term of the contract, generally three to four years , commencing on installation of the rental asset.

Convertible Debt Instruments

The Company evaluates embedded features within convertible debt that will be settled in shares upon conversion under ASC 815, Derivatives and Hedging (“ASC 815”) to determine whether the embedded feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

If an embedded derivative is bifurcated from share-settled convertible debt, the Company records the debt component at cost less a debt discount equal to the bifurcated derivative’s fair value.

The Company amortizes the debt discount over the life of the debt instrument as additional non-cash interest expense utilizing the effective interest method.

The convertible debt and the derivative liability are presented in total on the consolidated balance sheet.

The derivative liability will be remeasured at each reporting period with changes in fair value recorded in the consolidated statements of operations in other income (expense), net.

Derivative Financial Instruments

In the event that the fair value is recorded as an asset or liability, the change in fair value is recorded in the consolidated statements of operations as other income or other expense.

Upon conversion, exercise or expiration of a derivative financial instrument, the instrument is marked to fair value.

Lease Accounting

Arrangements with Inseego as a Lessee

The Company determines if an arrangement is a lease at inception.

The Company’s operating lease agreements are primarily for real estate and are included within right-of-use assets, net, accrued expenses and other current liabilities, and other long-term liabilities on the consolidated balance sheet s.

The Company elected the practical expedient to combine its lease and related non-lease components for all its leases.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

Variable lease payments that do not depend on an index or rate are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred.

The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

ROU assets also include any lease prepayments made and exclude lease incentives.

Many of the Company’s lessee agreements include options to extend the lease, which are not included in the Company’s minimum lease terms unless they are reasonably certain to be exercised.

Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term.

Arrangements with Inseego as a Lessor

The Company serves as lessor for certain monitoring device leases and classifies such arrangements as operating leases.

Accordingly, the Company carries rental devices at historical cost less accumulated depreciation and impairment, if any, and are included in rental assets, net, on the consolidated balance sheets.

Since the lease components meet the criteria for an operating lease under ASC 842, the Company has elected the practical expedient to combine the lease and the non-lease components because the service is the predominant element in the eyes of the customer and the pattern of service delivery is the same for both elements.

The Company accounts for the combined component as a single performance obligation under ASC 606, Revenue from Contracts with Customers .

Foreign Currency Transactions

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The primary component of the Company’s foreign currency transaction gain (loss) is due to agreements in place with certain subsidiaries in foreign countries regarding intercompany transactions.

Based upon historical experience, the Company anticipates repayment of these transactions in the foreseeable future, and recognizes the realized and unrealized gains (losses) on these transactions that result from foreign currency changes in the period in which they occur as foreign currency transaction gain (loss), which is recorded as other income, net, in the consolidated statements of operations.

Based upon historical experience, the Company anticipates repayment of these transactions in the foreseeable future, and recognizes the realized and unrealized gains (losses)

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

on these transactions that result from foreign currency changes in the period in which they occur as foreign currency transaction gain (loss), which is recorded as other income (expense), net, in the consolidated statements of operations.

Foreign Currency Translation

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Income and expenses are translated into U.S.

Dollars at the average

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

exchange rates during the period.

Dollars at the average exchange rates during the period.

The resulting translation adjustments are included in the Company’s consolidated balance sheets as a component of accumulated other comprehensive loss.

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The Company generally uses the Black-Scholes option pricing model to estimate the fair value of its stock options and stock purchase rights.

The Black-Scholes model is considered an acceptable model but the fair values generated by it may not be indicative of the actual fair values of the Company’s equity awards as it does not consider certain factors important to those awards to recipients, such as continued service and periodic vesting requirements, as well as limited transferability.

The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by the Company’s stock price and a number of assumptions, including expected volatility, expected term, risk-free interest rate and expected dividends.

1 unchanged sentence

The Company’s use of a blended volatility estimate in computing the expected volatility assumption for stock options is based on its belief that while the implied volatility is representative of expected future volatility, the historical volatility over the expected term of the award is also an indicator of expected future volatility.

Due to the short duration of stock purchase rights under the Company’s ESPP, the Company utilizes historical volatility in order to estimate the expected volatility assumption of the Black-Scholes model.

Due to the short duration of stock purchase rights under the Company’s ESPP, the Company utilizes a blended volatility estimate that consists of implied volatility and historical volatility in order to estimate the expected volatility assumption of the Black-Scholes model.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The expected term of stock options granted is estimated using historical experience.

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The dividend yield assumption is based on the Company’s history and expectation of no dividend payouts.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

estimates forfeitures at the time of grant and revises these estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company estimates forfeitures at the time of grant and revises these estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company estimates its forfeiture rate assumption for all types of share-based compensation awards based on historical forfeiture rates related to each category of award.

11 unchanged sentences

Fair Value of Financial Instruments

The Company’s fair value measurements relate to its cash equivalents and money market funds, which are classified pursuant to authoritative guidance for fair value measurements.

The Company’s fair value measurements relate to its cash equivalents, money market funds and an embedded derivative in the 2025 Notes, which are classified pursuant to authoritative guidance for fair value measurements.

The Company places its cash equivalents in instruments that meet credit quality standards, as specified in its investment policy guidelines.

5 unchanged sentences

Comprehensive loss consists of net earnings and foreign currency translation adjustments.

Prior Period Reclassifications

Certain amounts in prior periods have been reclassified to conform with current period presentation.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued ASU No.

2019-12, Simplifying the Accounting for Income Taxes , which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

ASU 2019-12 is effective for the Company no later than the first quarter of fiscal 2021.

Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

The Company adopted the provisions of ASU 2019-12 in the first quarter of fiscal 2021.

There was no material impact from the adoption of this pronouncement to the Company’s consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

From time to time, new accounting pronouncements are issued by the FASB, which are adopted by the Company as of the specified date.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) .

The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options.

This amendment is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted.

The Company is currently evaluating the impact that this new guidance will have on its consolidated financial statements.

In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40)-Accounting For Convertible Instruments and Contracts in an Entity's Own Equity .

1 unchanged sentence

Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features.

removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it.

The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it.

The ASU also simplifies the diluted net income per share calculation in certain areas.

1 unchanged sentence

The Company is currently evaluating the impact that this new guidance will have on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which requires measurement and recognition of expected credit losses for financial assets

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

This guidance is effective for interim and annual periods beginning after December 15, 2019.

There was no impact from the adoption of this pronouncement to the Company’s consolidated financial statements.

Financial Statement Details

3 unchanged sentences

$ 37,402 $ 33,952

Prepaid expenses and other

Prepaid expenses and other consists of the following (in thousands):

Rebate receivables $ 6,398 $ 5,992

Receivables from contract manufacturers 2,626 —

Software licenses 1,261 707

Insurance 1,269 1,262

Deposits 1,023 1,544

Financed assets 323 218

Other 724 478

$ 13,624 $ 10,201

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property, plant and equipment

11 unchanged sentences

$ 8,102 $ 13,699

At December 31, 2020, the Company had vehicles and equipment under finance leases with an aggregate carrying value of $ 2.6 million, net of accumulated amortization of $ 1.0 million.

At December 31, 2019, the Company had vehicles and equipment under finance leases with an aggregate carrying value of $ 2.1 million, net of accumulated amortization of $ 2.6 million.

At December 31, 2021, the Company had property, plant and equipment under finance leases with an aggregate carrying value of $ 3.1 million, net of accumulated amortization of $ 1.3 million.

At December 31, 2020, the Company had property, plant and equipment under finance leases with an aggregate carrying value of $ 2.6 million, net of accumulated amortization of $ 1.0 million.

Rental assets

3 unchanged sentences

$ 4,575 $ 6,109

Depreciation and amortization expense related to property, plant and equipment, including equipment under capital leases, and rental assets was $ 10.0 million and $ 8.8 million for the years ended December 31, 2020 and 2019, respectively.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Depreciation and amortization

Depreciation and amortization expense related to property, plant and equipment, including rental assets and property, plant and equipment under capital leases was $ 9.8 million, $ 10.0 million and $ 8.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Accrued expenses and other current liabilities

2 unchanged sentences

Payroll and related expenses 9,326 6,006

Warranty obligations 473 366

Professional fees 502 921

Bank overdrafts 370 160

Accrued interest 877 888

1 unchanged sentence

Operating lease liabilities 1,769 1,619

Acquisition-related liabilities — 1,000

Accrued contract manufacturing liabilities 927 938

Liabilities related to financed assets 1,593 2,686

Value added tax payables 642 2,039

Other 3,699 2,487

5 unchanged sentences

Balance at December 31, 2020 32,511

Effect of Ctrack South Africa divestiture

Effect of change in foreign currency exchange rates ( 1,441 )

Balance at December 31, 2021 $ 20,336

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s intangible assets are comprised of the following (in thousands):

12 unchanged sentences

Total intangible assets $ 46,995

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

11 unchanged sentences

Total intangible assets $ 51,487

Amortization expense for the years ended December 31, 2020 and 2019 was approximately $ 18.0 million and $ 9.7 million, respectively, including approximately $ 12.9 million and $ 4.1 million related to capitalized software development costs for the years ended December 31, 2020 and 2019, respectively.

The Company recorded a $ 1.4 million impairment loss on intangible assets during the years ended December 31, 2020 and no impairment loss during the year ended December 31, 2019.

Amortization expense for the years ended December 31, 2021, 2020 and 2019 was approximately $ 15.5 million, $ 18.0 million and $ 9.7 million, respectively, including approximately $ 12.2 million, $ 12.9 million and $ 4.1 million related to capitalized software development costs for the years ended December 31, 2021, 2020 and 2019, respectively.

The Company recorded impairment losses on intangible assets related to internal use capitalized software during the years ended December 31, 2021 and 2020 of $ 1.2 million and $ 1.4 million, respectively.

No impairment loss was recorded during the year ended December 31, 2019.

The following table represents details of the amortization of finite-lived intangible assets that is estimated to be expensed in the future (in thousands):

2022 $ 16,672

Thereafter 1,988

Total $ 38,450

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurement of Assets and Liabilities

10 unchanged sentences

Pricing inputs include significant inputs that are generally less observable from objective sources, including the Company’s own assumptions.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company reviews the fair value hierarchy classification on a quarterly basis.

Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

There have been no transfers of assets or liabilities between fair value measurement classifications during the year ended December 31, 2020.

The following table summarizes the Company’s financial instruments measured at fair value on a recurring basis in accordance with the authoritative guidance for fair value measurements as of December 31, 2020 (in thousands):

Balance as of

December 31, 2020 Level 1

Cash equivalents

Money market funds $ 126 $ 126

Total cash equivalents $ 126 $ 126

Balance as of

December 31, 2019 Level 1

There have been no transfers of assets or liabilities between fair value measurement classifications during the years ended December 31, 2021 or 2020.

December 31, 2021 December 31, 2020

Total Fair Value Level 3 Level 1 Total Fair Value Level 3 Level 1

Cash equivalents

Money market funds $ 126 $ — $ 126 $ 126 $ — $ 126

Total cash equivalents $ 126 $ 126

Balance as of

December 31, 2020 Level 3

Total assets $ 126 $ — $ 126 $ 126 $ — $ 126

Interest make-whole payment $ 926 $ 926 $ — $ 4,898 $ 4,898 $ —

Total embedded derivatives $ 4,898 $ 4,898

Total liabilities $ 926 $ 926 $ — $ 4,898 $ 4,898 $ —

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value of the interest make-whole payment derivative liability was determined using a Monte Carlo model with the following key assumptions:

May 12, 2020 December 31, 2020

December 31, 2021 December 31, 2020

Volatility 50 % 50 %

Stock price $10.62 per share $15.47 per share

Stock price $ 5.83 per share

$ 15.47 per share

Credit spread 15.93 % 19.25 %

10 unchanged sentences

The Company evaluated the 2025 Notes under ASC 815, Derivatives and Hedging , and identified an embedded derivative that required bifurcation.

The embedded derivative is an interest make-whole payment that was valued at $ 4.6 million on May 12, 2020.

The estimated fair value of the interest make-whole derivative liability at the date of issuance was determined using significant assumptions which include an implied credit spread rate for notes with a similar term, the expected volatility and dividend yield of the Company’s common stock and the risk-free interest rate.

Changes in the fair value of the interest make-whole payment are included in the Company’s consolidated statement of operations for the current fiscal year within other income, net.

The embedded derivative is an interest make-whole payment The estimated fair values of the interest make-whole derivative liability at December 31, 2021 and December 31, 2020 were determined using significant assumptions which include an implied credit spread rate for notes with a similar term, the expected volatility and dividend yield of the Company’s common stock and the risk-free interest rate.

Changes in the fair value of the interest make-whole payment are included in the Company’s consolidated statement of operations for the current fiscal year within other income (expense), net.

During the year ended December 31, 2021, certain holders of the 2025 Notes converted an aggregate of approximately $ 5.0 million in principal amount of the 2025 Notes into shares of the Company’s common stock in accordance with the terms of such notes and a portion of the embedded derivative was settled in shares of the Company’s common stock resulting in $ 0.1 million of the derivative liability being extinguished upon conversion.

As of December 31, 2020, the embedded derivative had a fair value of $ 4.9 million and a $ 0.6 million loss on the change in fair value was recorded to other income (expense), net, on the consolidated statement of operations.

As of December 31, 2021 and 2020 the embedded derivative had a fair value of $ 0.9 million and $ 4.9 million, respectively.

For the years ended December 31, 2021 and 2020 the Company recorded to other income (expense), net, on the consolidated statement of operations a $ 3.8 million gain and $ 0.6 million loss, respectively, on the change in fair value.

During the years ended December 31, 2021 and 2020, there were no transfers between the levels within the fair value hierarchy.

Other Financial Instruments

The Company’s financial assets and liabilities are carried at fair value or at amounts that, because of their short-term nature, approximate current fair value, with the exception of the 2025 Notes and 2022 Notes.

(See Note 5, Debt ).

The Company carries its 2025 Notes at amortized cost adjusted for changes in fair value of the embedded derivative.

On May 12, 2020, the Company issued $ 180.4 million in aggregate principal amount of 2025 Notes, and restructured its outstanding debt as described further in Note 6.

The Company elected to carry its 2025 Notes at amortized cost adjusted for changes in fair value of the embedded derivative.

It is not practicable to determine the fair value of the 2025 Notes due to the lack of information available to calculate the fair value of such notes.

Long-Term Debt

On August 23, 2017, the Company and certain of its direct and indirect subsidiaries (the “Guarantors”) entered into a credit agreement (the “Credit Agreement”) with Cantor Fitzgerald Securities, as administrative agent and collateral agent, and certain lenders (the “Lenders”).

Pursuant to the Credit Agreement, the Lenders provided the Company with a term loan in the principal amount of $ 48.0 million (the “Term Loan”) with a maturity date of August 23, 2020 (the “Maturity Date”).

In conjunction with the closing of the Term Loan, the Company received proceeds of $ 46.9 million, $ 35.0 million of which was funded to the Company in cash on the closing date, net of an original issue discount and commitment fee, and the remaining $ 11.9 million of which was funded through the Company’s repurchase and cancellation of approximately $ 14.9 million of its then outstanding 2022 Notes pursuant to the terms of the Note Purchase Agreement (as defined below).

The Company paid issuance costs of approximately $ 0.5 million.

Additionally, the Company issued shares of its common stock and accrued an exit fee, which, when combined with the original debt discount and commitment fee, resulted in a total debt discount of approximately $ 4.0 million.

On March 31, 2020, the Company issued 2,330 shares of Series E Preferred Stock to South Ocean Funding L.L.C.

(“South Ocean”), the Lender holding all of the aggregate principal amount then outstanding under the Credit Agreement in satisfaction of all then accrued interest under the Credit Agreement.

On May 12, 2020, the Company used a portion of the proceeds from the Offering to repay in full the Term Loan and terminate the Credit Agreement.

The amounts paid included $ 47.5 million in outstanding principal, approximately $ 0.5 million in interest accrued thereon, and prepayment and exit fees of $ 1.4 million.

The Company also used a portion of the proceeds of the Offering to repurchase the 2,330 shares of Series E Preferred Stock that had been issued to South Ocean for $ 2.4 million.

The Term Loan bore interest at a rate per annum equal to the three-month LIBOR, but in no event less than 1.00 %, plus 7.625 %.

As of December 31, 2021, $ 161.9 million in principal amount of the 2025 Notes remain outstanding.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Term Loan consisted of the following (in thousands):

Principal $ 47,500

unamortized debt discount and debt issuance costs ( 962 )

Net carrying amount $ 46,538

The effective interest rate on the Term Loan was 15.19 % for the year ended December 31, 2020.

The following table sets forth total interest expense recognized related to the Term Loan during the years ended December 31, 2020 and 2019 (in thousands):

Year Ended December 31,

Contractual interest expense $ 1,667 $ 4,789

Amortization of debt discount 859 1,331

Amortization of debt issuance costs 103 161

Total interest expense $ 2,629 $ 6,281

Business Divestiture

Sale of Ctrack South Africa Operations

On February 24, 2021, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”) with Convergence to sell its Ctrack South Africa business operations in an all-cash transaction for 528.9 million South African Rand (“ZAR”) (approximately $ 36.6 million United States Dollars).

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

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

Initial cash proceeds of $ 36.6 million were received.

Net cash proceeds received were $ 31.5 million, net o f cash divested of $ 5.0 million.

The Purchase Agreement required the Company to place in escrow 52.9 million ZAR, (approximately $ 3.3 million United States Dollars), which will be released on July 30, 2022.

The funds in escrow will allow for Convergence to submit claims that are deemed to be uninsured warranties as defined in the Purchase Agreement.

Such funds in escrow is recorded as restricted cash on the consolidated balance sheet.

In evaluating the accounting treatment for this sale, the transaction was considered to be the deconsolidation of a subsidiary, as defined in ASC 810 Consolidation .

The gain upon sale is $ 5.3 million.

Such gain has been recognized as gain on sale of Ctrack South Africa in the consolidated results of operations during the year ended December 31, 2021.

The Company also recorded $ 2.2 million of transaction expenses, which were expensed as incurred and included within other income (expense), net, in the consolidated results of operations for the year ended December 31, 2021.

The assets and liabilities of Ctrack South Africa that were sold in the transaction as of July 30, 2021, are summarized below:

(in thousands)

Cash and cash equivalents $ 5,040

Accounts receivable, net 3,505

Inventory 3,821

Prepaid expenses and other 370

Property, plant and equipment, net 4,545

Rental assets, net 2,448

Intangible assets, net 11,278

Goodwill 10,734

Total assets $ 41,741

Accounts payable $ 3,961

Accrued expenses and other liabilities 1,107

Deferred tax liabilities, net 3,647

Other long-term liabilities 746

Total liabilities 9,461

Net assets $ 32,280

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net proceeds recognized are comprised of the following:

(in thousands)

Initial purchase consideration received, upon close $ 36,566

Working capital adjustments 2,584

Net proceeds recognized $ 39,150

Net gain on sale is comprised of the following:

(in thousands)

Gross proceeds recognized $ 39,150

Book value of net assets sold 32,280

Release of cumulative foreign currency translation adjustments related to Ctrack South Africa 1,608

Net gain on sale $ 5,262

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-Term Debt

Convertible Notes

5 unchanged sentences

During the year ended December 31, 2021, certain holders of the 2025 Notes converted pursuant to the original terms of the 2025 Notes, an aggregate of approximately $ 5.0 million in principal amount of the 2025 Notes into 428,669 shares of the Company’s common stock, including 32,221 shares of common stock issued in satisfaction of the interest make-whole payment.

In connection therewith, the Company recorded a loss of $ 1.2 million in the consolidated statement of operations.

In connection therewith, the Company recorded a loss of $ 0.4 million on debt conversion, net in the consolidated statement of operations.

The 2025 Notes are issued under an indenture, dated May 12, 2020 (the “Base Indenture”), between the Company and Wilmington Trust, National Association, as trustee (the “Trustee”), as supplemented by the first supplemental indenture, dated May 12, 2020 (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), between the Company and the Trustee.

3 unchanged sentences

Upon conversion of the 2025 Notes, the Company 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.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

1 unchanged sentence

If a make-whole fundamental change (as defined in the Indenture) occurs, then the Company will in certain circumstances increase the conversion rate for a specified period of time.

The 2025 Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after May 6, 2023 and on or before the scheduled trading day before the maturity date, at a cash redemption price equal to the principal amount of the 2025 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, as long as the last reported sale price per share of the common stock exceeds 130 % of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice;

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

trading day immediately before the date the Company sends the related redemption notice;

and (ii) the trading day immediately before the date the Company sends such notice.

8 unchanged sentences

The Company has determined that this feature is an embedded derivative and has recognized the fair value of this derivative as a liability in the consolidated balance sheets, with subsequent changes to fair value to be recorded at each reporting period on the consolidated statement of operations in other income, net.

As of December 31, 2020, $ 166.9 million in principal amount of the 2025 Notes were outstanding, $ 80.4 million of which was held by related parties.

As of December 31, 2021 and 2020 $ 161.9 million and $ 166.9 million, respectively, principal amount of the 2025 Notes was outstanding.

As of both December 31, 2021 and 2020, $ 80.4 million principal amount of 2025 Notes was held by related parties and $ 0.4 million of accrued interest due to related parties was included within accrued expenses and other current liabilities on the consolidated balance sheets.

Assuming no repurchases or conversion of the 2025 Notes prior to May 1, 2025, the entire principal balance of $ 161.9 million of the 2025 Notes is due on May 1, 2025.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The 2025 Notes consist of the following (in thousands):

Liability component

Principal $ 161,898 $ 166,898

3 unchanged sentences

Net carrying amount $ 157,866 $ 165,147

The effective interest rate on the liability component of the 2025 Notes was 4.10 % for the twelve months ended December 31, 2020.

The effective interest rate of the 2025 Notes was 4.15 % and 4.10 %, respectively, for the twelve months ended December 31, 2021 and 2020.

The following table sets forth total interest expense recognized related to the 2025 Notes (in thousands):

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31,

3 unchanged sentences

Total interest expense $ 6,760 $ 4,425

As the offering of the 2025 Notes took place during the twelve months ended December 31, 2020, there was no interest expense in the comparable twelve months of 2019.

Subsequent to December 31, 2020, $ 5.0 million of the 2025 Notes were converted into 428,669 shares, pursuant to original terms of the 2025 Notes, including 32,221 shares of common stock in satisfaction of the interest-make-whole payments.

For the years ended December 31, 2021 and 2020 the contractual interest expense on the 2025 Notes recorded within interest expense, net on the consolidated statements of operations attributable to related parties was $ 2.6 million and $ 1.7 million, respectively.

On January 9, 2017, in connection with the Note Exchange (as defined below), the Company issued approximately $ 119.8 million aggregate principal amount of 2022 Notes.

7 unchanged sentences

As a result of the Private Exchange Transactions, $ 2,000 in principal amount of the 2022 Notes were outstanding as of June 30, 2020.

On July 22, 2020, pursuant to a redemption notice issued on May 15, 2020, the Company redeemed the remaining $ 2,000 principal amount of the 2022 Notes.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The 2022 Notes consist of the following (in thousands):

Liability component

Principal $ 105,125

unamortized debt discount and issuance costs ( 3,791 )

Net carrying amount $ 101,334

The effective interest rate on the liability component of the 2022 Notes was 12.89 % for the twelve months ended December 31, 2020.

On July 22, 2020, pursuant to a redemption notice iss ued on May 15, 2020, the Company redeemed the remaining $ 2,000 principal amount of the 2022 Notes.

As of December 31, 2020, no amoun t remained outstanding related to the 2022 Notes.

The effective interest rate on the liability component of the 2022 Notes was 12.89 % and 13.88 %, respectively, for the twelve months ended December 31, 2020 and 2019.

The following table sets forth total interest expense recognized related to the 2022 Notes (in thousands):

4 unchanged sentences

Total interest expense $ 2,831 $ 14,062

For the years ended December 31, 2020 and 2019 the contractual interest expense on the 2022 Notes recorded within interest expense, net on the consolidated statements of operations attributable to related parties was $ 0.8 million and $ 2.5 million, respectively

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Novatel Wireless Notes

2 unchanged sentences

On January 9, 2017, in connection with the settlement of an exchange offer and consent solicitation with respect to the Novatel Wireless Notes (the “Note Exchange”), approximately $ 119.8 million aggregate principal amount of outstanding Novatel Wireless Notes were validly tendered and accepted for exchange and subsequently canceled.

In February 2020, the holders of the remaining $ 250,000 of the aggregate

principal amount of Novatel Wireless Notes that remained outstanding following the Note Exchange, converted their Novatel

Wireless Notes into 50,000 shares of Inseego Corp.

common stock, at the conversion price of $ 5.00 per share, in accordance

with the terms of the Novatel Indenture.

In February 2020, the holders of the remaining $ 250,000 of the aggregate principal amount of Novatel Wireless Notes that remained outstanding following the Note Exchange, converted their Novatel Wireless Notes into 50,000 shares of Inseego Corp.

common stock, at the conversion price of $ 5.00 per share, in accordance with the terms of the Novatel Indenture.

Accordingly, no Novatel Wireless Notes were outstanding as of December 31, 2020.

The Company paid issuance costs of approximately $ 0.5 million.

On March 31, 2020, the Company issued 2,330 shares of Series E Preferred Stock to South Ocean Funding L.L.C.

(“South Ocean”), the Lender holding all of the aggregate principal amount then outstanding under the Credit Agreement in satisfaction of all then accrued interest under the Credit Agreement.

On May 12, 2020, the Company used a portion of the proceeds from the Offering to repay in full the Term Loan and terminate the Credit Agreement.

The amounts paid included $ 47.5 million in outstanding principal, approximately $ 0.5 million in interest accrued thereon, and prepayment and exit fees of $ 1.4 million.

The Company also used a portion of the proceeds of the Offering to repurchase the 2,330 shares of Series E Preferred Stock that had been issued to South Ocean for $ 2.4 million.

At December 31, 2020 there is no amount outstanding related to the Term Loan.

The Term Loan bore interest at a rate per annum equal to the three-month LIBOR, but in no event less than 1.00 %, plus 7.625 %.

The effective interest rate on the Term Loan was 15.19 % and 13.50 %, respectively, for the twelve months ended December 31, 2020 and 2019.

The following table sets forth total interest expense recognized related to the Term Loan, 100% of which was attributable to a related party, during the years ended December 31, 2020 and 2019, respectively (in thousands):

Year Ended December 31,

Contractual interest expense $ 1,667 $ 4,789

Amortization of debt discount 859 1,331

Amortization of debt issuance costs 103 161

Total interest expense $ 2,629 $ 6,281

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s loss before income taxes for the years ended December 31, 2021, 2020 and 2019 is comprised of the following (in thousands):

Year Ended December 31,

2021 2020 2019

Domestic $ ( 40,897 ) $ ( 109,837 ) $ ( 39,187 )

1 unchanged sentence

Loss before income taxes $ ( 47,720 ) $ ( 110,438 ) $ ( 39,574 )

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The provision for income taxes for the years ended December 31, 2021, 2020 and 2019 is comprised of the following (in thousands):

Year Ended December 31,

2021 2020 2019

Federal $ — $ — $ ( 49 )

20 unchanged sentences

Acquired intangible assets ( 666 ) ( 2,155 )

Convertible debt — ( 866 )

Depreciation and amortization ( 4,376 ) ( 5,545 )

3 unchanged sentences

Net deferred tax liabilities $ ( 852 ) $ ( 4,505 )

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recognizes federal, state and foreign current tax liabilities or assets based on its estimate of taxes payable to or refundable by tax authorities in the current fiscal year.

4 unchanged sentences

(1) future reversals of existing taxable temporary differences (i.e., offset of gross deferred tax assets against gross deferred tax liabilities);

(2) taxable income in prior

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

carryback years, if carryback is permitted under the applicable tax law;

(2) taxable income in prior carryback years, if carryback is permitted under the applicable tax law;

(3) tax planning strategies;

and (4) future taxable income exclusive of reversing temporary differences and carryforwards.

At December 31, 2020 and 2019, the Company recognized valuation allowances of $ 26.4 million and $ 9.2 million, respectively, related to its deferred tax assets created in those respective years.

As a result, no net income tax benefits resulted in the Company’s statements of operations from the operating losses created during those years.

During the years ended December 31, 2021, 2020 and 2019, the Company recognized valuation allowances of $ 6.0 million, $ 26.4 million and $ 9.2 million, respectively, related to its deferred tax assets created in those respective years for entities with historical losses and full valuation allowances.

In 2021, certain valuation allowances in the amount of $ 10.0 million were released related to entities included in the divestiture of Ctrack South Africa.

The Company also recognized $ 3.0 million of additional valuation allowance related to true-up of prior year deferred taxes, partially offset by foreign currency loss of $ 0.2 million in 2021.

Based on the Company’s current position on valuation allowance, no net income tax benefits resulted in the Company’s consolidated statements of operations from the operating losses created during those years.

The provision for income taxes reconciles to the amount computed by applying the statutory federal income tax rate of 21% in 2021 and 2020 to loss before income taxes as follows (in thousands):

Year Ended December 31,

2021 2020 2019

Federal tax benefit, at statutory rate $ ( 10,021 ) $ ( 23,192 ) $ ( 8,311 )

2 unchanged sentences

Valuation allowance against future tax benefits 6,029 26,410 9,168

Gain on sale of foreign subsidiaries 3,008 — —

Sub-part F income 791 — —

Loss on conversion of debt — 2,015 —

1 unchanged sentence

Share-based compensation ( 879 ) ( 1,134 ) 341

Other, including true-up of prior year provisions 429 291

Non-deductible officers compensation 1,449 — —

True-up of prior year provisions 1,681 — —

Other 54 429 291

Provision for income taxes $ 191 $ 748 $ 536

9 unchanged sentences

The Company will continue monitoring any future changes in stock ownership.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

It is the Company’s intention to reinvest undistributed earnings of its foreign subsidiaries and thereby indefinitely postpone their remittance.

3 unchanged sentences

government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which includes modifications to the limitation on business interest expense and net operating loss provisions, and provides a payment delay of employer payroll taxes during 2020 after the date of enactment.

Payments of approximately $ 1.4 million of employer payroll taxes otherwise due in 2020, were delayed with 50% due by December 31, 2021 and the remaining 50% by December 31, 2022.

Payments of approximately $ 1.4 million of employer payroll taxes otherwise due in 2020, were delayed with 50% due and paid by December 31, 2021 and the remaining 50% by December 31, 2022.

The CARES Act did not have a material impact on the Company’s consolidated financial statements.

5 unchanged sentences

The Company does not expect changes to its uncertain tax position in the next twelve months.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):

18 unchanged sentences

The 2019 Warrants may be exercisable on a cashless exercise basis if, and only if, the shares of common stock underlying such warrants cannot be immediately resold pursuant to an effective registration statement or Rule 144 of the Securities Act of 1933, as amended, without volume or manner of sale restrictions.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the fourth quarter of 2019, the Company received $ 6.9 million in net cash proceeds from the exercise of 1,255,129 of the Company’s common stock purchase warrants issued in 2015.

1 unchanged sentence

Pursuant to this guidance, the Company has determined that the warrants do not require liability accounting and has classified the warrants as equity.

Preferred Stock

6 unchanged sentences

However, the Company may, at its option, redeem shares of the Series E Preferred Stock, in whole or in part, on or after July 1, 2022, at a price equal to 110 % of the Series E Base Amount plus (without duplication) any accrued and unpaid dividends.

The “Series E Base Amount” means $ 1,000 per share,

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

plus any accrued but unpaid dividends, whether or not declared by the Company’s board of directors, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series E Preferred Stock.

The “Series E Base Amount” means $ 1,000 per share, plus any accrued but unpaid dividends, whether or not declared by the Company’s board of directors, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series E Preferred Stock.

In the event of a liquidation, dissolution or winding up of the Company, the holders of the Series E Preferred Stock will be entitled to receive, after satisfaction of liabilities to creditors and subject to the rights of holders of any senior securities, but before any distribution of assets is made to holders of common stock or any other junior securities, the Series E Base Amount plus (without duplication) any accrued and unpaid dividends.

On March 6, 2020, the Company entered into a Securities Purchase Agreement with an accredited investor pursuant to which, among other things, the Company issued and sold to the investor, in a private placement transaction, an aggregate of 25,000 shares of the Company’s Series E Preferred Stock, for a purchase price of $ 1,000 per share of Series E Preferred Stock, resulting in gross proceeds to the Company of $ 25.0 million.

On September 3, 2021, the Company entered into separate privately-negotiated exchange agreements (the “September Exchange Agreements”) with Golden Harbor Ltd.

and North Sound Trading, L.P.

(the “Participating Stockholders”), holders of the Company’s outstanding Series E Preferred Stock.

Pursuant to each respective September Exchange Agreement, each of the Participating Stockholders agreed to exchange Series E Preferred Stock that they held (representing an aggregate of 10,000 shares of Series E Preferred Stock) for an aggregate of 1,525,207 shares of common stock, of the Company (the “Series E Exchange Transactions”).

The Company did not receive any cash proceeds from the Participating Stockholders in connection with the Series E Exchange Transactions.

The Company used the Guidance in ASC 470 Debt , regarding the modification of debt instruments and determined that the Series E Exchange Transactions were an extinguishment.

If a modification or exchange represents an extinguishment for accounting purposes, it is accounted for as a redemption of the existing equity instrument and the issuance of a new instrument.

ASC 260-10-S99-2 (“SEC Staff Announcement:

The Effect on the Calculation of Earnings Per Share for a Period That Includes the Redemption or Induced Conversion of Preferred Stock”) provides guidance on the accounting for extinguishments (redemptions) of equity-classified preferred stock.

Under that guidance, an SEC registrant compares (1) the fair value of the consideration transferred to the holders of the preferred stock and (2) the carrying amount of the preferred stock immediately before the modification or exchange (net of issuance costs).

The difference is treated as a return to (or from) the holder of the

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

preferred stock in a manner similar to dividends paid on preferred stock.

Any excess of fair value of the consideration transferred to the holders of the preferred stock over the carrying amount of the preferred stock in the issuer’s balance sheet is treated as a dividend to those holders and charged against retained earnings.

The Company determined that the Series E Exchange Transactions resulted in an extinguishment of preferred stock and an issuance of common stock.

The difference between the carrying amount of the preferred stock plus accrued dividends, and the fair value of the common stock exchanged for such preferred stock, totaled $ 1.1 million.

The difference was treated as a deemed dividend, and was included within the Series E preferred stock dividends and deemed dividends from the preferred stock exchange, in the consolidated results of operations for the year ended December 31, 2021.

There were no dividends declared and $ 3.1 million and $ 2.9 million of dividends were accrued as of December 31, 2021, and 2020, respectively.

Rights Agreement

On January 22, 2018, the Company entered into a Rights Agreement with Computershare Trust Company, N.A., a federally chartered trust company, as rights agent (as subsequently amended, the “Rights Agreement”) and issued a dividend of one preferred share purchase right (a “Right”) to each of the stockholders of record of each share of common stock outstanding on February 2, 2018.

Each Right entitled the registered holder to purchase from the Company one one-thousandth of a share of Series D Preferred Stock, par value $ 0.001 per share (the “Preferred Shares”), of the Company, at a price of $ 10.00 per one one-thousandth of a Preferred Share represented by a Right (the “Purchase Price”), subject to adjustment.

The description and terms of the Rights are set forth in the Rights Agreement.

The Rights were not exercisable until the Distribution Date (as defined in the Rights Agreement).

The Rights expired on January 22, 2021.

In connection with the issuance of the 2019 Warrants, on March 28, 2019, the Company entered into an Amendment No.

3 to the Rights Agreement, dated January 22, 2018, as amended by that certain Amendment No.

1 to Rights Agreement, dated August 6, 2018, and as amended by that certain Amendment No.

2 to Rights Agreement, dated December 4, 2018, between the Company and Computershare Trust Company, N.A., as rights agent, for the purpose of modifying the definition of “Acquiring Person” under the Rights Agreement to permit each of the Investors to remain a Grandfathered Stockholder (as defined in the Rights Agreement) and not be deemed an “Acquiring Person” under the Rights Agreement in connection with the Investors’ purchase of the 2019 Warrants.

The Investors will remain Grandfathered Stockholders under the terms of the Rights Agreement as long as they do not acquire, after the date of the Third Amendment to Rights Agreement, beneficial ownership of Company securities (other than as a result of any adjustment provision or the accrual of interest under any outstanding convertible notes) equal to more than 0.50% of the then-outstanding common stock.

The Rights expired on January 22, 2021.

Common Shares Reserved for Future Issuance

7 unchanged sentences

Total shares of common stock reserved for issuance 29,656,136 30,517,721

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-based Compensation

1 unchanged sentence

The Compensation Committee of the Board of Directors administers the plans.

During the year ended December 31, 2019, the Board approved and transferred all available shares from the 2015 Plan to the 2018 Plan.

Under the 2018 Plan, a maximum of 8,897,084 shares of common stock may be issued upon the exercise of stock options, in the form of restricted stock, or in settlement of RSUs or other awards, including awards with alternative vesting schedules such as performance-based criteria.

1 unchanged sentence

Year Ended December 31,

2021 2020 2019

Cost of revenues $ 2,469 $ 1,583 $ 1,133

3 unchanged sentences

Total $ 16,649 $ 10,419 $ 7,302

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the quarter ended March 31, 2021, the Board of Directors of the Company approved and the Company granted restricted stock units to eligible employees under the 2018 Omnibus Incentive Compensation Plan, previously named the Amended and Restated 2009 Omnibus Incentive Compensation Plan (the “2018 Plan”) that were immediately vested, as fiscal 2020 annual bonus payments.

The total charges recorded during the quarter ended March 31, 2021 were $ 7.0 million.

Such bonus payments in fiscal 2020 were paid in the quarter ended June 30, 2020, and total charges related to such bonus payments recorded during the quarter ended June 30, 2020 were $ 2.7 million.

Such bonus payments in fiscal 2019 were paid in the quarter ended September 30, 2019, and total charges related to such bonus payments recorded during the quarter ended September 30, 2019 were $ 2.4 million.

During the year ended December 31, 2021, the Board of Directors of the Company approved, and the Company granted restricted stock units under the 2018 Plan to certain employees that contributed to the completion of the divestiture of Ctrack South Africa.

Such grants were immediately vested, and the total charges were $ 0.6 million.

Stock Options

17 unchanged sentences

Outstanding — December 31, 2019 9,044,304 $ 2.91

Granted 1,526,000 9.41

Exercised ( 1,357,620 ) 3.06

Canceled ( 732,705 ) 3.60

Outstanding — December 31, 2020 8,479,979 $ 3.99

Granted 1,929,500 8.86

Exercised ( 1,315,552 ) 2.62

Canceled ( 1,008,134 ) 8.60

Outstanding — December 31, 2021 8,085,793 $ 4.81 7.16 $ 16,603

Vested and Expected to Vest — December 31, 2021 7,398,958 $ 4.51 6.99 $ 16,464

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2019, 1,489,067 shares were issued upon the exercise of stock options.

The total intrinsic value of stock options exercised to purchase common stock during the years ended December 31, 2020 and 2019 was approximately $ 11.7 million and $ 5.6 million, respectively.

The total intrinsic value of stock options exercised to purchase common stock during the years ended December 31, 2021, 2020 and 2019 was approximately $ 4.3 million, $ 11.7 million and $ 5.6 million, respectively.

As of December 31, 2021, total unrecognized share-based compensation expense related to non-vested stock options was $ 11.3 million, which is expected to be recognized over a weighted-average period of approximately 2.68 years.

The Company recognized approximately $ 5.8 million and $ 3.5 million of share-based compensation expense related to the vesting of stock option awards during the years ended December 31, 2020 and 2019, respectively.

The Company recognized approximately $ 6.3 million, $ 5.8 million and $ 3.5 million of share-based compensation expense related to the vesting of stock option awards during the years ended December 31, 2021, 2020 and 2019, respectively.

Restricted Stock Units

10 unchanged sentences

Non-vested — December 31, 2019 400,315 $ 3.95

During the year ended December 31, 2019, the weighted-average grant-date fair value of RSUs granted was $ 5.07 .

During the years ended December 31, 2020 and 2019, the total fair value of shares vested was $ 5.1 million and $ 4.0 million, respectively.

Granted 570,368 $ 10.52

Vested ( 548,160 ) $ 7.28

Forfeited ( 5,418 ) $ 4.06

Non-vested — December 31, 2020 417,105 $ 8.68

Granted 1,931,263 $ 8.53

Vested ( 1,019,686 ) $ 10.20

Forfeited ( 80,959 ) $ 10.75

Non-vested — December 31, 2021 1,247,723 $ 7.65

During the years ended December 31, 2021, 2020 and 2019, the total fair value of shares vested was $ 10.4 million, $ 5.1 million and $ 4.0 million, respectively.

As of December 31, 2021, there was $ 5.8 million of unrecognized share-based compensation expense related to non-vested RSUs, which is expected to be recognized over a weighted-average period of 3.45 years.

The Company recognized approximately $ 4.1 million and $ 3.5 million of share-based compensation expense related to the vesting of RSUs during the years ended December 31, 2020 and 2019, respectively.

The Company recognized approximately $ 9.6 million and $ 4.1 million and $ 3.5 million of share-based compensation expense related to the vesting of RSUs during the years ended December 31, 2021, 2020 and 2019 respectively.

2000 Employee Stock Purchase Plan

2 unchanged sentences

During the years ended December 31, 2021 and 2020, the Company issued 220,390 shares and 231,275 shares, respectively, under the ESPP.

The Company recognized approximately $ 0.6 million and $ 0.3 million of share-based compensation expense related to the ESPP during the years ended December 31, 2020 and 2019, respectively.

The Company recognized approximately $ 0.7 million, $ 0.6 million and $ 0.3 million of share-based compensation expense related to the ESPP during the years ended December 31, 2021, 2020 and 2019, respectively.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Earnings per Share

2 unchanged sentences

Potentially dilutive securities (consisting primarily of the Convertible Notes calculated using the if-converted and treasury stock method and warrants, stock options and RSUs calculated using the treasury stock method) are excluded from the diluted EPS computation in loss periods and when the applicable exercise price is greater than the market price on the period end date as their effect would be anti-dilutive.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The calculation of basic and diluted earnings per share was as follows (in thousands, except share and per share data):

Year Ended December 31,

2021 2020 2019

Net loss attributable to common stockholders $ ( 52,368 ) $ ( 114,119 ) $ ( 40,486 )

1 unchanged sentence

Basic and diluted net loss per share $ ( 0.51 ) $ ( 1.19 ) $ ( 0.52 )

For the year ended December 31, 2020, the computation of diluted EPS excluded 26,180,766 shares, primarily related to Convertible Notes, warrants, stock options and RSUs for which the effect would have been anti-dilutive.

For the year ended December 31, 2021, the computation of diluted EPS excluded 26,318,509 shares, primarily related to convertible notes, warrants, stock options, RSUs and ESPP for which the effect would have been anti-dilutive.

The following is a summary of outstanding anti-dilutive potential common stock that was excluded from diluted net loss per share attributable to stockholders in the following periods:

Year Ended December 31,

(in thousands) 2021 2020 2019

Convertible notes 14,341 14,784 22,314

Warrants 2,500 2,500 2,838

Non-qualified stock options 8,086 8,480 9,027

Restricted stock units 1,248 417 414

Employee Stock Purchase Plan 144 25 98

Rights agreement — — 198

Commitments and Contingencies

Noncancellable Purchase Obligations

The Company typically enters into commitments with its contract manufacturers that require future purchase of goods or services in the three to four quarters following the balance sheet date.

Such commitments are noncancellable (“noncancellable purchase obligations).

As of December 31, 2021, future payments under these noncancellable purchase obligations were approximately $ 165.8 million.

The Company is, from time to time, party to various legal proceedings arising in the ordinary course of business.

6 unchanged sentences

On January 16, 2018, the former stockholders of RER filed an answer and counterclaim in the matter seeking recovery of certain deferred and earn-out payments allegedly owed to them by the Company in connection with the Company’s acquisition of RER.

On July 26, 2018, the Company and the former stockholders of RER entered into a mutual general release and settlement agreement (the “Settlement Agreement”) pursuant to which the parties agreed to release all claims against each other and the Company agreed to (i) pay the former stockholders of RER $ 1.0 million in cash by August 17, 2018, (ii) immediately instruct its transfer agent to permit the transfer or sale of 973,333 shares of the Company’s common stock that the Company had issued to the former stockholders of RER in March 2017, (iii) immediately issue 500,000 shares of the Company’s common stock to the former stockholders of RER, (iv) within 12 months following the execution of the Settlement Agreement, deliver to the former stockholders of RER an additional $ 1.0 million in cash, common stock, or a combination thereof, at the Company’s option, (v) within 24 months following the execution of the Settlement Agreement deliver to the former stockholders of RER an additional $ 1.0 million in cash, common stock, or a combination thereof, at the Company’s option, and (vi) file one or more registration statements with respect to the resale of the shares of the Company’s common stock issued to the former stockholders of RER pursuant to the Settlement Agreement.

On July 26, 2018, the Company and the former stockholders of RER

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

entered into a mutual general release and settlement agreement (the “Settlement Agreement”) pursuant to which the parties agreed to release all claims against each other and the Company agreed to (i) pay the former stockholders of RER $ 1.0 million in cash by August 17, 2018, (ii) immediately instruct its transfer agent to permit the transfer or sale of 973,333 shares of the Company’s common stock that the Company had issued to the former stockholders of RER in March 2017, (iii) immediately issue 500,000 shares of the Company’s common stock to the former stockholders of RER, (iv) within 12 months following the execution of the Settlement Agreement, deliver to the former stockholders of RER an additional $ 1.0 million in cash, common stock, or a combination thereof, at the Company’s option, (v) within 24 months following the execution of the Settlement Agreement deliver to the former stockholders of RER an additional $ 1.0 million in cash, common stock, or a combination thereof, at the Company’s option, and (vi) file one or more registration statements with respect to the resale of the shares of the Company’s common stock issued to the former stockholders of RER pursuant to the Settlement Agreement.

On July 24, 2020, the Company issued 89,928 shares of common stock to the former stockholders of RER in satisfaction of all remaining liabilities under the Settlement Agreement.

6 unchanged sentences

Certain real estate leases also include executory costs such as common area maintenance (non-lease component).

As a practical expedient permitted under ASC 842, the Company has elected to account for the lease and non-lease components as a single lease component.

Lease payments, which may include lease components and non-lease components, are included in the measurement of the Company’s lease liabilities to

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the extent that such payments are either fixed amounts or variable amounts based on a rate or index (fixed in substance) as stipulated in the lease contract.

As a practical expedient permitted under ASC 842, the Company has elected to account for the lease and non-lease components, including common area maintenance, as a single lease component.

Lease payments, which may include lease components and non-lease components, are included in the measurement of the Company’s lease liabilities to the extent that such payments are either fixed amounts or variable amounts based on a rate or index (fixed in substance) as stipulated in the lease contract.

None of the Company’s lease agreements contain any material residual value guarantees or material restrictive covenants.

5 unchanged sentences

The right-of-use asset also includes any lease payments made at or before lease commencement less any lease incentives.

As of December 31, 2020, the Company had right-of-use assets of $ 9.1 million and lease liabilities related to its operating leases of $ 9.9 million.

As of December 31, 2021 and 2020, the Company had right-of-use assets of $ 7.8 million and $ 9.1 million, respectively, and lease liabilities related to its operating leases of $ 8.9 million and $ 9.9 million, respectively.

Right-of-use assets are included in right-of-use assets, net, on the consolidated balance sheet and lease liabilities related to the Company’s operating leases are included in accrued expenses and other liabilities and other long-term liabilities on the consolidated balance sheet.

As of December 31, 2020, the Company’s weighted-average remaining lease term and weighted-average discount rate related to its operating leases were 5.8 years and 9.1 %, respectively.

During the years ended December 31, 2020 and 2019, the cash paid for amounts included in the measurement of lease liabilities related to the Company’s operating leases was approximately $ 1.9 million and $ 2.2 million, respectively, which is included as an operating cash outflow within the consolidated statements of cash flows.

During the twelve months ended December 31, 2020 and 2019, the operating lease costs related to the Company’s operating leases were approximately $ 2.2 million and $ 2.4 million, respectively, which is included in operating costs and expenses in the consolidated statements of operations.

During the twelve months ended December 31, 2020, the Company entered into a lease agreement for its new corporate offices and renewed the lease on a research and development facility for which right-of-use assets were recorded in exchange for new lease liabilities.

As of December 31, 2021 and 2020, the Company’s weighted-average remaining lease term and weighted-average discount rate related to its operating leases were 5.0 years and 5.8 years , respectively, and 9.1 % and 9.1 % , respectively.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the years ended December 31, 2021, 2020 and 2019, the cash paid for amounts included in the measurement of lease liabilities related to the Company’s operating leases was approximately $ 2.6 million, $ 1.9 million and $ 2.2 million, respectively, which is included as an operating cash outflow within the consolidated statements of cash flows.

During the twelve months ended December 31, 2021, 2020 and 2019 the operating lease costs related to the Company’s operating leases were approximately $ 2.8 million , $ 2.2 million and $ 2.4 million, respectively, which is included in operating costs and expenses in the consolidated statements of operations.

During the twelve months ended December 31, 2021 and 2020, the Company entered into and renewed various leases for which right-of-use assets of $ 0.7 million and $ 7.9 million, respectively, were recorded in exchange for lease liabilities of $ 0.7 million and $ 7.9 million, respectively.

The future minimum payments under operating leases were as follows at December 31, 2021 (in thousands):

9 unchanged sentences

The Company will account for the combined component as a single performance obligation under ASC 606, Revenue from Contracts with Customers .

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Geographic Information and Concentrations of Risk

2 unchanged sentences

United States and Canada $ 176,094 $ 148,485

Europe 35,630 27,277

South Africa — 48,211

1 unchanged sentence

$ 215,843 $ 227,394

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table details the Company’s net revenues by geographic region based on shipping destination (in thousands):

Year Ended December 31,

2021 2020 2019

United States and Canada $ 215,520 $ 260,009 $ 158,756

3 unchanged sentences

Concentrations of Risk

For the year ended December 31, 2021, two customers accounted for 43.9 % and 26.4 % of net revenues, respectively.

For the years ended December 31, 2020 and 2019 one customer accounted for 54.5 % and 52.5 % of net revenues, respectively.

At December 31, 2020, two customers accounted for 33.3 % and 17.2 % of total accounts receivable.

At December 31, 2019, two customers accounted for 25.0 % and 11.2 % of total accounts receivable.

During the years ended December 31, 2020 and 2019, the Company recorded net foreign currency transaction losses of approximately $ 0.7 million and $ 0.3 million, respectively, primarily related to outstanding intercompany loans that Ctrack has with certain of its subsidiaries, which are remeasured at each reporting period and payable upon demand.

All recorded gains and losses on foreign currency transactions are recorded in other income (expense), net, in the consolidated statements of operations.

At December 31, 2021, two customers accounted for 61.7 % and 12.6 % of total accounts receivable, net, respectively.

At December 31, 2020, two customers accounted for 33.3 % and 17.2 % of total accounts receivable, net, respectively.

Retirement Savings Plan

4 unchanged sentences

Employees may make discretionary contributions to the Plan subject to Internal Revenue Service limitations.

Employer matching contributions under the Plan amounted to approximately $ 0.7 million and $ 0.4 million for the years ended December 31, 2020 and 2019, respectively.

Employer matching contributions under the Plan amounted to approximately $ 0.9 million, $ 0.7 million and $ 0.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Employer matching contributions vest immediately.

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Quarterly Financial Information (Unaudited)

The following is a summary of unaudited quarterly results of operations for the years ended December 31, 2020 and 2019:

First Quarter Second Quarter Third Quarter Fourth Quarter

(in thousands, except per share amounts)

Net revenues $ 56,840 $ 80,689 $ 90,240 $ 86,063

Gross profit 17,227 22,000 25,170 26,447

Net loss attributable to common stockholders ( 18,590 ) ( 75,665 ) ( 6,271 ) ( 13,593 )

Basic and diluted net loss per share

( 0.20 ) ( 0.78 ) ( 0.06 ) ( 0.14 )

First Quarter Second Quarter Third Quarter Fourth Quarter

(in thousands, except per share amounts)

Net revenues $ 48,556 $ 55,891 $ 62,716 $ 52,333

Gross profit 14,760 15,555 18,625 15,031

Net loss attributable to stockholders ( 7,485 ) ( 10,779 ) ( 8,937 ) ( 13,285 )

Basic and diluted net income (loss) per share ( 0.10 ) ( 0.14 ) ( 0.11 ) ( 0.17 )

INSEEGO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Subsequent Events

At-the-Market Offering

333-238057), which was filed with the Securities and Exchange Commission on May 7, 2020, and the 424(b) prospectus supplement relating to the Offering dated January 25, 2021.

In January 2021, the Company sold 1,516,073 shares of common stock, at a public offering price of $ 20.11 per share, for net proceeds of $ 29.6 million, pursuant to the ATM Offering.

Sale of Ctrack South African Operations

On February 24, 2021, the Company announced its entry into a Share Purchase Agreement with an affiliate of Convergence, to sell its South African operations, 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), subject to certain regulatory approvals and other closing conditions.

The transaction is expected to close during the second quarter of fiscal 2021.

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 9A. Controls and Procedures