What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-04 compared with 2021-11-05 · 197 added, 336 removed, 343 unchanged (61% of the section changed)

3 unchanged sentences

(In thousands, except par value and share data)

September 30,

2022 December 31,

3 unchanged sentences

Accounts receivable, net of allowance for doubtful accounts of $ 358 and $ 408 , respectively

21,723 26,781

Inventories 37,474 37,402

4 unchanged sentences

Intangible assets, net of accumulated amortization of $ 54,100 and $ 48,404 , respectively

46,318 46,995

Goodwill 21,922 20,336

17 unchanged sentences

Series E Preferred stock, par value $ 0.001 ;

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

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

Common stock, par value $ 0.001 ;

3 unchanged sentences

Accumulated deficit ( 812,931 ) ( 787,047 )

Total stockholders’ deficit attributable to Inseego Corp.

( 15,332 ) ( 27,808 )

Noncontrolling interests — ( 91 )

Total stockholders’ deficit ( 34,190 ) ( 24,854 )

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net revenues:

12 unchanged sentences

Amortization of purchased intangible assets 444 466

Impairment of capitalized software — — 1,197 —

Total operating costs and expenses 37,015 34,669

Operating loss ( 21,767 ) ( 16,196 )

Other income (expense):

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

Other (expense) income:

Loss on debt conversion and extinguishment, net ( 450 ) ( 432 )

Interest expense, net ( 2,923 ) ( 1,845 )

Other income (expense), net ( 828 ) 1,053 291 2,818

Other (expense) income, net ( 405 ) 1,735

Loss before income taxes ( 25,545 ) ( 16,738 )

4 unchanged sentences

( 25,223 ) ( 17,173 )

Series E preferred stock dividends and deemed dividends from the preferred stock exchange ( 1,843 ) ( 829 ) ( 3,596 ) ( 2,056 )

Series E preferred stock dividends ( 661 ) ( 867 )

Net loss attributable to common stockholders $ ( 25,884 ) $ ( 18,040 )

9 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net loss $ ( 25,223 ) $ ( 16,959 )

Foreign currency translation adjustment 2,898 ( 1,732 )

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

Total comprehensive loss $ ( 22,325 ) $ ( 18,691 )

7 unchanged sentences

Preferred Stock Common Stock Additional

Paid-in Capital Accumulated

Comprehensive Income (Loss) Accumulated Deficit Noncontrolling Interests Total

Paid-in Capital Accumulated Deficit Accumulated

Comprehensive Income (Loss) Noncontrolling Interests Total

Stockholders’ Equity (Deficit)

Shares Amount Shares Amount

Balance, June 30, 2020 35 $ — 97,018 $ 97 $ 686,410 $ ( 15,783 ) $ ( 712,558 ) $ ( 94 ) $ ( 41,928 )

Net loss — — — — — — ( 5,442 ) 3 ( 5,439 )

Foreign currency translation adjustment — — — — — 1,170 — — 1,170

Exercise of stock options and vesting of restricted stock units — — 504 1 1,485 — — — 1,486

Taxes withheld on net settled vesting of restricted stock units — — — — ( 45 ) — — — ( 45 )

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

Issuance of common stock in connection with Notes Exchange — — — — 1 — — — 1

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

Share-based compensation — — — — 2,207 — — — 2,207

Series E preferred stock dividends — — — — 829 — ( 829 ) — —

Balance, September 30, 2020 35 $ — 98,789 $ 99 $ 706,212 $ ( 14,613 ) $ ( 718,829 ) $ ( 91 ) $ ( 27,222 )

Balance, June 30, 2021 35 $ — 103,109 $ 103 $ 761,412 $ ( 6,279 ) $ ( 764,150 ) $ 8 $ ( 8,906 )

Net loss — — — — — — ( 7,190 ) — ( 7,190 )

Foreign currency translation adjustment — — — — — ( 2,571 ) — — ( 2,571 )

Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan — — 316 — 693 — — — 693

Taxes withheld on net settled vesting of restricted stock units — — — — ( 280 ) — — — ( 280 )

Release of cumulative foreign currency translation adjustments as a result of sale of Ctrack South Africa — — — — 8 1,608 ( 1,748 ) ( 8 ) ( 140 )

Share-based compensation

— — — — 3,062 — — — 3,062

Series E preferred stock dividends — — — — 739 — ( 739 ) — —

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

Balance, September 30, 2021 25 $ — 104,950 $ 105 $ 766,736 $ ( 7,242 ) $ ( 774,931 ) $ — $ ( 15,332 )

INSEEGO CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(In thousands)

Preferred Stock Common Stock Additional

Paid-in Capital Accumulated

Comprehensive Income (Loss) Accumulated Deficit Noncontrolling Interests Total

Stockholders’ Deficit

Shares Amount Shares Amount

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

10 $ — 81,974 $ 82 $ 584,862 $ ( 3,879 ) $ ( 618,303 ) $ ( 120 ) $ ( 37,358 )

Net loss — — — — — ( 17,173 ) — 214 ( 16,959 )

2 unchanged sentences

Taxes withheld on net settled vesting of restricted stock units — — — — ( 468 ) — — — ( 468 )

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 private exchanges of 2022 Notes — — 13,739 14 66,074 — — — 66,088

Issuance of common shares in connection with conversion of 2025 Notes — — 429 1 5,382 — — — 5,383

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 29,426 — — — 29,428

Share-based compensation — — — — 9,098 — — — 9,098

— — — — 8,188 — — — 8,188

Net noncontrolling interest acquired — — — — — 241 — ( 116 ) 125

Series E preferred stock dividends — — — — 867 ( 867 ) — — —

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

Balance, September 30, 2020 35 $ — 98,789 $ 99 $ 706,212 $ ( 14,613 ) $ ( 718,829 ) $ ( 91 ) $ ( 27,222 )

Balance, March 31, 2021 35 $ — 102,773 $ 103 $ 757,352 $ ( 750,221 ) $ ( 8,704 ) $ 7 $ ( 1,463 )

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

1 unchanged sentence

Foreign currency translation adjustment — — — — — — 2,898 — 2,898

Adjustment relating to extinguishment of 2022 Notes — — — — 1,728 — — — 1,728

Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan — — 2,008 2 74 — — — 76

Taxes withheld on net settled vesting of restricted stock units — — — — ( 14 ) — — — ( 14 )

Issuance of common shares in connection with the conversion of 2025 Notes — — 429 — 5,382 — — — 5,382

Issuance of common shares in connection with a public offering, net of issuance costs

— — 1,516 2 29,368 — — — 29,370

Share-based compensation

1 unchanged sentence

Series E preferred stock dividends — — — — 661 ( 661 ) — — —

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

Release of cumulative foreign currency translation adjustments as a result of sale of Ctrack South Africa — — — — 8 1,608 ( 1,748 ) ( 8 ) ( 140 )

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

Balance, September 30, 2021 25 $ — 104,950 $ 105 $ 766,736 $ ( 7,242 ) $ ( 774,931 ) $ — $ ( 15,332 )

Balance, March 31, 2022 25 $ — 107,389 $ 107 $ 784,267 $ ( 812,931 ) $ ( 5,633 ) $ — $ ( 34,190 )

INSEEGO CORP.

1 unchanged sentence

(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

3 unchanged sentences

Provision for bad debts, net of recoveries ( 14 ) 101

Impairment of capitalized software 1,197 —

Provision for excess and obsolete inventory 247 ( 173 )

3 unchanged sentences

Loss on debt conversion and extinguishment, net 450 432

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

Deferred income taxes 189 326

Right-of-use assets 342 512

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

4 unchanged sentences

Accrued expenses, income taxes, and other 6,819 6,898

Operating lease liabilities ( 354 ) ( 537 )

Net cash (used in) provided by operating activities ( 638 ) 973

3 unchanged sentences

Proceeds from the sale of property, plant and equipment — 21

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

Additions to capitalized software development costs and purchases of intangible assets ( 20,589 ) ( 20,216 )

Net cash provided by (used in) investing activities 7,665 ( 24,973 )

Additions to capitalized software development costs ( 3,127 ) ( 7,977 )

Net cash used in investing activities ( 3,890 ) ( 9,396 )

Cash flows from financing activities:

Gross proceeds from the issuance of 2025 Notes — 100,000

Payment of issuance costs related to 2025 Notes — ( 3,600 )

Cash paid to investors in private exchange transactions — ( 32,062 )

Payoff of term loan and related extinguishment costs — ( 48,830 )

Gross proceeds received from issuance of Series E preferred stock — 25,000

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

Proceeds from the exercise of warrants to purchase common stock — 1,861

Net borrowing of bank and overdraft facilities ( 54 ) 263

1 unchanged sentence

Proceeds from a public offering, net of issuance costs — 29,428

Principal repayments on financed other assets ( 1,007 ) ( 1,237 )

Proceeds from stock option exercises and employee stock purchase plan, net of taxes paid on vested restricted stock units 63 1,093

Net cash provided by financing activities 28,979 40,754

Net cash (used in) provided by financing activities ( 1,060 ) 29,547

Effect of exchange rates on cash 957 ( 1,589 )

Net increase in cash, cash equivalents and restricted cash 21,594 29,920

Net (decrease) increase in cash, cash equivalents and restricted cash ( 4,631 ) 19,535

Cash, cash equivalents and restricted cash, beginning of period 49,812 40,015

8 unchanged sentences

Right-of-use assets obtained in exchange for operating leases liabilities $ 79 $ 148

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 $ —

Issuance of common stock under Settlement Agreement $ — $ 972

Preferred stock issued in extinguishment of term loan accrued interest $ — $ 2,330

Debt discount and issuance costs extinguished in notes conversion $ — $ 1,728

2022 Notes conversion to equity $ — $ 59,907

Novatel Wireless Notes conversion to equity $ — $ 250

2025 Notes issued to extinguish the 2022 Notes $ — $ 80,375

2025 Notes conversion, including shares issued in satisfaction of interest make-whole payment

$ 5,383 $ 14,353

1 Amounts for the nine months ended September 30, 2021 are net of $ 5.0 million of cash sold as part of the sale of Ctrack South Africa (see Note 4.

Business Divestiture ).

See accompanying notes to unaudited condensed consolidated financial statements.

4 unchanged sentences

(the “Company”) in accordance with the rules of the Securities and Exchange Commission (the “SEC”).

The information at September 30, 2021 and the results of the Company’s operations for the three and nine months ended September 30, 2021 and 2020 are unaudited.

The information at March 31, 2022 and the results of the Company’s operations for the three months ended March 31, 2022 and 2021 are unaudited.

The condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring accruals, except otherwise disclosed herein, which are, in the opinion of management, necessary for a fair statement of the results of the interim periods presented.

1 unchanged sentence

The year-end condensed consolidated balance sheet data as of December 31, 2021 was derived from the Company’s audited consolidated financial statements and may not include all disclosures required by accounting principles generally accepted in the United States.

Certain prior period amounts were reclassified to conform to the current period presentation.

These reclassifications did not affect total revenues, costs and expenses, net loss, assets, liabilities or stockholders’ deficit.

Except as set forth below, the accounting policies used in preparing these unaudited condensed consolidated financial statements are the same as those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

1 unchanged sentence

Risks and Uncertainties

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

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

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

5 unchanged sentences

however, if the shortage persists, the impact on our business could be material.

As of September 30, 2021, the Company had available cash and cash equivalents totaling $ 58.1 million, excluding restricted cash of $ 3.5 million, and working capital of $ 61.2 million.

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.

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.

Additionally, in the second quarter of 2020, the Company restructured its outstanding debt by completing a $ 100.0 million registered public offering (the “Offering”) of 3.25 % convertible senior notes due 2025 (the “2025 Notes”) and also entered into privately-negotiated exchange agreements (the “May Exchange Agreements”), pursuant to which an aggregate of $ 45.0 million in principal amount of the 2022 Notes were exchanged for an aggregate of $ 32 million in cash and $ 80.4 million in principal amount of the 2025 Notes (the “May Private Exchange Transactions”).

The Company also used a portion of the proceeds from the Offering to repay in full its previous term loan.

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

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 September 30, 2021, the Company’s outstanding debt primarily consisted of $ 161.9 million in principal amount of 2025 Notes.

As of March 31, 2022, the Company had available cash and cash equivalents totaling $ 41.5 million, excluding restricted cash of $ 3.7 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.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

1 unchanged sentence

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.

If events or circumstances occur such that the Company does not meet its operating plan as expected, or if the Company becomes obligated to pay unforeseen expenditures as a result of ongoing litigation, the Company may be required to raise capital, reduce planned research and development activities, incur additional restructuring charges or reduce other operating expenses which could have an adverse impact on its ability to achieve its intended business objectives.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

additional restructuring charges or reduce other operating expenses which could have an adverse impact on its ability to achieve its intended business objectives.

The Company’s liquidity could be impaired if there is any interruption in its business operations, a material failure to satisfy its contractual commitments or a failure to generate revenue from new or existing products.

1 unchanged sentence

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.

Divestiture of Ctrack South Africa

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 sold of $ 5.1 million.

The Company recorded a receivable for such balance on September 30, 2021.

The Company will continue to provide telematics solutions in the rest of the world, including in Europe and Australia.

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

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly- and majority-owned subsidiaries.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

All intercompany transactions and balances have been eliminated in consolidation.

6 unchanged sentences

Actual results could differ materially from these 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.

The inputs related to certain estimates include consideration of the economic impact of the COVID-19 pandemic.

As the impact of the COVID-19 pandemic continues to develop, these estimates could carry a higher degree of variability and volatility, and may change materially in future periods.

Sources of Revenue

The Company generates revenue from a broad range of product sales including intelligent wireless hardware products for the worldwide mobile communications, and industrial Internet of Things (“IIoT”) markets, Inseego Subscribe TM , a hosted SaaS platform that helps organizations manage the selection, deployment and spend of wireless assets, and various Software as a Service (“SaaS”) products.

The Company’s products principally include intelligent mobile hotspots, wireless routers for IoT applications, USB modems, integrated telematics and mobile tracking hardware devices, which are supported by applications software and cloud software services designed to enable customers to easily analyze data insights and configure and manage their hardware.

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

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.

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.

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.

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):

2022 December 31,

Cash and cash equivalents $ 41,520 $ 46,474

Restricted cash 3,661 3,338

Cash, cash equivalents and restricted cash, end of period

$ 45,181 $ 49,812

Recently Adopted Accounting Pronouncements

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 .

The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

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

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

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Company classifies its revenues from the sale of its products and services into two distinct groupings, specifically IoT & Mobile Solutions and Enterprise SaaS Solutions.

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

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 portfolio of 5G products.

The solutions are offered under the MiFi™ brand for consumer and enterprise markets, and under the Skyus brand for IIoT markets.

Effective in the third quarter ended on September 30, 2020, IoT & Mobile Solutions also includes the Company’s Device Management System (“DMS”), rebranded as Inseego Subscribe TM , 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 portfolio consists 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 new guidance is effective for annual and interim periods beginning after December 15, 2021.

The Company adopted this standard in the first quarter of fiscal 2022 and it did not have an impact to the condensed 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.

The Company adopted this standard in the first quarter of fiscal 2022 and it did not have an impact to the condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

Other than the above mentioned recently adopted accounting pronouncements, there have been no recent accounting pronouncements, changes in accounting pronouncements or recent accounting pronouncements not yet adopted during the three months ended March 31, 2022 that are of significance or potential significance to the Company’s financial position, results of operations and cash flows.

Financial Statement Details

Inventories, net, consist of the following (in thousands):

September 30,

2022 December 31,

Finished goods $ 33,351 $ 33,112

1 unchanged sentence

Total inventories $ 37,474 $ 37,402

1 Amounts exclude balances deconsolidated as part of the sale of Ctrack South Africa.

Business Divestiture.

Prepaid expenses and other

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

2022 December 31,

Rebate receivables $ 3,715 $ 6,398

Receivables from contract manufacturers 1,553 2,626

Software licenses 2,021 1,261

Insurance 522 1,269

Deposits 960 1,023

Financed assets 1,014 323

Other 1,159 724

$ 10,944 $ 13,624

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

September 30,

2022 December 31,

Royalties $ 1,828 $ 2,243

Payroll and related expenses 14,089 9,326

Warranty obligations 521 473

Professional fees 462 502

Bank overdrafts 350 370

Accrued interest 2,192 877

Deferred revenue 3,282 2,853

Contract liabilities 6,425 3,832

Operating lease liabilities 1,759 1,769

Accrued production costs 901 938

Accrued contract manufacturing liabilities 1,199 927

Liabilities related to financed assets 530 1,593

Value added tax payables 443 642

Other 2,687 3,699

Total accrued expenses and other current liabilities $ 32,485 $ 26,253

1 Amounts exclude balances deconsolidated as part of the sale of Ctrack South Africa.

Business Divestiture.

Fair Value Measurement of Assets and Liabilities

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

A fair value measurement reflects the assumptions

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

market participants would use in pricing an asset or liability based on the best available information.

A fair value measurement reflects the assumptions market participants would use in pricing an asset or liability based on the best available information.

These assumptions include the risk inherent in a particular valuation technique (such as a pricing model) and the risks inherent in the inputs to the model.

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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 nine months ended September 30, 2021.

The following tables summarize 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 September 30, 2021 and December 31, 2020 (in thousands):

September 30, 2021 December 31, 2020

There have been no transfers of assets or liabilities between fair value measurement classifications during the three months ended March 31, 2022 or 2021.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following tables summarize 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 March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 December 31, 2021

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

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Volatility 50 % 50 %

Stock price $6.66 per share $15.47 per share

Stock price $ 4.05 per share

$ 5.83 per share

Credit spread 15.53 % 15.93 %

2 unchanged sentences

Risk-free rate 2.45 % 1.02 %

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table sets forth a summary of changes in the fair value of Level 3 liabilities for the nine months ended September 30, 2021 (in thousands):

The following table sets forth a summary of changes in the fair value of Level 3 liabilities for the three months ended March 31, 2022 (in thousands):

Balance as of

December 31, 2021 Additions Conversions Change in fair value Balance as of

September 30, 2021

March 31, 2022

Interest make-whole payment $ 926 $ — $ — $ ( 609 ) $ 317

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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.

The estimated fair values of the interest make-whole derivative liability at March 31, 2022 and December 31, 2021 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 totaling a gain of $ 0.6 million for the three months ended March 31, 2022 are included in the Company’s condensed consolidated statement of operations within other income (expense), net.

As of March 31, 2022, the embedded derivative had a fair value of $ 0.3 million.

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.

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 5, Debt.

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 4.

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

As of September 30, 2021, $ 161.9 million in principal amount of the 2025 Notes remain outstanding.

As of March 31, 2022, $ 161.9 million in principal amount of the 2025 Notes remain outstanding.

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.

The Company evaluated the 2025 Notes under ASC 815 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.

Changes in the fair value of the interest make-whole payment totaling a gain of $ 1.6 million for the three months ended September 30, 2021 are included in the Company’s condensed consolidated statement of operations within other income, net.

During the nine months ended September 30, 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 September 30, 2021, the embedded derivative had a fair value of $ 1.3 million and a $ 3.4 million gain on the change in fair value was recorded to other income, net, on the condensed consolidated statement of operations in the nine months ended September 30, 2021.

During the three and nine months ended September 30, 2021 and 2020, there were no transfers between the levels within the fair value hierarchy.

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 of cash sold of $ 5.1 million.

The Company recorded a receivable for such balance as of September 30, 2021.

The Purchase Agreement required the Company to place in escrow 52.9 million ZAR, (approximately $ 3.5 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.

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 condensed consolidated results of operations during the three and nine months ended September 30, 2021.

The Company also recorded $ 2.2 million of transaction expenses, which were expensed as incurred and

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

included within other income (expense), net, in the condensed consolidated results of operations for the three and nine months ended September 30, 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

As of September 30, 2021, 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 for the three and nine months ended September 30, 2021 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

On August 23, 2017, the Company and certain of its direct and indirect subsidiaries, as guarantors, entered into a credit agreement (the “Credit Agreement”) with Cantor Fitzgerald Securities, as administrative agent and collateral agent, and certain funds managed by Highbridge Capital Management, LLC, as 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.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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 a prepayment fee 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 %.

The effective interest rate was 15.19 % for the nine months ended September 30, 2020.

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Contractual interest expense $ — $ — $ — $ 1,667

Amortization of debt discount — — — 859

Amortization of debt issuance costs — — — 103

Total interest expense $ — $ — $ — $ 2,629

Convertible Notes

On May 12, 2020, the Company completed its registered public Offering of $ 100.0 million aggregate principal amount of 2025 Notes.

On May 12, 2020, the Company also entered into the May Exchange Agreements with certain holders of the 2022 Notes.

Pursuant to the May Exchange Agreements, these noteholders agreed to exchange the 2022 Notes that they held (representing an aggregate of $ 45.0 million principal amount of 2022 Notes with an estimated fair value of approximately $ 112.4 million as of the date of exchange) for an aggregate of $ 32.0 million in cash and $ 80.4 million principal amount of 2025 Notes in the May Private Exchange Transactions that closed concurrently with the registered Offering.

In connection therewith, the Company recorded a loss of $ 67.2 million on debt conversion and extinguishment, net in the condensed consolidated statement of operations.

The 2025 Notes issued in the May Private Exchange Transactions are part of the same series as the 2025 Notes issued in the registered Offering.

During the nine months ended September 30, 2021, certain holders of the 2025 Notes converted an aggregate of approximately $ 5.0 million in principal amount of the 2025 Notes into 428,669 shares of the Company’s common stock, including 32,221 shares of common stock issued in satisfaction of the interest make-whole payment.

On May 12, 2020, the Company completed its registered public offering of $ 100.0 million aggregate principal amount of 2025 Notes and issued $ 80.4 million principal amount of 2025 Notes in the privately negotiated exchange agreements that closed concurrently with the registered offering in May 2020.

During the three months ended March 31, 2021, certain holders of the 2025 Notes converted an aggregate of approximately $ 5.0 million in principal amount of the 2025 Notes into 428,669 shares of 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 $ 0.4 million on debt conversion, net in the condensed consolidated statement of operations.

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Holders of the 2025 Notes may convert the 2025 Notes into shares of the Company’s common stock (together with cash in lieu of any fractional share), at their option, at any time until the close of business on the scheduled trading day immediately before the maturity date.

Upon conversion of the 2025 Notes, the Company will deliver for each $ 1,000 principal amount of

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.

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.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

2025 Notes converted a number of shares of common stock (together with cash in lieu of any fractional share), equal to the conversion rate.

If a fundamental change (as defined in the Indenture) occurs at any time prior to the maturity date, then the noteholders may require the Company to repurchase their 2025 Notes at a cash repurchase price equal to the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

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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 condensed consolidated balance sheets, with subsequent changes to fair value to be recorded at each reporting period on the condensed consolidated statement of operations in other income, net.

As of September 30, 2021, $ 161.9 million in principal amount of the 2025 Notes were outstanding, $ 80.4 million of which were held by related parties.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of March 31, 2022, $ 161.9 million in principal amount of the 2025 Notes were outstanding, $ 80.4 million of which were held by related parties, and $ 1.1 million of accrued interest due to related parties was included within accrued expenses and other current liabilities on the condensed consolidated balance sheets.

As of December 31, 2021, $ 161.9 million in principal amount of the 2025 Notes were outstanding, $ 80.4 million of which were 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 condensed consolidated balance sheets.

Assuming no repurchases or conversions 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.

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

September 30,

2022 December 31,

Liability component

Principal $ 161,898 $ 161,898

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Net carrying amount $ 157,629 $ 157,866

The effective interest rate on the liability component of the 2025 Notes was 4.15 % for the nine months ended September 30, 2021.

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Contractual interest expense $ 1,315 $ 1,278 $ 3,899 $ 2,078

Amortization of debt discount 207 217 622 341

Amortization of debt issuance costs 165 172 495 268

Total interest expense $ 1,687 $ 1,667 $ 5,016 $ 2,687

On January 9, 2017, in connection with the settlement of an exchange offer and consent solicitation with respect to the 5.50 % convertible senior notes due 2020 (the “Novatel Wireless Notes”), the Company issued approximately $ 119.8 million aggregate principal amount of 2022 Notes.

During the three months ended March 31, 2020, the Company entered into privately-negotiated exchange agreements (“the March Exchange Agreements”) with certain investors holding the 2022 Notes.

Pursuant to the March Exchange Agreements, the investors exchanged $ 59.9 million in aggregate principal amount of outstanding 2022 Notes for 13,688,876 shares of common stock.

The investors that participated in the March Exchange Agreements agreed to waive any accrued but unpaid interest on the exchanged 2022 Notes.

Included in the 13,688,876 shares of common stock issued in the exchange transactions that took place during the three months ended March 31, 2020 were 942,706 shares valued at $ 7.9 million on the date of issuance at fair value, which were issued pursuant to the terms of the privately-negotiated March Exchange Agreements and were in excess of the consideration issuable under the original conversion terms of the exchanged 2022 Notes.

ASC 470 Debt , requires the recognition through earnings of an inducement charge equal to the fair value of the consideration delivered in excess of the consideration issuable under the original conversion terms.

This resulted in a non-cash charge of $ 7.9 million for the three months ended March 31, 2020, which was recorded as inducement expense in the condensed consolidated statement of operations.

Pursuant to the May Private Exchange Transactions described above, on May 12, 2020, the holders of an aggregate of $ 45.0 million principal amount of 2022 Notes exchanged their 2022 Notes for a combination of 2025 Notes and cash.

As a result of the May Private Exchange Transactions, $ 2,000 in principal amount of the 2022 Notes remained outstanding as of May 12, 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 Condensed Consolidated Financial Statements (Unaudited)

The effective interest rate on the liability component of the 2022 Notes was 12.89 % for the nine months ended September 30, 2020.

The effective interest rate on the liability component of the 2025 Notes was 4.23 % and 4.06 % for the three months ended March 31, 2022 and 2021, respectively.

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Contractual interest expense $ 1,315 $ 1,287

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Share-based Compensation

The Company included the following amounts for share-based compensation awards in the unaudited condensed consolidated statements of operations (in thousands):

During the three months ended March 31, 2022, the Company granted awards under the 2018 Omnibus Incentive Compensation Plan, previously named the Amended and Restated 2009 Omnibus Incentive Compensation Plan (the “2018 Plan”), and the 2015 Incentive Compensation Plan (the “2015 Plan”).

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

Under the 2018 Plan, a maxi mum 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 restricted stock units (“RSUs”) or other awards, including awards with alternative vesting schedules such as performance-based criteria.

For the three months ended March 31, 2022 and 2021 the following table presents total share-based compensation expense in each functional line item on the unaudited condensed consolidated statements of operations (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Cost of revenues $ 1,415 $ 1,578

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General and administrative 3,671 2,304

$ 3,062 $ 2,207 $ 14,467 $ 8,188

1 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.

Total $ 11,199 $ 9,098

During the quarter ended March 31, 2022, the Board of Directors of the Company approved and the Company granted restricted stock units to eligible employees under the 2018 Plan that were immediately vested, as fiscal 2021 annual bonus payments.

The total charges recorded during the quarter ended March 31, 2022 were $ 8.8 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.

During the quarter ended September 30, 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.

Such bonus payments in fiscal 2021 were paid and recorded in the quarter ended March 31, 2021 and total charges related to such bonus payments were $ 7.0 million.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Stock Options

The following table summarizes the Company’s stock option activity:

The Compensation Committee of the Board of Directors determines eligibility, vesting schedules and exercise prices for stock options granted.

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

For performance stock awards subject to market-based vesting conditions, fair values are determined using the Monte-Carlo simulation model.

Stock options generally have a term of ten years and vest over a three - to four-year period.

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2022:

Outstanding — December 31, 2021 8,085,793

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Canceled ( 583,612 )

Outstanding — September 30, 2021 8,168,805

Exercisable — September 30, 2021 4,775,992

At September 30, 2021, total unrecognized compensation expense related to stock options was $ 12.6 million, which is expected to be recognized over a weighted-average period of 2.62 years.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Outstanding — March 31, 2022 8,673,891

Exercisable — March 31, 2022 4,931,898

At March 31, 2022, total unrecognized compensatio n expense related to stock options was $ 11.1 million, which is expected to be recognized over a weighted-average period of 2.97 years.

Restricted Stock Units

The following table summarizes the Company’s restricted stock unit (“RSU”) activity:

Pursuant to the 2018 Plan and the 2015 Plan, the Company may issue RSUs that, upon satisfaction of vesting conditions, allow recipients to receive common stock.

Issuances of such awards reduce common stock available under the 2018 Plan and 2015 Plan for stock incentive awards.

The Company measures compensation cost associated with grants of RSUs at fair value, which is generally the closing price of the Company’s stock on the date of grant.

RSUs generally vest over a three - to four-year period.

The following table summarizes the Company’s RSU activity:

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

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Forfeited ( 50,700 )

Non-vested — September 30, 2021 486,946

At September 30, 2021, total unrecognized compensation expense related to RSUs was $ 2.5 million, which is expected to be recognized over a weighted-average period of 2.45 years.

Non-vested — March 31, 2022 1,443,510

At March 31, 2022, total unrecognized compensation expense related to RSUs was $ 5.9 million, which is expected to be recognized over a weighted-average period of 3.34 years.

Earnings Per Share

Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net loss attributable to Inseego Corp.

by the weighted-average number of common shares outstanding for the period.

Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period.

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock using the treasury stock method.

Potentially dilutive securities (consisting primarily of the convertible notes calculated using the if-converted 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.

For the three and nine months ended September 30, 2021, the computation of diluted EPS excluded 25,496,537 shares related to the convertible notes, stock options and RSUs as their effect would have been anti-dilutive.

Potentially dilutive securities (consisting primarily of the 2025 Notes calculated using the if-converted 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.

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

Three Months Ended March 31,

Net loss attributable to common stockholders $ ( 25,884 ) $ ( 18,040 )

Weighted-average common shares outstanding 105,649,419 101,370,433

Basic and diluted net loss per share $ ( 0.24 ) $ ( 0.18 )

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the three months ended March 31, 2022, the computation of diluted EPS excluded 27,109,523 shares, primarily related to the 2025 Notes, warrants, stock options, RSUs and employee stock purchase plan 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:

Three Months Ended March 31,

(in thousands) 2022 2021

Convertible Notes 14,341 14,341

Warrants 2,500 2,500

Non-qualified stock options 8,675 7,627

Restricted stock units 1,443 400

Employee stock purchase plan 151 13

Total 27,110 24,881

Private Placements and Public Offering

On August 6, 2018, the Company completed a private placement of 12,062,000 shares of common stock, par value $ 0.001 per share, and warrants to purchase an additional 4,221,700 shares of common stock (the “2018 Warrants”), subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, to certain accredited investors.

On March 28, 2019, the 2018 Warrants were exercised at an exercise price of $ 2.52 per share, for aggregate cash proceeds to the Company of approximately $ 10.6 million.

In connection with the exercise of the 2018 Warrants, on March 28, 2019, the Company issued additional warrants to purchase 2,500,000 shares of common stock (the “2019 Warrants”) to the accredited investors.

On March 28, 2019, the Company issued warrants to purchase 2,500,000 shares of common stock (the “2019 Warrants”) to certain accredited investors.

Each 2019 Warrant has an initial exercise price of $ 7.00 per share, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, became exercisable on September 28, 2019, and will expire on June 30, 2022.

During the first quarter of 2020, the Company received $ 1.9 million in net cash proceeds from the exercise of 338,454 of the Company’s common stock purchase warrants issued in 2015.

The Company assessed the terms of the warrants under ASC 815.

2 unchanged sentences

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, and other offering fees, pursuant to the ATM Offering.

Preferred Stock

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

On March 31, 2020, the Company issued 2,330 shares of Series E Preferred Stock to South Ocean, in satisfaction of certain deferred interest obligations pursuant to the terms and conditions of the Credit Agreement.

On May 12, 2020, the Company used a portion of the proceeds from the Offering to repurchase the 2,330 shares of Series E Preferred Stock, which had been issued to satisfy accrued interest under the Credit Agreement, for $ 2.4 million.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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 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 condensed consolidated results of operations for the three and nine months ended September 30, 2021.

Geographic Information and Concentrations of Risk

1 unchanged sentence

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Three Months Ended March 31,

United States and Canada $ 52,642 $ 42,736

Europe 5,620 5,833

South Africa — 7,108

2,435 6,836 17,333 20,930

Other 3,122 1,920

Total $ 61,384 $ 57,597

1 Refer to Note 4.

Business Divestiture for the Company’s divestiture of Ctrack South Africa

Concentrations of Risk

For the three months ended September 30, 2021, two customers accounted for 40.4 % and 32.5 % of net revenues, respectively.

For the three months ended September 30, 2020, one customer accounted for 58.4 % of net revenues.

For the nine months ended September 30, 2021, two customers accounted for 44.3 % and 23.5 % of net revenues, respectively.

For the nine months ended September 30, 2020, one customer accounted for 56.4 % of net revenues.

As of September 30, 2021 two customers accounted for 40.1 % and 20.8 % of accounts receivable, net, respectively.

For the three months ended March 31, 2022, two customers accoun ted for 37.3 % and 39.9 % of n et revenues, respectively.

For the three months ended March 31, 2021, two customers accounted for 45.0 % and 15.8 % of net revenues.

As of March 31, 2022 two customers accoun ted for 33.0 % and 26.2 % of accounts receivable, net, respectively.

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

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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 March 31, 2022, future payments under these noncancellable purchase obligations were approximately $ 169.1 million.

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

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Based on an evaluation of these matters and discussions with the Company’s intellectual property litigation counsel, the Company currently believes that liabilities arising from or sums paid in settlement of these existing matters, if any, would not have a material adverse effect on its condensed consolidated results of operations or financial condition.

On May 11, 2017, the Company initiated a lawsuit against the former stockholders of R.E.R.

Enterprises, Inc.

(“RER”) in the Court of Chancery of the State of Delaware seeking recovery of damages for civil conspiracy, fraud in the inducement, unjust enrichment and breach of fiduciary duty.

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 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.

Indemnification

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Lease expense for payments related to the Company’s operating leases is recognized on a straight-line basis over the related lease term, which includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments as specified in the lease.

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

As of September 30, 2021, the Company had right-of-use assets of $ 8.0 million and lease liabilities related to its operating leases of $ 9.0 million.

Right-of-use assets are included in right-of-use assets, net, on the condensed 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 condensed consolidated balance sheet.

As of September 30, 2021, the Company’s weighted-average remaining lease term and weighted-average discount rate related to its operating leases were 5.3 years and 9.1 %, respectively.

During the nine months ended September 30, 2021 and 2020, 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 $ 0.5 million, respectively, which is included as an operating cash outflow within the consolidated statements of cash flows.

During the nine months ended September 30, 2021 and 2020, the operating lease costs related to the Company’s operating leases were approxima tely $ 1.0 million and $ 0.7 million, respectively, which is included in operating costs and expenses in the condensed consolidated statements of operations.

The future minimum payments under operating leases were as follows as of September 30, 2021 (in thousands):

The components of the right-of-use assets and lease liabilities were as follows (in thousands):

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Balance Sheet Classification March 31,

2022 December 31,

Right-of-use assets, net Right-of-use assets, net $ 7,699 $ 7,839

Current operating lease liabilities Accrued expenses and other current liabilities $ 1,759 $ 1,769

Non-current operating lease liabilities Other long-term liabilities 6,956 7,112

Total operating lease liabilities $ 8,715 $ 8,881

Weighted-average remaining lease term (in years) 4.8 5.0

Weighted-average discount rate 9.1 % 9.1 %

The components of lease cost were as follows (in thousands):

Three Months Ended March 31,

Operating lease costs included in operating costs and expenses:

Operating leases $ 610 $ 510

Supplemental cash flow information related to leases was as follows (in thousands):

Three Months Ended March 31,

Cash paid for amounts included in the measurement of operating lease liabilities:

Operating cash flows related to operating leases $ 622 $ 535

Right-of-use assets obtained in exchange for lease liabilities:

Operating leases $ 79 $ 148

The future minimum payments under operating leases were as follows as of March 31, 2022 (in thousands):

2022 (remainder) $ 1,918

Thereafter 2,813

Total minimum operating lease payments $ 10,739

3 unchanged sentences

Long-term portion of operating lease obligations $ 6,956

The current and long term portion of operating lease obligations are classified within accrued expenses and other current liabilities and other long-term liabilities, respectively, on the condensed consolidated balance sheets.

Monitoring device leases in which the Company serves as lessor are classified as operating leases.

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

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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 .

The Company’s income tax (benefit) provision of $( 4,000 ) a nd $ 0.2 million for the three months ended September 30, 2021 and 2020, respectively, and $ 0.4 million and $ 0.2 million for the nine months ended September 30, 2021 and 2020, respectively, consisted primarily of foreign income taxes at certain of the Company’s international entities and minimum state taxes for its U.S.-based entities.

The Company’s income tax expense is different than the expected expense based on statutory rates primarily due to full valuation allowances at all of its U.S.-based entities and many of its foreign subsidiaries.

The Company’s income tax (benefit) provision of $( 0.3 ) million a nd $ 0.2 million for the three months ended March 31, 2022 and 2021, respectively, consisted primarily of foreign income taxes at certain of the Company’s international entities and minimum state taxes for its U.S.-based entities.

The tax benefit for the first quarter of 2022 and the tax expense for the first quarter of 2021 were largely driven by foreign currency losses, and gains, respectively, at the Company’s foreign subsidiaries.

On March 11, 2021, Congress passed, and the President signed into law, the American Rescue Plan Act, 2021 (the “ARP”), which includes certain business tax provisions.

The Company does not expect the ARP to have a material impact on the Company’s effective tax rate or income tax expense for the year ending December 31, 2022.

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

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

House of Representatives in November 2021, is proposed legislation that has not yet been enacted into law.

Additionally, in late March 2022, the Biden administration proposed a 28% corporate income tax rate.

The Company does not believe this will have a material impact on its effective tax rate, though it continues to monitor the Biden Administration’s proposals.

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-Q

Item 1. Financial Statements