What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-04 · 146 added, 50 removed, 238 unchanged (45% of the section changed)

101 unchanged sentences

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

The demand environment for our 5G products during the three months ended March 31, 2022 was consistent with our expectations.

The demand environment for our 5G products during the three and six months ended June 30, 2022 was consistent with our expectations.

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

27 unchanged sentences

Results of Operations

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Net revenues .

Net revenues for the three months ended March 31, 2022 were $61.4 million, compared to $57.6 million for the same period in 2021.

Net revenues for the three months ended June 30, 2022 were $61.9 million, compared to $65.7 million for the same period in 2021.

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

Three Months Ended

March 31, Change

June 30, Change

Product Category 2022 2021 $ %

10 unchanged sentences

Cost of net revenues.

Cost of net revenues for the three months ended March 31, 2022 was $46.1 million, or 75.2% of net revenues, compared to $39.1 million, or 67.9% of net revenues, for the same period in 2021.

Cost of net revenues for the three months ended June 30, 2022 was $44.0 million, or 71.1% of net revenues, compared to $45.3 million, or 69.0% of net revenues, for the same period in 2021.

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

Three Months Ended

March 31, Change

June 30, Change

Product Category 2022 2021 $ %

6 unchanged sentences

Enterprise SaaS Solutions cost of net revenues decreased by $2.3 million compared to the same period in 2021 primarily due to lower sales of Enterprise SaaS Solutions as a result of the divestiture of Ctrack South Africa on July 30, 2021.

Enterprise SaaS Solutions cost of net revenues from the rest of the world stayed relatively flat.

Enterprise SaaS So lutions cost of net revenues from the rest of the world stayed relatively flat.

Gross profit.

Gross profit for the three months ended March 31, 2022 was $15.2 million, or a gross margin of 24.8%, compared to $18.5 million, or a gross margin of 32.1%, for the same period in 2021.

The decrease in gross profit was primarily attributable to a decrease in Enterprise SaaS Solutions as a result of the sale of Ctrack South Africa, which had a higher gross profit.

This decrease was partially offset by an increase in gross profit from IoT & Mobile Solutions as our 5G revenue and Inseego Subscribe business continued to grow.

Gross profit for the three months ended June 30, 2022 was $17.9 million, or a gross margin of 28.9%, compared to $20.3 million, or a gross margin of 31.0%, for the same period in 2021.

The decrease in gross profit was primarily attributable to increased freight charges and increased production cost on our 4G products .

The following table summarizes operating costs and expenses (dollars in thousands):

Three Months Ended March 31, Change

Three Months Ended June 30, Change

Operating costs and expenses 2022 2021 $ %

3 unchanged sentences

Amortization of purchased intangible assets 443 664 (221) (33.3) %

Impairment of capitalized software — 1,197 (1,197) (100.0) %

Total $ 27,925 $ 30,869 $ (2,944) (9.5) %

Research and development expenses.

Research and development expenses for the three months ended March 31, 2022 were $18.6 million, or 30.2% of net revenues, compared to $14.6 million, or 25.3% of net revenues, for the same period in 2021.

The increase was primarily a result of $0.9 million increase in payroll costs that were not capitalized due to timing of meeting technological feasibility milestone for capitalized software for various R&D projects, $2.3 million increase in amortization, and $0.8 million increase in share-based compensation expense.

Research and development expenses for the three months ended June 30, 2022 were $13.6 million, or 22.0% of net revenues, compared to $11.8 million, or 17.9% of net revenues, for the same period in 2021.

The increase was primarily a result of $1.4 million increase in amortization, and $0.3 million increase in testing equipment and materials.

Sales and marketing expenses.

Sales and marketing expenses for the three months ended March 31, 2022 were $9.8 million, or 15.9% of net revenues, compared to $11.0 million, or 19.1% of net revenues, for the same period in 2021.

The decrease was primarily a result of the decrease of payroll costs for Ctrack South Africa employees, given the divestiture was completed on July 30, 2021.

This decrease was partially offset by the increase in outbound freight charges, consulting expenses and commission to employees which is in line with the revenue increase from IoT & Mobile Solutions.

Sales and marketing expenses for the three months ended June 30, 2022 were $7.7 million, or 12.5% of net revenues, compared to $9.8 million, or 14.9% of net revenues, for the same period in 2021.

The decrease was primarily a result of the dec rease of payroll costs for Ctrack South Africa employees, given the divestiture was completed on July 30, 2021.

This decrea se was partially offset by the increase in outbound freight charges and consulting expenses.

General and administrative expenses.

General and administrative expenses for the three months ended March 31, 2022 were $8.2 million, or 13.4% of net revenues, compared to $8.6 million, or 15.0% of net revenues, for the same period in 2021.

The decrease was primarily due to the decrease in payroll costs for Ctrack South Africa employees, given the divestiture was completed on July 30, 2021.

The decrease in general and administrative expenses was partially offset by a $1.4 million increase in share-based compensation expense attributed by the impact of higher fiscal 2021 bonus grants paid in the first quarter of 2022 in the form of RSUs.

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

General and administrative expenses for the three months ended June 30, 2022 were $6.1 million, or 9.9% of net revenues, compared to $7.4 million, or 11.3% of net revenues, for the same period in 2021.

The decrease was primarily due to the decr ease in payroll costs for Ctrack South Africa employees, giv en the divestiture was completed on July 30, 2021.

Amortization of purchased intangible assets .

Amortization of purchased intangible assets for the three months ended March 31, 2022 and 2021 was $0.4 million and $0.5 million, respectively.

Amortization of purchased intangible assets for the three months ended June 30, 2022 and 2021 was $0.4 million and $0.7 million, respectively.

The decrease was primarily as a result of certain purchased intangible assets being fully amortized as of the fourth quarter of 2021.

Impairment of capitalized software .

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

There was no such expense for the three months ended June 30, 2022.

The following table summarizes other income (expense) (dollars in thousands):

Three Months Ended March 31, Change

Three Months Ended June 30, Change

Other (expense) income 2022 2021 $ %

Loss on debt conversion and extinguishment, net (450) (432) (18) 4.2 %

Interest expense, net $ (1,664) $ (1,678) $ 14 (0.8) %

1 unchanged sentence

Total $ (2,646) $ (2,295) $ (351) 15.3 %

Loss on debt conversion and extinguishment, net.

The loss on debt conversion and extinguishment, net of $0.5 million during the three months ended March 31, 2022 was primarily a result of certain 2022 Notes debt extinguishments related adjustments in prior years recorded in the current period.

For the same period in 2021, loss on debt conversion and extinguishment, net was $0.4 million which was primarily related to the extinguishment of the 2022 Notes.

Interest expense, net.

Interest expense, net, for the three months ended March 31, 2022 and 2021 was $2.9 million and $1.8 million, respectively.

The increase was primarily a result of certain 2022 Notes debt extinguishments related adjustments in prior years recorded in the current period.

Interest expense, net, for the three months ended June 30, 2022 and 2021 was $1.7 million.

Other (expense) income, net.

Other expense, net, for the three months ended March 31, 2022 was $0.4 million, which primarily includes $1.0 million of foreign currency exchange gains and losses partially offset by the $0.6 million fair value adjustment related to our interest make-whole arrangement.

For the same period in 2021, other income, net, was $1.7 million, which primarily includes the fair value adjustment related to our interest make-whole arrangement.

Other expense, net, for the three months ended June 30, 2022 was $1.0 million, which primarily includes $1.0 million of foreign currency exchange gains and losses partially offset b y the $0.3 million fair valu e adjustment related to our interest make-whole arrangement.

For the same period in 2021, other expense, net, was $0.6 million, which primarily includes the fair value adjustment related to our interest make-whole arrangement.

Fair value input changes between the periods are primarily related to increased interest rates and a lower stock price.

The following table summarizes income tax provision, net income attributable to noncontrolling interests, and Series E preferred stock dividends (dollars in thousands):

Three Months Ended March 31, Change

Three Months Ended June 30, Change

2022 2021 $ %

Income tax provision $ (303) $ 228 $ (531) (232.9) %

Net income attributable to noncontrolling interests — (214) 214 (100.0) %

Series E preferred stock dividends (677) (886) 209 (23.6) %

Income tax (benefit) provision.

The income tax benefit of $0.3 million for the three months ended March 31, 2022 and the income tax provision of $0.2 million for the same period in 2021, respectively, consisted primarily of foreign income taxes at certain of our international entities and minimum state taxes for our U.S.-based entities.

The income tax benefit of $0.3 million for the three months ended June 30, 2022 and the income tax provision of $0.2 million for the same period in 2021, respectively, consisted primarily of foreign income taxes at certain of our international entities and minimum state taxes for our U.S.-based entities.

Our income tax expense is different than the expected expense based on statutory rates primarily due to full valuation allowances at all of our U.S.-based entities and several of our foreign subsidiaries.

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 our foreign subsidiaries.

The tax benefit in 2022 and the tax expense in 2021 were largely driven by foreign currency losses, and gains, respectively, at our foreign subsidiaries.

Series E preferred stock dividends.

During the three months ended June 30, 2022 and 2021, we recorded dividends of $0.7 million and $0.9 million, respectively, on our Fixed-Rate Cumulative Perpetual Preferred Stock, Series E, par value $0.001 per share (the “Series E Preferred Stock”).

The decrease was primarily attributable to a decrease in recurring preferred stock dividends as 10,000 shares of the original 35,000 shares of preferred stock were extinguished in September 2021, resulting in a lower accrued preferred stock dividends for the period ended June 30, 2022.

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

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Net revenues .

Net revenues for the six months ended June 30, 2022 were $123.2 million, compared to $123.3 million for the same period in 2021

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

Six Months Ended June 30, Change

Product Category 2022 2021 $ %

IoT & Mobile Solutions $ 109,495 $ 94,795 $ 14,700 15.5 %

Enterprise SaaS Solutions 13,745 28,495 (14,750) (51.8) %

Total $ 123,240 $ 123,290 $ (50) — %

IoT & Mobile Solutions.

The increase in IoT & Mobile Solutions net revenues is primarily due to an increase in our enterprise and carrier offers within IoT & Mobile solutions, specifically increased sales of our second-generation 5G hotspot related to our MiFi business of $23.3 million and increased revenues in our Inseego Subscribe business due to subscriber growth of $1.5 million, partially offset by a $10.1 million decrease in revenues from our 4G products.

Enterprise SaaS Solutions.

Enterprise SaaS Solutions net revenues decreased year-over-year as a result of the divestiture of Ctrack South Africa as of July 30, 2021.

Enterprise SaaS Solutions revenues from the rest of the world stayed relatively flat.

SaaS revenue was no longer generated in South Africa beginning in August 2021.

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

Cost of net revenues.

Cost of net revenues for the six months ended June 30, 2022 was $90.1 million or 73.1% of net revenues, compared to $84.5 million or 68.5% of net revenues, for the six months ended June 30, 2021.

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

Six Months Ended June 30, Change

Product Category 2022 2021 $ %

IoT & Mobile Solutions $ 83,597 $ 73,178 $ 10,419 14.2 %

Enterprise SaaS Solutions 6,503 11,288 (4,785) (42.4) %

Total $ 90,100 $ 84,466 $ 5,634 6.7 %

IoT & Mobile Solutions.

The increase in IoT & Mobile Solutions cost of net revenues is primarily attributable to $16.4 million increase from higher sales of our second-generation 5G hotspot, and $1.0 million increase of freight charges, partially offset by $6.9 million decrease from lower sales of our 4G products.

Enterprise SaaS Solutions.

Enterprise SaaS Solutions cost of net revenues decreased by 42.4% compared to the same period in 2021 primarily due to lower sales of Enterprise SaaS Solutions as a result of the divestiture of Ctrack South Africa on July 30, 2021.

Enterprise SaaS So lutions cost of net revenues from the rest of the world stayed relatively flat.

Gross profit.

Gross profit for the six months ended June 30, 2022 was $33.1 million, or a gross margin of 26.9%, compared to $38.8 million, or a gross margin of 31.5%, for the same period in 2021.

The decrease in gross margin was primarily attributable to increased freight charges and increased production cost on our 4G products.

Six Months Ended June 30, Change

Operating costs and expenses 2022 2021 $ %

Research and development $ 32,179 $ 26,328 $ 5,851 22.2 %

Sales and marketing 17,494 20,825 (3,331) (16.0) %

General and administrative 14,380 16,058 (1,678) (10.4) %

Amortization of purchased intangible assets 887 1,130 (243) (21.5) %

Impairment of capitalized software — 1,197 (1,197) (100.0) %

Total $ 64,940 $ 65,538 $ (598) (0.9) %

Research and development expenses.

Research and development expenses for the six months ended June 30, 2022 were $32.2 million, or 26.1% of net revenues, compared to $26.3 million, or 21.4% of net revenues, for the same period in 2021.

The increase was primarily a resul t of staffing, test units, other development spending related to 5G product programs, and the amount of bonus grants to eligible employees during the six months ended June 30, 2022 compared to the amount of bonus grants awarded to eligible employees during the six months ended June 30, 2021.

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

Sales and marketing expenses.

Sales and marketing expenses for the six months ended June 30, 2022 were $17.5 million, or 14.2% of net revenues, compared to $20.8 million, or 16.9% of net revenues, for the same period in 2021.

The decrease was primarily a result of the decrease in payroll costs for Ctrack South Africa employees, given the divestiture was completed on July 30, 2021.

The decrease was partially offset by higher spend on marketing 5G products, and the amount of bonus grants to eligible employees during the six months ended June 30, 2022 compared to the amount of bonus grants awarded to eligible employees during the six months ended June 30, 2021.

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

General and administrative expenses.

General and administrative expenses for the six months ended June 30, 2022 were $14.4 million, or 11.7% of net revenues, compared to $16.1 million, or 13.0% of net revenues, for the same period in 2021.

The decrease was primarily due to the decr ease in payroll costs for Ctrack South Africa employees, giv en the divestiture was completed on July 30, 2021, partially offset by the amount of bonus grants to eligible employees during the six months ended June 30, 2022 compared to the amount of bonus grants awarded to eligible employees during the six months ended June 30, 2021.

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

Amortization of purchased intangible assets .

Amortization of purchased intangible assets for each of the six months ended June 30, 2022 and 2021 was $0.9 million and $1.1 million, respectively.

The decrease was primarily as a result of certain purchased intangible assets being fully amortized in the prior year.

Impairment of capitalized software .

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

There was no such expense for the six months ended June 30, 2022.

Six Months Ended June 30, Change

Other (expense) income 2022 2021 $ %

Loss on debt conversion and extinguishment, net (450) (432) (18) 4.2 %

Interest expense, net (4,587) (3,523) (1,064) 30.2 %

Other (expense) income, net (1,387) 1,117 (2,504) (224.2) %

Total $ (6,424) $ (2,838) $ (3,586) 126.4 %

Loss on debt conversion and extinguishment.

The loss on debt conversion and extinguishment, net of $0.5 million during the six months ended June 30, 2022 was primarily a result of certain 2022 Notes debt extinguishments related adjustments in prior years recorded in the current period.

For the same period in 2021, loss on debt conversion and extinguishment, net was $0.4 million which was primarily related to the extinguishment of the 2022 Notes.

Interest expense, net.

Interest expense, net for each of the six months ended June 30, 2022 and 2021 was $4.6 million and $3.5 million, respectively.

The increase in interest expense was primarily a result of certain 2022 Notes debt extinguishments related adjustments in prior years recorded in the current period.

Other income (expense), net.

Other income (expense), net, for each of the six months ended June 30, 2022 and 2021 was ($1.4 million) and $1.1 million, respectively, which primarily includes the fair value adjustment related to our interest make-whole arrangement as well as foreign currency transaction gains and losses.

Six Months Ended June 30, Change

2022 2021 $ %

Income tax provision $ (625) $ 449 $ (1,074) (239.2) %

Net income attributable to noncontrolling interests — (214) 214 (100.0) %

There was no net income or loss attributable to noncontrolling interests for the three months ended March 31, 2022, compared to a net income attributable to noncontrolling interests of $0.2 million for the same period in 2021, due to the sale of the noncontrolling interests as part of the sale of Ctrack South Africa.

Series E preferred stock dividends (1,338) (1,753) 415 (23.7) %

During the three months ended March 31, 2022 and 2021, we recorded dividends of $0.7 million and $0.9 million, respectively, on our Fixed-Rate Cumulative Perpetual Preferred Stock, Series E, par value $0.001 per share (the “Series E Preferred Stock”).

The decrease was primarily attributable to a decrease in the recurring preferred stock dividends as 10,000 shares of the original 35,000 shares of preferred stock were extinguished in September 2021, resulting in a lower preferred stock dividend accrued for the period ended March 31, 2022.

Income tax provision (benefit).

The income tax benefit of $0.6 million for the six months ended June 30, 2022 and the income tax provision of $0.4 million for the six months ended June 30, 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 in 2022 and the tax expense in 2021 were largely driven by foreign currency losses, and gains, respectively, at our foreign subsidiaries.

Net loss (income) attributable to noncontrolling interests.

There was no net income or loss attributable to noncontrolling interests for the six months ended June 30, 2022, compared to a net income attributable to noncontrolling interests of $0.2 million for the same period in 2021, due to the sale of the noncontrolling interests as part of the sale of Ctrack South Africa.

Series E preferred stock dividends.

During the six months ended June 30, 2022, and 2021 we recorded dividends of $1.3 million and $1.8 million, respectively, on our Series E Preferred Stock.

The decrease was primarily attributable to a decrease in recurring preferred stock dividends as 10,000 shares of the original 35,000 shares of preferred stock were extinguished in September 2021, resulting in a lower preferred stock dividend accrued for the period ended June 30, 2022.

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

Liquidity and Capital Resources

Our principal sources of liquidity are our existing cash and cash equivalents and cash generated from operations.

As of March 31, 2022, we had available cash and cash equivalents totaling $41.5 million, as well as $3.7 million of restricted cash that will become available in July 2022.

As of June 30, 2022, we had available cash and cash equivalents totaling $21.1 million , as well as $3.3 million of restricted cash that will become available in July 2022.

On August 5, 2022, Inseego Corp.

(“Inseego” or the “Company”) entered into a Loan and Security Agreement (the “Credit Agreement”), by and among Siena Lending Group LLC, as lender (“Lender”), Inseego Wireless, Inc., a Delaware corporation (“Inseego Wireless”), and Inseego North America LLC, an Oregon limited liability company, as borrowers (“Inseego North America” and, together with Inseego Wireless, the “Borrowers”), and the Company, as guarantor (together with the Borrowers, the “Loan Parties”).

The Credit Agreement establishes a secured asset-backed revolving credit facility which is comprised of a $50 million revolving credit facility (the “Credit Facility”), with a minimum draw of $4.5 million upon execution of the Credit Agreement.

The Credit Facility matures on December 31, 2024.

Availability under the Credit Facility is determined by a Borrowing Base (as defined in the Credit Agreement) comprised of a percentage of eligible accounts receivable and eligible inventory of the Borrowers.

The Borrowers’ obligations under the Credit Agreement are guaranteed by the Company.

The Loan Parties’ obligations under the Credit Agreement are secured by a continuing security interest in all property of each Loan Party, subject to certain Excluded Collateral (as defined in the Credit Agreement).

Borrowings under the Credit Facility may take the form of base rate loans or Secured Overnight Financing Rate (“SOFR”) loans.

SOFR loans will bear interest at a rate per annum equal to Term SOFR (as defined in the Credit Agreement) plus an adjustment based on the outstanding amount for a preceding month.

If the outstanding amount for a preceding month is less than $15 million, the interest rate on the Credit Agreement is Term SOFR plus 3.50% per annum, with a Term SOFR floor of 1.00%.

If the outstanding amount for a preceding month is greater than $15 million, the interest rate is calculated by Term SOFR plus 4.00%, with a Term SOFR floor of 1.00%.

If the outstanding amount for a preceding month is greater than $25 million, the interest rate is calculated by Term SOFR plus 5.50%, with a Term SOFR floor of 1.00%.

The Credit Agreement is also subject to closing costs and financial covenants.

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

3 unchanged sentences

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

As of March 31, 2022, our outstanding debt primarily consisted of $161.9 million in principal amount of 2025 Notes.

As of June 30, 2022, our outstanding debt primarily consisted of $161.9 million in principal amount of 2025 Notes.

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

11 unchanged sentences

Contractual Obligations and Commitments

There were no material changes in our contractual obligations in the first quarter of 2022.

There were no material changes in our contractual obligations in the three and six months ended June 30, 2022.

On May 12, 2020, we completed a 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 in May 2020.

19 unchanged sentences

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

Three Months Ended

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

Six Months Ended

Net cash used in operating activities $ (17,598) $ (12,030)

Net cash used in investing activities (7,281) (17,434)

5 unchanged sentences

Operating activities.

Net cash used in operating activities was $0.6 million for the three months ended March 31, 2022, compared to net cash provided by operating activities of $1.0 million for the same period in 2021.

Net cash used in operating activities for the three months ended March 31, 2022 was primarily attributable to $25.2 million net loss incurred during the period and a $0.6 million non-cash gain as a result of the fair value adjustment on derivative instruments, partially offset by net cash provided by working capital of $4.2 million, depreciation and amortization of $7.2 million, share-based compensation expense of $11.2 million, amortization of debt discount and debt issuance costs of $1.7 million, and loss on debt conversion of $0.5 million.

Net cash provided by operating activities for the three months ended March 31, 2021 was primarily attributable to net cash provided by working capital of $3.4 million, depreciation and amortization of $6.2 million, amortization of debt discount and debt issuance costs of $0.4 million, loss on debt conversion of $0.4 million, and share-based compensation expense of $9.1 million, offset by $17.0 million net loss incurred during the period, and a $2.0 million non-cash gain as a result of the fair value adjustment on derivative instruments.

Net cash used in operating activities was $17.6 million for the six months ended June 30, 2022, compared to net cash used in operating activities of $12.0 million for the same period in 2021.

Net cash used in operating activities for the six months ended June 30, 2022 was primarily attributable to $37.6 million net loss incurred during the period and a $0.9 million non-cash gain as a result of the fair value adjustment on derivative instruments, net cash used in working capital of $10.9 million, partially offset by non-cash charges including depreciation and amortization of $14.0 million, share-based compensation expense of $13.5 million, amortization of debt discount and debt issuance costs of $2.0 million, and loss on debt conversion of $0.5 million.

Net cash used in operating activities for the six months ended June 30, 2021 was primarily

attributable to a $30.0 million net loss incurred during the period, cash used in working capital of $8.4 million, and a $1.8 million non-cash gain as a result of the fair value adjustment on derivative instruments, partially offset by non-cash charges including depreciation and amortization of $13.1 million, impairment of capitalized software of $1.2 million, amortization of debt discount and debt issuance costs of $0.7 million, loss on debt conversion of $0.4 million, and share-based compensation expense of $11.4 million.

Investing activities.

Net cash used in investing activities during the three months ended March 31, 2022 was $3.9 million, compared to net cash used in investing activities of $9.4 million for the same period in 2021.

Cash used in investing activities during the three months ended March 31, 2022 was primarily related to $0.8 million purchases of property, plant and equipment and $3.1 million spending on certain costs related to the development of software to be sold in our products, in large part due to the increase in development in support of 5G products and services.

Net cash used in investing activities during the six months ended June 30, 2022 was $7.3 million, compared to net cash used in investing activities of $17.4 million for the same period in 2021.

Cash used in investing activities during the six months ended June 30, 2022 was primarily related to $1.1 million purchases of property, plant and equipment and $6.2 million spending on certain costs related to the development of software to be sold in our products, in large part due to the increase in development in support of 5G products and services.

Cash used in investing activities during the same period in 2021 was primarily related to $2.5 million purchases of property, plant and equipment and $15.4 million spending on certain costs related to the research and development of software to be sold in our products, in large part due to the increase in development in support of 5G products and services.

Financing activities.

Net cash used in financing activities during the three months ended March 31, 2022 was $1.1 million, compared to net cash provided by financing activities of $29.5 million for the same period in 2021.

Net cash used in financing activities during the three months ended March 31, 2022 was primarily related to $1.0 million principal payments for financed other assets.

Net cash provided by financing activities for the same period in 2021 was primarily related to $29.4 million net proceeds received from the ATM Offering, $1.1 million proceeds from stock option exercises and purchases through our employee stock purchase plan, partially offset by $1.2 million principal payments under finance lease obligations and taxes paid on vested restricted stock units.

Net cash used in financing activities during the six months ended June 30, 2022 was $1.3 million, compared to net cash provided by financing activities of $29.5 million for the same period in 2021.

Net cash used in financing activities during the six months ended June 30, 2022 was primarily related to $1.2 million principal payments for financed other assets.

Net cash provided by financing activities for the same period in 2021 was primarily related to $29.4 million net proceeds received from the ATM Offering, $2.0 million proceeds from stock option exercises and purchases through our employee stock purchase plan, partially offset by $2.2 million principal payments under finance lease obligations.

Off-Balance Sheet Arrangements

1 unchanged sentence

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 2. Management’s Discussion and Analysis