What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-09 · 187 added, 239 removed, 371 unchanged (53% of the section changed)

3 unchanged sentences

(In thousands, except par value and share data)

September 30,

2022 December 31,

22 unchanged sentences

2025 Notes, net 158,079 157,866

Revolving credit facility, net 3,451 —

Deferred tax liabilities, net 816 852

14 unchanged sentences

Total liabilities and stockholders’ deficit $ 184,400 $ 215,843

See accompanying notes to unaudited condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

INSEEGO CORP.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

16 unchanged sentences

Operating loss ( 11,909 ) ( 9,973 ) ( 43,708 ) ( 36,689 )

Other (expense) income:

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

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

1 unchanged sentence

Other (expense) income, net ( 1,758 ) ( 828 ) ( 3,145 ) 291

Total other (expense) income ( 3,792 ) 2,779 ( 10,216 ) ( 57 )

Loss before income taxes ( 15,701 ) ( 7,194 ) ( 53,924 ) ( 36,746 )

Income tax (benefit) provision ( 303 ) 228 ( 625 ) 449

Income tax provision (benefit) 42 ( 4 ) ( 582 ) 445

Net loss ( 15,743 ) ( 7,190 ) ( 53,342 ) ( 37,191 )

9 unchanged sentences

Basic and diluted 107,747,468 103,430,083 106,977,201 102,586,121

See accompanying notes to unaudited condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

INSEEGO CORP.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

1 unchanged sentence

Foreign currency translation adjustment 1,147 ( 2,571 ) 4,581 ( 1,878 )

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

Total comprehensive loss $ ( 14,596 ) $ ( 8,153 ) $ ( 48,761 ) $ ( 37,461 )

2 unchanged sentences

$ ( 14,596 ) $ ( 8,153 ) $ ( 48,761 ) $ ( 37,675 )

See accompanying notes to unaudited condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

INSEEGO CORP.

6 unchanged sentences

Shares Amount Shares Amount

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

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

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

2 unchanged sentences

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

Issuance of common shares in connection with a public offering, net of issuance costs — — — — ( 59 ) — — — ( 59 )

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

Share-based compensation — — — — 3,062 — — — 3,062

Net noncontrolling interest acquired — — — — — — — 1 1

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 $ ( 774,931 ) $ ( 7,242 ) $ — $ ( 15,332 )

Balance, June 30, 2022 25 $ — 107,645 $ 108 $ 787,283 $ ( 825,984 ) $ ( 5,097 ) $ — $ ( 43,690 )

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

Net loss — — — — — $ ( 15,743 ) — — ( 15,743 )

5 unchanged sentences

Series E preferred stock dividends — — — — 691 ( 691 ) — — —

Balance, June 30, 2022 25 $ — 107,645 $ 108 $ 787,283 $ ( 825,984 ) $ ( 5,097 ) $ — $ ( 43,690 )

Balance, September 30, 2022 25 $ — 107,846 $ 108 $ 790,460 $ ( 842,418 ) $ ( 3,950 ) $ — $ ( 55,800 )

INSEEGO CORP.

16 unchanged sentences

Series E preferred stock dividends — — — — 2,492 ( 2,492 ) — — —

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 ( 1,748 ) 1,608 ( 8 ) ( 140 )

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

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

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

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

7 unchanged sentences

Series E preferred stock dividends — — — — 2,029 ( 2,029 ) — — —

Balance, June 30, 2022 25 $ — 107,645 $ 108 $ 787,283 $ ( 825,984 ) $ ( 5,097 ) $ — $ ( 43,690 )

Balance, September 30, 2022 25 $ — 107,846 $ 108 $ 790,460 $ ( 842,418 ) $ ( 3,950 ) $ — $ ( 55,800 )

INSEEGO CORP.

1 unchanged sentence

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization 20,936 19,131

(Recoveries) provision for bad debts ( 15 ) 266

Provision for bad debts 29 346

Impairment of capitalized software — 1,197

4 unchanged sentences

Loss on debt conversion and extinguishment, net 450 432

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

Deferred income taxes ( 223 ) 175

Right-of-use assets 1,057 1,364

Other — ( 330 )

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

10 unchanged sentences

Proceeds from the sale of property, plant and equipment — 1,143

Proceeds from sale of Ctrack South Africa, net of cash divested — 31,526

Additions to capitalized software development costs ( 9,242 ) ( 20,589 )

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

Net cash (used in) provided by investing activities ( 10,445 ) 7,665

Cash flows from financing activities:

Net borrowing of bank and overdraft facilities ( 139 ) 295

Net (repayment) borrowing of bank and overdraft facilities ( 458 ) 315

Principal payments under finance lease obligations ( 62 ) ( 3,138 )

1 unchanged sentence

Principal payments on financed assets ( 1,567 ) —

Borrowings on revolving credit facility 9,000 —

Repayments on revolving credit facility ( 4,500 ) —

Payment of debt issuance costs on revolving credit facility ( 1,126 ) —

Proceeds from stock option exercises and employee stock purchase plan, net of taxes paid on vested restricted stock units 196 2,432

Net cash (used in) provided by financing activities ( 1,317 ) 29,511

Net cash provided by financing activities 1,483 28,979

Effect of exchange rates on cash 1,916 ( 293 )

10 unchanged sentences

Right-of-use assets obtained in exchange for operating leases liabilities $ 342 $ 544

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

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

See accompanying notes to unaudited condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

INSEEGO CORP.

1 unchanged sentence

Basis of Presentation

The information contained herein has been prepared by Inseego Corp.

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

The information at June 30, 2022 and the results of the Company’s operations for the three and six months ended June 30, 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.

These unaudited condensed consolidated financial statements and notes hereto should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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.

The condensed consolidated financial statements contained herein have been prepared by Inseego Corp.

(the “Company”) in accordance with the Securities and Exchange Commission (the “SEC”) rules for interim financial information.

Accordingly, the condensed consolidated financial statements reflect all normal recurring adjustments, which are, in the opinion of management, necessary for fair presentation of the results of interim periods and may not include all disclosures required by accounting principles generally accepted in the United States (“GAAP”).

The information as of September 30, 2022 and for the three and nine months ended September 30, 2022 and September 30, 2021, is unaudited, whereas the condensed consolidated balance sheet as of December 31, 2021 is derived from the Company’s audited consolidated financial statements as of that date.

These condensed consolidated financial statements and notes hereto should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “Form 10-K”).

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.

The accounting policies used in preparing these condensed consolidated financial statements are the same as those described in the Form 10-K.

The results of operations for the interim periods presented are not necessarily indicative of results to be expected for any other interim period or for the year as a whole.

Risks and Uncertainties

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.

The extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S.

government, state and local government officials, and international governments to prevent the spread of the disease, all of which are uncertain and cannot be predicted.

In addition, a global semiconductor supply shortage is having wide-ranging effects across the technology industry.

This semiconductor shortage has not materially impacted the Company but may impact the Company’s customers, and may negatively impact the supply of materials needed for our testing and production timeline.

Our suppliers, contract manufacturers, and our customers are all taking actions to reduce the impact of the semiconductor shortage;

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

As of June 30, 2022, the Company had available cash and cash equivalents totaling $ 21.1 million, excluding restricted cash of $ 3.3 million.

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 (as defined in the Credit Agreement) plus 3.50 %, 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.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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.

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

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

The Company’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.

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.

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

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.

Principles of Consolidation

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

The 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.

1 unchanged sentence

Management has determined that the Company has one reportable segment.

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

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

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions.

These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent liabilities.

Actual results could differ materially from these estimates.

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.

Estimates are assessed each period and updated to reflect current information.

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.

Risks and Uncertainties

In March 2020, the World Health Organization declared a global pandemic caused by the novel coronavirus (“COVID-19”), resulting in shutdowns of manufacturing and commerce globally in the months that followed.

The extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance will depend on future developments, including the duration, severity and spread of the outbreak, emergence of new variants of concern, and actions taken by the federal, state, local and foreign governments to contain the pandemic, all of which are uncertain and cannot be predicted.

In addition, a global semiconductor supply shortage is causing wide-ranging impacts across the technology industry.

While the shortage has not materially impacted the Company’s operations and financial results, it may negatively impact our customers and the supply of materials needed for our testing and production timeline.

Our suppliers, contract manufacturers, and customers are all taking actions to reduce the impact of the semiconductor shortage;

however, if the shortage persists, the impact on our operations and financial results could be material.

The inflationary pressures impacting the global supply chain could potentially increase the cost of net revenues in the current and future years.

The ongoing inflation challenges could adversely impact our future revenues, gross margins and financial results.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Sale 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”) and recognized a pre-tax gain of $ 5.3 million.

Total cash proceeds received from the sale were $ 31.5 million, net of cash divested of $ 5.0 million.

As of September 30, 2022, the Company had available unrestricted cash and cash equivalents totaling $ 18.1 million and $ 14.6 million of excess availability under its secured asset-backed revolving credit facility.

See Note 4, Debt , for more information on this new credit facility.

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

The Company’s management believes that its cash and cash equivalents on-hand, together with anticipated cash flows from operations, availability under its secured asset-backed revolving credit facility, and anticipated savings from ongoing cost reduction efforts, will be sufficient to meet its cash flow needs for the next twelve months from the filing date of this report.

If events or circumstances occur such that the Company does not meet its operating plans 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 and capital expenditures, which could have an adverse impact on its ability to achieve its intended business objectives.

The Company’s liquidity could also be impaired by significant interruptions in its business operations, such as those described above under the heading Risks and Uncertainties , or, a material failure to satisfy its contractual commitments or a failure to generate revenues from new or existing products.

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

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.

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

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

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

statements of cash flows (in thousands):

2022 December 31,

Cash and cash equivalents $ 21,090 $ 46,474

Restricted cash 3,270 3,338

Cash, cash equivalents and restricted cash, end of period

$ 24,360 $ 49,812

Restricted cash held in escrow as of December 31, 2021 was released during the third quarter of 2022 and we no longer have any restricted cash on our balance sheet as of September 30, 2022.

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 .

In August 2020, the Financial Accounting Standards Board (“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.

2 unchanged sentences

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

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.

The guidance is effective for annual and interim periods beginning after December 15, 2021.

The Company adopted the ASU in the first quarter of fiscal 2022 and there was no 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.

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

The ASU is effective for annual and interim periods beginning after December 15, 2021.

The Company adopted the ASU in the first quarter of fiscal 2022 and there was no 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 six months ended June 30, 2022 that are of significance or potential significance to the Company’s financial position, results of operations and cash flows.

In September 2022, the FASB issued ASU No.

2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50) .

The ASU requires disclosure of the key terms of outstanding supplier finance programs and a rollforward of the related obligations.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The ASU does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations.

The ASU is effective for annual and interim periods beginning after December 15, 2022, except for the rollforward requirement, which is effective for annual periods beginning after December 15, 2023.

The Company is currently evaluating the impact of this ASU on its consolidated financial statements.

Financial Statement Details

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

Inventories consist of the following (in thousands):

September 30,

2022 December 31,

2 unchanged sentences

Total inventories $ 42,406 $ 37,402

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Prepaid expenses and other

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

September 30,

2022 December 31,

9 unchanged sentences

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

September 30,

2022 December 31,

3 unchanged sentences

Professional fees 586 502

Bank overdrafts 231 370

Accrued interest 2,410 877

Contract liabilities 5,042 3,832

Customer contract liabilities 8,554 3,832

Operating lease liabilities 1,662 1,769

Accrued contract manufacturing liabilities 1,599 927

Liabilities related to financed assets 272 1,593

Value added tax payables 424 642

1 unchanged sentence

Total accrued expenses and other current liabilities $ 31,476 $ 26,253

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 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.

The Company classifies inputs to measure fair value using a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

The categorization of financial instruments within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The hierarchy is prioritized into three levels (with Level 3 being the lowest) and is defined as follows:

Pricing inputs are based on quoted market prices for identical assets or liabilities in active markets (e.g., NYSE or NASDAQ).

Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Pricing inputs include benchmark yields, trade data, reported trades and broker dealer quotes, two-sided markets and industry and economic events, yield to maturity, Municipal Securities Rule Making Board reported trades and vendor trading platform data.

Level 2 includes those financial instruments that are valued using various pricing services and broker pricing information including Electronic Communication Networks and broker feeds.

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

Fair Value Measurement of Assets and Liabilities

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.

Each fair value measurement is classified into one of the following levels based on the information used in the valuation:

Observable inputs such as quoted prices in active markets.

Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

The fair market value for level 3 securities may be highly sensitive to the use of unobservable inputs and subjective assumptions.

Generally, changes in significant unobservable inputs may result in significantly lower or higher fair value measurements.

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

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

There have been no transfers of assets or liabilities between fair value measurement classifications during the six months ended June 30, 2022 or 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 June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022 December 31, 2021

The following table summarizes the Company’s financial instruments measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 (in thousands):

September 30, 2022 December 31, 2021

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

4 unchanged sentences

Total liabilities $ 24 $ 24 $ — $ 926 $ 926 $ —

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

June 30, 2022 December 31, 2021

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

September 30, 2022 December 31, 2021

Volatility 50 % 50 %

5 unchanged sentences

Risk-free rate 4.24 % 1.02 %

The following table sets forth a summary of changes in the fair value of Level 3 li abilities for the six months ended June 30, 2022 (in thousands):

Balance as of

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

June 30, 2022

Interest make-whole payment $ 926 $ — $ — $ ( 902 ) $ 24

No unrealized gain related to the interest make-whole payment derivative liability was recognized for the three months ended September 30, 2022, compared to a $ 1.6 million,unrealized gain for the three months ended September 30, 2021.

The Company also recognized $ 0.9 million and $ 3.4 million of unrealized gains for the nine months ended September 30, 2022 and 2021, respectively.

Unrealized gains and losses on the interest make-whole payment derivative are included within other income (expense), net, on the condensed consolidated statements of operations.

The Company reviews the fair value hierarchy classification of its financial instruments measured at fair value on a quarterly basis.

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

There have been no transfers of assets or liabilities between fair value measurement classifications during the nine months ended September 30, 2022 or 2021.

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 June 30, 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 $ 0.9 million for the six months ended June 30, 2022 are included in the Company’s condensed consolidated statement of operations within other income (expense), net.

As of June 30, 2022, the embedded derivative had a fair value of $ 0.02 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 4.

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

As of June 30, 2022, $ 161.9 million in principal amount of the 2025 Notes remain outstanding.

The carrying values of the Company’s other financial assets and liabilities approximate their fair values because of their short-term nature, with the exception of the 3.25% convertible senior notes due 2025 (the “2025 Notes”).

The 2025 Notes are carried at amortized cost, adjusted for changes in fair value of the embedded derivative.

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

Asset-backed Revolving Line of Credit

On August 5, 2022, the Company entered into the Credit Agreement with Siena Lending Group LLC.

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

As of September 30, 2022 and December 31, 2021, the carrying amount of the 2025 Notes was $ 158.1 million and $ 157.9 million, respectively.

Debt for additional information on the 2025 Notes.

Asset-backed Revolving Credit Facility

On August 5, 2022, 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 (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 maximum $ 50 million revolving credit facility (“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 comprised of a percentage of eligible accounts receivable and eligible inventory of the Borrowers.

Availability under the Credit Facility is determined monthly by a borrowing base comprised of a percentage of eligible accounts receivable and eligible inventory of the Borrowers.

Outstanding amounts exceeding the borrowing base must be repaid immediately.

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

Borrowings under the Credit Facility may take the form of base rate loans or 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 Rate 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 Rate plus 5.50 %, with a Term SOFR floor of 1.00 %.

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

Borrowings under the Credit Facility may take the form of base rate (“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 as the Term SOFR Reference Rate for a tenor of one month on the day) plus the Applicable Margin (as defined in the Credit Agreement), with a Term SOFR floor of 1 %.

Base Rate loans will bear interest at a rate per annum equal to the Applicable Margin plus the greatest of (a) the per annum rate of interest which is identified as the “Prime Rate” and normally published in the Money Rates section of The Wall Street Journal, (b) the sum of the Federal Funds Rate (as defined in the Credit Agreement) plus 0.5 % and (c) 3.50 % per annum.

The Applicable Margin varies depending on the average outstanding amount for a preceding month.

If the average outstanding amount for a preceding month is less than $15 million, the Applicable Margin will be 2.50 % for Base Rate loans and 3.50 % for SOFR loans.

If the average outstanding amount for a preceding month is between $15 million and $25 million, the Applicable Margin will be 3.00 % for Base Rate loans and 4.00 % for SOFR loans.

If the average outstanding amount for a preceding month is greater than $25 million, the Applicable Margin will be 4.5 % for Base Rate loans and 5.50 % for SOFR loans.

The Credit Agreement contains a financial covenant whereby the Loan Parties shall not permit the consolidated Liquidity (as defined in the Credit Agreement) to be less than $ 10 million at any time.

The Credit Agreement also contains certain customary covenants, which include, but are not limited to, restrictions on indebtedness, liens, fundamental changes, restricted payments, asset sales, and investments, and places limits on various other payments.

The Company was in compliance with all Credit Agreement covenants as of September 30, 2022.

Upon execution of the Credit Agreement, the Company paid $ 1.1 million of debt issuance costs, which will be amortized to interest expense throughout the term of the agreement..

Through September 30, 2022, the Company borrowed an aggregate $ 9.0 million and repaid an aggregate $ 4.5 million under the Credit Facility.

As of September 30, 2022, the Credit Facility had outstanding borrowings of $ 4.5 million and a borrowing base of $ 19.1 million.

The Company’s policy is to classify outstanding borrowings as long-term so long as such borrowings are not expected to exceed the borrowing base over the 12 months subsequent to the balance sheet date, in which case, any excess borrowings would be classified as short-term.

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 six months ended June 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.

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

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

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The 2025 Notes will mature on May 1, 2025, unless earlier repurchased, redeemed or converted.

The 2025 Notes are senior unsecured obligations of the Company and bear interest at an annual rate of 3.25 %, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on November 1, 2020.

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 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.

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.

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

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

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

The Indenture contains customary events of default.

If an event of default (other than certain events of bankruptcy, insolvency or reorganization involving the Company) occurs and is continuing, the Trustee, by notice to the Company, or the holders of the 2025 Notes representing at least 25 % in aggregate principal amount of the outstanding 2025 Notes, by notice to the Company and the Trustee, may declare 100 % of the principal of, and all accrued and unpaid interest on, all of the then outstanding 2025 Notes to be due and payable immediately.

Upon the occurrence of certain events of bankruptcy, insolvency or reorganization involving the Company, 100 % of the principal of, and all accrued and unpaid interest on, all of the then outstanding 2025 Notes will automatically become immediately due and payable.

Notwithstanding the foregoing, the Indenture provides that, to the extent the Company elects, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture will, for the first 360 days after such event of default, consist exclusively of the right to receive additional interest on the 2025 Notes.

Interest make-whole payment

The 2025 Notes also include an interest make-whole payment feature whereby if the last reported sale price of the Company’s common stock for each of the five trading days immediately preceding a conversion date is greater than or equal to $ 10.51 , the Company will, in addition to the other consideration payable or deliverable in connection with such conversion, make an interest make-whole payment to the converting holder equal to the sum of the present values of the scheduled payments of interest that would have been made on the 2025 Notes to be converted had such notes remained outstanding from the conversion date through the earlier of (i) the date that is three years after the conversion date and (ii) the maturity date.

The present values will be computed using a discount rate equal to 1 %.

The Company will satisfy its obligation to pay the interest make-whole payment, at its election, in cash or shares of common stock (together with cash in lieu of fractional shares).

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.

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,

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of June 30, 2022, $ 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.

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.

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.

As of September 30, 2022 and 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 is due on May 1, 2025.

The 2025 Notes are senior unsecured obligations of the Company and bear interest at an annual rate of 3.25 %, payable semi-annually in arrears on May 1 and November 1 of each year.

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

September 30,

2022 December 31,

4 unchanged sentences

Net carrying amount $ 158,079 $ 157,866

The effective interest rate on the liability component of the 2025 Notes was 4.18 % and 4.17 % for the three months ended June 30, 2022 and 2021, respectively, and 4.20 % and 4.16 % for the six months ended June 30, 2022 and 2021, respectively.

The effective interest rate on the liability component of the 2025 Notes was 4.13 % and 4.12 % for the three months ended September 30, 2022 and 2021, respectively, and 4.18 % and 4.15 % for the nine months ended September 30, 2022 and 2021, respectively.

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

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

4 unchanged sentences

Share-based Compensation

During the six months ended June 30, 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”).

During the nine months ended September 30, 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 maximum of 8,897,084 shares of common stock may be issued upon the exercise of stock options, in the form of restricted stock, or in settlement of restricted stock units (“RSUs”) or other awards, including awards with alternative vesting schedules such as performance-based criteria.

For the three and six months end ed June 30, 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):

For the three and nine months end ed September 30, 2022 and 2021 the following table presents total share-based compensation expense within each functional line item on the condensed consolidated statements of operations (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

6 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Stock Options

3 unchanged sentences

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 activ ity for the six months ended June 30, 2022 :

The following table summarizes the Company’s stock option activ ity for the nine months ended September 30, 2022 :

Outstanding — December 31, 2021 8,085,793

2 unchanged sentences

Canceled ( 831,400 )

Outstanding — June 30, 2022 8,638,497

Exercisable — June 30, 2022 5,229,193

At June 30, 2022, total unrecognized compensatio n expense related to stock options was $ 10.1 million, which is expected to be recognized over a weighted-average period of 2.92 years.

Outstanding — September 30, 2022 8,412,550

Exercisable — September 30, 2022 5,391,541

At September 30, 2022, total unrecognized compensatio n expense related to stock options was $ 8.9 million , which is expected to be recognized over a weighted-average period of 2.76 years .

Restricted Stock Units

3 unchanged sentences

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

The following table summarizes the Company’s RSU activity for the six months ended June 30, 2022 :

The following table summarizes the Company’s RSU activity for the nine months ended September 30, 2022 :

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

2 unchanged sentences

Forfeited ( 220,883 )

Non-vested — June 30, 2022 1,408,926

At June 30, 2022, total unrecognized compensation expense related to RSUs was $ 5.2 million, which is expected to be recognized over a weighted-average period of 3.15 years.

Non-vested — September 30, 2022 1,491,624

At September 30, 2022, total unrecognized compensation expense related to RSUs was $ 5.0 million , which is expected to be recognized over a weighted-average period of 2.71 years .

Earnings Per Share

5 unchanged sentences

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

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

2 unchanged sentences

Basic and diluted net loss per share $ ( 0.15 ) $ ( 0.09 ) $ ( 0.52 ) $ ( 0.40 )

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 June 30, Six Months Ended June 30,

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

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

(in thousands) 2022 2021 2022 2021

6 unchanged sentences

Private Placements and Public Offering

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, and became exercisable on September 28, 2019.

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

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

As of June 30, 2022, the warrants expired unexercised.

On January 25, 2021, the Company entered into an Equity Distribution Agreement with 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.

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

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

The Company determined that the warrants did not require liability accounting and classified the warrants as equity.

At June 30, 2022, the warrants expired unexercised.

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

2 unchanged sentences

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

Three Months Ended June 30, Six Months Ended

Three Months Ended September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

1 unchanged sentence

Europe 6,954 5,828 20,176 17,425

South Africa — 7,790 — 14,898

South Africa (a)

— 2,435 — 17,333

Australia (b)

7,543 982 9,966 2,883

Other 746 358 2,873 1,044

Total $ 69,167 $ 66,217 $ 192,408 $ 189,507

(a) In July 2021, the Company sold its Ctrack South Africa business.

(b) Separated Australia and Europe from Other for all prior year periods presented.

INSEEGO CORP.

1 unchanged sentence

Concentrations of Credit Risk

For the three months ended June 30, 2022, two customers accounted for 31.4 % and 40.9 % of net revenues, respectively.

For the three months ende d June 30, 2021, two customers accounted for 46.7 % and 21.3 %, respectively, of net revenues.

For the six months ended June 30, 2022, two customers accounted for 34.3 % and 40.4 % of net revenues, respectively.

For the six months ende d June 30, 2021, two customers accounted for 46.4 % and 18.7 %, respectively, of net revenues.

As of June 30, 2022, two customers accoun ted for 25.4 % and 30.9 % of accounts receivable, net, respectively.

For the three months ended September 30, 2022, two customers accounted for 33.9 % and 29.3 % of net revenues, respectively.

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

For the nine months ended September 30, 2022, two customers accounted for 50.8 % and 44.4 % of net revenues, respectively.

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

As of September 30, 2022, three customers accoun ted for 33.5 %, 15.3 % and 13.3 % of accounts receivable, net, respectively.

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

3 unchanged sentences

Such commitments are noncancellable (“noncancellable purchase obligations”).

As of June 30, 2022, future payments under these noncancellable purchase obligations were approximately $ 145.1 million .

As of September 30, 2022, future payments under these noncancellable purchase obligations were approximately $ 104.7 million.

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

The Company is, from time to time, party to various legal proceedings arising in the ordinary course of business and may be required to indirectly participate in other U.S.

patent infringement actions pursuant to its contractual indemnification obligations to certain customers.

Indemnification

In the normal course of business, the Company periodically enters into agreements that require the Company to indemnify and defend its customers for, among other things, claims alleging that the Company’s products infringe third-party patents or other intellectual property rights.

The Company’s maximum exposure under these indemnification provisions cannot be estimated but the Company does not believe that there are any matters individually or collectively that would have a material adverse effect on its condensed consolidated results of operations or financial condition.

The Company is a lessee in lease agreements for office space, automobiles and certain equipment.

Certain of the Company’s leases contain provisions that provide for one or more options to renew at the Company’s sole discretion.

The majority of the Company’s leases are comprised of fixed lease payments, with a small percentage of its real estate leases including lease payments subject to a rate or index, which may be variable.

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

As a practical expedient permitted under the new guidance, ASC 842 Leases (“ASC 842”), the Company has elected to account for the lease and non-lease components as a single lease component.

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

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

As a result of the Company’s election of the package of practical expedients permitted within ASC 842, which among other things, allows for the carryforward of historical lease classification, all of the Company’s lease agreements in existence at the date of adoption that were classified as operating leases under the legacy guidance, ASC 840, have been classified as operating leases under ASC 842.

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.

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.

Right-of-use assets and lease liabilities

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

related to the Company’s operating leases are recognized at the lease commencement date based on the present value of the remaining lease payments over the lease term.

When the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available surrounding the Company’s borrowing rates at the lease commencement date in determining the present value of lease payments.

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

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

Balance Sheet Classification June 30,

Balance Sheet Classification September 30,

2022 December 31,

Right-of-use assets, net Right-of-use assets, net $ 6,985 $ 7,839

Operating right-of-use assets, net Right-of-use assets, net $ 6,902 $ 7,839

Current operating lease liabilities Accrued expenses and other current liabilities $ 1,662 $ 1,769

4 unchanged sentences

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

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

Operating lease costs included in operating costs and expenses $ 589 $ 200 $ 1,789 $ 1,000

Operating leases $ 590 $ 290 $ 1,200 $ 800

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

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

Nine Months Ended September 30,

Operating cash flows related to operating leases $ 1,857 $ 1,858

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

Operating leases 79 $ 108 $ 158 $ 148

The future minimum payments under operating leases were as follows as of June 30, 2022 (in thousands):

Operating right-of-use assets obtained in exchange for lease liabilities $ 342 $ 544

F uture minimum payments under operating leases were as follows as of September 30, 2022 (in thousands):

2022 (remainder) $ 783

4 unchanged sentences

Long-term portion of operating lease obligations $ 6,056

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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.

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 was $( 0.3 ) million and $ 0.2 million for the three months ended June 30, 2022 and 2021, respectively.

The Company’s incom e tax (benefit) provision was $( 0.6 ) million and $ 0.4 million for the six months ended June 30, 2022 and 2021, respectively.

The income tax (benefit) provision 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 several of its foreign subsidiaries.

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

The Company’s income tax provision (benefit) was $ 42 thousand and $( 4 ) thousand for the three months ended September 30, 2022 and 2021, respectively, and $( 0.6 ) million and $ 0.4 million for the nine months ended September 30, 2022 and 2021, respectively.

Income taxes for all periods 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 differs from the expected expense based on statutory rates primarily due to full valuation allowances at all of its U.S.-based entities and several of its foreign subsidiaries.

The income tax (benefit) provision for the nine months ended September 30, 2022 and 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.

On August 16, 2022, Congress passed, and the President signed into law, the Inflation Reduction Act, 2022 (the “IRA”), which includes certain business tax provisions.

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

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