What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-03 compared with 2022-03-01 · 140 added, 107 removed, 273 unchanged (48% of the section changed)

15 unchanged sentences

It is this proven expertise, commitment to quality, obsession with innovation and a relentless focus on execution that makes us a preferred global partner of service providers, distributors, value-added resellers, system integrators, and enterprises worldwide.

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

On July 30, 2021, we completed the sale of Ctrack South Africa to an affiliate of Convergence.

Initial cash proceeds of $36.6 million were received.

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Business Segment Reporting

We do not provide separate segment reporting for our various lines of business.

We operate as one business segment.

Our Chief Executive Officer, who is also our Chief Operating Decision Maker, evaluates the business as a single entity and reviews financial information and makes business decisions based on the overall results of the business.

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Our revenues are also significantly dependent upon the availability of materials and components used in our hardware products.

We anticipate introducing additional products during the next twelve months, including SaaS and additional service offerings, industrial IoT hardware and services, and other mobile and fixed wireless devices targeting the emerging 5G market.

A number of the products that we invested in and launched in 2021 and 2022 will continue to drive revenue in 2023 as the 5G markets grow.

We will supplement our portfolio with strategic additions of both hardware and SaaS offerings targeting the emerging 5G market.

We continue to develop and maintain strategic relationships with service providers and other wireless industry leaders such as Verizon Wireless, T-Mobile and Qualcomm.

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Although general and administrative expenses are not directly related to revenue levels, certain expenses such as legal expenses and provisions for bad debts may cause significant volatility in future general and administrative expenses which may, in turn, impact net revenue levels.

Operating Results.

Our results are affected by numerous macroeconomic factors including inflation, consumer spending confidence and global supply chains.

The existence of inflation in the U.S.

and global economy has resulted in, and may continue to result in, higher interest rates and capital costs, increased costs of labor, fluctuating exchange rates and other similar effects.

If the inflation rate continues to increase, it could affect our expenses, especially employee compensation expense.

Inflation and related increases in interest rates could also increase our customers' operating costs, which could result in reduced operating budgets.

To the extent our products are perceived by customers and potential customers as discretionary, our revenue may be disproportionately affected by delays or reductions in general information technology spending.

Such delays or reductions in technology spending are often associated with enhanced budget scrutiny by our customers including additional levels of approvals, cloud optimization efforts and additional time to evaluate and test our products, which can lead to long and unpredictable sales cycles.

Such increases have, and may continue to have, a negative impact on the Company’s revenue and profit margins, if the selling prices of products do not increase with the increased costs.

Business Strategy.

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

26 unchanged sentences

Interest expense, net (8,606) (3.5) (6,874) (2.6) (9,942) (3.5)

Other income, net 845 0.3 % 992 0.3 % 351 0.2 %

Other (expense) income, net (1,460) (0.6) 845 0.3 992 0.3

Loss before income taxes (68,434) (27.9) (47,720) (18.2) (110,438) (35.2)

Income tax provision 191 0.1 % 748 0.2 % 536 20.0 %

Income tax (benefit) provision (465) (0.2) 191 0.1 748 0.2

Net loss (67,969) (27.7) (47,911) (18.3) (111,186) (35.4)

14 unchanged sentences

IoT & Mobile Solutions.

The decrease in IoT & Mobile Solutions net revenues is primarily due to decreases in our enterprise and carrier offerings, and lower sales of LTE gigabit hotspots as the COVID-19 pandemic demand eased, partially offset by increased sales of our second-generation 5G hotspot related to our MiFi business and increased revenues in our Inseego Subscribe business due to subscriber growth.

The $0.4 million increase in IoT & Mobile Solutions net revenues is primarily due to decreases in our carrier offerings and lower sales of LTE gigabit hotspots as the COVID-19 pandemic demand eased.

Sales of our second-generation and fourth generation (launched in later part of 2022) 5G hotspot related to our MiFi business also increased as well as revenues in our Enterprise and Inseego Subscribe businesses due to subscriber growth.

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

SaaS revenue was no longer generated in Africa, Pakistan or the Middle East beginning in August 2021.

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Following the divestiture of Ctrack South Africa, we continue to provide telematics solutions in the rest of the world, including in Europe and Australia.

Such impact was partially offset by an increase in Enterprise SaaS Solutions net revenue throughout the rest of the world as a result of the lifting of COVID-19 related installation restrictions during fiscal 2021.

The resulting decrease was partially offset by an increase in Enterprise SaaS Solutions net revenue throughout the rest of the world as a result of the lifting of COVID-19 related installation restrictions in place during fiscal 2021.

Cost of net revenues.

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Gross profit for the year ended December 31, 2022 was $66.9 million, or a gross margin of 27.3%, compared to $75.9 million, or a gross margin of 28.9%, for the same period in 2021.

The gross margin percentage remained stable due to an unfavorable product mix and a decrease in Enterprise SaaS Solutions as a result of the divestiture of Ctrack South Africa which has a higher gross margin, offset by higher Inseego Subscribe revenue.

The gross margin percentage slightly decreased due to an unfavorable product mix and a decrease in Enterprise SaaS Solutions as a result of the divestiture of Ctrack South Africa which had a higher gross margin, offset by higher Inseego Subscribe revenue and gross margin.

Operating costs and expenses.

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

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Research and development expenses for the year ended December 31, 2022 were $59.2 million, or 24.1% of net revenues, compared to $52.7 million, or 20.1% of net revenues, for the same period in 2021.

The increase was primarily a result of increased staffing, test units, and other development spending related to 5G product programs.

The increase was primarily driven by an increase in capitalized project amortization, partially offset by a decrease in consulting services for 2021 efforts towards internal SaaS use projects.

Sales and marketing expenses.

Sales and marketing expenses for the year ended December 31, 2022 were $33.5 million, or 13.7% of net revenues, compared to $38.2 million, or 14.6% of net revenues, for the same period in 2021.

The increase was primarily a result of higher spend on the marketing of our 5G products.

The increase in sales and marketing expenses was partially offset by a decrease in payro ll costs for Ctrack South Africa employees, given the divestiture that was completed on July 30, 2021.

The decrease in sales and marketing expenses was due to the divestiture of Ctrack South Africa employees on July 30, 2021.

See Part IV Item 15.

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General and administrative expenses for the year ended December 31, 2022 were $27.3 million, or 11.1% of net revenues, compared to $28.3 million, or 10.8% 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 that was completed on July 30, 2021.

The decrease was primarily due to the divestiture of Ctrack South Africa on July 30, 2021.

See Part IV Item 15.

Business Divestiture .

The decrease in general and administrative expenses was partially offset by the impact of bonus grants to employees who contributed to completion of the Ctrack South Africa sale.

Business Divestiture for more information on the sale of Ctrack South Africa.

This decrease was partially offset by the impact of bonus stock award grants and a full year of licenses for our enterprise resource planning (“ERP”) system.

See Part IV Item 15.

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The amortization of purchased intangible assets for the years ended December 31, 2022 and 2021 was $1.7 million and $2.1 million, respectively.

The decrease was related to the divestiture of Ctrack South Africa as well as certain purchased intangibles becoming fully amortized for the year ended December 31, 2021.

The change was related to the divestiture of Ctrack South Africa for the year ended December 31, 2021.

Impairment of capitalized software.

For the years ended December 31, 2021 and 2020, we recorded losses of $1.2 million and $1.4 million, respectively, on capitalized software development costs related to an internal enterprise resource planning project.

For the years ended December 31, 2022 and 2021, we recorded losses of $3.0 million and $1.2 million, respectively, on capitalized software development costs related to decreases in sales and dormant projects.

Other income (expense).

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

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Interest expense, net (8,606) (6,874) (1,732) 25.2

Other income, net 845 992 (147) (14.8) %

Other (expense) income, net (1,460) 845 (2,305) (272.8)

Total $ (10,516) $ (1,199) $ (9,317) 777.1

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The loss on debt conversion and extinguishment, net for each of the years ended December 31, 2022 and 2021 was $0.5 million and $0.4 million, respectively.

These amounts represent the loss on debt conversion of the 2025 Notes during fiscal 2021 and the debt conversion and extinguishment of the 2022 Notes during fiscal 2020, respectively.

Interest expense, net.

Interest expense, net, for the years ended December 31, 2022 and 2021 was $8.6 million and $6.9 million, respectively.

The decrease in interest expense was primarily due to the lower interest rate on the 2025 Notes, as compared to the 2022 Notes and our previous term loan, partially offset by the higher principal amount of the 2025 Notes.

Other income, net.

Other income, net, for the year ended December 31, 2021 was $0.8 million, which primarily included the fair value adjustment related to our interest make-whole payment on the 2025 Notes as well as foreign currency transaction gains and losses.

The increase in interest expense was primarily due to an adjustment made to the 2022 Notes.

Other (expense) income, net.

Other expense, net, for the year ended December 31, 2022 was $1.5 million, which primarily included the fair value adjustment related to our interest make-whole payment on the 2025 Notes as well as foreign currency transaction gains and losses.

Other income, net for the same period in 2021 was $0.8 million, which primarily consisted of the fair value adjustment related to our interest make-whole payment on the 2025 Notes as well as foreign currency transaction gains and losses.

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

Income tax provision, net income attributable to noncontrolling interests, and Series E preferred stock dividends and deemed dividends from the preferred stock exchange (dollars in thousands):

December 31, Change

2022 2021 $ %

Income tax provision $ 191 $ 748 $ (557) (74.5) %

Income tax (benefit) provision $ (465) $ 191 $ (656) (343.5) %

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

Series E preferred stock dividends and deemed dividends from the preferred stock exchange (2,736) (4,243) 1,507 (35.5)

Income tax provision.

Income tax provision for the years ended December 31, 2021 and 2020 was $0.2 million and $0.7 million, respectively, which, in each case, primarily related to certain of our profitable subsidiaries in foreign jurisdictions.

Income tax (benefit) provision.

Income tax provision for the years ended December 31, 2022 and 2021 was a benefit of $0.5 million and a provision of $0.2 million, respectively, which, in each case, primarily related to certain of our profitable subsidiaries in foreign jurisdictions.

The effective tax rate for the year ended December 31, 2022 is different than the U.S.

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Net income attributable to noncontrolling interests.

For the years ended December 31, 2021 and 2020 there was $214,000 and $29,000, respectively, of net income attributable to noncontrolling interests.

For the years ended December 31, 2022 and 2021 there was $0 and $0.2 million, respectively, of net income attributable to noncontrolling interests.

Due to the sale of Ctrack South Africa in 2021, no such non-controlling interest existed in 2022.

Series E Preferred Stock dividends and deemed dividend from the preferred stock exchange.

During the years ended December 31, 2022 and 2021, we recorded dividends of $2.7 million and $4.2 million, respectively, on our Series E Preferred Stock.

The increase was primarily attributable to the impact of the deemed dividend of $1.1 million as part of the preferred stock exchange, offset by a decrease in the recurring preferred stock dividends as 10,000 shares of Series E Preferred Stock were extinguished in September 2021, resulting in a lower preferred stock dividends accrued through the end of 2021.

The decrease was primarily attributable to the impact of the deemed dividend of $1.1 million as part of the preferred stock exchange in September 2021, resulting in a lower preferred stock dividends accrued through the end of 2022.

See Part IV Item 15.

Stockholders’ Equity in the accompanying consolidated financial statements for further information.

Preferred Stock and Common Stock in the accompanying consolidated financial statements for further information.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Net revenues .

Net revenues for the year ended December 31, 2020 were $313.8 million, an increase of $94.3 million, or 43.0%, compared to the same period in 2019.

Net revenues for the year ended December 31, 2021 were $262.4 million, a decrease of $51.4 million, or 16.4%, compared to the same period in 2020.

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

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IoT & Mobile Solutions.

The increase in IoT & Mobile Solutions net revenues is primarily a result of increased sales in our LTE gigabit hotspots, the introduction of our second-generation 5G hotspot related to our MiFi business, and increased revenues in our Inseego Subscribe business due to subscriber growth.

As a result of the COVID-19 pandemic, there has been an increase in demand for our products due to a dramatic increase around the world in remote or tele-working and learning.

Enterprise SaaS Solutions.

Enterprise SaaS Solutions net revenues were down year-over-year due to the effects of strengthening U.S.

Dollar foreign exchange rates on international sales and the effect of COVID-19.

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

SaaS revenue was no longer generated in Africa, Pakistan or the Middle East beginning in August 2021.

See Part IV Item 15 Note 5.

Business Divestiture .

Following the divestiture of Ctrack South Africa, we continue to provide telematics solutions in the rest of the world, including in Europe and Australia.

The impact of the divestiture was partially offset by an increase in Enterprise SaaS Solutions net revenue throughout the rest of the world as a result of the lifting of COVID-19 related installation restrictions in place during fiscal 2021.

Cost of net revenues.

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IoT & Mobile Solutions.

The increase in IoT & Mobile Solutions cost of net revenues is primarily a result of increased sales of our LTE gigabit hotspots, and 5G hotspots, as well as associated expenses such as freight and royalties.

As a result of the COVID-19 pandemic, there has been an increase in demand in our products due to a dramatic increase around the world in remote or tele-working and learning.

The decrease in IoT & Mobile Solutions cost of net revenues is primarily a result of lower sales of LTE gigabit hotspots.

Enterprise SaaS Solutions.

Enterprise SaaS Solutions cost of net revenues decreased as a result of lower Ctrack system revenue, partially offset by the effect of strengthening U.S.

Dollar foreign exchange rates on international costs.

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

See Part IV Item 15 Note 5.

Business Divestiture .

Gross profit.

Gross profit for the year ended December 31, 2021 was $75.9 million, or a gross margin of 28.9%, compared to $90.8 million, or a gross margin of 28.9%, for the same period in 2020.

The slight decrease in the gross profit percentage was primarily attributable to an unfavorable product mix offset by improvements in IoT & Mobile Solutions gross margin.

The gross margin percentage remained

stable due to an unfavorable product mix and a decrease in Enterprise SaaS Solutions as a result of the divestiture of Ctrack South Africa which has a higher gross margin, offset by higher Inseego Subscribe revenue.

Operating costs and expenses .

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

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Sales and marketing expenses for the year ended December 31, 2021 were $38.2 million, or 14.6% of net revenues, compared to $35.8 million, or 11.4% of net revenues, for the same period in 2020.

The increase was primarily a result of an increase in headcount.

The increase was primarily a result of higher spend on the marketing of our 5G products.

The increase in sales and marketing expenses was partially offset by a decrease in payro ll costs for Ctrack South Africa employees, given the divestiture that was completed on July 30, 2021.

See Part IV Item 15.

Business Divestiture .

General and administrative expenses.

General and administrative expenses for the year ended December 31, 2021 were $28.3 million, or 10.8% of net revenues, compared to $30.7 million, or 9.8% of net revenues, for the same period in 2020.

The increase was primarily a result of an increase in employment costs attributable to an increase in headcount and non-recurring legal expenses.

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

See Part IV Item 15.

Business Divestiture .

The decrease in general and administrative expenses was partially offset by the impact of bonus grants to employees who contributed to the completion of the Ctrack South Africa sale.

See Part IV Item 15.

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

Amortization of purchased intangible assets .

The amortization of purchased intangible assets for the years ended December 31, 2021 and 2020 was $2.1 million and $3.2 million, respectively.

The decrease was related to the divestiture of Ctrack South Africa as well as certain purchased intangibles becoming fully amortized for the year ended December 31, 2021.

Impairment of capitalized software.

During the year ended December 31, 2020, we recorded a loss of $1.4 million on capitalized software development costs.

There was no such expense for the same period in 2019.

Other income (expense).

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

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Other income (expense) 2021 2020 $ %

Gain on sale of Ctrack South Africa $ 5,262 $ — $ 5,262 100.0 %

Loss on debt conversion and extinguishment, net (432) (76,354) 75,922 (99.4)

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Total $ (1,199) $ (85,304) $ 84,105 (98.6)

Gain on sale of Ctrack South Africa .

Gain on sale of Ctrack South Africa during the year ended December 31, 2021 was $5.3 million, related to the gain recognized on sale of Ctrack South Africa, while there was no such gain for the same period in fiscal 2020.

Loss on debt conversion and extinguishment, net.

During the year ended December 31, 2020, we recorded a loss of $76.4 million, which primarily represents the loss on debt conversion and extinguishment of the 2022 Notes, including a $7.9 million inducement expense incurred in connection with certain conversions of the 2022 Notes, and a $67.2 million loss recorded on debt conversion of the 2025 Notes.

There was no such expense for the same period in 2019.

The loss on debt conversion and extinguishment, net for each of the years ended December 31, 2021 and 2020 was $0.4 million and $76.4 million, respectively.

These amounts represent the loss

on debt conversion of the 2025 Notes during fiscal 2021 and the debt conversion and extinguishment of the 2022 Notes during fiscal 2020, respectively.

Interest expense, net.

Interest expense, net, for the years ended December 31, 2021 and 2020 was $6.9 million and $9.9 million, respectively.

Interest expense was primarily a result of the interest expense and amortization of the debt discount and debt issuance costs related to our previous term loan, the 2022 Notes and the 2025 Notes.

The decrease in interest expense was due to the conversion of debt into equity in 2020, payment in full of our previous term loan during 2020, as well as a lower interest rate on the 2025 Notes, as compared to the 2022 Notes.

Other income, net.

Other income, net for the same period in 2019 was $0.4 million, which primarily consisted of foreign currency transaction gains and losses.

Other income, net for the same period in 2020 was $1.0 million, which primarily consisted of the fair value adjustment related to our interest make-whole payment on the 2025 Notes as well as foreign currency transaction gains and losses.

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

December 31, Change

4 unchanged sentences

Income tax provision.

Income tax provision for the years ended December 31, 2020 and 2019 was $0.7 million and $0.5 million, respectively, which primarily related to certain of our profitable subsidiaries in foreign jurisdictions.

The effective tax rate for the year ended December 31, 2021 is different than the U.S.

1 unchanged sentence

Net income attributable to noncontrolling interests.

For the years ended December 31, 2020 and 2019 there was $0.03 million and $0.02 million, respectively, of net income or loss attributable to noncontrolling interests.

Series E Preferred Stock dividends.

During the year ended December 31, 2020 and 2019, we recorded $2.9 million and $0.4 million, respectively, of accrued Series E Preferred Stock dividends.

For the years ended December 31, 2021 and 2020 there was $0.2 million and $29 thousand, respectively, of net income attributable to noncontrolling interests.

Series E Preferred Stock dividends and deemed dividend from the preferred stock exchange.

During the years ended December 31, 2021 and 2020, we recorded dividends of $4.2 million and $2.9 million, respectively, on our Series E Preferred Stock.

See Part IV Item 15.

Preferred Stock and Common Stock in the accompanying 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 December 31, 2021, we had cash and cash equivalents of $46.5 million, as well as $3.3 million of restricted cash that will become available in July 2022, compared with cash and cash equivalents of $40.0 million as of December 31, 2020.

Our principal sources of liquidity are our existing cash and cash equivalents, cash generated from operations and a revolving credit facility as discussed further below.

As of December 31, 2022, we had available unrestricted cash and cash equivalents totaling $7.1 million and $6.1 million of availability under the Credit Facility compared with cash and cash equivalents of $46.5 million as of December 31, 2021.

As of December 31, 2022, we had working capital of $21.4 million compared to working capital as of December 31, 2021 of $52.8 million.

On July 30, 2021, we completed the sale of our Ctrack South Africa operations in Africa, Pakistan and the Middle East.

On July 30, 2021, we completed the sale of our Ctrack South Africa operations in Africa, Pakistan and the Middle East to an affiliate of Convergence.

Initial cash proceeds of $36.6 million were received.

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On January 25, 2021, we entered into an Equity Distribution Agreement with Canaccord Genuity LLC (the “Agent”), pursuant to which we may offer and sell, from time to time, through or to the Agent, up to $40.0 million of shares of our common stock (the “ATM Offering”) pursuant to the Company’s Registration Statement on Form S-3ASR (File No.

333-238057), which was filed with the Securities and Exchange Commission on May 7, 2020 and amended on February 14, 2022.

333-238057), as filed with the SEC on May 7, 2020 and amended from time to time.

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 December 31, 2021, there was approximately $9.5 million of shares of our common stock available for issuance pursuant to the ATM Offering.

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

As of December 31, 2021, our outstanding debt primarily consisted of $161.9 million in principal amount of 2025 Notes.

In the first quarter of 2020, $59.9 million of our 2022 Notes were exchanged for common stock in private exchange transactions.

Additionally, in the second quarter of 2020, we restructured our outstanding debt by completing a $100.0 million registered public offering (the “Offering”) of 2025 Notes and also entered into privately-negotiated Exchange Agreements, pursuant to which an aggregate of $45.0 million in principal amount of the 2022 Notes were exchanged for an aggregate of $32.0 million in cash and $80.4 million in principal amount of the 2025 Notes (the “Private Exchange Transactions”).

We also used a portion of the proceeds from the Offering to repay in full our previous term loan.

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

In order to make continued growth investments, on March 6, 2020, we issued and sold 25,000 shares of our Series E Preferred Stock, for an aggregate purchase price of $25.0 million.

There are currently 25,000 shares of Series E Preferred Stock outstanding with an aggregate liquidation preference of $25 million.

Each share of Series E Preferred Stock entitles the holder thereof to receive, when, as and if declared by the Company out of assets legally available therefor, cumulative cash dividends at an annual rate of 9.00% payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year, beginning on October 1, 2019.

If dividends are not declared and paid in any quarter, or if such dividends are declared but holders of the Series E Preferred Stock elect not to receive them in cash, the quarterly dividend will be deemed to accrue and will be added to the Series E Base Amount.

The Series E Preferred Stock has no voting rights unless otherwise required by law.

The Series E Preferred Stock is perpetual and has no maturity date.

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

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

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

As of December 31, 2022, there was approximately $9.5 million of cash, before underwriter fees and discounts, that we may generate from the issuance of shares of our common stock pursuant to the ATM Offering.

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

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

Our 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 our evolving cost structure.

If events or circumstances occur such that we do not meet our operating plan as expected, or if we become obligated to pay unforeseen expenditures as a result of ongoing litigation, we 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 our ability to achieve our intended business objectives.

We believe that our cash and cash equivalents, anticipated cash flows from operations, and our revolving credit facility will be sufficient to meet our cash flow needs for the next twelve months from the filing date of this report.

Our ability to achieve profitable operations and generate positive cash flow is dependent upon achieving a level and mix of revenues adequate to support our evolving cost structure and increasing working capital needs.

Our liquidity could be compromised if there is any interruption in our business operations, a material failure to satisfy our 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 us, or at all.

Ultimately, our ability to attain profitability and to generate positive cash flow is dependent upon achieving a level of revenues adequate to support our evolving cost structure and increasing working capital needs.

If events or circumstances occur such that we do not meet our operating plan as expected, we may be required to raise additional capital, reduce planned research and development activities, incur additional restructuring charges or reduce other operating expenses which could have an adverse impact on our ability to achieve our intended business objectives.

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

If additional funds are raised by the issuance of equity securities, Company stockholders could experience dilution of their ownership interests and securities issued may have rights senior to those of the holders of the Company’s common stock.

If additional funds are raised by the issuance of debt securities, we may be subject to additional limitations on our operations.

Additionally, we are uncertain of the full extent to which the COVID-19 pandemic will impact our business, operations and financial results.

Settlement Agreement

Pursuant to the amended merger agreement with respect to our acquisition of R.E.R.

Enterprises, Inc.

(“RER”) and its wholly-owned subsidiary and principal operating asset, Feeney Wireless, LLC (which has been renamed Inseego North America, LLC), we agreed to pay a total of $15.0 million in deferred purchase price in five cash installments over a four-year period, beginning in March 2016.

We also agreed to provide earn-out consideration to the former stockholders of RER in the form of $6.1 million in cash over a four-year period, beginning in March 2016, and issuance of up to 2,920,000 shares of our common stock in three equal annual installments, beginning in March 2016, contingent upon retention of certain key personnel of RER.

On May 11, 2017, we initiated a lawsuit against the former stockholders of RER in the Court of Chancery of the State of Delaware seeking recovery of damages for civil conspiracy, fraud in the inducement, unjust enrichment and breach of fiduciary duty.

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

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

On July 24, 2020, the Company issued 89,928 shares in satisfaction of all remaining liabilities under the Settlement Agreement.

Additionally, we are uncertain of the full extent to which the COVID-19 pandemic may impact our business, operations and financial results.

Revolving Credit Facility

On August 5, 2022, we 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”), as subsequently amended on February 25, 2023.

The Credit Agreement establishes a secured asset-backed revolving credit facility which is comprised of a maximum $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 monthly by a Borrowing Base (as defined in the Credit Agreement) 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 us.

Our 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 (“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 term 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.

We pay monthly fees of 0.4% per annum on the unused portion of the Credit Facility.

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 “Liquidity Covenant”).

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.

We determined that the term “Eligible Accounts”, as defined in the Credit Agreement would have excluded certain balances used in the determination of eligible collateral upon which our borrowing base is calculated and that exclusion would have resulted in a violation of the liquidity covenant as of December 31, 2022.

Accordingly, to clarify this matter and others, the Loan Parties agreed to amend the Credit Agreement, (the “Amended Credit Agreement”) to modify and clarify the definitions of “Eligible Accounts”, “Permitted Indebtedness” and “Eligible Inventory”.

The Amended Credit Agreement was entered into on February 25, 2023 with an effective date of December 15, 2022.

We were in compliance with the financial covenants in the Amended Credit Agreement as of December 31, 2022.

Upon execution of the Credit Agreement, we paid $1.1 million of debt issuance costs.

As of December 31, 2022, we had outstanding borrowings of $7.9 million, gross borrowing base of $15.7 million and availability of $7.8 million.

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 privately negotiated exchange agreements that closed concurrently with the registered offering in May 2020.

As of December 31, 2022 and December 31, 2021, $161.9 million in principal amount of the 2025 Notes were outstanding.

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.

Historical Cash Flows

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Net cash (used in) provided by operating activities $ (33,289) $ (25,212) $ 20,050

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

Net cash (used in) provided by investing activities (13,319) 6,078 (34,713)

Net cash provided by financing activities 5,427 29,921 42,081

Effect of exchange rates on cash (1,488) (990) 523

Net increase (decrease) in cash, cash equivalents and restricted cash 9,797 27,941 (19,002)

Net (decrease) increase in cash, cash equivalents and restricted cash (42,669) 9,797 27,941

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

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Operating activities.

Net cash used in operating activities was $25.2 million for the year ended December 31, 2021 compared to net cash provided by operating activities of $20.1 million for the same period in 2020.

Net cash used in operating

activities for the year ended December 31, 2021 was primarily attributable to the net cash used by changes in working capital, and the adjustments to the net loss such as share-based compensation expense, depreciation and amortization, including the amortization of debt discount and debt issuance costs, partially offset by the gain on sale of Ctrack South Africa and a non-cash fair value adjustment on derivative instrument .

Net cash provided by operating activities for the year ended December 31, 2020 was primarily attributable to non-cash charges for depreciation and amortization, including the amortization of debt discount and debt issuance costs, and share-based compensation expense as add backs to the net loss incurred during the period.

Net cash used in operating activities for the year ended December 31, 2019 was primarily attributable to the net losses incurred during the period, partially offset by non-cash charges for depreciation and amortization, including the amortization of debt discount and debt issuance costs, and share-based compensation expense.

Net cash used in operating activities for the year ended December 31, 2022 was $33.3 million and reflected a net loss of $68.0 million due to changes in working capital and non-cash fair value adjustment on our derivative instruments, offset by non-cash charges for share-based compensation expense, depreciation and amortization, including the amortization of debt discount and debt issuance costs and capitalized software impairment.

N et cash used in operating activities for the year ended December 31, 2021 was $25.2 million and reflected a net loss of $47.9 million due to changes in working capital, the gain on sale of Ctrack South Africa and a non-cash fair value adjustment on our derivative instruments, offset by non-cash charges for share-based compensation expense, depreciation and amortization, including the amortization of debt discount and debt issuance costs.

Net cash provided by operating activities for the year ended December 31, 2020 was primarily attributable to non-cash charges for loss on debt extinguishment, depreciation and amortization, including the amortization of debt discount and debt

issuance costs, and share-based compensation expense, offset by the net loss of $111.2 million incurred during the period and changes in working capital.

Investing activities.

Net cash provided by investing activities during the year ended December 31, 2021 was $6.1 million compared to $34.7 million used in investing activities for the same period in 2020.

Cash provided by investing activities during the year ended December 31, 2021 was primarily from the proceeds from sale of Ctrack South Africa, partially offset by purchases of intangible assets and additions to capitalized software, as well as purchases of property, plant and equipment.

Cash used in investing activities during the year ended December 31, 2020 was primarily related to the purchases of property, plant and equipment and capitalization of 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 as well as certain internally developed software projects.

Cash used in investing activities during the same period in 2019 was primarily attributable to the purchases of property, plant and equipment and the capitalization of certain costs related to the development of software to be sold in our products.

Net cash used in investing activities during the year ended December 31, 2022 was $13.3 million compared to $6.1 million provided by investing activities for the year ended December 31, 2021 .

Net cash used in investing activities during the year ended December 31, 2022 was primarily from capitalization of certain costs related to the development of software to be sold in our products, as well as purchases of property, plant and equipment.

Net cash provided by investing activities during the year ended December 31, 2021 was primarily from the proceeds from sale of Ctrack South Africa, partially offset by purchases of intangible assets and capitalization of certain costs related to the development of software to be sold in our products, as well as purchases of property, plant and equipment.

Net cash used in investing activities during the year ended December 31, 2020 was primarily related to the purchases of property, plant and equipment and capitalization of 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 as well as certain internally developed software projects.

Financing activities.

Net cash provided by financing activities during the year ended December 31, 2021 was $29.9 million, compared to net cash provided by financing activities of $42.1 million for the same period in 2020.

Net cash provided by financing activities during the year ended December 31, 2022 was primarily comprised of $6.8 million of cash inflows (consisting of borrowings of $12.4 million, net of $4.5 million in repayments and $1.1 million in debt issuance costs) related to our Credit Facility, partially offset by $1.6 million in principal payments for finance assets.

Net cash provided by financing activities during the year ended December 31, 2021 was primarily related to net proceeds received from the ATM Offering, stock option exercises and purchases through our employee stock purchase plan, partially offset by principal payments under finance lease arrangements.

Net cash provided by financing activities during the year ended December 31, 2020 was primarily attributable to the proceeds received from the issuance and sale of Series E Preferred Stock and the exercise of warrants to purchase common stock, as well as proceeds received from stock option exercises and purchases made under the employee stock purchase plan, partially offset by net repayments of bank and overdraft facilities, principal payments under our previous term loan and taxes paid on vested restricted stock units.

Net cash provided by financing activities during the year ended December 31, 2019 was primarily attributable to the proceeds received from the issuance and sale of Series E Preferred Stock and the exercise of warrants to purchase common stock, as well as proceeds received from stock option exercises and purchases made under the employee stock purchase plan, partially offset by net repayments of bank and overdraft facilities, principal payments under our previous term loan and taxes paid on vested restricted stock units.

Contractual Obligations

Net cash provided by financing activities during the year ended December 31, 2020 was primarily attributable to the proceeds received from the issuance of our 2025 Notes, net of issuance costs, the issuance and sale of Series E Preferred Stock and the exercise of warrants to purchase common stock, as well as proceeds received from stock option exercises and purchases made under the employee stock purchase plan, partially offset by net repayments of bank and overdraft facilities, repurchase of Series E preferred stock, principal payments under our previous term loan, principal payments under finance lease obligations and taxes paid on vested restricted stock units.

Contractual Obligations and Commitments

In order to mitigate the risk of material shortages and price increases, we enter into non-cancellable purchase obligations with certain key contract manufacturers for the purchase of goods and services in the three to four quarters following the balance sheet date.

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see Part IV Item 15 Note 6.

• $7.9 million in outstanding borrowings under the Credit Facility;

see Part IV Item 15 Note 6.

• Operating lease liabilities that are included on our consolidated balance sheet;

see Part IV Item 15 Note 12.

• other non-cancellable unconditional purchase obligations;

• other non-cancellable unconditional purchase obligations totaling approximating $77.6 million;

see Part IV Item 15 Note 11.

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

The establishment of technological feasibility and the ongoing assessment for recoverability of capitalized computer software development costs require considerable judgment by management with respect to certain external factors including, but not limited to, technological feasibility, anticipated future gross revenues, estimated economic life and changes in software and hardware technologies.

The establishment of technological feasibility and the ongoing assessment for recoverability of capitalized computer software development costs requires considerable judgment by us with respect to certain external factors including, but not limited to, technological feasibility, anticipated future gross revenues, estimated economic life and changes in software and hardware technologies.

Capitalized software development costs are comprised primarily of salaries, other direct payroll-related costs and payments to third party vendors.

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

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

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

2 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis