INSEEGO CORP. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in our reports to the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosure. As required by SEC rules, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal financial and accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2022, the end of the period covered by this report. Based on the foregoing, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures were effective as of December 31, 2022. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that internal controls may become inadequate because of changes in conditions, or because the degree of compliance with policies and procedures may deteriorate. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013 framework) in Internal Control—Integrated Framework . Based on our evaluation under the framework in Internal Control—Integrated Framework , our management concluded that our internal control over financial reporting was effective as of December 31, 2022. Marcum LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this Annual Report on Form 10-K, has also audited our internal control over financial reporting as of December 31, 2022. Their report on the effectiveness of the Company’s internal control over financial reporting is included below. 51 Changes in Internal Control over Financial Reporting An evaluation was also performed under the supervision and with the participation of our management, including our principal executive officer and our principal financial and accounting officer, of any change in our internal control over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The evaluation did not identify any change in our internal control over financial reporting that occurred during our latest fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING To the Stockholders and Board of Directors of Inseego Corp. Opinion on Internal Control over Financial Reporting We have audited Inseego Corp.'s (the “Company”) internal control over financial reporting as of December 31, 2022 based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets as of December 31, 2022 and 2021 and the related consolidated statements of operations, comprehensive loss, stockholders’ deficit, and cash flows and the related notes for each of the three years in the period ended December 31, 2022 of the Company, and our report dated March 2, 2023 expressed an unqualified opinion on those financial statements. Basis for Opinion The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate. 52 /s/ Marcum LLP Marcum LLP Philadelphia, Pennsylvania March 2, 2023 Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 53 PART III Items 10, 11, 12, 13 and 14. The information required by Items 10, 11, 12, 13 and 14 is incorporated by reference from the Company’s definitive proxy statement for the 2023 Annual Meeting of Stockholders or an amendment to this report, which the Company intends to file with the SEC within 120 days of the end of the fiscal year end to which this report relates. PART IV Item 15. Exhibit and Financial Statement Schedules (a)(1) The Company’s consolidated financial statements and report of the Marcum LLP, Independent Registered Public Accounting Firm, are included in Section IV of this report beginning on page F-1. (a)(2) Schedules have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the consolidated financial statements or related notes thereto. (a)(3) Exhibits The following Exhibits are filed as part of, or incorporated by reference into this report: Exhibit No. Description 2.1 Share Purchase Agreement, dated as of February 24, 2021, by and between Inseego Corp. and Main Street 1816 Proprietary Limited (in the process of being renamed Convergence CTSA Proprietary Limited)(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed February 25, 2021). 2.2 First Addendum dated March 17, 2021 to the Share Purchase Agreement dated February 24, 2021 between Main Street 1816 Proprietary Limited (in the process of being renamed Convergence CTSA Proprietary Limited) and Inseego Corp. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed June 30, 2021.) 2.3 Second Addendum dated April 30, 2021 to the Share Purchase Agreement dated February 24, 2021 between Main Street 1816 Proprietary Limited (in the process of being renamed Convergence CTSA Proprietary Limited) and Inseego Corp. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed June 30, 2021). 2.4 Third Addendum dated June 30, 2021 to the Share Purchase Agreement dated February 24, 2021 between Main Street 1816 Proprietary Limited (in the process of being renamed Convergence CTSA Proprietary Limited) and Inseego Corp. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 30, 2021.) 3.1 Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed November 9, 2016). 3.2 Amended and Restated Bylaws of Inseego Corp. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed November 9, 2016). 3.3 Certificate of Designation of Series D Junior Participating Preferred Stock of Inseego Corp. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed January 22, 2018). 3.4 Certificate of Designation of Series E Fixed-Rate Cumulative Perpetual Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed August 13, 2019). 3.5 Certificate of Amendment to Certificate of Designation of Series E Fixed-Rate Cumulative Perpetual Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed March 10, 2020). 4.1 Form of Inseego Corp. Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed November 9, 2016). 4.2 Description of Equity Securities Registered under Section 12 of the Exchange Act. (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K filed on March 1, 2021). 4.3 Base Indenture, dated May 12, 2020, between Inseego Corp. and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed May 12, 4.4 First Supplemental Indenture, dated May 12, 2020, between Inseego Corp. and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed May 12, 2020). 54 Exhibit No. Description 4.5 Form of 3.25% convertible senior note due 2025 (incorporated by reference Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q, filed August 10, 2020). 4.6 Registration Rights Agreement, dated August 6, 2018, by and among Inseego Corp. and the Investors identified on Exhibit A to the Securities Purchase Agreement (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K, filed August 7, 2018). 10.1* Amended and Restated Inseego Corp. 2000 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-38358), filed on August 9, 2022). 10.2* Change in Control Agreement dated September 25, 2017 between Inseego Corp. and Ashish Sharma. 10.3* Form of Indemnification (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed August 21, 2017). 10.4* Transition Agreement, dated March 1, 2022, between Inseego Corp. and Dan Mondor (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q, filed May 4, 2022). 10.5* Inseego Corp. 2015 Incentive Compensation Plan (incorporated by reference to Exhibit 10.26 to the Company’s Annual Report on Form 10-K, filed on March 16, 2018). 10.6* Form of Nonstatutory Stock Option Agreement under the Inseego Corp. 2015 Incentive Compensation Plan (incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K, filed on March 16, 2018). 10.7* Amended Inseego Corp. 2018 Omnibus Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38358), filed on August 9, 2022). 10.8 Securities Purchase Agreement, dated August 6, 2018, by and among Inseego Corp. and the Investors identified on Exhibit A thereto (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed August 7, 2018). 10.9 Assignment and License Agreement, dated as of February 24, 2021, by and between Inseego Corp. and certain entities that will be acquired by Purchaser in the Sale Transaction (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed February 25, 2021). 10.10 Transitional Services Agreement, dated as of February 24, 2021, by and between Inseego Corp. and certain entities that will be acquired by Purchaser in the Sale Transaction (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed February 25, 2021). 10.11 Trademark Agreement, dated as of February 24, 2021, by and between Inseego Corp. Ctrack Holdings (Pty) Limited, and certain entities that will be acquired by Purchaser in the Sale Transaction (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed February 25, 2021). 10.12 Equity Distribution Agreement, dated as of January 25, 2021, by and between Inseego Corp. and Canaccord Genuity LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed January 26, 2021). 10.13* Amended and Restated Change in Control and Severance Agreement, dated June 7, 2021, by and between the Company and Dan Mondor (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed June 10, 2021). 10.16* Offer Letter dated October 13, 2021 between Inseego Corp. and Robert G. Barbieri. (incorporated by reference to Exhibit 10.1 to the Company’s Current on Form 8-K/A, filed October 26, 2021). 10.17* Form of Inducement Stock Option Agreement, by and between Inseego Corp. and Robert G. Barbieri (incorporated by reference to Exhibit 10.2 to the Company’s Current on Form 8-K/A, filed October 26, 2021). 10.18* Change in Control Agreement dated October 25, 2021 between Inseego Corp. and Robert G. Barbieri (incorporated by reference to Exhibit 10.3 to the Company’s Current on Form 8-K/A, filed October 26, 2021). 10.19 Loan and Security Agreement, dated as of August 5, 2022, among Siena Lending Group LLC (as Lender), Inseego Wireless, Inc., and Inseego North America LLC (as Borrowers), and Inseego Corp. (as Guarantor). 10.20 First Amendment, dated as of December 15, 2022, to Loan and Security Agreement, dated as of August 5, 2022, among Siena Lending Group LLC (as Lender), Inseego Wireless, Inc., and Inseego North America LLC (as Borrowers), and Inseego Corp. (as Guarantor). 21** Subsidiaries of Inseego Corp. 55 Exhibit No. Description 23.1** Consent of Independent Registered Public Accounting Firm (Marcum LLP). 31.1** Certification of our Principal Executive Officer adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2** Certification of our Principal Financial Officer adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2** Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) * Management contract, compensatory plan or arrangement ** Filed herewith (b) See Item 15(a)(3) above. (c) See Item 15(a)(2) above. Item 16. Form 10-K Summary None. 56 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 2, 2023 INSEEGO CORP. By /s/ Ashish Sharma Ashish Sharma Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Ashish Sharma Chief Executive Officer (Principal Executive Officer and Director) March 2, 2023 Ashish Sharma /s/ Robert G. Barbieri Chief Financial Officer (Principal Financial and Accounting Officer) March 2, 2023 Robert G. Barbieri /s/ Christopher Harland Director March 2, 2023 Christopher Harland /s/ Christopher Lytle Director March 2, 2023 Christopher Lytle /s/ Jeffrey Tuder Director March 2, 2023 Jeffrey Tuder /s/ James B. Avery Director March 2, 2023 James B. Avery /s/ Stephanie Bowers Director March 2, 2023 Stephanie Bowers 57 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID # 688 ) 2 Consolidated Balance Sheets 3 Consolidated Statements of Operations 4 Consolidated Statements of Comprehensive Loss 5 Consolidated Statements of Stockholders’ Deficit 6 Consolidated Statements of Cash Flows 7 Notes to Consolidated Financial Statements 9 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Inseego Corp. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Inseego Corp. (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2022, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated March 2, 2023, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Marcum LLP Marcum LLP We have served as the Company’s auditor since 2018. Philadelphia, Pennsylvania March 2, 2023 F-2 INSEEGO CORP. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, 2022 2021 ASSETS Current assets: Cash and cash equivalents $ 7,143 $ 46,474 Restricted cash — 3,338 Accounts receivable, net of allowances of $ 541 and $ 408 , respectively 25,259 26,781 Inventories 37,976 37,402 Prepaid expenses and other 7,978 13,624 Total current assets 78,356 127,619 Property, plant and equipment, net of accumulated depreciation of $ 26,049 and $ 26,692 , respectively 5,390 8,102 Rental assets, net of accumulated depreciation of $ 5,484 and $ 5,392 , respectively 4,816 4,575 Intangible assets, net of accumulated amortization of $ 31,629 and $ 48,404 , respectively 41,383 46,995 Goodwill 21,922 20,336 Right-of-use assets 6,662 7,839 Other assets 488 377 Total assets $ 159,017 $ 215,843 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $ 29,018 $ 48,577 Accrued expenses and other current liabilities 27,945 26,253 Total current liabilities 56,963 74,830 Long-term liabilities: 2025 Notes, net 158,427 157,866 Revolving credit facility, net 6,919 — Deferred tax liabilities, net 323 852 Other long-term liabilities 6,503 7,149 Total liabilities 229,135 240,697 Commitments and Contingencies Stockholders’ deficit: Preferred stock, par value $ 0.001 ; 2,000,000 shares authorized: Series E Preferred stock, par value $ 0.001 ; 39,500 shares designated, 25,000 shares issued and outstanding as of December 31, 2022 and 2021, liquidation preference of $ 1,000 per share (plus any accrued but unpaid dividends) — — Common stock, par value $ 0.001 ; 150,000,000 shares authorized, 108,468,150 shares issued and outstanding as of December 31, 2022 and 105,380,533 shares issued and outstanding as of December 31, 2021 108 105 Additional paid-in capital 793,855 770,619 Accumulated other comprehensive loss ( 6,329 ) ( 8,531 ) Accumulated deficit ( 857,752 ) ( 787,047 ) Total stockholders’ deficit ( 70,118 ) ( 24,854 ) Total liabilities and stockholders’ deficit $ 159,017 $ 215,843 See accompanying notes to consolidated financial statements. F-3 INSEEGO CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) Year Ended December 31, 2022 2021 2020 Net revenues: IoT & Mobile Solutions $ 218,401 $ 217,984 $ 261,169 Enterprise SaaS Solutions 26,922 44,415 52,663 Total net revenues 245,323 262,399 313,832 Cost of net revenues: IoT & Mobile Solutions 166,033 168,604 202,421 Enterprise SaaS Solutions 12,381 17,870 20,568 Total cost of net revenues 178,414 186,474 222,989 Gross profit 66,909 75,925 90,843 Operating costs and expenses: Research and development 59,237 52,673 44,953 Sales and marketing 33,488 38,234 35,750 General and administrative 27,339 28,250 30,689 Amortization of purchased intangible assets 1,749 2,092 3,175 Impairment of capitalized software 3,014 1,197 1,410 Total operating costs and expenses 124,827 122,446 115,977 Operating loss ( 57,918 ) ( 46,521 ) ( 25,134 ) Other income (expense): Gain on sale of Ctrack South Africa — 5,262 — Loss on debt conversion and extinguishment, net ( 450 ) ( 432 ) ( 76,354 ) Interest expense, net ( 8,606 ) ( 6,874 ) ( 9,942 ) Other (expense) income, net ( 1,460 ) 845 992 Loss before income taxes ( 68,434 ) ( 47,720 ) ( 110,438 ) Income tax (benefit) provision ( 465 ) 191 748 Net loss ( 67,969 ) ( 47,911 ) ( 111,186 ) Less: Net income attributable to noncontrolling interests — ( 214 ) ( 29 ) Net loss attributable to Inseego Corp. ( 67,969 ) ( 48,125 ) ( 111,215 ) Series E preferred stock dividends and deemed dividends from the preferred stock exchange ( 2,736 ) ( 4,243 ) ( 2,904 ) Net loss attributable to common stockholders $ ( 70,705 ) $ ( 52,368 ) $ ( 114,119 ) Per share data: Net loss per common share: Basic and diluted $ ( 0.66 ) $ ( 0.51 ) $ ( 1.19 ) Weighted-average shares used in computation of net loss per common share: Basic and diluted 107,269,331 103,246,308 96,111,547 See accompanying notes to consolidated financial statements. F-4 INSEEGO CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) Year Ended December 31, 2022 2021 2020 Net loss $ ( 67,969 ) $ ( 47,911 ) $ ( 111,186 ) Foreign currency translation adjustment 2,202 ( 3,167 ) ( 3,093 ) Release of cumulative foreign currency translation adjustments as a result of the sale of Ctrack South Africa — 1,608 — Total comprehensive loss ( 65,767 ) ( 49,470 ) ( 114,279 ) Comprehensive income attributable to noncontrolling interests — ( 214 ) ( 29 ) Comprehensive loss attributable to Inseego Corp. $ ( 65,767 ) $ ( 49,684 ) $ ( 114,308 ) See accompanying notes to consolidated financial statements. F-5 INSEEGO CORP. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (in thousands) Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Noncontrolling Interests Total Stockholders’ Deficit Shares Amount Shares Amount Balance, December 31, 2019 10 $ — 81,974 $ 82 $ 584,862 $ ( 618,303 ) $ ( 3,879 ) $ ( 120 ) $ ( 37,358 ) Net loss — — — — — ( 111,215 ) — 29 ( 111,186 ) Foreign currency translation adjustment — — — — — — ( 3,093 ) — ( 3,093 ) Exercise of stock options, vesting of restricted stock units (RSUs) and stock issued under employee stock purchase plan (ESPP) — — 2,081 2 5,420 — — — 5,422 Taxes withheld on net settled vesting of RSUs — — — — ( 354 ) — — — ( 354 ) Issuance of Series E preferred stock 25 — — — 25,000 — — — 25,000 Issuance of Series E preferred stock in lieu of interest 2 — — — 2,330 — — — 2,330 Repurchase of Series E preferred stock ( 2 ) — — — ( 2,354 ) — — — ( 2,354 ) Issuance of common stock in connection with Notes Exchange — — 13,739 14 66,074 — — — 66,088 Issuance of common stock related to conversion of 2025 Notes — — 1,177 1 14,353 — — — 14,354 Exercise of warrants — — 338 — 1,861 — — — 1,861 Share-based compensation — — — — 10,419 — — — 10,419 Series E preferred stock dividends — — — — 2,904 ( 2,904 ) — — — Issuance of common stock under settlement agreement — — 90 — 972 — — — 972 Balance, December 31, 2020 35 — 99,399 99 711,487 ( 732,422 ) ( 6,972 ) ( 91 ) ( 27,899 ) Net loss — — — — — ( 48,125 ) — 214 ( 47,911 ) Foreign currency translation adjustment — — — — — — ( 3,167 ) — ( 3,167 ) Exercise of stock options, vesting of RSUs and stock issued under ESPP — — 2,512 2 4,763 — — — 4,765 Taxes withheld on net settled vesting of RSUs — — — — ( 1,279 ) — — — ( 1,279 ) Divestiture of Ctrack South Africa — — — — 8 ( 2,497 ) 1,608 ( 8 ) ( 889 ) Issuance of common stock related to conversion of 2025 Notes — — 429 — 5,382 — — — 5,382 Issuance of common stock in connection with public offering, net of issuance costs — — 1,516 2 29,368 — — — 29,370 Share-based compensation — — — — 16,649 — — — 16,649 Series E preferred stock dividends — — — — 3,139 ( 3,139 ) — — — Series E preferred stock exchange ( 10 ) — 1,525 2 1,102 ( 1,104 ) — — — Net noncontrolling interest acquired — — — — — 240 — ( 115 ) 125 Balance, December 31, 2021 25 — 105,381 105 770,619 ( 787,047 ) ( 8,531 ) — ( 24,854 ) Net loss — — — — — ( 67,969 ) — — ( 67,969 ) Foreign currency translation adjustment — — — — — — 2,202 — 2,202 Adjustment relating to extinguishment of 2022 Notes — — — — 1,728 — — — 1,728 Exercise of stock options, vesting of RSUs and stock issued under ESPP — — 3,092 3 1,187 — — — 1,190 Taxes withheld on net settled vesting of RSUs — — ( 5 ) — ( 290 ) — — — ( 290 ) Share-based compensation — — — — 17,875 — — — 17,875 Series E preferred stock dividends — — — — 2,736 ( 2,736 ) — — — Balance, December 31, 2022 25 $ — 108,468 $ 108 $ 793,855 $ ( 857,752 ) $ ( 6,329 ) $ — $ ( 70,118 ) See accompanying notes to consolidated financial statements. F-6 INSEEGO CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2022 2021 2020 Cash flows from operating activities: Net loss $ ( 67,969 ) $ ( 47,911 ) $ ( 111,186 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities Depreciation and amortization 27,206 25,330 27,946 Fair value adjustment on derivative instrument ( 926 ) ( 3,826 ) 597 Provision for bad debts, net of recoveries 189 401 512 Impairment of capitalized software 3,014 1,197 1,410 Provision for excess and obsolete inventory 2,614 657 538 Share-based compensation expense 17,875 16,649 10,419 Amortization of debt discount and debt issuance costs 2,960 1,495 4,016 Loss on debt conversion and extinguishment, net 450 432 76,354 Gain on sale of Ctrack South Africa — ( 5,262 ) — Deferred income taxes ( 570 ) ( 53 ) 659 Right-of-use assets 1,268 1,144 1,432 Other — 286 ( 765 ) Changes in assets and liabilities, net of effects of divestiture: Accounts receivable 2,441 ( 1,148 ) ( 10,797 ) Inventories ( 3,065 ) ( 12,494 ) ( 13,336 ) Prepaid expenses and other assets 5,642 ( 1,988 ) ( 3,070 ) Accounts payable ( 26,313 ) ( 3,108 ) 27,087 Accrued expenses, income taxes, and other 3,450 4,448 8,785 Operating lease liabilities ( 1,555 ) ( 1,461 ) ( 551 ) Net cash (used in) provided by operating activities ( 33,289 ) ( 25,212 ) 20,050 Cash flows from investing activities: Acquisition of noncontrolling interest — ( 116 ) — Purchases of property, plant and equipment ( 1,481 ) ( 4,928 ) ( 5,736 ) Proceeds from the sale of property, plant and equipment — 1,338 392 Proceeds from sale of Ctrack South Africa, net of cash divested 1 — 33,689 — Additions to capitalized software development costs and purchases of intangible assets ( 11,838 ) ( 23,905 ) ( 29,369 ) Net cash (used in) provided by investing activities ( 13,319 ) 6,078 ( 34,713 ) Cash flows from financing activities: Gross proceeds received from issuance of Series E preferred stock — — 25,000 Gross proceeds from the issuance of 2025 Notes — — 100,000 Payment of issuance costs related to 2025 Notes — — ( 3,645 ) Cash paid to investors in private exchange transactions — — ( 32,062 ) Payoff of term loan and related extinguishment costs — — ( 48,830 ) Repurchase of Series E preferred stock — — ( 2,354 ) Proceeds from the exercise of warrants to purchase common stock — — 1,861 Net borrowing of bank and overdraft facilities ( 569 ) 265 ( 199 ) Principal payments on financed assets ( 1,567 ) — — Borrowings on asset-backed revolving credit facility 12,351 — — Repayment on asset-backed revolving credit facility ( 4,500 ) — — Payment of debt issuance costs on asset-backed revolving credit facility ( 1,126 ) — — Principal payments under finance lease obligations ( 62 ) ( 3,200 ) ( 2,756 ) Proceeds from a public offering, net of issuance costs — 29,370 — Proceeds from stock option exercises and ESPP, net of taxes paid on vested restricted stock units 900 3,486 5,066 Net cash provided by financing activities 5,427 29,921 42,081 Effect of exchange rates on cash ( 1,488 ) ( 990 ) 523 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 Cash, cash equivalents and restricted cash, end of period $ 7,143 $ 49,812 $ 40,015 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 5,535 $ 5,387 $ 3,215 Income taxes $ 168 $ 523 $ 142 Supplemental disclosures of non-cash activities: F-7 Transfer of inventories to rental assets $ 442 $ 5,142 $ 4,036 Purchases of property, plant and equipment under finance leases $ — $ — $ 664 Right-of-use assets obtained in exchange for operating leases liabilities $ 705 $ 658 $ 7,931 Proceeds related to divestiture of Ctrack South Africa in exchange for settlement of tax liabilities $ — $ 421 $ — Exchange of Series E Preferred Stock for common stock $ — $ 11,982 $ — Issuance of common stock in exchange for Series E Preferred Stock $ — $ 13,086 $ — Deemed dividend on exchange of Series E Preferred Stock for common stock $ — $ 1,104 $ — Capital expenditures financed through accounts payable or accrued liabilities $ 2,276 $ 748 $ 5,710 Issuance of common stock under Settlement Agreement $ — $ — $ 972 Preferred stock issued in extinguishment of term loan accrued interest $ — $ — $ 2,330 Debt discount and issuance costs extinguished in notes conversion $ — $ — $ 1,728 2022 Notes conversion to equity $ — $ — $ 59,907 Novatel Wireless Notes conversion to equity $ — $ — $ 250 2025 Notes issued to extinguish 2022 Notes $ — $ — $ 80,375 2025 Notes conversion, including shares issued in satisfaction of interest-make-whole payment $ — $ 5,382 $ 14,353 1 The amount for the year ended December 31, 2021 is net of cash divested of $ 5.0 million . See accompanying notes to consolidated financial statements. F-8 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Nature of Business and Significant Accounting Policies Inseego Corp. (the “Company”, “Inseego”, “We” or “Our”) is a leader in the design and development of fixed and mobile wireless solutions (advanced 4G and 5G NR), Industrial Internet of Things (“IIoT”) and cloud solutions for Fortune 500 enterprises, service providers, small and medium-sized businesses, governments, and consumers around the globe. Our product portfolio consists of fixed and mobile device-to-cloud solutions that provide compelling, intelligent, reliable and secure end-to-end IoT services with deep business intelligence. Inseego’s products and solutions, designed and developed in the U.S., power mission critical applications with a “zero unscheduled downtime” mandate, such as our 5G fixed wireless access (“FWA”) gateway solutions, 4G and 5G mobile broadband, IIoT applications such as software-defined wide area network failover management, asset tracking and fleet management services. Our solutions are powered by our key wireless innovations in mobile and FWA technologies, including a suite of products employing the 5G NR standards, and purpose-built SaaS cloud platforms. Inseego is a Delaware corporation formed in 2016 and is the successor to Novatel Wireless, Inc., a Delaware corporation formed in 1996, resulting from an internal reorganization that was completed in November 2016. The Company’s principal executive office is located at 9710 Scranton Road, Suite 200, San Diego, CA 92121. The Company’s corporate offices are also located at 9710 Scranton Road, Suite 200, San Diego CA 92121 and its sales and engineering offices are located throughout the world. Inseego’s common stock trades on the NASDAQ Global Select Market under the trading symbol “INSG”. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Basis of presentation The consolidated financial statements of Inseego Corp. present information in accordance with generally accepted accounting principles in the U.S. (“GAAP”), have been prepared pursuant to the rules and regulations of the SEC and, in the opinion of management, present fairly the consolidated financial position, results of operations and cash flows of the Company and its wholly-owned subsidiaries for the periods presented. Reclassifications Certain amounts recorded in the prior period consolidated financial statements have been reclassified to conform to the current period financial statement presentation. These reclassifications had no effect on previously reported operating results. Segment Information The Company has one reportable segment. The Chief Executive Officer, who is also the Chief Operating Decision Maker, does not manage any part of the Company separately, and the allocation of resources and assessment of performance is based solely on the Company’s consolidated operations and operating results. Use of Estimates 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. Significant estimates include revenue recognition, capitalized software costs, allowance for credit losses, provision for excess and obsolete inventory, valuation of long-lived assets, valuation of goodwill and indefinite-lived intangible assets, valuation of derivatives, accruals relating to litigation, income taxes and share-based compensation expense. Risks and Uncertainties The COVID-19 pandemic continues to impact worldwide economic activity. A pandemic, including COVID-19 or other public health epidemic, poses the risk that we or our employees, manufacturers, suppliers and other partners may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. The COVID-19 pandemic and mitigation measures have also had an adverse impact on global economic conditions which could have an adverse effect on our business and financial condition. The extent to which the COVID-19 pandemic, or any other outbreak of an epidemic disease, impacts F-9 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. 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 our future cost of net revenues. The ongoing inflation challenges could adversely impact our future revenues, gross margins and financial results. 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. See Note 5 . Business Divestiture , for more information. Liquidity As of December 31, 2022, the Company had available unrestricted cash and cash equivalents totaling $ 7.1 million, working capital of $ 21.4 million, and $ 6.1 million of availability under its secured asset-backed Credit Facility (as defined below in Note 6 . Debt ). See Note 6 . 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 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. To the extent that additional liquidity may be needed, the Company may issue up to $ 9.5 million in equivalent shares of the Company’s common stock available, pursuant to a shelf-registration statement filed with the SEC on May 7, 2020 and amended from time to time. 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 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 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. Restricted cash held in escrow with a financial institution as of December 31, 2021, which was set up as collateral for potential future uninsured warranty claims related to the divestiture of Ctrack South Africa, was released during the third quarter of 2022, and we no longer have any restricted cash on our balance sheet as of December 31, 2022. See Note 5. Business Divestiture for additional information about the divestiture of Ctrack South Africa. December 31, 2022 2021 Cash and cash equivalents $ 7,143 $ 46,474 Restricted cash — 3,338 Cash, cash equivalents and restricted cash, end of period $ 7,143 $ 49,812 F-10 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Revenue Recognition The Company’s products and services primarily include intelligent mobile hotspots, wireless routers for IoT applications, USB modems, integrated telematics and mobile tracking hardware devices, which are supported by applications software and cloud services designed to enable customers to easily analyze data insights and configure and manage their hardware. The Company classifies its revenues from the sale of its products and services into two distinct groupings, IoT & Mobile Solutions and Enterprise SaaS Solutions. Both IoT & Mobile Solutions and Enterprise SaaS Solutions revenues include any hardware and software required for the respective solution. Net revenues by grouping for the years ended December 31, 2022, 2021 and 2020 were as follows (in thousands): Year Ended December 31, 2022 2021 2020 IoT & Mobile Solutions $ 218,401 $ 217,984 $ 261,169 Enterprise SaaS Solutions 26,922 44,415 52,663 Total $ 245,323 $ 262,399 $ 313,832 See geographic disaggregation information in Note 13 . Geographic Information and Concentrations of Risk . IoT & Mobile Solutions . The IoT & Mobile Solutions portfolio is comprised of end-to-end edge to cloud solutions including 4G LTE mobile broadband gateways, routers, modems, hotspots, HD quality VoLTE based wireless home phones, cloud management software and an advanced 5G portfolio of products (currently in various stages of development). The solutions are offered under the MiFi TM brand for consumer and business markets, and under the Skyus brand for industrial IoT markets. IoT & Mobile Solutions also includes Inseego Subscribe TM , a hosted SaaS platform that helps organizations manage the selection, deployment and spend of their customer’s wireless assets, helping them save money on personnel and telecom expenses. Enterprise SaaS Solutions . The Enterprise SaaS Solutions portfolio consists of various subscription offerings within the Company’ s Ctrack tel ematics platforms, which provide fleet vehicle, aviation ground vehicle and asset tracking and performance information, and other telematics applications. Revenue Recognition Criteria The Company follows Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (as amended, “ASC 606”), which provides guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company recognizes revenue upon transfer of control of products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company determines revenue recognition according to the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when, or as, performance obligations are satisfied. Customer Contracts The Company routinely enters into a variety of agreements with customers, including quality agreements, pricing agreements and master supply agreements which outline the general commercial terms and conditions under which the Company does business with a specific customer, including shipping terms and pricing for the products and services that the Company offers. The Company also sells to some customers solely based on purchase orders. The Company has concluded, for the vast majority of its revenues, that its contracts with customers are either a purchase order or the combination of a purchase order with a master supply agreement. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. F-11 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Performance Obligations The Company’s performance obligations are established when a customer submits a purchase order notification (in writing, electronically or verbally) for goods and services, and the Company accepts the order. The Company identifies performance obligations as the delivery of the requested product or service in appropriate quantities and to the location specified in the customer’s contract and/or purchase order. The Company generally recognizes revenue upon the satisfaction of these criteria when control of the product or service has been transferred to the customer at which time the Company has an unconditional right to receive payment. The Company’s prices are fixed and have no history of being affected by contingent events that could impact the transaction price. The Company does not offer price concessions and does not accept payment that is less than the price stated upon acceptance of a customer purchase order. The Company enters into contracts that may include various combinations of products and services which are generally capable of being distinct and accounted for as separate performance obligations. Hardware. Hardware revenue from the sale of the Company’s IoT & Mobile Solutions devices is recognized when the Company transfers control to the customer, typically at the time when the product is delivered, shipped or installed, at which time, title passes to the customer and there are no further performance obligations with regards to the hardware device. The Company also considered the performance obligations in its customer master supply agreements and determined that, for the majority of its revenue, the Company generally satisfies performance obligations at a point in time upon delivery of the product to the customer. SaaS and other services. SaaS subscription revenue is recognized over time on a ratable basis over the contract term beginning on the date that its service is made available to the customer. Subscription periods range from monthly to multi-year, with the majority of contracts being one to three years in length. Revenues from the Company’s SaaS subscription services represent a single promise to provide continuous access to its software solutions and their processing capabilities, in the form of a service, through one of the Company’s data centers or a hosted data center. As each day of providing access to the software is substantially the same, and the customer simultaneously receives and consumes the benefits as access is provided, the Company has determined that its subscription services arrangements include a single performance obligation comprised of a series of distinct services. The Company’s SaaS subscriptions also include an unspecified volume of call center support and any remote system diagnostic and software upgrades as needed. These services are combined with the recurring monthly subscription service since they are highly interrelated and interdependent. Our telematics services include devices which collect and transmit information from vehicles or other assets. The Company’s customers have an option to purchase the monitoring device or lease it over the term of the contract. If the customer purchases the hardware device, the Company recognizes the revenue at a point in time as discussed above. Because the Company’s rental asset contracts qualify as operating leases under Accounting Standards Codification (“ASC”) 842, Leases , and the contracts also include services to operate and maintain the underlying asset, the Company has elected to combine the lease and non-lease components because the service is the predominant element in the eyes of the customer and the pattern of service delivery is the same for both elements. The Company recognizes revenue ratably over time throughout the term of the contract. Maintenance and support services revenue. Periodically, the Company sells separately-priced warranty contracts that extend beyond the Company’s base warranty period. The separately priced service contracts range from 12 months to 36 months. The Company typically receives payment at the inception of the contract and recognizes revenue as earned on a straight-line basis over the term of the contract. The Company’s estimated allowances for product warranties can vary from actual results and the Company may have to record additional charges to cost of revenue. Within cost of revenue, the Company records an estimate to reflect its standard warranty obligation to end users to provide for replacement of a defective product. The standard obligation period for most regions is 12 months. Factors that affect the warranty obligation include product failure rates, material usage, and service delivery costs incurred in correcting product failures. Professional services revenue. From time to time, the Company enters into special engineering design service agreements. Revenues from engineering design services are designed to meet specifications of a particular product, and therefore do not create an asset with an alternative use. The Company recognizes revenue based on the achievement of certain applicable milestones and the amount of payment the Company believes it is entitled to at the time. Multiple performance obligations. The Company’s contracts with customers may include commitments to transfer multiple products and services to a customer. When hardware, software and services are sold in various combinations, judgment is required to determine whether each performance obligation is considered distinct and accounted for separately, or not distinct F-12 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS and accounted for together with other performance obligations. The Company considered the performance obligations in its customer master supply agreements and determined that, for the majority of its revenue, the Company generally satisfies performance obligations at a point in time upon delivery of the product to the customer. In instances where the software elements included within hardware for various products are considered to be functioning together with non-software elements to provide the tangible product’s essential functionality, these arrangements are accounted for as a single distinct performance obligation. Judgment is required to determine the stand-alone selling price (“SSP”) for each distinct performance obligation. When available, the Company uses observable inputs to determine SSP. In instances where SSP is not directly observable, such as when the Company does not sell the product or service separately, it determines the SSP based on a cost-plus model as market and other observable inputs are seldom present based on the proprietary nature of the Company’s products. Contract Assets The Company capitalizes sales commissions earned by its sales force as contract acquisition costs if such costs are significant and both incremental and recoverable. Any capitalized sales commissions are either deferred and amortized over a period of benefit exceeding one year or are expensed as incurred if the period of benefit is one year or less. There were no contract assets related to customer acquisition costs as of December 31, 2022 or 2021 since the Company’s customer contracts are predominantly hardware sales that are immediately recognized as revenue upon either shipment or delivery, and therefore the related contract acquisition costs are also immediately recognized. Sales commissions are included in sales and marketing expense as incurred. Sales commissions associated with SaaS offerings are not material. Contract Liabilities Timing of revenue recognition may differ from the timing of invoicing to customers. If customers are invoiced for subscription services in advance of the service period, then deferred revenue is recorded. Contract liabilities are also recorded when the Company collects payments in advance of performing the services. As of December 31, 2022 and 2021, the Company had $ 5.1 million and $ 3.8 million, respectively, of contract liabilities which represent our deferred revenue included within accrued expenses and other current liabilities, and $ 0.6 million and $ 0.1 million, respectively, of contract liabilities included within other long-term liabilities on the consolidated balance sheets. Cost of Net Revenues Cost of net revenues includes the costs associated with the manufacturing of our portfolio of hardware devices, as well as personnel costs for employees and contractors, depreciation, allocated overhead costs and other period adjustments related to costs of inventories sold or for sale or use in manufacturing. Shipping and Handling Charges Fees charged to customers for shipping and handling of products are included in product revenues, and costs for shipping and handling of products are included as a component of sales and marketing expense. Taxes Collected from Customers Taxes collected on the value of transaction revenue are excluded from product and services revenues and cost of sales and are accrued in current liabilities until remitted to governmental authorities. F-13 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Accounts Receivable and Allowance for Credit Losses Accounts receivable are customer obligations generally due under normal trade terms for the industry. Credit terms are granted and periodically revised based on evaluations of the customer’s financial condition. The Company performs ongoing credit evaluations of its customers. The Company’s payment terms are generally net 30 days from invoice date and could go up to 90 days for large carrier customers. The Company recognizes an allowance for credit losses at the time a receivable is recorded based on its estimate of expected credit losses and adjusts this estimate over the life of the receivable as needed. The Company evaluates the aggregation and risk characteristics of a receivable pool and develops loss rates that reflect historical collections, current forecasts of future economic conditions over the time horizon the Company is exposed to credit risk, and payment terms or conditions that may materially affect future forecasts. As of December 31, 2022 and 2021, the Company reported $ 25.3 million and $ 26.8 million, respectively, of accounts receivable, net of allowances of $ 0.5 million and $ 0.4 million, respectively. Inventories and Provision for Excess and Obsolete Inventory Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Inbound shipping and handling costs are classified as a component of cost of net revenues in the consolidated statements of operations. The Company reviews the components of its inventory and its inventory purchase commitments on a regular basis for excess and obsolete inventory based on estimated future usage and sales. Write-downs in inventory value or losses on inventory purchase commitments depend on various items, including factors related to customer demand, economic and competitive conditions, technological advances or new product introductions by the Company or its customers that vary from its current expectations. Whenever inventory is written down, a new cost basis is established and the inventory is not subsequently written up if market conditions improve. The Company believes that, when made, the estimates used in calculating the inventory provision are reasonable and properly reflect the risk of excess and obsolete inventory. Intangible Assets other than Goodwill Intangible assets include purchased finite-lived and indefinite-lived intangible assets resulting from previous acquisitions, along with the costs of non-exclusive and perpetual worldwide software technology licenses and capitalized software development costs for both internal and external use. Finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. Indefinite-lived intangible assets, including in-process capitalized software development costs, are not amortized; however, they are tested for impairment annually, and between annual tests, if certain events occur indicating that the carrying amounts may be impaired. Software Development Costs for External Use Software development costs for external use are expensed as incurred until technological feasibility has been established, at which time those costs are capitalized as intangible assets until the software is available for general release to customers. Capitalized software development costs are amortized on a straight-line basis over the estimated economic life. The straight-line recognition method approximates the manner in which the expected benefit will be derived. At each balance sheet date, the unamortized capitalized software development cost for external use is compared to the net realizable value of that product by analyzing critical inputs such as expected future lifetime revenue. The amount by which unamortized software costs exceed the net realizable value, if any, is recognized as a charge to amortization expense in the period it is determined. Costs incurred to enhance existing software or after the software is available for general release to customers are expensed in the period they are incurred and included in research and development expense in the consolidated statements of operations. Software Development Costs for Internal Use Costs incurred in the preliminary stages of development are expensed as incurred and included in research and development expense in the consolidated statements of operations. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized. Capitalization ceases upon completion of all substantial testing performed to ensure the product is ready for its intended use. The Company also capitalizes costs related to specific upgrades and enhancements of internal-use software when it is probable that the expenditures will result in additional functionality. Maintenance and training costs are expensed as incurred. Capitalized internal-use software costs are recorded as intangible assets and are amortized on a straight-line basis to general and administrative expense in the consolidated statement of operations over the estimated useful life of the software. The Company tests these assets for impairment whenever events or circumstances occur that could impact their recoverability. For the years ended December 31, 2022, 2021, and 2020, the F-14 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Company recorded impairment losses of $ 3.0 million, $ 1.2 million and $ 1.4 million, respectively, related to software development costs for internal use. Valuation of Indefinite-Lived Intangible Assets The Company performs an annual impairment review of indefinite-lived assets during the fourth quarter of each year, and more frequently if the Company believes indicators of impairment exist. To review for impairment, the Company first assesses qualitative factors to determine whether events or circumstances lead to a determination that it is more likely than not that the fair value of the asset is less than its carrying amount. The Company’s qualitative assessment is based on various macroeconomic, industry-specific, and company specific factors. These factors include: (i) industry or economic trends; (ii) current, historical, or projected financial performance, and; (iii) the Company’s market capitalization. After assessing the totality of events and circumstances, if the Company determines that it is not more likely than not that the fair value of the asset is less than its carrying amount, then no further assessment is performed. If the Company determines that it is more likely than not that the fair value of the asset is less than its carrying amount, then the Company calculates the fair value of the asset and compares the fair value to the asset’s carrying value. An impairment charge is recognized if the asset’s estimated fair value is less than it’s carrying value. For the years ended December 31, 2022, 2021 and 2020 the Company recorded zero impairment loss related to indefinite-lived intangible assets. Goodwill Goodwill represents the excess purchase price over estimated fair value of net assets of businesses acquired in a business combination. Goodwill is tested for impairment during the fourth quarter of each year, and more frequently if the Company believes indicators of impairment exist. Valuation of Goodwill Goodwill is tested for impairment at the reporting unit level by first assessing qualitative factors to determine whether events or circumstances lead to a determination that it is more likely than not that the fair value of the Company’s reporting unit is less than its carrying amount. The Company’s qualitative assessment is based on various macroeconomic, industry-specific, and company specific factors. These factors include: (i) industry or economic trends; (ii) current, historical, or projected financial performance, and; (iii) the Company’s market capitalization. After assessing the totality of events and circumstances, if the Company determines that it is not more likely than not that the fair value of the Company’s reporting unit is less than its carrying amount, no further assessment is performed. If the Company determines that it is more likely than not that the fair value of the Company’s reporting unit is less than its carrying amount, the Company calculates the fair value of the reporting unit and compares the fair value to the reporting unit’s carrying amount. An impairment charge is recognized if the fair value of the business (reporting unit) is less than its carrying value. The Company has identified two reporting units for the purpose of goodwill impairment testing, Ctrack and Inseego North America (“INA”), and performed a qualitative test for goodwill impairment of the two reporting units during the fourth fiscal quarter. Based upon the results of qualitative testing, the Company believed that it was more-likely-than not that the fair value of these reporting units were greater than their respective carrying values. For the years ended December 31, 2022, 2021 and 2020, the Company recorded no impairment loss related to goodwill. Long-Lived Assets The Company periodically evaluates the carrying value of the unamortized balances of its long-lived assets, including property, plant and equipment and rental assets, to determine whether impairment of these assets has occurred or whether a revision to the related amortization periods should be made. If the carrying value of the long-lived asset group exceeds the estimated future undiscounted cash flows, an impairment loss is recorded based on the amount by which the asset group’s carrying amount exceeds its fair value. Fair value is determined based on an evaluation of the assets’ associated discounted future cash flows or appraised value . For the years ended December 31, 2022, 2021 and 2020, the Company had no impairment loss related to long-lived assets, except for the impairment of the capitalized software development costs for internal use, noted above. Property, Plant and Equipment Property, plant and equipment are initially stated at cost and depreciated using the straight-line method. Land is not depreciated. Buildings are depreciated over 50 years. Leasehold improvements are depreciated over the shorter of the related remaining lease period or useful life, not to exceed 5 years. Product tooling is depreciated over 13 months. Computer equipment, purchased software, vehicles, production equipment, and furniture and fixtures, are depreciated over lives ranging from 2 to 7 years. Amortization of equipment under finance leases is included in depreciation expense. F-15 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Expenditures for repairs and maintenance are expensed as incurred. Expenditures for major renewals and betterment that extend the useful lives of existing property, plant and equipment are capitalized and depreciated. Upon retirement or disposition of property, plant and equipment, any resulting gain or loss is recognized in other income (expense), net, in the consolidated statements of operations. Rental Assets The cost of rental assets, which represents fleet management and vehicle tracking hardware installed in customers’ vehicles where such hardware is provided as part of a fixed term contract with the customer, is capitalized and disclosed separately in the consolidated balance sheets. The Company recognizes depreciation expense on rental assets within Enterprise SaaS cost of net revenues on a straight-line basis over the term of the contract, generally three to four years , commencing on installation of the rental asset. Convertible Debt Instruments The Company evaluates embedded features within convertible debt that will be settled in shares upon conversion under ASC 815, Derivatives and Hedging (“ASC 815”) to determine whether the embedded feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If an embedded derivative is bifurcated from share-settled convertible debt, then the Company records the debt component at cost less a debt discount equal to the bifurcated derivative’s fair value. The Company amortizes the debt discount over the life of the debt instrument as additional non-cash interest expense utilizing the effective interest method. The convertible debt and the derivative liability are presented in total on the consolidated balance sheet. The derivative liability is remeasured at each reporting period with changes in fair value recorded in the consolidated statements of operations within other income (expense), net. Derivative Financial Instruments The Company evaluates stock warrants, debt instruments and other contracts to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for under the relevant sections of ASC 815. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative financial instrument and is marked-to-market at each balance sheet date and recorded as an asset or liability. In the event that the fair value is recorded as an asset or liability, the change in fair value is recorded in the consolidated statements of operations as other income or other expense. Upon conversion, exercise or expiration of a derivative financial instrument, the instrument is marked to fair value. Research and Development Research and development expense consists primarily of personnel costs for our engineers engaged in the design and development of our products, software and technologies, project material costs, services, depreciation and amortization. Such costs are charged to research and development expense as they are incurred, to the extent not capitalized as software development costs for external or internal use. Lease Accounting Lessee Arrangements The Company determines if an arrangement contains a lease at inception. The Company primarily leases office space, automobiles and equipment. Certain of the Company’s leases contain provisions that provide for one or more options to renew at the Company’s sole discretion. Certain real estate leases also include executory costs such as common area maintenance. The Company accounts for lease and non-lease components, including common area maintenance, as a single lease component as a practical expedient election. None of the Company’s operating lease agreements contain any material residual value guarantees or material restrictive covenants. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The lease term includes the base non-cancelable term, and any renewal options that are reasonably certain to be exercised at the commencement date. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. ROU assets also include any lease prepayments made and exclude lease incentives. Rental expense related to operating leases is recognized on a straight-line basis over the lease term. The F-16 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Company has elected the practical expedient to exclude any short-term lease, defined as a lease with an original term of 12 months or less, from the provisions of ASC 842, Leases . Variable lease payments that do not depend on an index or rate are excluded from the measurement of ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. Lessor Arrangements The Company serves as lessor for certain monitoring device leases and classifies such arrangements as operating leases. Accordingly, the Company carries rental devices at historical cost less accumulated depreciation and impairment, if any. The Company combines the lease and the non-lease components under these arrangements because the service is the predominant element from the customer’s perspective 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. Foreign Currency Transactions Foreign currency transactions are transactions denominated in a currency other than a subsidiary’s functional currency. A change in the exchange rate between a subsidiary’s functional currency and the currency in which a transaction is denominated increases or decreases the expected amount of functional currency cash flows upon settlement of the transaction. Such increase or decrease is reported by the Company as a foreign currency transaction gain or loss within other income (expense), net, in the consolidated statements of operations. We recognize foreign currency transaction gains and losses primarily on intercompany transactions between certain subsidiaries in foreign countries . Based upon historical experience, the Company anticipates repayment of these transactions in the foreseeable future and recognizes realized and unrealized gains and losses on these transactions in the period in which they occur. Foreign Currency Translation Assets and liabilities of the Company’s international subsidiaries in which the local currency is the functional currency are translated into U.S. Dollars at period-end exchange rates. Income and expenses are translated into U.S. Dollars at the average exchange rates during the period. The resulting translation adjustments are included in the Company’s consolidated balance sheets as a component of accumulated other comprehensive loss. Income Taxes The Company recognizes federal, state and foreign current tax liabilities or assets based on its estimate of taxes payable to or refundable by tax authorities in the current fiscal year. The Company also recognizes federal, state and foreign deferred tax liabilities or assets based on the Company’s estimate of future tax effects attributable to temporary differences and carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by valuation allowances if, based on the consideration of all available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. The Company evaluates deferred income taxes on a quarterly basis to determine if valuation allowances are required by considering available evidence. If the Company is unable to generate sufficient future taxable income in certain tax jurisdictions, or if there is a material change in the actual effective tax rates or time period within which the underlying temporary differences become taxable or deductible, the Company could be required to increase its valuation allowance against its deferred tax assets which could result in an increase in the Company’s effective tax rate and an adverse impact on operating results. The Company will continue to evaluate the necessity of the valuation allowance based on the remaining deferred tax assets. The Company recognizes the impact of an uncertain income tax position on an income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Uncertain tax positions are recognized in the first subsequent financial reporting period in which that threshold is met or from changes in circumstances such as the expiration of applicable statutes of limitations. The Company’s policy is to include interest and penalties related to such positions as a component of income tax expense. Litigation The Company is, from time to time, party to various legal proceedings arising in the ordinary course of business. The Company records a loss when information indicates that a loss is both probable and reasonably estimable. Where a liability is probable and there is a range of estimated loss with no best estimate in the range, the Company records the minimum estimated F-17 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS liability related to the claim. As additional information becomes available, the Company revises its estimates, if necessary. The Company expenses litigation costs as incurred. Share-Based Compensation The Company has granted stock options and restricted stock units (“RSUs”) to employees, non-employee consultants and non-employee members of our Board of Directors. The Company also has an employee stock purchase plan (“ESPP”) for eligible employees. The Company measures the compensation cost associated with all share-based payments based on grant date fair values. The fair value of each stock option and stock purchase right is estimated on the date of grant using an option pricing model that meets certain requirements. The Company generally uses the Black-Scholes option pricing model to estimate the fair value of its stock options and stock purchase rights. The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by the Company’s stock price and a number of assumptions, including expected volatility, expected term, risk-free interest rate and expected dividends. For grants of stock options, the Company uses a blend of historical and implied volatility for traded options on its stock in order to estimate the expected volatility assumption required in the Black-Scholes model. The Company’s use of a blended volatility estimate in computing the expected volatility assumption for stock options is based on its belief that while the implied volatility is representative of expected future volatility, the historical volatility over the expected term of the award is also an indicator of expected future volatility. Due to the short duration of stock purchase rights under the Company’s ESPP, the Company utilizes a blended volatility estimate that consists of implied volatility and historical volatility in order to estimate the expected volatility assumption of the Black-Scholes model. The expected term of stock options granted is estimated using historical experience. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected terms of the Company’s stock options and stock purchase rights. The dividend yield assumption is based on the Company’s history and expectation of no dividend payouts. The Company estimates forfeitures at the time of grant and revises these estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company estimates its forfeiture rate assumption for all types of share-based compensation awards based on historical forfeiture rates related to each category of award. Compensation cost associated with grants of restricted stock units are measured at fair value, which has historically been the closing price of the Company’s common stock on the date of grant. The Company recognizes share-based compensation expense over the requisite service period of each individual award, which generally equals the vesting period, using the straight-line method for awards that contain only service conditions. For awards that contain performance conditions, the Company recognizes the share-based compensation expense on a straight-line basis for each vesting tranche. The Company evaluates the assumptions used to value stock awards on a quarterly basis. If factors change and the Company employs different assumptions, share-based compensation expense may differ significantly from what it has recorded in the past. If there are any modifications or cancellations of the underlying unvested securities, the Company may be required to accelerate, increase or cancel any remaining unearned share-based compensation expense. Net Loss Per Share Attributable to Inseego Corp. Net loss attributable to common stockholders is computed by dividing the net loss by the weighted-average number of shares that were outstanding during the period. Diluted net loss attributable to common stockholders (“EPS”) reflects the potential dilution that could occur if securities or other contracts to acquire common stock were exercised or converted into common stock. Potentially dilutive securities are excluded from the diluted EPS computation in loss periods as their effect would be anti-dilutive. Fair Value of Financial Instruments 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 F-18 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) and is defined as follows: Level 1: 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. Level 2: 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. Level 3 : Pricing inputs include significant inputs that are generally less observable from objective sources, including the Company’s own assumptions. 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. Comprehensive Loss Comprehensive loss consists of net earnings and foreign currency translation adjustments. Recently Adopted Accounting Pronouncements 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. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted net income per share calculation in certain areas. 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 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 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 consolidated financial statements. Recent Accounting Pronouncements Not Yet Adopted 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. 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 adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial position or results of operations. F-19 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Financial Statement Details Inventories Inventories consist of the following (in thousands): December 31, 2022 2021 Finished goods $ 31,153 $ 33,112 Raw materials and components 6,823 4,290 Total inventories $ 37,976 $ 37,402 Prepaid expenses and other Prepaid expenses and other consists of the following (in thousands): December 31, 2022 2021 Rebate receivables $ 2,038 $ 6,398 Receivables from contract manufacturers 3,561 2,626 Software licenses 772 1,261 Insurance 12 1,269 Deposits 829 1,023 Financed assets — 323 Other 766 724 Total prepaid expenses and other $ 7,978 $ 13,624 Property, plant and equipment Property, plant and equipment consists of the following (in thousands): December 31, 2022 2021 Test equipment $ 19,724 $ 19,095 Computer equipment and purchased software 4,603 7,618 Product tooling 5,007 4,350 Furniture and fixtures 1,214 1,214 Vehicles 119 1,654 Leasehold improvements 772 863 Total property, plant and equipment, gross 31,439 34,794 Less—accumulated depreciation and amortization ( 26,049 ) ( 26,692 ) Total property, plant and equipment, net $ 5,390 $ 8,102 At December 31, 2022, the Company had property, plant and equipment under finance leases with an aggregate carrying value of $ 3.1 million, net of accumulated amortization of $ 2.1 million. At December 31, 2021, the Company had property, plant and equipment under finance leases with an aggregate carrying value of $ 3.1 million, net of accumulated amortization of $ 1.3 million. Rental assets F-20 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Rental assets consist of the following (in thousands): December 31, 2022 2021 Rental assets $ 10,300 $ 9,967 Less—accumulated depreciation ( 5,484 ) ( 5,392 ) Total rental assets $ 4,816 $ 4,575 Depreciation and amortization Depreciation and amortization expense related to property, plant and equipment, including rental assets and property, plant and equipment under finance leases, was $ 7.1 million, $ 9.8 million and $ 10.0 million for the years ended December 31, 2022, 2021 and 2020, respectively. Accrued expenses and other current liabilities Accrued expenses and other current liabilities consist of the following (in thousands): December 31, 2022 2021 Royalties $ 992 $ 2,243 Payroll and related expenses 8,873 9,326 Warranty obligations 480 473 Professional fees 738 502 Bank overdrafts — 370 Accrued interest 1,112 877 Deferred revenue 5,060 3,832 Customer advances 2,828 — Operating lease liabilities 1,759 1,769 Accrued contract manufacturing liabilities 1,416 927 Liabilities related to financed assets — 1,593 Value added tax payables 449 642 Other 4,238 3,699 Total accrued expenses and other current liabilities $ 27,945 $ 26,253 3. Goodwill and Other Intangible Assets A summary of the activity in goodwill is presented below (in thousands): Balance at December 31, 2020 $ 32,511 Effect of Ctrack South Africa divestiture ( 10,734 ) Effect of change in foreign currency exchange rates ( 1,441 ) Balance at December 31, 2021 20,336 Effect of change in foreign currency exchange rates 1,586 Balance at December 31, 2022 $ 21,922 F-21 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company’s intangible assets are comprised of the following (in thousands): December 31, 2022 Weighted-Average Life (in years) Gross Carrying Value Accumulated Amortization Net Carrying Value Finite-lived intangible assets: Developed technologies 6.0 $ 4,534 $ ( 4,016 ) $ 518 Trademarks and trade names 10.0 9,513 ( 7,105 ) 2,408 Customer relationships 10.0 8,500 ( 6,597 ) 1,903 Capitalized software development costs 2.8 40,767 ( 11,686 ) 29,081 Other 3.0 2,884 ( 2,225 ) 659 Total finite-lived intangible assets $ 66,198 $ ( 31,629 ) 34,569 Indefinite-lived intangible assets: In-process capitalized software development costs 6,814 Total intangible assets $ 41,383 December 31, 2021 Weighted-Average Life (in years) Gross Carrying Value Accumulated Amortization Net Carrying Value Finite-lived intangible assets: Developed technologies 6.0 $ 8,305 $ ( 7,100 ) $ 1,205 Trademarks and trade names 10.0 9,088 ( 5,920 ) 3,168 Customer relationships 10.0 11,995 ( 9,242 ) 2,753 Capitalized software development costs 3.1 54,581 ( 24,604 ) 29,977 Other 3.0 2,885 ( 1,538 ) 1,347 Total finite-lived intangible assets $ 86,854 $ ( 48,404 ) 38,450 Indefinite-lived intangible assets: In-process capitalized software development costs 8,545 Total intangible assets $ 46,995 Amortization expense for the years ended December 31, 2022, 2021 and 2020 was approximately $ 20.1 million, $ 15.5 million, and $ 18.0 million, respectively, including approximately $ 17.9 million, $ 12.2 million and $ 12.9 million related to capitalized software development costs for the years ended December 31, 2022, 2021 and 2020, respectively. For the years ended December 31, 2022, 2021, and 2020, the Company recorded $ 3.0 million, $ 1.2 million, and $ 1.4 million, respectively, of impairment losses on intangible assets related to internal use capitalized software. The following table represents details of the amortization of finite-lived intangible assets that is estimated to be expensed in the future (in thousands): 2023 $ 15,181 2024 9,235 2025 3,976 2026 2,178 2027 2,104 Thereafter 1,895 Total $ 34,569 F-22 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. Fair Value Measurement of Assets and Liabilities The following table summarizes the Company’s financial instruments measured at fair value on a recurring basis as of December 31, 2022 and 2021 (in thousands): December 31, 2022 December 31, 2021 Total Fair Value Level 3 Level 1 Total Fair Value Level 3 Level 1 Assets Cash equivalents Money market funds $ — $ — $ — $ 126 $ — $ 126 Total assets $ — $ — $ — $ 126 $ — $ 126 Liabilities 2025 Notes Interest make-whole payment $ — $ — $ — $ 926 $ 926 $ — Total liabilities $ — $ — $ — $ 926 $ 926 $ — During the years ended December 31, 2022 and 2021, there were no transfers between the levels within the fair value hierarchy. The fair value of the interest make-whole payment derivative liability was determined using a Monte Carlo model with the following key assumptions: December 31, 2022 December 31, 2021 Volatility 50 % 50 % Stock price $ 0.84 per share $ 5.83 per share Credit spread 56.52 % 15.93 % Term 2.34 years 3.34 years Dividend yield — % — % Risk-free rate 4.35 % 1.02 % The estimated fair value of the interest make-whole derivative liability at December 31, 2022 and December 31, 2021 was determined using 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. During the year ended December 31, 2022, there were no conversions of the 3.25% convertible senior notes due 2025 (the “2025 Notes”) into shares of the Company’s common stock. During the year ended December 31, 2021, certain holders of the 2025 Notes converted an aggregate of approximately $ 5.0 million in principal amount of the 2025 Notes into shares of the Company’s common stock in accordance with the terms of such notes and a portion of the embedded derivative was settled in shares of the Company’s common stock resulting in $ 0.1 million of the derivative liability being extinguished upon conversion. There was a $ 0.9 million reduction in the fair value of the interest make-whole liability for the year ended December 31, 2022. For the years ended December 31, 2021 and 2020, the Company recorded a $ 3.8 million gain and a $ 0.6 million loss, respectively, as a result of the changes in fair value of the interest make-whole liability. Other Financial Instruments 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 2025 Notes. The 2025 Notes are carried at amortized cost, adjusted for changes in fair value of the embedded derivative. F-23 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. Business Divestiture Sale of Ctrack South Africa Operations On July 30, 2021, the Company completed the sale of Ctrack South Africa to an affiliate of Convergence Partners (“Convergence”), an investment management firm in South Africa. Net cash proceeds received were approximately $ 33.7 million, net o f cash divested of $ 5.0 million. The Company placed in escrow approximately $ 3.3 million, which was released to the Company on July 30, 2022. The funds in escrow allowed for Convergence to submit claims that were deemed to be uninsured warranties as defined in the purchase agreement. Such funds in escrow were recorded as restricted cash on the Company’s consolidated balance sheet prior to their release. The transaction was considered a deconsolidation of a subsidiary. Accordingly, upon the sale of Ctrack South Africa, the Company recognized a pre-tax gain of $ 5.3 million for the year ended December 31, 2021. Such gain was recognized as gain on the sale of Ctrack South Africa in the consolidated statement of operations during the year ended December 31, 2021 The Company also recorded $ 2.2 million of transaction costs within other income (expense), net, in the consolidated results of operations for the year ended December 31, 2021. The carrying values of the assets and liabilities of Ctrack South Africa sold in the transaction as of July 30, 2021, are summarized below: (in thousands) Assets : Cash and cash equivalents $ 5,040 Accounts receivable, net 3,505 Inventory 3,821 Prepaid expenses and other 370 Property, plant and equipment, net 4,545 Rental assets, net 2,448 Intangible assets, net 11,278 Goodwill 10,734 Total assets 41,741 Accounts payable 3,961 Accrued expenses and other liabilities 1,107 Deferred tax liabilities, net 3,647 Other long-term liabilities 746 Total liabilities 9,461 Net assets $ 32,280 Total consideration recognized was comprised of the following: (in thousands) Initial purchase consideration received, upon close $ 36,566 Working capital adjustments (a) 2,584 Total consideration recognized $ 39,150 (a) $ 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 Convergence. Net gain on sale is comprised of the following: F-24 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) Total consideration recognized $ 39,150 Less: Book value of net assets sold 32,280 Less: Release of cumulative foreign currency translation adjustments related to Ctrack South Africa 1,608 Net gain on sale $ 5,262 F-25 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. Debt Convertible Notes 2025 Notes In May 2020, the Company completed its registered public offering of $ 100.0 million aggregate principal amount of the 2025 Notes. Also in May 2020, the Company entered into privately negotiated exchange agreements (the “Exchange Agreements”) with certain related party holders of the 5.5% convertible senior notes due 2022 (the “2022 Notes”). Pursuant to the Exchange Agreements, these noteholders agreed to exchange the 2022 Notes that they held (representing an aggregate of $ 45.0 million principal amount of 2022 Notes with an estimated fair value of approximately $ 112.4 million as of the date of exchange) for an aggregate of $ 32.0 million in cash and $ 80.4 million principal amount of 2025 Notes in private placement transactions that closed concurrently with the registered offering (the “Private Exchange Transaction”). In connection therewith, the Company recorded a $ 67.2 million loss on debt conversion and extinguishment in the consolidated statements of operations in the year ended December 31, 2020. The 2025 Notes issued in the Private Exchange Transaction are part of the same series as the 2025 Notes issued in the registered offering. During the year ended December 31, 2021, certain holders of the 2025 Notes converted, pursuant to the original terms of the 2025 Notes, an aggregate of approximately $ 5.0 million in principal amount of the 2025 Notes into 428,669 shares of the Company’s common stock, including 32,221 shares of common stock issued in satisfaction of the interest make-whole payment. In connection therewith, the Company recorded a loss of $ 0.4 million on debt conversion, shown as net in the consolidated statement of operations. The 2025 Notes were 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. 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. 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 the Company’s 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 through the last 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 F-26 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. 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 consolidated balance sheets, with subsequent changes to fair value to be recorded at each reporting period on the consolidated statement of operations in other income, net. As of December 31, 2022 and 2021, $ 161.9 million of principal of the 2025 Notes was outstanding. As of December 31, 2022 and 2021, $ 80.4 million principal amount of 2025 Notes was held by related parties and $ 0.9 million of accrued interest due to related parties was included within accrued expenses and other current liabilities on the consolidated balance sheets. Assuming no repurchases or conversions of the 2025 Notes prior to May 1, 2025, the entire principal balance of $ 161.9 million of the 2025 Notes is due on May 1, 2025. The 2025 Notes consist of the following (in thousands): December 31, 2022 2021 Principal $ 161,898 $ 161,898 Add: fair value of embedded derivative — 926 Less: unamortized debt discount ( 1,933 ) ( 2,761 ) Less: unamortized issuance costs ( 1,538 ) ( 2,197 ) Net carrying amount $ 158,427 $ 157,866 The effective interest rate of the 2025 Notes was 4.17 % and 4.15 %, respectively, for the twelve months ended December 31, 2022 and 2021. The following table sets forth total interest expense recognized related to the 2025 Notes (in thousands): F-27 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2022 2021 2020 Contractual interest expense $ 5,262 $ 5,271 $ 3,434 Amortization of debt discount 828 829 552 Amortization of debt issuance costs 659 660 439 Total interest expense $ 6,749 $ 6,760 $ 4,425 The contractual interest expense on the 2025 Notes recorded within interest expense, net on the consolidated statements of operations attributable to related parties was $ 2.6 million in each of the years ended December 31, 2022 and 2021 and $ 1.7 million in the year ended December 31, 2020. The Company’s consolidated statements of operations for the year ended December 31, 2020 included related party interest expense of $ 0.8 million related to the 2022 Notes. The Company had interest expense relating to the following debt obligations that were fully settled in 2020 as follows: Year Ended December 31, 2020 2022 Notes Novatel Wireless Notes Contractual interest expense $ 768 $ 1,667 Amortization of debt discount 1,952 859 Amortization of debt issuance costs 111 103 Total interest expense $ 2,831 $ 2,629 The effective interest rates on the 2022 Notes and the Novatel Wireless Notes in the year ended December 31, 2020 were 12.89 % and 15.19 %, respectively. 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”), a subsidiary of the Company, and Inseego North America LLC, an Oregon limited liability company, an indirect subsidiary of the Company, as borrowers (together with Inseego Wireless, the “Borrowers”), and the Company, as guarantor (together with the Borrowers, the “Loan Parties”) as 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 (“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 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. 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 (“Base Rate”) loans or Secured Overnight Financing Rate (“SOFR”) loans. SOFR loans will bear interest at a rate per annum equal to Term SOFR (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 F-28 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 Company pays 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 Amended 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. The Company 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 the Company’s 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 also “Eligible Inventory”. The Amendment was entered into on February 25, 2023 with an effective date of December 15, 2022. The Company was in compliance with the financial covenants in the Amended Credit Agreement as of December 31, 2022. Upon execution of the Credit Agreement on August 5, 2022, the Company paid $ 1.1 million of debt issuance costs, which are being amortized to interest expense throughout the term of the agreement. Amortization expense of $ 0.2 million related to debt issuance cost was recognized for the year ended December 31, 2022. As of December 31, 2022, the Company had outstanding borrowings of $ 7.9 million, gross borrowing base of $ 15.7 million and availability of $ 7.8 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. December 31, 2022 Gross amount outstanding (in thousands) $ 7,851 Less: unamortized debt issuance cost ( 932 ) Revolving credit facility, net $ 6,919 The effective interest rate of the Credit Facility was 17.71 %, which includes 8.50 % related to amortization of original issuance costs, for the twelve months ended December 31, 2022. The following table sets forth total interest expense recognized related to the Credit Facility (in thousands): December 31, 2022 Contractual interest expense $ 211 Amortization of debt issuance costs 194 Total interest expense $ 405 7. Income Taxes The Company’s loss before income taxes for the years ended December 31, 2022, 2021 and 2020 is comprised of the following (in thousands): Year Ended December 31, 2022 2021 2020 Domestic $ ( 63,939 ) $ ( 40,897 ) $ ( 109,837 ) Foreign ( 4,495 ) ( 6,823 ) ( 601 ) Loss before income taxes $ ( 68,434 ) $ ( 47,720 ) $ ( 110,438 ) F-29 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The (benefit) provision for income taxes for the years ended December 31, 2022, 2021 and 2020 is comprised of the following (in thousands): Year Ended December 31, 2022 2021 2020 Current: Federal $ — $ — $ — State 50 30 ( 4 ) Foreign 55 214 93 Total current 105 244 89 Deferred: Federal 15 12 12 State — — — Foreign ( 585 ) ( 65 ) 647 Total deferred ( 570 ) ( 53 ) 659 (Benefit) Provision for income taxes $ ( 465 ) $ 191 $ 748 The Company’s net deferred tax liabilities consist of the following (in thousands): December 31, 2022 2021 Deferred tax assets: Accrued expenses $ 715 $ 1,016 Provision for excess and obsolete inventory 759 466 Capitalized research and experimental expenditures 8,986 — Convertible debt 9,782 9,804 Interest expense limitation 12,722 11,113 Net operating loss and tax credit carryforwards 112,297 110,463 Share-based compensation 3,375 2,562 Right-of-use-asset 2,294 1,765 Unrecognized tax benefits 1,942 1,567 Deferred tax assets 152,872 138,756 Valuation allowances ( 145,431 ) ( 132,132 ) Deferred tax assets, net of valuation allowances 7,441 6,624 Deferred tax liabilities: Operating lease liability ( 2,518 ) ( 1,830 ) Acquired intangible assets ( 599 ) ( 666 ) Depreciation and amortization ( 4,288 ) ( 4,376 ) Unrealized foreign currency gains ( 359 ) ( 604 ) Deferred tax liabilities ( 7,764 ) ( 7,476 ) Deferred tax liabilities, net $ ( 323 ) $ ( 852 ) The Company recognizes federal, state and foreign current tax liabilities or assets based on its estimate of taxes payable to or refundable by tax authorities in the current fiscal year. The Company also recognizes federal, state and foreign deferred tax liabilities or assets based on the Company’s estimate of future tax effects attributable to temporary differences and carryforwards. The Company records a valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence and judgment, are not expected to be realized. The Company assesses whether a valuation allowance should be recorded against its deferred tax assets based on the consideration of all available evidence, using a “more likely than not” realization standard. The four sources of taxable income that must be considered in determining whether deferred tax assets will be realized are: (1) future reversals of existing taxable F-30 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS temporary differences (i.e., offset of gross deferred tax assets against gross deferred tax liabilities); (2) taxable income in prior carryback years, if carryback is permitted under the applicable tax law; (3) tax planning strategies; and (4) future taxable income exclusive of reversing temporary differences and carryforwards. During the years ended December 31, 2022 and 2021, the Company recognized valuation allowances of $ 13.6 million, and $ 6.0 million, respectively, related to its deferred tax assets created in those respective years for entities with historical losses and full valuation allowances. In 2021, certain valuation allowances in the amount of $ 10.0 million were released related to entities included in the divestiture of Ctrack South Africa. The Company also recognized $ 3.0 million of additional valuation allowance in 2021 related to true-up of prior year deferred taxes, partially offset by foreign currency loss of $ 0.2 million. Based on the Company’s current position on valuation allowance, no net income tax benefits resulted in the Company’s consolidated statements of operations from the operating losses created during those years. Beginning January 1, 2022, we are required to capitalize certain research and development expenditures in accordance with Section 174 of the Internal Revenue Code, as amended by the Tax Cuts and Jobs Act of 2017, instead of expensing such expenditures, as previously allowed. Amortization of such capitalized expenditures are allowed over a 5-year period if incurred domestically or a 15-year period if incurred outside the United States. The (benefit) provision for income taxes reconciles to the amount computed by applying the statutory federal income tax rate of 21% in 2022, 2021 and 2020 to loss before income taxes as follows (in thousands): Year Ended December 31, 2022 2021 2020 Federal tax benefit, at statutory rate $ ( 14,371 ) $ ( 10,021 ) $ ( 23,192 ) State benefit, net of federal benefit ( 370 ) ( 148 ) ( 1,285 ) Foreign tax rate difference ( 259 ) ( 358 ) ( 140 ) Valuation allowance against future tax benefits 13,564 6,029 26,410 Gain on sale of foreign subsidiaries — 3,008 — Sub-part F income — 791 — Loss on conversion of debt — — 2,015 Research and development credits ( 2,222 ) ( 1,415 ) ( 2,355 ) Share-based compensation 1,010 ( 879 ) ( 1,134 ) Non-deductible officers compensation 108 1,449 — True-up of prior year provisions 2,123 1,681 — Other ( 48 ) 54 429 (Benefit) Provision for income taxes $ ( 465 ) $ 191 $ 748 At December 31, 2022, the Company had U.S. federal net operating loss carryforwards (“NOLs”) related to tax years 2020 and prior of approximately $ 417.2 million. Approximately $ 110.0 million of these NOLs have no expiration date. The remainder began to expire in 2023, unless previously utilized. Some of these NOLs may be limited by either past or future changes in control events. The Company has California NOLs at December 31, 2022 of approximately $ 62.0 million, which begin to expire in 2028, unless previously utilized, and foreign NOLs for its active foreign subsidiaries of approximately $ 22.7 million, which generally have no expiration date. At December 31, 2022, the Company had federal research and development tax credit carryforwards of approximately $ 15.9 million, which begin to expire in 2026, unless previously utilized, and California research and development tax credit carryforwards of approximately $ 17.4 million, which have no expiration date. Pursuant to Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of the Company’s net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a rolling three-year period. An analysis was performed for the period through December 31, 2022 and did not identify any events of cumulative change in ownership during the review period. The Company will continue monitoring any future changes in stock ownership. It is the Company’s intention to reinvest undistributed earnings of its foreign subsidiaries and thereby indefinitely postpone their remittance. Accordingly, no provision has been made for foreign withholding taxes on U.S. income taxes which may become payable if undistributed earnings of the foreign subsidiary were paid as dividends to the Company. F-31 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which includes modifications to the limitation on business interest expense and net operating loss provisions, and provides a payment delay of employer payroll taxes during 2020 after the date of enactment. Payments of approximately $ 1.4 million of employer payroll taxes otherwise due in 2020, were delayed with 50% due and paid by December 31, 2021 and the remaining 50% in February 2023. The CARES Act did not have a material impact on the Company’s consolidated financial statements. The Company follows the accounting guidance related to financial statement recognition, measurement and disclosure of uncertain tax positions. The Company recognizes the impact of an uncertain income tax position on an income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. No income tax benefit was recognized during the years ended December 31, 2022, 2021 and 2020. At December 31, 2022, 2021 and 2020, the Company did no t have interest expense related to uncertain tax positions or a liability for unrecognized tax benefits. The Company does not expect changes to its uncertain tax position in the next twelve months. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands): Balance at December 31, 2020 $ 39,631 Increases related to current and prior year tax positions 1,998 Balance at December 31, 2021 41,629 Increases related to current and prior year tax positions 1,286 Balance at December 31, 2022 $ 42,915 There are no tax benefits that, if recognized, would affect the effective tax rate that are included in the balances of unrecognized tax benefits at December 31, 2022. The Company and its subsidiaries file U.S., state and foreign income tax returns in jurisdictions with various statutes of limitations. The Company’s tax returns are subject to examination by federal, state and foreign taxing authorities. The Company’s federal and state tax returns are subject to examination for the years beginning in 2019 and 2018, respectively. Net operating loss carryforwards arising prior to these years are also open to examination, if and when utilized. The Company believes appropriate provisions for all outstanding issues have been made for all jurisdictions and all open years. However, because audit outcomes and the timing of audit settlements are subject to significant uncertainty, the Company’s current estimate of the total amounts of unrecognized tax benefits could increase or decrease for all open years. On August 16, 2022, Congress passed, and the President signed into law, the Inflation Reduction Act of 2022 (the “IRA”), which includes certain business tax provisions. The IRA provides for excise taxes on corporate stock buy-backs and a minimum tax on corporate financial statement income in excess of $1.0 billion. These new provisions become effective January 1, 2023. 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, 2023. 8. Preferred Stock and Common Stock Preferred Stock The Company has a total of 2,000,000 shares of preferred stock authorized for issuance at a par value of $ 0.001 per share, 150,000 of which have been designated Series D Preferred Stock and 39,500 of which have been designated Series E Preferred Stock. Each share of Series E Preferred Stock entitles the holder thereof to receive, when 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 (as defined below). 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, the Company may, at its option, redeem shares of the Series E Preferred Stock, in whole or in part, on or after July 1, 2022, at a price equal to 110 % of the Series E Base Amount plus (without duplication) any accrued and unpaid dividends. The “Series E Base Amount” means $ 1,000 per share, 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 F-32 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Exchange Transactions On March 6, 2020, the Company entered into a Securities Purchase Agreement with an accredited investor pursuant to which, among other things, the Company issued and sold to the investor, in a private placement transaction, an aggregate of 25,000 shares of the Company’s Series E Preferred Stock, for a purchase price of $ 1,000 per share of Series E Preferred Stock, resulting in gross proceeds to the Company of $ 25.0 million. On September 3, 2021, the Company entered into separate privately-negotiated exchange agreements (the “September Exchange Agreements”) with Golden Harbor Ltd. and North Sound Trading, L.P. (the “Participating Stockholders”), holders of the Company’s outstanding Series E Preferred Stock. Pursuant to each respective September Exchange Agreement, each of the Participating Stockholders agreed to exchange Series E Preferred Stock that they held (representing an aggregate of 10,000 shares of Series E Preferred Stock) for an aggregate of 1,525,207 shares of common stock, of the Company (the “Series E Exchange Transactions”). The Company did not receive any cash proceeds from the Participating Stockholders in connection with the Series E Exchange Transactions. The Company used the Guidance in ASC 470 Debt , regarding the modification of debt instruments and determined that the Series E Exchange Transactions were an extinguishment. If a modification or exchange represents an extinguishment for accounting purposes, it is accounted for as a redemption of the existing equity instrument and the issuance of a new instrument. ASC 260-10-S99-2, “SEC Staff Announcement: The Effect on the Calculation of Earnings Per Share for a Period That Includes the Redemption or Induced Conversion of Preferred Stock,” provides guidance on the accounting for extinguishments (redemptions) of equity-classified preferred stock. Under that guidance, an SEC registrant compares (1) the fair value of the consideration transferred to the holders of the preferred stock and (2) the carrying amount of the preferred stock immediately before the modification or exchange (net of issuance costs). The difference is treated as a return to (or from) the holder of the preferred stock in a manner similar to dividends paid on preferred stock. Any excess of fair value of the consideration transferred to the holders of the preferred stock over the carrying amount of the preferred stock in the issuer’s balance sheet is treated as a dividend to those holders and charged against retained earnings. The Company determined that the Series E Exchange Transactions resulted in an extinguishment of preferred stock and an issuance of common stock. The difference between the carrying amount of the preferred stock plus accrued dividends, and the fair value of the common stock exchanged for such preferred stock, totaled $ 1.1 million. This difference was treated as a deemed dividend, and was included within the Series E Preferred Stock dividends and deemed dividends from the preferred stock exchange, in the consolidated results of operations for the year ended December 31, 2021. During the years ended December 31, 2022, 2021 and 2020, dividends declared, but not paid, related to the Series E Preferred Stock resulted in $ 9.1 million, $ 6.4 million and $ 3.3 million of dividends accrued, approximating $ 365.60 , $ 256.16 and $ 130.60 per preferred share, as of December 31, 2022, 2021, and 2020, respectively. Common Stock On August 6, 2018, the Company completed a private placement of 12,062,000 shares of its common stock and warrants (the “2018 Warrants”) to purchase an additional 4,221,700 shares of its common stock, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, to certain accredited investors for gross proceeds of $ 19.7 million in cash. Each warrant had an initial exercise price of $ 2.52 per share, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions. On March 28, 2019, the 2018 Warrants were exercised at an exercise price of $ 2.52 per share, for aggregate cash proceeds to the Company of approximately $ 10.6 million. In connection with the exercise of the 2018 Warrants, on March 28, 2019, the Company issued additional warrants to purchase 2,500,000 shares of common stock (the “2019 Warrants”) to the accredited investors. 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, were exercisable at any time on or after September 28, 2019. The 2019 Warrants were not exercised and expired on June 30, 2022. The Company assessed the terms of the warrants under ASC 815. Pursuant to this guidance, the Company determined that the warrants did not require liability accounting and classified the warrants as equity. F-33 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Common Shares Reserved for Future Issuance The Company had reserved shares of common stock for possible future issuance as of December 31, 2022 and 2021 as follows: December 31, 2022 2021 Common stock warrants outstanding — 2,500,000 Stock options outstanding 8,132,959 8,085,793 Restricted stock units outstanding 1,178,370 1,247,723 Shares available for issuance pursuant to Convertible Notes 14,090,448 14,340,786 Shares available for future grants of awards under the 2018 Omnibus Incentive Compensation Plan 8,848,748 3,311,023 Shares available under the 2000 Employee Stock Purchase Plan 895,141 170,811 Total shares of common stock reserved for issuance 33,145,666 29,656,136 9. Share-based Compensation During the year ended December 31, 2022, the Company granted awards under the 2018 Omnibus Incentive Compensation Plan, previously named the Amended and Restated 2009 Omnibus Incentive Compensation Plan (the “2018 Plan”), and the 2015 Incentive Compensation Plan (the “2015 Plan”). The Compensation Committee of the Board of Directors administers the plans. Under the 2018 Plan, shares of common stock may be issued upon the exercise of stock options, in the form of restricted stock, or in settlement of RSUs or other awards, including awards with alternative vesting schedules such as performance-based criteria. The 2018 Plan authorizes 32,753,085 shares, of which 8,848,748 remain available for future grants. During the year ended December 31, 2022, the Board of Directors of the Company approved and the Company granted RSUs to eligible employees under the 2018 Omnibus Incentive Compensation Plan, previously named the Amended and Restated 2009 Omnibus Incentive Compensation Plan (the “2018 Plan”) that were immediately vested, as fiscal 2021 annual bonus payments. The total charges recorded for the year ended December 31, 2022 were $ 8.8 million. Total charges related to bonus payments recorded for the year ended December 31, 2021 were $ 7.0 million. Total charges related to bonus payments recorded for the year ended December 31, 2020 were $ 2.7 million. During the year ended December 31, 2021, the Board of Directors of the Company approved, and the Company granted additional RSUs under the 2018 Plan to certain employees who contributed to the completion of the divestiture of Ctrack South Africa. Such grants were immediately vested, and the total charges were $ 0.6 million. For the years ended December 31, 2022, 2021 and 2020 the following table presents total share-based compensation expense in each functional line item on the consolidated statements of operations (in thousands): Year Ended December 31, 2022 2021 2020 Cost of revenues $ 2,110 $ 2,469 $ 1,583 Research and development 5,369 4,813 2,823 Sales and marketing 3,528 3,704 2,346 General and administrative 6,868 5,663 3,667 Total $ 17,875 $ 16,649 $ 10,419 Stock Options The Compensation Committee of the Board of Directors determines eligibility, vesting schedules and exercise prices for stock options granted. Stock options generally have a term of ten years and vest over a three - to four-year period. F-34 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the weighted-average assumptions used in the Black-Scholes valuation model by the Company in calculating the fair value of each stock option granted: Year Ended December 31, 2022 2021 Expected dividend yield — % — % Risk-free interest rate 0.4 % 0.9 % Volatility 16 % 73 % Expected term (in years) 1.1 5.4 The weighted-average fair value of stock option awards granted during the years ended December 31, 2022 and 2021 was $ 2.91 and $ 5.41 , respectively. The following table summarizes the Company’s stock option activity for the years ended December 31, 2022, 2021 and 2020 (dollars in thousands, except per share data): Stock Options Outstanding Weighted-Average Exercise Price Per Option Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding — December 31, 2019 9,044,304 $ 2.91 Granted 1,526,000 9.41 Exercised ( 1,357,620 ) 3.06 Canceled ( 732,705 ) 3.60 Outstanding — December 31, 2020 8,479,979 $ 3.99 Granted 1,929,500 8.86 Exercised ( 1,315,552 ) 2.62 Canceled ( 1,008,134 ) 8.60 Outstanding — December 31, 2021 8,085,793 $ 4.81 Granted 1,505,000 4.63 Exercised ( 370,688 ) 1.37 Canceled ( 1,087,146 ) 7.97 Outstanding — December 31, 2022 8,132,959 $ 4.65 5.25 $ — Vested and Expected to Vest — December 31, 2022 7,573,152 $ 4.49 5.01 $ 1 Exercisable — December 31, 2022 5,550,858 $ 3.87 3.69 $ 1 The total intrinsic value of stock options exercised to purchase common stock during the years ended December 31, 2022, 2021 and 2020 was approximately $ 3.7 million, $ 4.3 million and $ 11.7 million, respectively. As of December 31, 2022, total unrecognized share-based compensation expense related to non-vested stock options was $ 7.1 million, which is expected to be recognized over a weighted-average period of approximately 2.69 years. The Company recognized approximately $ 5.9 million, $ 6.3 million and $ 5.8 million of share-based compensation expense related to the vesting of stock option awards during the years ended December 31, 2022, 2021 and 2020, respectively. Restricted Stock Units Pursuant to the 2018 Plan and the 2015 Plan, the Company may issue RSUs that, upon satisfaction of vesting conditions, allow recipients to receive common stock. Issuances of such awards reduce common stock available under the 2018 Plan and 2015 Plan for stock incentive awards. The Company measures compensation cost associated with grants of RSUs at fair value, which is generally the closing price of the Company’s stock on the date of grant. RSUs generally vest over a three - to four-year period. F-35 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A summary of restricted stock unit activity under all plans for the years ended December 31, 2022, 2021 and 2020 is presented below: Number of Shares Weighted-Average Grant-Date Fair Value Non-vested — December 31, 2019 400,315 $ 3.95 Granted 570,368 10.52 Vested ( 548,160 ) 7.28 Forfeited ( 5,418 ) 4.06 Non-vested — December 31, 2020 417,105 8.68 Granted 1,931,263 8.53 Vested ( 1,019,686 ) 10.20 Forfeited ( 80,959 ) 10.75 Non-vested — December 31, 2021 1,247,723 7.65 Granted 2,544,053 4.51 Vested ( 2,278,818 ) 4.53 Forfeited ( 334,588 ) 3.45 Non-vested — December 31, 2022 1,178,370 7.33 During the years ended December 31, 2022, 2021 and 2020, the total fair value of shares vested was $ 9.5 million, $ 10.4 million and $ 5.1 million, respectively. As of December 31, 2022, there was $ 4.0 million of unrecognized share-based compensation expense related to non-vested RSUs, which is expected to be recognized over a weighted-average period of 2.40 years. The Company recognized approximately $ 11.7 million, $ 9.6 million and $ 4.1 million of share-based compensation expense related to the vesting of RSUs during the years ended December 31, 2022, 2021 and 2020 respectively. 2000 Employee Stock Purchase Plan The ESPP permits eligible employees of the Company to purchase newly issued shares of common stock, at a price equal to 85 % of the lower of the fair market value on (i) the first day of the offering period or (ii) the last day of each six-month purchase period, through payroll deductions of up to 10 % of their annual cash compensation. Under the ESPP, a maximum of 5,324,000 shares of common stock may be purchased by eligible employees. During the years ended December 31, 2022 and 2021, the Company issued 525,670 shares and 220,390 shares, respectively, under the ESPP. The Company recognized approximately $ 0.3 million, $ 0.7 million and $ 0.6 million of share-based compensation expense related to the ESPP during the years ended December 31, 2022, 2021 and 2020, respectively. 10. Earnings per Share Basic EPS excludes dilution and is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock using the treasury stock method. Potentially dilutive securities (consisting primarily of the convertible notes calculated using the if-converted and treasury stock method and warrants, stock options and RSUs calculated using the treasury stock method) are excluded from the diluted EPS computation in loss periods and when the applicable exercise price is greater than the market price on the period end date as their effect would be anti-dilutive. F-36 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The calculation of basic and diluted earnings per share was as follows (in thousands, except share and per share data): Year Ended December 31, 2022 2021 2020 Net loss attributable to common stockholders $ ( 70,705 ) $ ( 52,368 ) $ ( 114,119 ) Weighted-average common shares outstanding 107,269,331 103,246,308 96,111,547 Basic and diluted net loss per share $ ( 0.66 ) $ ( 0.51 ) $ ( 1.19 ) The following is a summary of outstanding potential shares of common stock that have been excluded from the computation of diluted net loss per share attributable to common stockholders because their inclusion would have been anti-dilutive: Year Ended December 31, (in thousands) 2022 2021 2020 Convertible notes 14,090 14,341 14,784 Warrants — 2,500 2,500 Non-qualified stock options 8,133 8,086 8,480 Restricted stock units 1,178 1,248 417 Employee Stock Purchase Plan 426 144 25 Total 23,827 26,319 26,206 11. Commitments and Contingencies Noncancellable Purchase Obligations The Company typically enters into commitments with its contract manufacturers that require future purchases of goods or services in the upcoming three to four quarters following the balance sheet date. Such commitments are noncancellable (“noncancellable purchase obligations). As of December 31, 2022, future payments under these noncancellable purchase obligations were approximately $ 77.6 million. Legal The Company is, from time to time, party to various legal proceedings arising in the ordinary course of business. The Company is regularly required to directly or indirectly participate in other U.S. patent infringement actions pursuant to its contractual indemnification obligations to certain customers. Based on an evaluation of these matters the Company currently believes that liabilities arising from, or sums paid in settlement of these existing matters, if any, would not have a material adverse effect on its consolidated results of operations or financial condition. 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 upon 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 consolidated results of operations or financial condition. 12. Leases The components of the right-of-use assets and lease liabilities were as follows (in thousands): F-37 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Balance Sheet Classification December 31, 2022 December 31, 2021 Operating right-of-use assets Right-of-use assets $ 6,662 $ 7,839 Current operating lease liabilities Accrued expenses and other current liabilities $ 1,759 $ 1,769 Non-current operating lease liabilities Other long-term liabilities 5,903 7,112 Total operating lease liabilities $ 7,662 $ 8,881 Weighted-average remaining lease term (in years) 4.1 5.0 Weighted-average discount rate 9.0 % 9.1 % The components of lease cost were as follows (in thousands): Year Ended December 31, 2022 2022 2021 2020 Operating lease costs included in operating costs and expenses $ 2,453 $ 2,800 $ 2,200 Supplemental cash flow information related to leases was as follows (in thousands): Year Ended December 31, 2022 2022 2021 2020 Operating cash flows related to operating leases $ 2,464 $ 2,600 $ 1,900 Operating right-of-use assets obtained in exchange for lease liabilities $ 705 $ 658 $ 7,931 The future minimum payments under operating leases were as follows at December 31, 2022 (in thousands): 2023 $ 2,459 2024 2,203 2025 1,763 2026 1,698 2027 1,125 Total minimum operating lease payments 9,248 Less: amounts representing interest ( 1,586 ) Present value of net minimum operating lease payments 7,662 Less: current portion ( 1,759 ) Long-term portion of operating lease obligations $ 5,903 13. Geographic Information and Concentrations of Risk Geographic Information The following table details the geographic concentration of the Company’s assets (in thousands): December 31, 2022 2021 United States and Canada $ 122,074 $ 176,094 Europe 32,903 35,630 Other 4,040 4,119 $ 159,017 $ 215,843 F-38 INSEEGO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table details the Company’s net revenues by geographic region based on shipping destination (in thousands): Year Ended December 31, 2022 2021 2020 United States and Canada $ 201,799 $ 215,520 $ 260,009 Europe 27,562 23,123 21,720 Australia 11,250 4,202 3,333 South Africa — 17,346 28,208 Other 4,712 2,208 562 Total $ 245,323 $ 262,399 $ 313,832 Concentrations of Risk For the year ended December 31, 2022, two customers accounted for 35.1 % and 32.2 % of net revenues, respectively. For the year ended December 31, 2021, the same two customers accounted for 43.9 % and 26.4 % of net revenues, respectively. For the year ended December 31, 2020, only one of these two customers accounted for 54.5 % of net revenues. At December 31, 2022, two customers accounted for 37.4 % and 21.9 % of total accounts receivable, net, respectively. At December 31, 2021, two customers accounted for 61.7 % and 12.6 % of total accounts receivable, net, respectively. 14. Retirement Savings Plan The Company has a defined contribution 401(k) retirement savings plan (the “Plan”). Substantially all of the Company’s U.S. employees are eligible to participate in the Plan after meeting certain minimum age and service requirements. The Company matches 50 % of the first 6 % of an employee’s designated deferral of their eligible compensation. Employees may make discretionary contributions to the Plan subject to Internal Revenue Service limitations. Employer matching contributions under the Plan were $ 0.9 million, $ 0.9 million and $ 0.7 million for the years ended December 31, 2022, 2021 and 2020, respectively. Employer matching contributions vest immediately. F-39