What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-04 compared with 2022-11-03 · 149 added, 212 removed, 346 unchanged (51% of the section changed)

3 unchanged sentences

(In thousands, except par value and share data)

September 30,

2023 December 31,

1 unchanged sentence

Cash and cash equivalents $ 8,686 $ 7,143

Restricted cash — 3,338

Accounts receivable, net of allowance for doubtful accounts of $ 561 and $ 541 , respectively

8 unchanged sentences

Goodwill 21,922 21,922

Right-of-use assets, net 6,902 7,839

Right-of-use assets 6,122 6,662

Other assets 448 488

29 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net revenues:

16 unchanged sentences

Other (expense) income:

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

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

1 unchanged sentence

Other (expense) income, net 795 ( 405 )

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

Total other expense ( 1,202 ) ( 3,778 )

Loss before income taxes ( 4,793 ) ( 25,545 )

1 unchanged sentence

Net loss ( 5,104 ) ( 25,223 )

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

Net loss attributable to Inseego Corp.

( 15,743 ) ( 7,190 ) ( 53,342 ) ( 37,405 )

Series E preferred stock dividends ( 723 ) ( 661 )

10 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net loss $ ( 5,104 ) $ ( 25,223 )

Foreign currency translation adjustment 94 2,898

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

Total comprehensive loss $ ( 5,010 ) $ ( 22,325 )

Comprehensive income attributable to noncontrolling interests — — — ( 214 )

Comprehensive loss attributable to Inseego Corp.

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

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

Preferred Stock Common Stock Additional

Paid-in Capital Accumulated Deficit Accumulated

Comprehensive Income (Loss) Noncontrolling Interests Total

Paid-in Capital Accumulated Deficit 1

Comprehensive Income (Loss) 1

Stockholders’ Equity (Deficit)

Shares Amount Shares Amount

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

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

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

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

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

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

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

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

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

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

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

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

Foreign currency translation adjustment — — — — — $ — 1,147 — 1,147

Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan — — 201 — 101 $ — — — 101

Taxes withheld on net settled vesting of restricted stock units — — — — ( 21 ) $ — — — ( 21 )

Share-based compensation

— — — — 2,406 $ — — — 2,406

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

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

INSEEGO CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(In thousands)

Preferred Stock Common Stock Additional

Paid-in Capital Accumulated Deficit Accumulated

Comprehensive Income (Loss) Noncontrolling Interests Total

Stockholders’ Deficit

Shares Amount Shares Amount

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

1 unchanged sentence

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

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

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

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

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

Issuance of common shares in connection with a public offering, net of issuance costs — — 1,516 2 29,368 — — — 29,370

Share-based compensation — — — — 11,199 — — 11,199

— — — — 14,467 — — — 14,467

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

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

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

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

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

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

Balance, December 31, 2022 25 $ — 108,468 $ 108 $ 793,855 $ ( 857,752 ) $ ( 6,329 ) $ ( 70,118 )

1 unchanged sentence

Foreign currency translation adjustment — — — — — — 94 94

Adjustment relating to extinguishment of 2022 Notes 1,727 — — — 1,727

Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan — — 46 — 96 — — 96

Taxes withheld on net settled vesting of restricted stock units — — — — ( 21 ) — — ( 21 )

Issuance of common shares in connection with a public offering, net of issuance costs 858 1 528 529

Share-based compensation

1 unchanged sentence

Series E preferred stock dividends — — — — 723 ( 723 ) — —

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

Balance, March 31, 2023 25 $ — 109,372 $ 109 $ 796,981 $ ( 863,578 ) $ ( 6,236 ) $ ( 72,724 )

1 Rounding may impact summation of amounts.

See accompanying notes to condensed consolidated financial statements.

INSEEGO CORP.

1 unchanged sentence

(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

Net loss $ ( 5,104 ) $ ( 25,223 )

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization 5,430 7,243

6 unchanged sentences

Loss on debt conversion and extinguishment, net — 450

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

Deferred income taxes 101 189

7 unchanged sentences

Operating lease liabilities ( 625 ) ( 354 )

Net cash used in operating activities ( 24,703 ) ( 14,757 )

Net cash provided by (used in) operating activities 7,659 ( 638 )

Cash flows from investing activities:

Acquisition of noncontrolling interest — ( 116 )

Purchases of property, plant and equipment ( 61 ) ( 763 )

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

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

Additions to capitalized software development costs ( 2,443 ) ( 3,127 )

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

Net cash used in investing activities ( 2,504 ) ( 3,890 )

Cash flows from financing activities:

3 unchanged sentences

Principal payments on financed assets ( 360 ) ( 1,007 )

Borrowings on revolving credit facility 9,000 —

Repayments on revolving credit facility ( 4,500 ) —

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

Borrowings (repayments) on revolving credit facility ( 3,385 ) —

Proceeds from stock option exercises and employee stock purchase plan, net of taxes paid on vested restricted stock units 75 63

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

Net cash used in financing activities ( 3,340 ) ( 1,060 )

Effect of exchange rates on cash ( 272 ) 957

Net (decrease) increase in cash, cash equivalents and restricted cash ( 31,749 ) 21,594

Net increase (decrease) in cash, cash equivalents and restricted cash 1,543 ( 4,631 )

Cash, cash equivalents and restricted cash, beginning of period 7,143 49,812

8 unchanged sentences

Right-of-use assets obtained in exchange for operating leases liabilities $ 50 $ 79

Exchange of Series E Preferred Stock for common stock $ — $ 11,982

Issuance of common stock in exchange for Series E Preferred Stock $ — $ 13,086

Deemed dividend on exchange of Series E Preferred Stock for common stock $ — $ 1,104

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

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

Basis of Presentation

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

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

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

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

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

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

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

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

(the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

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

The information as of March 31, 2023, and for the three months ended March 31, 2023, and March 31, 2022, is unaudited, whereas the condensed consolidated balance sheet as of December 31, 2022, is derived from the Company’s audited consolidated financial statements as of that date.

These condensed consolidated financial statements and notes hereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s latest shareholders’ annual report (“Form 10-K”).

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

4 unchanged sentences

Segment Information

Management has determined that the Company has one reportable segment.

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

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 are based solely on the Company’s consolidated operations and financial results.

Use of Estimates

3 unchanged sentences

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

Significant estimates include revenue recognition, capitalized software costs, allowance for credit losses, provision for excess and obsolete inventory, valuation of intangible and long-lived assets, valuation of goodwill, valuation of derivatives, accruals relating to litigation, income taxes and share-based compensation expense.

Significant estimates include revenue recognition, capitalized software costs, allowance for credit losses, provision for excess and obsolete inventory, valuation of tangible and intangible long-lived assets, valuation of goodwill, valuation of derivatives, accruals relating to litigation, income taxes and share-based compensation expense.

Risks and Uncertainties

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

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

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

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

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

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

We may be affected by various macroeconomic factors and the current and future conditions in the global financial markets.

The global credit and financial markets have recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, rising interest rates, inflation, increases in unemployment rates and uncertainty about economic stability.

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

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

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

In addition, the COVID-19 pandemic continues to impact worldwide economic activity.

A pandemic, including COVID-19 or other public health epidemic, poses the risk that the Company or its 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 the Company’s business and financial condition.

The extent to which the COVID-19 pandemic, or any other outbreak of an epidemic disease, impacts the Company’s 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.

Furthermore, a global semiconductor supply shortage continues to have wide-ranging impacts across the technology industry.

While the shortage has not materially impacted the Company’s operations and financial results, it may negatively

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Sale of Ctrack South Africa

On July 30, 2021, the Company completed the sale of its Ctrack business operations in Africa, Pakistan and the Middle East (together “Ctrack South Africa”) and recognized a pre-tax gain of $ 5.3 million.

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

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

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

impact the Company’s customers and the supply of materials needed for testing and production timeline.

The Company’s 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 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.

As of March 31, 2023, the Company had available cash and cash equivalents totaling $ 8.7 million and $ 11.8 million of excess availability under its secured asset-backed revolving credit facility.

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

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

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

To the extent that additional liquidity may be needed, the Company may issue up to $ 9 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 plans as expected, or if the Company becomes obligated to pay unforeseen expenditures as a result of ongoing litigation, the Company may be required to raise capital, reduce planned research and development activities, incur additional restructuring charges or reduce other operating expenses and capital expenditures, which could have an adverse impact on its ability to achieve its intended business objectives.

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 the Company’s 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

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.

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

There are no cash equivalents as of December 31, 2022 and as of March 31, 2023.

Restricted cash held in escrow as of December 31, 2021 was released during the third quarter of 2022 and we no longer have any restricted cash on our balance sheet as of March 31, 2023.

Restricted cash as of March 31, 2022 was $ 3.7 million.

Recently Adopted Accounting Pronouncements

9 unchanged sentences

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

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Company adopted the ASU in the first quarter of fiscal 2022 and there was no impact to the condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In September 2022, the FASB issued ASU No.

1 unchanged sentence

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

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

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

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

The Company adopted the ASU in the first quarter of 2023, and there was no impact to the consolidated financial statements.

Financial Statement Details

Inventories consist of the following (in thousands):

September 30,

2023 December 31,

4 unchanged sentences

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

September 30,

2022 December 31,

March 31, 2023 1

Rebate receivables

$ 1,905 $ 2,038

Receivables from contract manufacturers

Software licenses

Insurance 218 1,269

Deposits 870 1,023

Financed assets

Other 1,203 724

$ 10,902 $ 13,624

Total prepaid expenses and other $ 9,977 $ 7,978

Rounding may impact summation of amounts.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Accrued expenses and other current liabilities

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

September 30,

2023 December 31,

4 unchanged sentences

Accrued interest 2,401 1,112

Customer contract liabilities 8,554 3,832

Deferred revenue 4,887 5,060

Customer advances — 2,828

Operating lease liabilities 1,814 1,759

Accrued contract manufacturing liabilities 816 1,416

Liabilities related to financed assets 1,018 —

Value added tax payables 630 449

1 unchanged sentence

Total accrued expenses and other current liabilities $ 27,109 $ 27,945

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Fair Value Measurement of Assets and Liabilities

6 unchanged sentences

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

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

September 30, 2022 December 31, 2021

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

Cash equivalents

Money market funds $ — $ — $ — $ 126 $ — $ 126

Total assets $ — $ — $ — $ 126 $ — $ 126

Interest make-whole payment $ 24 $ 24 $ — $ 926 $ 926 $ —

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

The Company’s financial instruments measured at fair value were $0 and less than $0.1 million as of March 31, 2023 and December 31, 2022 respectively.

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Volatility 50 % 50 %

5 unchanged sentences

Risk-free rate 4.04 % 4.35 %

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

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

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

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

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

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

There was no change in the fair value of the interest make-whole liability for the three months ended March 31, 2023.

For the three months ended March 31, 2023 and 2022, the Company recorded $ — and a $ 0.6 million gain, respectively as a result of the change in the fair value of the interest make-whole liability.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Company reviews the fair value hierarchy classification of its financial instruments measured at fair value each reporting period.

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

There have been no transfers of assets or liabilities between fair value measurement classifications during the three months ended March 31, 2023 or 2022.

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 3.5% convertible senior notes due 2025 (the “2025 Notes”).

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

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

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

Debt for additional information on the 2025 Notes.

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

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

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

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.

As of March 31, 2023 and December 31, 2022, $ 161.9 million in principal amount of the 2025 Notes were outstanding, $ 80.4 million of which were held by related parties.

As of March 31, 2023 and December 31, 2022, accrued interest due of $ 1.3 million and $ 0.9 million, respectively, was included within accrued expenses and other current liabilities on the condensed consolidated balance sheets.

Assuming no repurchases or conversions of the 2025 Notes prior to May 1, 2025, the entire principal balance of $ 161.9 million is due on May 1, 2025.

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

2023 December 31,

Principal $ 161,898 $ 161,898

fair value of embedded derivative — $ —

unamortized debt discount ( 1,725 ) $ ( 1,933 )

unamortized issuance costs ( 1,374 ) $ ( 1,538 )

Net carrying amount $ 158,799 $ 158,427

The effective interest rate on the liability component of the 2025 Notes was 4.23 % for both the three months ended March 31, 2023 and 2022, respectively.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Three Months Ended March 31,

Contractual interest expense $ 1,315 $ 1,315

Amortization of debt discount $ 207 $ 207

Amortization of debt issuance costs $ 165 $ 165

Total interest expense $ 1,687 $ 1,687

Asset-backed Revolving Credit Facility

7 unchanged sentences

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

SOFR loans will bear interest at a rate per annum equal to Term SOFR (as defined in the Credit Agreement as the Term SOFR Reference Rate for a tenor of one month on the day) plus the Applicable Margin (as defined in the Credit Agreement), with a Term SOFR floor of 1 %.

SOFR loans will bear interest at a rate per annum equal to Term SOFR (as defined in the Credit Agreement as the Term SOFR Reference Rate for a term of one month on the day) plus the Applicable Margin (as defined in the Credit Agreement), with a Term SOFR floor of 1 %.

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

5 unchanged sentences

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

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

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 of the Amended Credit Agreement as of March 31, 2023 .

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

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

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

As of March 31, 2023 , the Company had outstanding borrowings of $ 4.5 million, a gross borrowing base of $ 16.3 million and excess availability of $ 11.8 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.

During the nine months ended September 30, 2021, certain holders of the 2025 Notes converted an aggregate of approximately $ 5.0 million in principal amount of the 2025 Notes into 428,669 shares of the Company’s common stock,

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

including 32,221 shares of common stock issued in satisfaction of the interest make-whole payment.

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

As of September 30, 2022 and December 31, 2021, $ 161.9 million in principal amount of the 2025 Notes were outstanding, $ 80.4 million of which were held by related parties, and $ 0.4 million of accrued interest due to related parties was included within accrued expenses and other current liabilities on the condensed consolidated balance sheets.

Assuming no repurchases or conversions of the 2025 Notes prior to May 1, 2025, the entire principal balance of $ 161.9 million is due on May 1, 2025.

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

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

September 30,

The following tables set forth the principal amount outstanding and interest expense for the periods (in thousands):

2023 December 31,

Principal $ 4,467 $ 7,851

fair value of embedded derivative 24 926

unamortized debt discount ( 2,140 ) ( 2,761 )

unamortized issuance costs $ ( 816 ) $ ( 932 )

Net carrying amount $ 3,651 $ 6,919

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

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

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

2022 2021 2022 2021

The effective interest rate of the Credit Facility was 21.1 %, which includes 10.5 % related to amortization of original issuance costs, for the three months ended March 31, 2023.

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

Three Months Ended March 31,

Contractual interest expense $ 118

Amortization of debt discount 207 207 621 622

Amortization of debt issuance costs $ 117

Total interest expense $ 235

On May 2, 2023, (1) two related parties (the “Participants”) collectively purchased a $4.0 million last-out subordinated participation interest in the Credit Agreement (the “Participation Interest”) from the Lender, and (2) the Borrowers entered into an amendment to the Credit Agreement which increased the borrowing base under the Credit Facility by $4.0 million, increased the minimum draw to $8.5 million, and modified certain covenants.

In connection with the purchase of the Participation Interest, we agreed to pay the Participants an aggregate exit fee ranging from 7.5% to 12.5% of the amount of the Participation Interest, payable upon the earlier to occur of (a) the maturity date of the Credit Facility, (b) termination of the Lender’s commitment to make revolving loans prior to the scheduled maturity date of the Credit Facility, and (c) the early redemption of the Participation Interest, as applicable.

Further, the purchase of the Participation Interest granted an option for the Participants to purchase the subject revolving loan or to redeem its Participation Interest under certain circumstances.

The Participants are each affiliates of beneficial holders of greater than five percent of our outstanding common stock.

Share-based Compensation

During the nine months ended September 30, 2022, the Company granted awards under the 2018 Omnibus Incentive Compensation Plan, previously named the Amended and Restated 2009 Omnibus Incentive Compensation Plan (the “2018 Plan”), and the 2015 Incentive Compensation Plan (the “2015 Plan”).

During the three months ended March 31, 2023 and 2022 , the Company granted awards under the 2018 Omnibus Incentive Compensation Plan, previously named the Amended and Restated 2009 Omnibus Incentive Compensation Plan (the “2018 Plan”), and the 2015 Incentive Compensation Plan (the “2015 Plan”).

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

Under the 2018 Plan, a maximum of 9,574,995 shares of common stock may be issued upon the exercise of stock options, in the form of restricted stock, or in settlement of restricted stock units (“RSUs”) or other awards, including awards with alternative vesting schedules such as performance-based criteria.

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

The following table presents total share-based compensation expense within each functional line item on the condensed consolidated statements of operations for the three months end ed March 31, 2023 and 2022, (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Cost of revenues $ 184 $ 1,415

10 unchanged sentences

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

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

The following table summarizes the Company’s stock option activ ity for the three months ended March 31, 2023 :

Outstanding — December 31, 2022 8,132,959

Granted 38,750

Exercised ( 264,343 )

Canceled ( 728,002 )

Outstanding — September 30, 2022 8,412,550

Exercisable — September 30, 2022 5,391,541

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

Outstanding — March 31, 2023 7,443,707

Exercisable — March 31, 2023 5,423,759

At March 31, 2023, total unrecognized compensatio n expense related to stock options was $ 6.2 million , which is expected to be recognized over a weighted-average period of 2.52 years .

Restricted Stock Units

3 unchanged sentences

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

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

The following table summarizes the Company’s RSU activity for the three months ended March 31, 2023 :

Non-vested — December 31, 2022 1,178,370

2 unchanged sentences

Forfeited ( 67,809 )

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

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

Non-vested — March 31, 2023 1,044,711

At March 31, 2023, total unrecognized compensation expense related to RSUs was $ 3.3 million , which is expected to be recognized over a weighted-average period of 2.11 years .

On April 28, 2023, the Company granted a total of approximately 2.2 million RSUs to certain employees to encourage retention and incentivize future performance (“Retention Awards”).

All of the Retention Awards fully vest on November 1, 2023.

Earnings Per Share

5 unchanged sentences

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

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

2022 2021 2022 2021

Three Months Ended

Net loss attributable to common stockholders $ (5,827) $ (25,884)

1 unchanged sentence

Basic and diluted net loss per share $ ( 0.05 ) $ ( 0.24 )

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

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

(in thousands) 2022 2021 2022 2021

The following is a summary of outstanding anti-dilutive potential shares of common stock that have been excluded from diluted net loss per share attributable to common stockholders because their inclusion would have been anti-dilutive:

(in thousands) March 31, 2023 December 31, 2022

2025 Notes 14,090 14,090

Warrants — 2,500 — 2,500

Non-qualified stock options 7,956 8,133

2 unchanged sentences

Total 25,385 23,827

Private Placements and Public Offering

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

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

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

At June 30, 2022, the warrants expired unexercised.

Public Offering

In January 2021, the Company entered into an Equity Distribution Agreement with Canaccord Genuity LLC (the “Agent”), pursuant to which the Company may offer and sell, from time to time, through or to the Agent, up to $ 40.0 million of shares of its common stock (the “ATM Offering”).

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

There were no ATM transactions in 2022.

In March 2023, the Company’s Board of Directors (BOD) approved the issuance of up to the remaining $ 9.5 million worth of shares under this ATM Offering.

During the quarter ended March 31, 2023 the Company sold 858,098 shares of common stock, at an average price of $ 0.62 per share, for net proceeds of $ 0.5 million, after deducting underwriter fees and discounts.

As of March 31, 2023, there were approximately $ 9 million of shares remaining available for sale under this ATM Offering.

Geographic Information and Concentrations of Risk

1 unchanged sentence

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

Three Months Ended September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Three Months Ended

United States and Canada $ 43,205 $ 52,642

Europe $ 5,987 $ 5,620

South Africa (a)

— 2,435 — 17,333

Australia (b)

Australia (a)

$ 1,598 $ 1,013

1 unchanged sentence

Total $ 50,794 $ 61,384

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

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

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(a) Prior period was reclassified to conform to current period presentation.

Concentrations of Credit Risk

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

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

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

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

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

For the three months ended March 31, 2023, two customers accounted for 31.1 % and 26.6 % of net revenues, respectively.

For the three months ended March 31, 2022, two customers accounted for 37.3 % and 39.9 %, respectively, of net revenues.

As of March 31, 2023, three customers accounted for 42.4 %, 16.0 % and 14.6 % of accounts receivable, net, respectively.

As of December 31, 2022, two customers accounted for 37.4 % and 21.9 % of accounts receivable, net, respectively.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Commitments and Contingencies

Noncancellable Purchase Obligations

The Company typically enters into commitments with its contract manufacturers that require future purchase of goods or services in the three to four quarters following the balance sheet date.

The Company typically enters into commitments with its contract manufacturers that require future purchases of goods or services in the three to four quarters following the balance sheet date.

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

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

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

As of March 31, 2023, future payments under these noncancellable purchase obligations were approximately $ 53.4 million.

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 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 results of operations or financial condition.

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

Balance Sheet Classification September 30,

Balance Sheet Classification March 31,

2023 December 31,

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

Operating right-of-use assets, net Right-of-use assets $ 6,122 $ 6,662

Current operating lease liabilities Accrued expenses and other current liabilities $ 1,814 $ 1,759

4 unchanged sentences

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

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

2022 2021 2022 2021

Three Months Ended March 31,

Operating lease costs included in operating costs and expenses $ 592 $ 610

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Nine Months Ended September 30,

Three Months Ended March 31,

Operating cash flows related to operating leases $ 624 $ 622

Operating right-of-use assets obtained in exchange for lease liabilities $ 50 $ 79

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

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Future minimum payments under operating leases were as follows as of March 31, 2023 (in thousands):

2023 (remainder) $ 1,687

4 unchanged sentences

Long-term portion of operating lease obligations $ 5,149

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

Income taxes for all periods consisted primarily of foreign income taxes at certain of the Company’s international entities and minimum state taxes for its U.S.-based entities.

The Company’s income tax provision (benefit) was $ 0.3 million and $( 0.3 ) million for the three months ended March 31, 2023 and 2022, respectively.

Income taxes for both periods consisted primarily of foreign income taxes at certain of the Company’s international entities and minimum state taxes for its U.S.-based entities.

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

The income tax (benefit) provision for the nine months ended September 30, 2022 and 2021, were largely driven by foreign currency losses and gains, respectively, at the Company’s foreign subsidiaries.

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

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

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

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

The income tax provision (benefit) provision for the three months ended March 31, 2023 and 2022, were largely driven by unrealized foreign currency gains and losses, respectively, at the Company’s foreign subsidiaries.

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

What changed 10-Q

Item 1. Financial Statements