What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-04 compared with 2022-11-03 · 91 added, 172 removed, 179 unchanged (60% of the section changed)

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• our reliance on sole source suppliers for some products and devices used in our solutions;

• the continuing impact of uncertain global economic conditions, such as inflation, on the demand for our products and our future revenues, gross margins and financial results;

• the impact of geopolitical instability on our business;

• the emergence of global public health emergencies, such as the outbreak of the 2019 novel coronavirus, known as “COVID-19”, which could extend lead times in our supply chain and lengthen sales cycles with our customers;

• direct and indirect effects of COVID-19, including government efforts to reduce the spread of the disease, on our employees, customers and supply chain and the economy and financial markets;

• the continuing impact of uncertain global economic conditions on the demand for our products;

• the impact of geopolitical instability on our business, including the current conflict between Russia and Ukraine;

• the emergence of global public health emergencies, such as the outbreak of the 2019 novel coronavirus (2019-nCoV), known as “COVID-19”, which could extend lead times in our supply chain and lengthen sales cycles with our customers;

• direct and indirect effects of COVID-19 on our employees, customers and supply chain and the economy and financial markets;

• the impact of high inflation and rising interest rates;

• our ability to be cost competitive while meeting time-to-market requirements for our customers;

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• the introduction of new products that could contain errors or defects;

• conducting business abroad, including international conflicts such as the Russia-Ukraine crisis, and foreign currency risks;

• conducting business abroad, including foreign currency risks;

• the pace of 5G wireless network rollouts globally and their adoption by customers;

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Inseego Corp.

is a leader in the design and development of fixed and mobile wireless solutions (advanced 4G and 5G NR), 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 (“SD-WAN”) 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.

is a leader in the design and development of cloud-managed 5G wireless wide area network (WWAN) and intelligent edge solutions.

Our portfolio is comprised of secure, high-performance, cloud-managed fixed and mobile WWAN modems, routers, and gateways;

enterprise networking software-defined edge (“SD EDGE”) solutions powered by our 5G WWAN portfolio that secures and prioritizes corporate network traffic;

and intelligent edge and telematics solutions with built-in artificial intelligence (“AI”) technology, created to improve business outcomes.

All of these products and solutions are designed and developed in the U.S.

and are used in mission-critical applications requiring the highest levels of security and zero unscheduled downtime.

These solutions support business applications such as enterprise networking, software-defined wide area network (“SD-WAN”) failover management, asset tracking, edge computing, artificial intelligence, fleet management, and other services.

We have been at the forefront of the ways in which the world stays connected and accesses information, protects, and derives intelligence from that information.

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Our Sources of Revenue

We provide intelligent wireless 4G and 5G hardware products for the worldwide mobile communications and IIoT markets.

We provide intelligent, cloud-managed wireless 4G and 5G hardware products for the worldwide mobile communications and IIoT markets.

Our hardware products address multiple vertical markets including private LTE/5G networks, the First Responders Network Authority/Firstnet, SD-WAN, telematics, remote monitoring and surveillance, and fixed wireless access and mobile broadband devices.

Our broad range of products principally includes intelligent 4G and 5G fixed wireless routers and gateways, mobile hotspots, wireless gateways and routers for IIoT applications, Gigabit-speed 4G LTE hotspots and 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/manage their hardware remotely.

Our broad range of products principally includes intelligent 4G and 5G fixed wireless routers and gateways, mobile hotspots, wireless gateways and routers for IIoT applications, Gb speed 4G LTE hotspots and 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/manage their hardware remotely.

Our products currently operate on most major global cellular wireless networks.

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These wireless operators include Verizon Wireless, T-Mobile and U.S.

Cellular in the United States, Rogers and Telus in Canada, Telstra in Australia, Swisscom in Switzerland, as well as other international wireless operators, distributors and various companies in other vertical markets and geographies.

We sell our wireless routers for IIoT, integrated telematics and mobile tracking hardware devices through our direct sales force, value-added resellers and through distributors.

The customer base for our IIoT products is comprised of transportation companies, industrial enterprises, manufacturers, application service providers, system integrators and distributors in various industries, including fleet and vehicle transportation, aviation ground service management, energy and industrial automation, security and safety, medical monitoring and government.

Integrated telematics and asset tracking devices are also sold under our Ctrack brand and provided as part of our integrated SaaS solutions.

We sell SaaS, software and services solutions across multiple mobile and IIoT vertical markets, including fleet management, vehicle telematics, stolen vehicle recovery, asset tracking, monitoring, business connectivity and subscription management.

Our SaaS delivery platforms include our telematics and asset tracking and management platforms, which provide fleet, vehicle, aviation, asset and other telematics applications.

Cellular in the United States, Rogers and Telus in Canada, Telstra in Australia, as well as other international wireless operators, distributors and various companies in other vertical markets and geographies.

We sell our 5G WWAN solutions, integrated telematics and mobile tracking hardware devices through our direct sales force, value-added resellers and through distributors.

The customer base for our products is comprised of transportation companies, industrial enterprises, retailers, manufacturers, application service providers, system integrators and distributors in various industries, including fleet and vehicle transportation, aviation ground service management, energy and industrial automation, security and safety, medical monitoring and government.

Integrated telematics and asset tracking devices are provided as part of our integrated SaaS solutions.

We sell SaaS, software and services solutions across multiple vertical markets, including fleet management, vehicle telematics, stolen vehicle recovery, asset tracking, monitoring, business connectivity and subscription management.

Our SaaS delivery platforms include our telematics and asset tracking and management platforms, which provide fleet, vehicle, aviation, municipalities, healthcare, utilities asset and other telematics applications.

Our SaaS platforms are device-agnostic and provide a standardized, scalable way to order, connect and manage remote assets and to improve business operations.

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Both IoT & Mobile Solutions and Enterprise SaaS Solutions revenues include any hardware and software required for the respective solution.

Our SaaS delivery platforms include our Ctrack platforms, which provide fleet, vehicle, aviation, asset and other telematics applications.

Since the sale of our Ctrack South Africa operations was completed on July 30, 2021, certain portions of our SaaS revenue are no longer be generated, but Inseego continues to provide telematics solutions in the rest of the world, including in North America, Europe and Australia.

Factors Which May Influence Future Results of Operations

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Through strategic relationships, we have been able to maintain market penetration by leveraging the resources of our channel partners, including their access to distribution resources, increased sales opportunities and market opportunities.

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

The demand environment for our 5G products during the three months ended March 31, 2023 was consistent with our expectations.

However, we have recently experienced lower sales of LTE gigabit hotspots within IoT & Mobile Solutions as COVID-19 pandemic demand has eased.

The macroeconomic environment continues to remain uncertain and the demand for our products in the prior year may not be sustainable for the long term.

The macroeconomic environment continues to remain uncertain and the demand for our products in prior years may not be sustainable for the long term.

We will continue to monitor the implications of the COVID-19 pandemic on our business, as well as our customers’ and suppliers’ businesses.

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In order to maintain strong sales relationships, we provide co-marketing, trade show support and product training.

We are also engaged in

a wide variety of marketing activities, such as awareness and lead generation programs as well as product marketing.

We are also engaged in a wide variety of marketing activities, such as awareness and lead generation programs as well as product marketing.

Other marketing initiatives include public relations, seminars and co-branding with partners.

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Results of Operations

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

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Net revenues .

Net revenues for the three months ended September 30, 2022 were $69.2 million, compared to $66.2 million for the same period in 2021.

Net revenues for the three months ended March 31, 2023 were $50.8 million, compared to $61.4 million for the same period in 2022.

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

Three Months Ended

September 30, Change

March 31, Change

Product Category 2023 2022 $ %

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IoT & Mobile Solutions.

The $5.7 million increase in IoT & Mobile Solutions net revenues over the same period in 2021 is primarily due to higher sales of our second-generation 5G hotspot related to our MiFi business and increases in our Enterprise FWA and Subscribe business, partially offset by a decrease in revenue from our 4G products.

The $10.9 million decrease in IoT & Mobile Solutions net revenues over the same period in 2022 is primarily due to decreases in our carrier offerings and lower sales of LTE gigabit hotspots as the COVID-19 pandemic demand eased, partially offset by sales of our second-generation and fourth-generation 5G hotspot related to our MiFi business (launched in later part of 2022) and subscriber growth in our Enterprise and Inseego Subscribe businesses.

Enterprise SaaS Solutions.

The $2.7 million decrease in Enterprise SaaS Solutions net revenues over the same period in 2021 is primarily due to lower sales attributable to the Ctrack South Africa divestiture and decrease in Enterprise SaaS solutions revenue from the rest of the world.

The $0.3 million increase in Enterprise SaaS Solutions net revenues over the same period in 2022 is primarily due to increase in Enterprise SaaS Solutions net revenue throughout the rest of the world as a result of the lifting of COVID-19 related installation restrictions in place during fiscal 2022 .

Cost of net revenues.

Cost of net revenues for the three months ended September 30, 2022 was $51.2 million, or 74.0% of net revenues, compared to $47.3 million, or 71.4% of net revenues, for the same period in 2021.

Cost of net revenues for the three months ended March 31, 2023 was $32.6 million, or 64.2% of net revenues, compared to $46.1 million, or 75.2% of net revenues, for the same period in 2022.

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

Three Months Ended

September 30, Change

March 31, Change

Product Category 2023 2022 $ %

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IoT & Mobile Solutions.

The $4.6 million increase in IoT & Mobile Solutions cost of net revenues over the same period in 2021 is primarily due to higher sales and costs of production of our second-generation 5G hotspot.

The $13.2 million decrease in IoT & Mobile Solutions cost of net revenues over the same period in 2022 is primarily is a result of lower sales of LTE gigabit hotspots.

Enterprise SaaS Solutions.

The $0.7 million decrease in Enterprise SaaS Solutions cost of net revenues over the same period in 2021 is primarily due to a decrease in costs attributable to the Ctrack South Africa divestiture.

The $0.3 million decrease in Enterprise SaaS Solutions cost of net revenues over the same period in 2022 is primarily due to reduced costs associated with providing our recurring rental and subscription services.

Gross profit.

Gross profit for the three months ended September 30, 2022 was $18.0 million, or a gross margin of 26.0%, compared to $18.9 million, or a gross margin of 28.6%, for the same period in 2021.

The decrease in gross profit is primarily due to a higher mix of lower-margin 5G product revenue, higher supply chain costs and a decrease in margin attributable to the Ctrack South Africa divestiture.

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

Three Months Ended September 30, Change

Gross profit for the three months ended March 31, 2023 was $18.2 million, or a gross margin of 35.8%, compared to $15.2 million, or a gross margin of 24.8%, for the same period in 2022.

The increase in gross profit is primarily due an increase in revenue from Enterprise SaaS Solutions as well as various initiatives to improve efficiencies in production.

Operating costs and expenses.

Research and development $ 15,417 $ 12,626 $ 2,791 22.1 %

Sales and marketing 8,295 9,172 (877) (9.6) %

General and administrative 5,720 6,599 (879) (13.3) %

Amortization of purchased intangible assets 433 519 (86) (16.6) %

Total $ 29,865 $ 28,916 $ 949 3.3 %

Research and development expenses.

Research and development expenses for the three months ended September 30, 2022 were $15.4 million, or 22.3% of net revenues, compared to $12.6 million, or 19.1% of net revenues, for the same period in 2021.

The increase in expense is primarily due to additional certification costs incurred driven by the launch of major 5G products during the current period, an increase in amortization expense from recently launched projects, and a net decrease in capitalizable costs as fewer new projects were undertaken during the current period.

Sales and marketing expenses.

Sales and marketing expenses for the three months ended September 30, 2022 were $8.3 million, or 12.0% of net revenues, compared to $9.2 million, or 13.9% of net revenues, for the same period in 2021.

The decrease in expense is primarily due to lower commission costs and other sales personnel-related costs as a result of the decrease in overall sales headcount compared to the prior year period.

General and administrative expenses.

General and administrative expenses for the three months ended September 30, 2022 were $5.7 million, or 8.3% of net revenues, compared to $6.6 million, or 10.0% of net revenues, for the same period in 2021.

The decrease in expense is primarily due to lower costs attributable to the Ctrack South Africa divestiture, partially offset by increases in other general and administrative expenses.

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

Three Months Ended September 30, Change

Other (expense) income 2022 2021 $ %

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

Interest expense, net $ (2,034) $ (1,655) $ (379) 22.9 %

Other (expense) income, net (1,758) (828) (930) 112.3 %

Total $ (3,792) $ 2,779 $ (6,571) (236.5) %

Gain on sale of Ctrack South Africa.

During the three months ended September 30, 2021, we recorded a gain of $5.3 million related to the sale of Ctrack South Africa.

There was no such gain for the same period in 2022.

Interest expense, net.

The $0.4 million increase in expense over the same period in 2021 is primarily due to incremental interest expense attributable to the Company’s new revolving credit facility.

Other (expense) income, net.

The $0.9 million increase in expense over the same period in 2021 is primarily due to higher foreign currency exchange losses.

The following table summarizes income tax provision (benefit) and Series E preferred stock dividends (in thousands):

Three Months Ended September 30, Change

2022 2021 $ %

Income tax provision (benefit) $ 42 $ (4) $ 46 (1150.0)%

Series E preferred stock dividends (691) (1,843) 1,152 (62.5) %

Series E preferred stock dividends.

During the three months ended September 30, 2022 and 2021, we recorded dividends of $0.7 million and $1.8 million, respectively, on our Fixed-Rate Cumulative Perpetual Preferred Stock, Series E, par value $0.001 per share (the “Series E Preferred Stock”).

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

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Net revenues .

Net revenues for the nine months ended September 30, 2022 were $192.4 million, compared to $189.5 million for the same period in 2021

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

Nine Months Ended September 30, Change

Product Category 2022 2021 $ %

IoT & Mobile Solutions $ 172,129 $ 151,770 $ 20,359 13.4 %

Enterprise SaaS Solutions 20,279 37,737 (17,458) (46.3) %

Total $ 192,408 $ 189,507 $ 2,901 1.5 %

IoT & Mobile Solutions.

The $20.4 million increase in IoT & Mobile Solutions net revenues over the same period in 2021 is primarily due to higher sales of our second-generation 5G hotspot, strong performance of our Enterprise FWA business, and an increase in subscriber growth within our Inseego Subscribe business, partially offset by a decrease in revenues from our 4G products.

Enterprise SaaS Solutions.

The $17.5 million decrease in Enterprise SaaS Solutions net revenues over the same period in 2021 is primarily due to lower sales attributable to the Ctrack South Africa divestiture and decrease in Enterprise SaaS solutions revenue in the rest of the world.

Cost of net revenues.

Cost of net revenues for the nine months ended September 30, 2022 was $141.3 million or 73.4% of net revenues, compared to $131.7 million or 69.5% of net revenues, for the nine months ended September 30, 2021.

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

Nine Months Ended September 30, Change

Product Category 2022 2021 $ %

IoT & Mobile Solutions $ 131,805 $ 116,777 $ 15,028 12.9 %

Enterprise SaaS Solutions 9,505 14,965 (5,460) (36.5) %

Total $ 141,310 $ 131,742 $ 9,568 7.3 %

IoT & Mobile Solutions.

The $15.0 million increase in IoT & Mobile Solutions cost of net revenues over the same period in 2021 is primarily due to higher sales of our second-generation 5G hotspot, and an increase in freight costs, partially offset by a decrease in costs attributable to lower sales of our 4G products.

Enterprise SaaS Solutions.

The $5.5 million decrease in Enterprise SaaS Solutions cost of net revenues over to the same period in 2021 is primarily due to a decrease in costs attributable to the Ctrack South Africa divestiture.

Gross profit.

Gross profit for the nine months ended September 30, 2022 was $51.1 million, or a gross margin of 26.6%, compared to $57.8 million, or a gross margin of 30.5%, for the same period in 2021.

The decrease in gross margin is primarily due to a higher mix of lower-margin 5G product revenue, higher supply chain costs (i.e.

freight cost) and a decrease in margin attributable to the Ctrack South Africa divestiture.

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

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

Operating costs and expenses 2023 2022 $ %

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Research and development expenses.

Research and development expenses for the nine months ended September 30, 2022 were $47.6 million, or 24.7% of net revenues, compared to $39.0 million, or 20.6% of net revenues, for the same period in 2021.

The increase in expense is primarily due to a net decrease in capitalizable costs as fewer new projects undertaken during the current period, an increase in amortization expense from recently launched projects, and increases in other costs, including costs related to certification and launch of 5G product programs and share-based compensation.

Research and development expenses for the three months ended March 31, 2023 were $8.2 million, or 16.1% of net revenues, compared to $18.6 million, or 30.2% of net revenues, for the same period in 2022.

The decrease in research and development expenses was primarily due to net decrease in research and development costs as fewer new projects were undertaken during the current period.

Sales and marketing expenses.

Sales and marketing expenses for the nine months ended September 30, 2022 were $25.8 million, or 13.4% of net revenues, co mpared to $30.0 million, or 15.8% of net revenues, for the same period in 2021.

The decrease in expense is primarily due to lower payroll costs resulting from the Ctrack South Africa divestiture and a decrease in commission and other sales personnel-related expenses due to headcount reduction, partially offset by an increase in costs related to the marketing of 5G products.

Sales and marketing expenses for the three months ended March 31, 2023 were $6.6 million, or 13.1% of net revenues, compared to $9.8 million, or 15.9% of net revenues, for the same period in 2022.

The decrease in sales and marketing expenses was primarily due to lower consulting costs and other sales personnel-related costs as a result of the decrease in overall sales headcount compared to the same period in 2022.

General and administrative expenses.

General and administrative expenses for the nine months ended September 30, 2022 were $20.1 million, or 10.4% of net revenues, compared to $22.7 million, or 12.0% of net revenues, for the same period in 2021.

The decrease in expense is primarily due to lower payroll costs attributable to the Ctrack South Africa divestiture and decreases in other general and administrative expenses , partially offset by an increase in share-based compensation expense.

Amortization of purchased intangible assets .

Amortization of purchased intangible assets for each of the nine months ended September 30, 2022 and 2021 was $1.3 million and $1.6 million, respectively.

The decrease in expense is primarily due to certain purchased intangible assets that became fully amortized in the prior year.

Impairment of capitalized software .

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

There was no such expense for the nine months ended September 30, 2022.

General and administrative expenses for the three months ended March 31, 2023 were $6.0 million, or 11.9% of net revenues, compared to $8.2 million, or 13.4% of net revenues, for the same period in 2022.

The decrease in general and administrative expense was primarily due to decrease in share-based expense due to lower RSU bonus released during the three months ended March 31, 2023 compared to the same period in 2022.

Other (expense) income.

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

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

Other (expense) income 2023 2022 $ %

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

Loss on debt conversion and extinguishment, net — (450) 450 (100.0) %

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Total $ (1,202) $ (3,778) $ 2,576 (68.2)

Gain on sale of Ctrack South Africa.

During the nine months ended September 30, 2021, we recorded a gain of $5.3 million related to the sale of Ctrack South Africa.

There was no such gain for the same period in 2022.

Loss on debt conversion and extinguishment, net .

The loss on debt conversion and extinguishment, net for the three months ended March 31, 2023 and 2022 was $0 and $0.5 million, respectively.

Interest expense, net.

Interest expense, net for each of the nine months ended September 30, 2022 and 2021 was $6.6 million and $5.2 million, respectively.

The increase is primarily due to certain debt extinguishment-related adjustments in prior years recorded in the current year period and incremental expense attributable to the Company’s new revolving credit facility.

The $0.9 million decrease in interest expense over the same period in 2022 was primarily a result of certain 2022 Notes debt extinguishments related adjustments recorded in the prior period.

Other (expense) income, net.

Other income (expense), net, for each of the nine months ended September 30, 2022 and 2021 was $3.1 million of expense and $0.3 million of income, respectively.

The increase in expense is primarily due to an increase in foreign exchange transaction losses, partially offset by unrealized gains attributable to fair value adjustments on our interest make-whole derivative liability.

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

Nine Months Ended September 30, Change

2022 2021 $ %

Income tax (benefit) provision $ (582) $ 445 $ (1,027) (230.8) %

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

Series E preferred stock dividends (2,029) (3,596) 1,567 (43.6) %

Income tax (benefit) provision.

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

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

Net income attributable to noncontrolling interests.

There was no net income attributable to noncontrolling interests for the nine months ended September 30, 2022, due to the sale of noncontrolling interests as part of the Ctrack South Africa divestiture.

The $1.2 million increase in other income over the same period in 2022 is primarily due to foreign currency exchange gains in the current period.

Income tax provision (benefit).

Income tax provision for the three months ended March 31, 2023 and 2022 was a provision of $0.3 million and a benefit of $0.3 million, respectively.

This $0.6 million increase in income tax expense was driven by a marked increase in pre-tax profits at Inseego SA (Pty) Ltd (previously, C-track Holdings) for the current year period compared to a loss in the prior year period.

Series E preferred stock dividends.

During the nine months ended September 30, 2022, and 2021 we recorded dividends of $2.0 million and $3.6 million, respectively, on our Series E Preferred Stock.

During the three months ended March 31, 2023 and 2022, we recorded dividends of $0.7 million and $0.7 million, respectively, on our Fixed-Rate Cumulative Perpetual Preferred Stock, Series E, par value $0.001 per share (the “Series E Preferred Stock”).

There was minimal increase in preferred stock dividends for the period ended March 31, 2023.

Liquidity and Capital Resources

Our principal sources of liquidity are our existing cash and cash equivalents and availability under our new revolving credit facility.

As of September 30, 2022, we had available unrestricted cash and cash equivalents totaling $18.1 million and $14.6 million of excess availability under our revolving credit facility.

As of March 31, 2023, we had available cash and cash equivalents totaling $8.7 million and $11.8 million of excess availability under our revolving credit facility.

We also have an equity distribution agreement through which we may sell shares of our common stock, and as of March 31, 2023, there was approximately $9 million of cash remaining before underwriter fees and discounts that we may generate from such issuance.

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

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

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

If events or circumstances occur such that we do not meet our operating plan as expected, or if we become obligated to pay unforeseen expenditures as a result of ongoing litigation, we may be required to raise capital, reduce planned research and development activities, incur restructuring charges or reduce other operating expenses which could have an adverse impact on our ability to achieve our intended business objectives.

Our liquidity could be compromised if there is any interruption in our business operations, a material failure to satisfy our contractual commitments or a failure to generate revenue from new or existing products.

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Revolving Credit Facility

On August 5, 2022, the Company entered into a Loan and Security Agreement (the “Credit Agreement”), by and among Siena Lending Group LLC, as lender (“Lender”), Inseego Wireless, Inc., a Delaware corporation (“Inseego Wireless”), and Inseego North America LLC, an Oregon limited liability company, as borrowers (together with Inseego Wireless, the “Borrowers”), and the Company, as guarantor (together with the Borrowers, the “Loan Parties”).

The Credit Agreement

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

The Credit Facility matures on December 31, 2024.

On August 5, 2022, we entered into a Loan and Security Agreement (the “Credit Agreement”) with Siena Lending Group LLC, as lender (“Lender”).

The Credit Agreement established a $50.0 million secured asset-backed revolving credit facility (“Credit Facility”) with a final maturity date of December 31, 2024.

On February 25, 2023, we entered into an amendment of the Credit Agreement (“Amended Credit Agreement”) with an effective date of December 15, 2022, which clarified certain terms within the Credit Agreement.

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

Outstanding amounts exceeding the borrowing base must be repaid immediately.

The Borrowers’ obligations under the Credit Agreement are guaranteed by 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 (as defined in the Credit Agreement as the Term SOFR Reference Rate for a tenor of one month on the day) plus the Applicable Margin (as defined in the Credit Agreement), with a Term SOFR floor of 1%.

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

SOFR loans will bear interest at a rate per annum equal to Term SOFR (as defined in the Amended 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 Amended 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 Amended 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.

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

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

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

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

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

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

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.

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.

As of September 30, 2022 and December 31, 2021, $161.9 million in principal amount of the 2025 Notes were outstanding.

We were in compliance with the financial covenants contained in the Amended Credit Agreement as of March 31, 2023.

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

On May 12, 2020, we completed a registered public offering of $100.0 million aggregate principal amount of our 3.5% convertible senior notes due 2025 (“the 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.

As of March 31, 2023 and December 31, 2022, $161.9 million in principal amount of the 2025 Notes were outstanding.

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

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

Equity Distribution Agreement

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

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

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 the ATM Offering.

Contractual Obligations and Commitments

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.

Such commitments are considered noncancellable purchase obligations.

As of September 30, 2022 and December 31, 2021, future payments under these noncancellable purchase obligations were approximately $104.7 million and $165.8 million, respectively.

There were no material changes in our other contractual obligations during the three and nine months ended September 30, 2022.

Our material contractual obligations are as follows:

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

Our purchase obligations consist of agreements to purchase goods and services entered into in the ordinary course of business.

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

• $161,898 in outstanding principal amount of 2025 Notes with required interest payments;

• $4.5 million in outstanding borrowings under the revolving Credit Facility;

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

There were no material changes in our other contractual obligations during the three months ended March 31, 2023.

Historical Cash Flows

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

Nine Months Ended

September 30,

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

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

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

Three Months Ended

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

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

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

1 unchanged sentence

Operating activities.

Net cash used in operating activities was $24.7 million for the nine months ended September 30, 2022, compared to net cash used in operating activities of $14.8 million for the same period in 2021.

Net cash used in operating activities for the nine months ended September 30, 2022 is primarily comprised of a $53.3 million net loss incurred during the period, net cash used for working capital of $12.4 million, as adjusted for a $0.9 million non-cash gain attributable to the fair value adjustment on derivative instruments, partially offset by non-cash charges, including depreciation and amortization of $20.9 million, share-based compensation expense of $15.9 million, and amortization of debt discount and debt issuance costs of $2.5 million.

Net cash used in operating activities for the same period in 2021 is primarily comprised of a $37.2 million net loss, net cash used for working capital of $8.3 million, as adjusted for a $3.4 million non-cash gain attributable to the fair value adjustment on derivative instruments, partially offset by non-cash charges, including depreciation and amortization of $19.1 million and share-based compensation expense of $14.5 million.

Net cash provided by operating activities for the three months ended March 31, 2023 is primarily comprised of a $5.1 million net loss incurred during the period, net cash used for working capital of $3.6 million, partially offset by non-cash charges, including depreciation and amortization of $5.4 million, share-based compensation expense of $1.8 million, and amortization of debt discount and debt issuance costs of $0.5 million.

Net cash used in operating activities for the same period in 2022 is primarily comprised of a $25.2 million net loss and a $0.6 million non-cash gain attributable to the fair value adjustment on derivative instruments.

which was offset by net cash provided from working capital of $3.9 million, and non-cash charges, including depreciation and amortization of $7.2 million share-based compensation expense of $11.2 million, $1.7 million of amortization of debt issuance and discount costs and other non-cash adjustments.

Investing activities.

Net cash used in investing activities during the nine months ended September 30, 2022 was $10.4 million, compared to net cash provided by investing activities of $7.7 million for the same period in 2021.

Net cash used in investing activities during the nine months ended September 30, 2022 is primarily comprised of $9.2 million of c ash outflows related to the development of software in support of our 5G products and services and $1.2 million of property, plant and equipment purchases.

Net cash provided by investing activities during the same period in 2021 is primarily comprised of a $31.5 million of cash inflows related to the sale of Ctrack South Africa, partially offset by $20.6 million of cash outflows related to the development of software in support of our 5G products and services and $4.3 million of property, plant and equipment purchases.

Net cash used in investing activities during the three months ended March 31, 2023 is primarily comprised of $2.4 million of c ash outflows related to the development of software in support of our 5G products and services and $0.1 million of property, plant and equipment purchases.

Net cash used in investing activities during the same period in 2022 is primarily comprised of $3.1 million of cash outflows related to the development of software in support of our 5G products and services and $0.8 million of property, plant and equipment purchases.

Financing activities.

Net cash provided by financing activities during the nine months ended September 30, 2022 was $1.5 million, c ompared to net cash provided by financing activities of $29.0 million for the same period in 2021.

Net cash provided by financing activities during the nine months ended September 30, 2022 is primarily comprised of $3.4 million of cash inflows (consisting of net borrowings of $4.5 million, net of $1.1 million in debt issuance costs) related to our new revolving credit facility, partially offset by $1.6 million in principal payments for financed assets.

Net cash provided by financing activities for the same period in 2021 is primarily comprised of $29.4 million of net proceeds received from the sale of approximately 1.5 million shares of common stock and $2.4 million of proceeds from stock option exercises and purchases through our employee stock purchase plan, partially offset by $3.1 million in principal payments under finance lease obligations.

Net cash used in financing activities during the three months ended March 31, 2023 is primarily comprised of $3.4 million of cash outflow related to repayments of our revolving credit facility, partially offset by $0.5 million in proceeds from public offering .

Net cash used in financing activities for the same period in 2022 is primarily comprised of $1.0 million in principal repayments of financed assets.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis