What changed in this filing

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Item 1. Financial Statements

2023-08-03 compared with 2023-05-04 · 123 added, 68 removed, 427 unchanged (31% of the section changed)

6 unchanged sentences

Cash and cash equivalents $ 15,165 $ 7,143

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

Accounts receivable, net of provision for credit losses of $ 761 and $ 541 , respectively

25,203 25,259

39 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Net revenues:

18 unchanged sentences

Interest expense, net ( 2,014 ) ( 1,664 ) ( 4,011 ) ( 4,587 )

Other (expense) income, net 795 ( 405 )

Other income (expense), net 658 ( 982 ) 1,453 ( 1,387 )

Total other expense ( 1,356 ) ( 2,646 ) ( 2,558 ) ( 6,424 )

14 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Net loss $ ( 4,936 ) $ ( 12,376 ) $ ( 10,041 ) $ ( 37,599 )

7 unchanged sentences

Paid-in Capital Accumulated Deficit 1

Comprehensive Income (Loss) Total

Stockholders’ Equity (Deficit ) 1

Shares Amount Shares Amount

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

Net loss — — — — — ( 12,376 ) — ( 12,376 )

Foreign currency translation adjustment — — — — — — 536 536

Adjustment relating to extinguishment of 2022 Notes — — — — — — — —

Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan — — 256 1 74 — — 75

Taxes withheld on net settled vesting of restricted stock units — — — — ( 22 ) — — ( 22 )

Share-based compensation — — — — 2,287 — — 2,287

Series E preferred stock dividends — — — — 677 ( 677 ) — —

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

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

Net loss — — — — — ( 4,936 ) — ( 4,936 )

Foreign currency translation adjustment — — — — — — ( 619 ) ( 619 )

Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan — — 320 — ( 1 ) — — ( 1 )

Taxes withheld on net settled vesting of restricted stock units — — — — ( 27 ) — — ( 27 )

Issuance of common shares in connection with a public offering — — 7,178 8 5,521 — — 5,529

Share-based compensation

— — — — 1,964 — — 1,964

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

Balance, June 30, 2023 25 $ — 116,870 $ 117 $ 805,177 $ ( 869,254 ) $ ( 6,855 ) $ ( 70,815 )

1 Rounding may impact summation of amounts.

See accompanying notes to condensed consolidated financial statements.

INSEEGO CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(In thousands)

Preferred Stock Common Stock Additional

Paid-in Capital 1

Accumulated Deficit 1

Comprehensive Income (Loss) 1

9 unchanged sentences

Series E preferred stock dividends — — — — 1,338 ( 1,338 ) — —

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

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

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

3 unchanged sentences

Taxes withheld on net settled vesting of restricted stock units — — — — ( 48 ) — — ( 48 )

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

Issuance of common shares in connection with a public offering — — 8,036 9 6,049 — — 6,058

Share-based compensation — — — — 3,762 — — 3,762

— — — — 1,800 — — 1,800

Series E preferred stock dividends — — — — 1,462 ( 1,462 ) — —

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

Balance, June 30, 2023 25 $ — 116,870 $ 117 $ 805,177 $ ( 869,254 ) $ ( 6,855 ) $ ( 70,815 )

1 Rounding may impact summation of amounts.

3 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization 10,819 13,955

Provision for bad debts 41 ( 14 )

Provision for (recoveries of) credit losses 244 ( 15 )

Impairment of capitalized software 504 —

6 unchanged sentences

Right-of-use assets ( 255 ) 1,070

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

Right-of-use asset impairment 469 —

Changes in assets and liabilities:

Accounts receivable 233 5,239

10 unchanged sentences

Cash flows from financing activities:

Net (repayment) borrowing of bank and overdraft facilities — ( 54 )

Net borrowing (repayment) of bank and overdraft facilities 79 ( 139 )

Principal payments under finance lease obligations — ( 62 )

Proceeds from a public offering, net of issuance costs 529 —

Proceeds from a public offering 6,059 —

Principal payments on financed assets ( 360 ) ( 1,231 )

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

Repayments on revolving credit facility ( 4,598 ) —

Proceeds from stock option exercises and employee stock purchase plan, net of taxes paid on vested restricted stock units 47 115

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

Net cash provided by (used in) financing activities 1,227 ( 1,317 )

Effect of exchange rates on cash ( 1,282 ) 744

18 unchanged sentences

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.

The information as of June 30, 2023, and for the six months ended June 30, 2023, and June 30, 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”).

31 unchanged sentences

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.

As of June 30, 2023, the Company had available cash and cash equivalents totaling $ 15.2 million and $ 14.2 million of excess availability under its secured asset-backed revolving credit facility.

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

1 unchanged sentence

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.

To the extent that additional liquidity may be needed, the Company may issue up to $ 3.5 million (balance as of June 30, 2023;

$ 9.5 million as of December 31, 2022) 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.

6 unchanged sentences

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.

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.

Gains and losses associated with the Company’s foreign currency denominated demand deposits are recorded as a component of other income, net, in the condensed consolidated statements of operations.

There are no cash equivalents as of December 31, 2022 and as of June 30, 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 June 30, 2023.

Restricted cash as of June 30, 2022 was $ 3.3 million.

Recently Adopted Accounting Pronouncements

5 unchanged sentences

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

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

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

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) .

3 unchanged sentences

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.

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

In September 2022, the FASB issued ASU No.

12 unchanged sentences

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

March 31, 2023 1

Rebate receivables

19 unchanged sentences

Accrued contract manufacturing liabilities 690 1,416

Liabilities related to financed assets 1,018 —

Value added tax payables 485 449

9 unchanged sentences

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

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 Company’s financial instruments measured at fair value were $0 and less than $0.1 million as of June 30, 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:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Volatility 60 % 50 %

5 unchanged sentences

Risk-free rate 4.96 % 4.35 %

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.

There was no material change in the fair value of the interest make-whole liability for both the three and six months ended June 30, 2023.

For the three and six months ended June 30, 2022, the Company recorded a $ 0.3 million and $ 0.9 million gain, respectively, as a result of the change in the fair value of the interest make-whole liability.

INSEEGO CORP.

2 unchanged sentences

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.

There have been no transfers of assets or liabilities between fair value measurement classifications during the six months ended June 30, 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 carrying values of the Company’s other financial assets and liabilities approximate their fair values because of their short-term nature, with the exception of the 3.25% convertible senior notes due 2025 (the “2025 Notes”, see “Note 4, Debt” ).

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

2 unchanged sentences

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.

As of June 30, 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 both June 30, 2023 and December 31, 2022, accrued interest due of $ 0.9 million, 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.

6 unchanged sentences

Net carrying amount $ 159,169 $ 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.

The effective interest rate on the liability component of the 2025 Notes was 4.23 % and 4.18 % for the three months ended June 30, 2023 and 2022, respectively, and 4.25 % and 4.20 % for the six months ended June 30, 2023 and 2022 , respectively.

INSEEGO CORP.

1 unchanged sentence

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

Three Months Ended March 31,

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

2023 2022 2023 2022

Contractual interest expense $ 1,315 $ 1,315 $ 2,631 $ 2,631

22 unchanged sentences

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 .

The Company was in compliance with the financial covenants of the Amended Credit Agreement as of June 30, 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.

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.

As of June 30, 2023, the Company had outstanding borrowings of $ 3.3 million, a gross borrowing base of $ 17.5 million and excess availability of $ 14.2 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.

6 unchanged sentences

Net carrying amount $ 2,554 $ 6,919

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 effective interest rate of the Credit Facility was 28.5 %, which includes 14.5 % related to amortization of original issuance costs, for the six months ended June 30, 2023.

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

Three Months Ended March 31,

Six Months Ended June 30, 2023

Contractual interest expense $ 223

6 unchanged sentences

Share-based Compensation

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”).

During the six months ended June 30, 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 7,474,326 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.

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):

The following table presents total share-based compensation expense within each functional line item on the condensed consolidated statements of operations for the three and six months end ed June 30, 2023 and 2022 (in thousands):

Three Months Ended

June 30, Six Months Ended

Cost of revenues $ 223 $ 259 406 $ 1,674

3 unchanged sentences

Total $ 1,964 $ 2,287 $ 3,762 $ 13,486

1 Rounding may impact summation of amounts.

INSEEGO CORP.

5 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 three months ended March 31, 2023 :

The following table summarizes the Company’s stock option activ ity for the six months ended June 30, 2023 :

Outstanding — December 31, 2022 8,132,959

1 unchanged sentence

Canceled ( 886,833 )

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 .

Outstanding — June 30, 2023 7,374,376

Exercisable — June 30, 2023 5,518,502

At June 30, 2023, total unrecognized compensatio n expense related to stock options was $ 5.5 million , which is expected to be recognized over a weighted-average per iod of 2.42 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 three months ended March 31, 2023 :

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.

The following table summarizes the Company’s RSU activity (including above retention RSUs) for the six months ended June 30, 2023 :

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

2 unchanged sentences

Forfeited ( 120,109 )

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.

Non-vested — June 30, 2023 3,189,136

At June 30, 2023, total unrecognized compensation expense related to RSUs was $ 3.6 million , which is expected to be recognized over a weighted-average period of 0.82 years .

Earnings Per Share

5 unchanged sentences

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

Three Months Ended

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

2023 2022 2023 2022

Net loss attributable to common stockholders $ ( 5,675 ) $ ( 13,053 ) $ ( 11,503 ) $ ( 38,937 )

2 unchanged sentences

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

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

(in thousands) 2023 1

2025 Notes 14,090 14,341 14,090 14,341

3 unchanged sentences

Total 27,259 24,832 26,756 24,650

1 Rounding may impact summation of amounts.

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.

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

For 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.

During the six months ended June 30, 2023 the Company sold 8,035,959 shares of common stock, at an average price of $ 0.75 per share, for net proceeds of $ 5.9 million, after deducting underwriter fees and discounts.

As of March 31, 2023 and June 30, 2023, there were approximately $ 9 million and $ 3.5 million, respectively, of shares remaining available for sale under this ATM Offering.

Geographic Information and Concentrations of Risk

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

United States and Canada $ 46,072 $ 52,826 $ 89,277 $ 105,468

6 unchanged sentences

Concentrations of Credit Risk

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.

For the three months ended June 30, 2023, two customers accounted for 25.9 % and 33.2 % of net revenues, respectively.

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

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the six months ended June 30, 2023, two customers accounted for 28.4 % and 30 % of net revenues, respectively.

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

As of June 30, 2023, three customers accounted for 39.5 %, 22.2 % and 12 % of accounts receivable, net, respectively.

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

Commitments and Contingencies

2 unchanged sentences

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

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

As of June 30, 2023, future payments under these noncancellable purchase obligations were approximately $ 49.7 million.

The Company is, from time to time, party to various legal proceedings arising in the ordinary course of business.

6 unchanged sentences

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

Balance Sheet Classification March 31,

Balance Sheet Classification June 30,

2023 December 31,

6 unchanged sentences

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

Three Months Ended March 31,

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

2023 2022 2023 2022

Operating lease costs included in operating costs and expenses $ 582 $ 590 $ 1,174 $ 1,200

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

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

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):

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

2023 2022 2023 2022

Operating cash flows related to operating leases $ 607 $ 617 $ 1,231 $ 1,239

Operating right-of-use assets obtained in exchange for lease liabilities $ 783 $ 79 $ 833 $ 158

Future minimum payments under operating leases were as follows as of June 30, 2023 (in thousands):

2023 (remainder) $ 1,159

Thereafter 717

Total minimum operating lease payments $ 9,259

3 unchanged sentences

Long-term portion of operating lease obligations $ 5,498

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.

Sublease of operating lease

The Company subleased one of its leased properties in San Diego effective June 2023 for total sublease rental payments of $ 1.2 million over 4.25 years, without a change to nor relief from current obligations under the original lease agreement which the Company continued accounting as an operating lease.

Sublease income earned on a straight-line basis amounted to less than $ 0.1 million for the three and six months ended June 30, 2023 and is included under other income (expense) in the condensed consolidated statements of operations.

Further, the associated lease cost for the term of the sublease, which is equal to the remaining term of the original lease, exceeded the anticipated sublease income for the same period.

The Company treated this as an indicator that the carrying amount of the right-of-use asset associated with the original lease may not be recoverable.

As a result, the Company tested the related right-of-use asset for recoverability and determined that the carrying amount of the lease was not recoverable as it exceeded its fair value.

Accordingly, an impairment loss of approximately $ 0.5 million was determined as the difference between the $ 1.5 million carrying value of the right-of-use asset and the $ 1.0 million fair value.

The fair value of the right-of-use asset for the original lease was determined based on the net present value of the total future cash flows from the related sublease agreement as of June 2, 2023 (sublease commencement date), using a 9 % marketable discount rate that considers the amount and term of the sublease.

The Company’s income tax provision was $ 0.3 million and $ 0.6 million for the three and six months ended June 30, 2023, respectively, compared to a tax benefit of $ 0.3 million and $ 0.6 million for the three and six months ended June 30, 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 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.

The income tax provisions for the three and six months ended June 30, 2023 and tax benefits for the three and six months ended June 30, 2022 were largely driven by the Company’s foreign subsidiaries which had unrealized foreign currency gains and improved profitability during the three and six months ended June 30, 2023 compared to significant unrealized foreign currency losses during the three and six months ended June 30, 2022.

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

What changed 10-Q

Item 1. Financial Statements