What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-22 compared with 2023-03-03 · 216 added, 290 removed, 123 unchanged (80% of the section changed)

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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 FWA gateway solutions, 4G and 5G mobile broadband, IIoT applications such as 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.

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

With multiple first-to-market innovations across a number of wireless technologies, including 5G, and a strong and growing portfolio of hardware and software innovations for IIoT solutions, Inseego has been advancing technology and driving industry transformations for over 30 years.

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

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

Initial cash proceeds of $36.6 million were received.

Final cash proceeds were subject to certain post-closing working capital adjustments which totaled $2.6 million, $2.2 million of which was received on October 29, 2021, and the remaining $0.4 million was offset with our existing accounts payable balance to Convergence.

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

Our 4G and 5G WAN portfolio is comprised of secure and high-performance mobile broadband and fixed wireless access (“FWA”) solutions with associated cloud solutions for real time WAN visibility, monitoring, automation and control with centralized orchestration of network functions.

These solutions are specifically built for the enterprise and small and medium business (“SMB”) market segments with a focus on performance, scalability, quality and enterprise grade security.

Our intelligent edge telematics solutions are designed to improve business outcomes for enterprise and SMB market segments.

We also provide a wireless subscriber management solution for carrier’s management of their government and complex enterprise customer subscriptions.

Our 5G products and associated cloud 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 applications such as business broadband for both mobile and fixed use cases, enterprise networking and software-defined wide area network (“SD-WAN”) failover management.

Business Segment Reporting

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As such, our operations constitute a single operating segment and one reportable segment.

Financial Statement Presentation

During 2023 the Company reclassified revenues on the Consolidated Statement of Operations in order to align with how management currently reviews revenue results.

Historically, the Company classified revenues from products and services into two categories, IoT & Mobile Solutions and Enterprise SaaS Solutions.

The Company is now classifying revenues into the following two categories:

Product Revenue, which consists of our Mobile Solutions and Fixed Wireless Access Solutions, and Services and Other.

See the Supplemental disclosure of quarterly revenues and cost of revenues section below for a table of revenues and related costs of revenues under the current classification for each of the four quarters during the years ended December 31, 2023 and 2022.

Additionally, during 2023 the Company reclassified all depreciation and amortization expense previously recorded in the operating expense line items of research and development, sales and marketing, and general and administrative expenses on the Consolidated Statement of Operations into a separate line labeled Depreciation and amortization.

All prior periods have been reclassified to conform to the current period presentation for these changes.

Factors Which May Influence Future Results of Operations

Net Revenues.

We believe that our future net revenues will be influenced by a number of factors including:

• economic environment and related market conditions;

• increased competition from other fleet and vehicle telematics solutions, as well as suppliers of emerging devices that contain wireless data access or device management features;

• acceptance of our products by new vertical markets;

• growth in the aviation ground vertical;

• rate of change to new products;

We classify our revenues from the sale of our products and services into two categories:

Product Revenue, which consists of our Mobile Solutions and Fixed Wireless Access Solutions, and Services and Other.

Historically, the Company classified revenues from products and services into two different categories, IoT & Mobile Solutions and Enterprise SaaS Solutions.

All prior periods have been reclassified to conform to the current period presentation for this change.

A description of each of the current revenue classifications is as follows:

Mobile solutions :

Our mobile broadband solutions, sold under the MiFi brand, are actively used by millions of end users to provide secure and convenient high-speed access to corporate, public and personal information through the Internet and enterprise networks.

Our mobile portfolio is supported by our cloud offerings - Inseego Connect for device management, and 5G SD EDGE for secure networking enabling corporate managed mobile remote workforce.

Our Mobile Solutions portfolio also includes 4G VoLTE products and 4G USB modems.

Our Mobile Solutions customer base is primarily comprised of mobile operators.

These mobile operators include Verizon Wireless, T-Mobile

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.

Fixed wireless access solutions:

Our fixed wireless access solutions are deployed by enterprise and SMB customers for their distributed sites and employees as a fully secure and corporate managed wireless WWAN solution.

The portfolio consists of indoor, outdoor and industrial routers and gateways supported by our cloud solutions – Inseego Connect for device management and 5G SD Edge for secure cloud networking.

These solutions, sold under the Wavemaker and Skyus brands, are sold by mobile operators such as T-Mobile, U.S.

Cellular and Verizon Wireless along with distribution and channel partners.

Services and other:

We sell certain other types of SaaS solutions.

First is our telematics and asset tracking solution that is deployed across multiple vertical markets in Europe, UK, Australia and New Zealand.

This solution provides real time visibility to fleet managers on their deployed vehicles with live maps and data to improve driver safety and performance.

We have thousands of enterprise and SMB customers currently subscribed to this service.

Second, we provide a wireless subscriber management solution (Inseego Subscribe) for carrier’s management of their government and complex enterprise customer subscriptions.

We also categorize non-recurring engineering services we provide to our customers as Service and other revenue.

We believe that our future revenues will be influenced by a number of factors including:

• deployment of 5G infrastructure equipment;

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• competition in the area of 5G technology;

• increased competition from other fleet and vehicle telematics solutions, as well as suppliers of emerging devices that contain wireless data access or device management features;

• acceptance of our products by new vertical markets;

• rate of change to new products;

• economic environment and related market conditions;

• product pricing;

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

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

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

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

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.

Cost of Net Revenues.

Cost of net revenues includes all costs associated with our contract manufacturers, distribution, fulfillment and repair services, delivery of SaaS services, warranty costs, amortization of intangible assets, royalties, operations overhead, costs associated with cancellation of purchase orders and costs related to outside services.

Also included in cost of net revenues are costs related to inventory adjustments, as well as any write downs for excess and obsolete inventory and abandoned product lines.

Cost of Revenues.

Cost of revenues includes all costs associated with our contract manufacturers, distribution, fulfillment and repair services, delivery of SaaS services, warranty costs, amortization of intangible assets, depreciation of rental assets for telematics services, royalties, operations overhead, costs associated with cancellation of purchase orders and costs related to outside services.

Also included in cost of revenues are costs related to inventory adjustments, as well as any write downs for excess and obsolete inventory and abandoned product lines.

Inventory adjustments are impacted primarily by demand for our products, which is influenced by the factors discussed above.

Operating Costs and Expenses.

Our operating costs consist of three primary categories:

research and development, sales and marketing and general and administrative costs.

Our operating costs consist of four primary categories:

research and development, sales and marketing, general and administrative, and depreciation and amortization costs,.

Research and development is at the core of our ability to produce innovative, leading-edge products.

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

General and administrative expenses include primarily corporate functions such as accounting, human resources, legal, administrative support and professional fees.

This category also includes the expenses needed to operate as a publicly traded company, including compliance with the Sarbanes-Oxley Act of 2002, as amended, SEC filings, stock exchange fees and investor relations expense.

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

General and administrative expenses include primarily corporate functions such as accounting, human resources, legal, administrative support, information technology, and professional fees.

This category includes the expenses needed to operate as a publicly traded company, including compliance with the Sarbanes-Oxley Act of 2002, as amended, SEC filings, stock

exchange fees and investor relations expense.

Depreciation and amortization expenses .

Our depreciation and amortization expenses primarily include depreciation on our property, plant, and equipment, amortization of capitalized software projects, and amortization of intangibles purchased through acquisitions.

Depreciation related to rental assets of our telematics services are included in Cost of Revenues as noted above.

Impairment of capitalized software.

Impairment expenses can be recorded on capitalized software intended for internal and external use.

Impairments of capitalized software intended for internal use are recorded when the carrying value of the asset group to which the software belongs is not recoverable and exceeds its fair value.

Impairments of capitalized software intended for external use are recorded when the net realizable value of the asset falls below its carrying value.

Operating Results.

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

Business Strategy.

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

Given our current cash position and recent losses, any additional acquisitions we make would likely involve issuing stock in order to provide the purchase consideration for the acquisitions.

If we make any additional acquisitions, we may incur substantial expenditures in conjunction with the acquisition process and the subsequent assimilation of any acquired business, products, technologies or personnel.

Results of Operations

The following table sets forth our consolidated statements of operations in dollars (in thousands) and expressed as a percentage of net revenues, derived from the accompanying consolidated financial statements for the periods indicated.

The following table sets forth our consolidated statements of operations in dollars (in thousands) and expressed as a percentage of revenues, derived from the accompanying consolidated financial statements for the periods indicated.

Year Ended December 31,

2022 2021 2020

Net revenues:

IoT & Mobile Solutions $ 218,401 89.0 % $ 217,984 83.1 % $ 261,169 83.2 %

Enterprise SaaS Solutions 26,922 11.0 44,415 16.9 52,663 16.8

Total net revenues 245,323 100.0 262,399 100.0 313,832 100.0

Cost of net revenues:

IoT & Mobile Solutions 166,033 67.7 168,604 64.3 202,421 64.5

Enterprise SaaS Solutions 12,381 5.0 17,870 6.8 20,568 6.6

Total cost of net revenues 178,414 72.7 186,474 71.1 222,989 71.1

Mobile solutions $ 80,498 41.1 % $ 143,524 58.5 %

Fixed wireless access solutions 54,900 28.1 43,602 17.8

Product revenues 135,398 69.2 187,126 76.3

Services and other 60,290 30.8 58,197 23.7

Total revenues 195,688 100.0 245,323 100.0

Cost of revenues:

Product 127,157 65.0 161,943 66.0

Services and other 16,077 8.2 16,471 6.7

Total cost of revenues 143,234 73.2 178,414 72.7

Gross profit 52,454 26.8 66,909 27.3

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General and administrative 20,721 10.6 26,208 10.7

Amortization of purchased intangible assets 1,749 0.7 2,092 0.8 3,175 1.0

Depreciation and amortization 19,759 10.1 24,490 10.0

Impairment of capitalized software 5,239 2.7 3,014 1.2

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Other income (expense):

Gain on sale of Ctrack South Africa — — 5,262 2.0 — —

Loss on debt conversion and extinguishment, net (450) (0.2) (432) (0.2) (76,354) (24.3)

Interest expense, net (9,072) (4.6) (8,606) (3.5)

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

Other income (expense), net 54 — (1,910) (0.8)

Loss before income taxes (45,300) (23.1) (68,434) (27.9)

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

Income tax provision (benefit) 885 0.5 (465) (0.2)

Net loss (46,185) (23.6) (67,969) (27.7)

Net income attributable to noncontrolling interests — — (214) (0.1) (29) 0.0

Net loss attributable to Inseego Corp.

(67,969) (27.7) (48,125) (18.3) (111,215) (35.4)

Series E preferred stock dividends (2,991) (1.5) (2,736) (1.1)

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Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Net revenues .

Net revenues for the year ended December 31, 2022 were $245.3 million, a decrease of $17.1 million, or 6.5%, compared to the same period in 2021.

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

Revenues for the year ended December 31, 2023 were $195.7 million, a decrease of $49.6 million, or 20.2%, compared to the same period in 2022.

The following table summarizes net revenues by category (dollars in thousands):

Year Ended December 31, Change

Product Category 2023 2022 $ %

IoT & Mobile Solutions $ 218,401 $ 217,984 $ 417 0.2 %

Enterprise SaaS Solutions 26,922 44,415 (17,493) (39.4)

Mobile solutions $ 80,498 $ 143,524 $ (63,026) (43.9) %

Fixed wireless access solutions 54,900 43,602 11,298 25.9

Product revenues 135,398 187,126 (51,728) (27.6)

Services and other 60,290 58,197 2,093 3.6

Total $ 195,688 $ 245,323 $ (49,635) (20.2)

IoT & Mobile Solutions.

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

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

Enterprise SaaS Solutions.

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

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

See Part IV Item 15 Note 5.

Business Divestiture .

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

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

Cost of net revenues.

Cost of net revenues for the year ended December 31, 2022 was $178.4 million, or 72.7% of net revenues, compared to $186.5 million, or 71.1% of net revenues, for the same period in 2021.

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

Mobile solutions.

The $63.0 million decrease in mobile solutions revenues is primarily due to decreases in our carrier offerings and lower sales of LTE gigabit hotspots as we transition from 4G products to 5G product offerings, partially offset by sales of 5G hotspots related to our MiFi business (launched in the second half of 2022).

Fixed wireless access solutions.

The $11.3 million increase in fixed wireless access solutions revenues is primarily due increased adoption of fixed wireless access products, specifically sales of a 5G Fixed Wireless Access device that we launched in the second quarter of 2023.

Services and other.

The $2.1 million increase in services and other net revenues is primarily due to increased telematics subscription revenues.

Cost of revenues.

Cost of revenues for the year ended December 31, 2023 was $143.2 million, or 73.2% of net revenues, compared to $178.4 million, or 72.7% of net revenues, for the same period in 2022.

The following table summarizes cost of revenues by category (dollars in thousands):

December 31, Change

Product Category 2023 2022 $ %

IoT & Mobile Solutions $ 166,033 $ 168,604 $ (2,571) (1.5) %

Enterprise SaaS Solutions 12,381 17,870 (5,489) (30.7)

Product $ 127,157 $ 161,943 $ (34,786) (21.5) %

Services and other 16,077 16,471 (394) (2.4)

Total $ 143,234 $ 178,414 $ (35,180) (19.7)

IoT & Mobile Solutions.

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

Enterprise SaaS Solutions.

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

See Part IV Item 15 Note 5.

Business Divestiture .

The $34.8 million decrease in Product cost of revenues is primarily is a result of lower sales of LTE gigabit hotspots, partially offset by an increase in inventory and contract manufacturer reserves as further described below.

Services and other.

The $0.4 million decrease in Services and other cost of revenues is primarily due to reduced costs associa ted with providing our telematics services.

Gross profit.

Gross profit for the year ended December 31, 2023 was $52.5 million, or a gross margin of 26.8%, compared to $66.9 million, or a gross margin of 27.3%, for the same period in 2022.

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

Operating costs and expenses.

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

December 31, Change

Operating costs and expenses 2022 2021 $ %

Research and development $ 59,237 $ 52,673 $ 6,564 12.5 %

Sales and marketing 33,488 38,234 (4,746) (12.4)

General and administrative 27,339 28,250 (911) (3.2)

Amortization of purchased intangible assets 1,749 2,092 (343) (16.4)

Impairment of capitalized software 3,014 1,197 1,817 151.8

Total $ 124,827 $ 122,446 $ 2,381 1.9

Research and development expenses.

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

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

Sales and marketing expenses.

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

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

See Part IV Item 15.

Business Divestiture .

General and administrative expenses.

General and administrative expenses for the year ended December 31, 2022 were $27.3 million, or 11.1% of net revenues, compared to $28.3 million, or 10.8% of net revenues, for the same period in 2021.

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

See Part IV Item 15.

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

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

See Part IV Item 15.

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

Amortization of purchased intangible assets .

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

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

Impairment of capitalized software.

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

Other income (expense).

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

December 31, Change

Other income (expense) 2022 2021 $ %

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

Loss on debt conversion and extinguishment, net (450) (432) (18) 4.2

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

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

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

Gain on sale of Ctrack South Africa .

Gain on sale of Ctrack South Africa during the year ended December 31, 2021 was $5.3 million, related to the gain recognized on sale of Ctrack South Africa, while there was no such gain for the same period in fiscal 2022.

Loss on debt conversion and extinguishment, net.

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

Interest expense, net.

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

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

Other (expense) income, net.

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

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

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

December 31, Change

2022 2021 $ %

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

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

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

Income tax (benefit) provision.

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

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

statutory rate primarily due to a valuation allowance recorded against additional tax assets generated during the year and certain profitable foreign subsidiaries.

Net income attributable to noncontrolling interests.

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

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

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

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

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

See Part IV Item 15.

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

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

Net revenues .

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

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

Year Ended December 31, Change

Product Category 2021 2020 $ %

IoT & Mobile Solutions $ 217,984 $ 261,169 $ (43,185) (16.5) %

Enterprise SaaS Solutions 44,415 52,663 (8,248) (15.7)

Total $ 262,399 $ 313,832 $ (51,433) (16.4)

IoT & Mobile Solutions.

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

Enterprise SaaS Solutions.

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

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

See Part IV Item 15 Note 5.

Business Divestiture .

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

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

Cost of net revenues.

Cost of net revenues for the year ended December 31, 2021 was $186.5 million, or 71.1% of net revenues, compared to $223.0 million, or 71.1% of net revenues, for the same period in 2020.

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

December 31, Change

Product Category 2021 2020 $ %

IoT & Mobile Solutions $ 168,604 $ 202,421 $ (33,817) (16.7) %

Enterprise SaaS Solutions 17,870 20,568 (2,698) (13.1)

Total $ 186,474 $ 222,989 $ (36,515) (16.4)

IoT & Mobile Solutions.

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

Enterprise SaaS Solutions.

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

See Part IV Item 15 Note 5.

Business Divestiture .

The decrease in gross profit is primarily due to lower revenues.

The slight decrease in gross profit margin is due to an increase in inventory and contract manufacturer reserves discussed below, which were partially offset by a higher percentage of high margin service revenues, higher margins in our telematics business, and various initiatives to improve efficiencies in production.

As discussed in Part IV Item 15 Note 2 – Financial Statement Details, in the year ended December 31, 2023 , the Company recorded a write-down of $9.6 million to reflect inventories at net realizable value, in addition to a $1.3 million write-off of capitalized inventory order fees.

Further, management accrued an additional $6.8 million in net charges for contract manufacturing liabilities (whose remaining balance is accrued in the Accrued Expenses and Other Current Liabilities ) related to excess materials at the contract manufacturers’ sites.

All $17.7 million of th ese charges were recorded in cost of product revenues during the year ended December 31, 2023 and thereby negatively impacted Gross Profit.

Management’s analysis was based on new information that became available during the year, updated sales projections and other dynamics in the market.

Supplemental disclosure of quarterly revenues and cost of revenues.

As noted above, the Company has elected to classify revenues into two categories:

Product Revenue, which consists of our Mobile Solutions and Fixed Wireless Access Solutions, and Services and Other .

The company has reclassified all prior periods to conform to the current period presentation for this change.

Below is a supplemental disclosure of revenues and costs of revenues under the current classification for the each quarter in the years ended December 31, 2023 and 2022 (in thousands):

Year Ended Three Months Ended

December 31, 2023 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023

Mobile solutions $ 80,498 $ 16,029 $ 22,534 $ 18,895 $ 23,040

Fixed wireless access solutions 54,900 12,411 11,114 19,505 11,870

Product revenues 135,398 28,440 33,648 38,400 34,910

Services and other 60,290 14,314 14,935 15,157 15,884

Total revenues 195,688 42,754 48,583 53,557 50,794

Cost of revenues:

Product 127,157 25,782 42,788 30,620 27,967

Services and other 16,077 3,496 3,900 4,041 4,640

Total cost of revenues 143,234 29,278 46,688 34,661 32,607

Gross profit $ 52,454 $ 13,476 $ 1,895 $ 18,896 $ 18,187

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

The gross margin percentage remained

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

Year Ended Three Months Ended

December 31, 2022 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022

Mobile solutions $ 143,524 $ 21,469 $ 40,292 $ 37,469 $ 44,294

Fixed wireless access solutions 43,602 16,467 14,173 9,935 3,027

Product revenues 187,126 37,936 54,465 47,404 47,321

Services and other 58,197 14,980 14,702 14,452 14,063

Total revenues $ 245,323 $ 52,916 $ 69,167 $ 61,856 $ 61,384

Cost of revenues:

Product 161,943 33,021 46,777 39,953 42,192

Services and other 16,471 4,082 4,434 4,011 3,944

Total cost of revenues 178,414 37,103 51,211 43,964 46,136

Gross profit $ 66,909 $ 15,813 $ 17,956 $ 17,892 $ 15,248

Operating costs and expenses.

5 unchanged sentences

General and administrative 20,721 26,208 (5,487) (20.9)

Amortization of purchased intangible assets 2,092 3,175 (1,083) (34.1)

Depreciation and amortization 19,759 24,490 (4,731) (19.3)

Impairment of capitalized software 5,239 3,014 2,225 73.8

2 unchanged sentences

Research and development expenses for the year ended December 31, 2023 were $21.5 million, or 11.0% of net revenues, compared to $38.3 million, or 15.6% of net revenues, for the same period in 2022.

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

The decrease in research and development expenses was primarily due to a reduction in headcount and lower consulting and outside service fees, in pursuit of cost reduction efforts, compared to the same period in 2022.

Sales and marketing expenses.

Sales and marketing expenses for the year ended December 31, 2023 were $21.5 million, or 11.0% of net revenues, compared to $32.8 million, or 13.4% of net revenues, for the same period in 2022.

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

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

See Part IV Item 15.

Business Divestiture .

The decrease in sales and marketing expenses was primarily due to lower professional fees and reduction in sales headcount compared to the same period in 2022.

General and administrative expenses.

General and administrative expenses for the year ended December 31, 2023 were $20.7 million, or 10.6% of net revenues, compared to $26.2 million, or 10.7% of net revenues, for the same period in 2022.

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

See Part IV Item 15.

Business Divestiture .

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

See Part IV Item 15.

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

Amortization of purchased intangible assets .

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

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

The decrease in general and administrative expenses was primarily due to a decrease in share-based compensation expense due to lower restricted stock unit (“RSU”) based bonuses during the year ended December 31, 2023 compared to the same period in 2022.

Depreciation and amortization expenses .

Depreciation and amortization expenses for the years ended December 31, 2023 was $19.8 million, or 10.1% of net revenues, compared to $24.5 million, or 10.0% of net revenues, for the same period in 2022.

The decrease in depreciation and amortization expenses was primarily due to lower amortization related to capitalized software projects during the year ended December 31, 2023 compared to the same period in 2022.

Impairment of capitalized software.

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

For the years ended December 31, 2023 and 2022, we recorded impairments of $5.2 million and $3.0 million, respectively.

The impairments during 2023 were primarily related to the decision to discontinue a software project related to our telematics business in the fourth quarter of 2023.

Other income (expense).

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Other income (expense) 2023 2022 $ %

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

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

Interest expense, net (9,072) (8,606) (466) 5.4

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

Other income (expense), net 54 (1,910) 1,964 (102.8)

Total $ (9,018) $ (10,516) $ 1,498 (14.2)

Gain on sale of Ctrack South Africa .

Loss on debt conversion and extinguishment, net.

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

These amounts represent the loss

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

Interest expense, net.

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

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

Other income, net.

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

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

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

December 31, Change

2021 2020 $ %

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

Net income attributable to noncontrolling interests (214) (29) (185) 637.9

Series E preferred stock dividends and deemed dividends from the preferred stock exchange (4,243) (2,904) (1,339) 46.1

Income tax provision.

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

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

statutory rate primarily due to a valuation allowance recorded against additional tax assets generated during the year and certain profitable foreign subsidiaries.

Net income attributable to noncontrolling interests.

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

The $0.5 million increase in interest expense, net for the year ended December 31, 2023 over the same period in 2022 was primarily due higher interest rates in 2023 and the Credit Agreement which commenced in the second half of 2022.

Other income (expense), net.

The $2.0 million increase in other income, net over the same period in 2022 was primarily due to favorable changes in foreign exchange rates in the current period.

Income tax provision (benefit).

Income tax provision for the years ended December 31, 2023 and 2022 was a provision of $0.9 million and a benefit of $0.5 million, respectively.

This $1.4 million increase in income tax expense was driven by an increase in pre-tax profits at certain foreign subsidiaries for the current year period compared to a loss in the prior year period.

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

During the years ended December 31, 2023 and 2022, we recorded dividends of $3.0 million and $2.7 million, respectively, on our Series E Preferred Stock.

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

See Part IV Item 15.

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

Reverse Stock Split

On January 24, 2024, the Company completed a 1-for-10 reverse stock split of its issued and outstanding common stock (the “Reverse Stock Split”).

As a result of the Reverse Stock Split, each share of common stock issued and outstanding immediately prior to January 24, 2024 were automatically converted into one-tenth (1/10) of a share of common stock.

The Reverse Stock Split did not change the par value of the common stock or the authorized number of shares of common stock.

All outstanding convertible notes, stock options and RSUs entitling their holders to purchase or obtain or convert into shares of our common stock were adjusted, as required by the terms of these securities.

All applicable common share and per share amounts have been retrospectively restated to show the effect of the reverse split.

Liquidity and Capital Resources

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As of December 31, 2023, we had working capital of $2.3 million compared to working capital as of December 31, 2022 of $21.4 million.

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

Initial cash proceeds of $36.6 million were received.

Net cash proceeds received were $31.5 million, net of cash divested of $5.0 million.

Final cash proceeds were subject to certain post-closing working capital adjustments which totaled $2.6 million, out of which $2.2 million was received on October 29, 2021, and the remaining $0.4 million was offset with our existing accounts payable balance to an affiliate of Convergence, an investment management firm in South Africa.

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.

In January 2021, we sold 1,516,073 shares of common stock, at an average price of $20.11 per share, for net proceeds of $29.4 million, after deducting underwriter fees and discounts of $0.9 million, and other offering fees, pursuant to the ATM Offering.

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

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

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

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

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, expected availability under its secured asset-backed Credit Facility, and anticipated savings from ongoing cost reduction efforts, will be sufficient to meet its cash flow needs for the next twelve months from the filing date of this report.

The Company’s ability to attain profitable operations and generate positive cash flow is dependent upon achieving a level and mix of revenues adequate to support its evolving cost structure.

If events or circumstances occur such that the Company does not meet its operating plan as expected, or if the Company becomes obligated to pay unforeseen expenditures as a result of potential litigation or otherwise, 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 Credit Facility has a maturity date of December 31, 2024.

The Company’s convertible 2025 Notes (as defined below) have a principal balance of $161.9 million and matures on May 1, 2025.

The Company’s intention is to restructure or refinance the Credit Facility and the 2025 Notes, however 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.

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

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

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

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

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

Revolving Credit Facility

On August 5, 2022, we entered into a Loan and Security Agreement (the “Credit Agreement”), by and among Siena Lending Group LLC, as lender (“Lender”), Inseego Wireless, Inc., a Delaware corporation (“Inseego Wireless”), and Inseego North America LLC, an Oregon limited liability company, as borrowers (together with Inseego Wireless, the “Borrowers”), and the Company, as guarantor (together with the Borrowers, the “Loan Parties”), as subsequently amended on February 25, 2023.

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

The Credit Facility matures on December 31, 2024.

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

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 with an effective date of December 15, 2022, which clarified certain terms within the Credit Agreement.

On May 2, 2023, we entered into a third amendment of the Credit Agreement which increased the borrowing base under the Credit Facility by $4.0 million, increased the minimum borrowing amount for interest calculations to $8.5 million, and modified certain covenants (as so amended, the “Amended Credit Agreement”).

On February 20, 2024, we entered into a fourth amendment (the “Fourth Amendment”) of the Credit Agreement which relaxed the financial covenants under the Credit Agreement by decreasing the minimum liquidity level we are required to maintain from $10 million to $8 million.

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

Outstanding amounts exceeding the borrowing base must be repaid immediately.

The Borrowers’ obligations under the Credit Agreement are guaranteed by us.

Our obligations under the Credit Agreement are secured by a continuing security interest in all property of each Loan Party, subject to certain Excluded Collateral (as defined in the Credit Agreement).

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

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

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

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.

If the average outstanding amount for a preceding month is less than $15 million, the Applicable Margin will be 2.50% for Base Rate loans and 3.50% for SOFR loans.

If the average outstanding amount for a preceding month is less than $15 million, the Applicable Margin will be 2.50% for Base Rate loans

and 3.50% for SOFR loans.

If the average outstanding amount for a preceding month is between $15 million and $25 million, the Applicable Margin will be 3.00% for Base Rate loans and 4.00% for SOFR loans.

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

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

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

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

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

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

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

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

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

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

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

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

On May 2, 2023, in addition to the amendment to the Credit Agreement entered into as described above, South Ocean Funding, LLC and North Sound Ventures, LP (the “Participants”) collectively purchased a $4.0 million last-out subordinated participation interest in the Amended Credit Agreement (the “Participation Interest”) from the Lender pursuant to a Participation Agreement between the Participants and the Lender (the “Participation Agreement”).

In connection with the purchase of the Participation Interest, we agreed to pay the Participants an exit fee upon the earlier of (a) the scheduled maturity date of the Amended Credit Agreement, (b) the termination of the Lender’s commitment to make revolving loans prior to the scheduled maturity date of the Amended Credit Agreement, and (c) the early redemption of the Participants’ Participation Interest under the Participation Agreement (the earliest to occur of the foregoing, the “Exit Event”).

The aggregate exit fee payable to the Participants is equal to (i) 7.5% of the Participation Interest, if the Exit Event occurs on or before December 31, 2023, (ii) 10.0% of the Participation Interest, if the Exit Event occurs between January 1, 2024 and June 30, 2024 and (iii) 12.5% of the Participation Interest, if the Exit Events occurs after June 30, 2024.

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.

South Ocean Funding, LLC is an affiliate of Golden Harbor, Ltd.

and North Sound Ventures, LP is an affiliate of North Sound Management, Inc.

As of the date hereof, each of Golden Harbor, Ltd.

and North Sound Management, Inc.

hold in excess of 5% of the Company’s outstanding common stock.

James Avery, a member of our Board of Directors, currently serves as Senior Managing Director of Tavistock Group, an affiliate of South Ocean Funding, LLC.

The Amended Credit Agreement contains a financial covenant whereby the Loan Parties shall not permit the consolidated Liquidity (as defined in the Amended Credit Agreement) to be less than $8 million at any time.

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

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

As of December 31, 2023, we had outstanding borrowings under the Credit Agreement of $4.1 million and availability of $3.2 million.

After taking into account exchanges and redemptions occurring in prior periods, the outstanding principal balance of the 2025 Notes was $161.9 million as of both December 31, 2023 and December 31, 2022 .

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

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

D uring the year end ended December 31, 2023, the Company sold 803,596 shares of common stock, at an average price of $7.50 per share, for net proceeds of $5.9 million, after deducting underwriter fees and discounts.

There was no ATM transactions during the year ended December 31, 2022.

Effective as of November 2, 2023 , the Equity Distribution Agreement was terminated by the Company, and there will be no further sales under the ATM Offering .

Contractual Obligations and Commitments

As of December 31, 2023, our material contractual obligations consisted of the following:

• 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 December 31, 2023, our future payments under these noncancellable purchase obligations were approximately $33.9 million.

• $161.9 million in outstanding principal amount of 2025 Notes with required interest payments;

see Part IV Item 15 Note 5 – Debt ;

• $4.1 million in outstanding borrowings under the Credit Facility;

see Part IV Item 15 Note 5 – Debt ;

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

see Part IV Item 15 Note 11 – Leases ;

Historical Cash Flows

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Year Ended December 31,

2022 2021 2020

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

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

Net cash provided by (used in) operating activities $ 7,165 $ (33,289)

Net cash used in investing activities (10,169) (13,319)

Net cash provided by financing activities 2,211 5,427

Effect of exchange rates on cash 1,169 (1,488)

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

Net increase (decrease) in cash, cash equivalents and restricted cash 376 (42,669)

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

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Operating activities.

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

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

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

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

Net cash provided by operating activities for the year ended December 31, 2023 is primarily comprised of a $46.2 million net loss incurred during the period, partially offset by non-cash charges, including depreciation and amortization of $22.5 million, excess and obsolete inventory provisions of $9.6 million, share-based compensation expense of $7.4 million, capitalized software impairments of $5.2 million, and amortization of debt discount and debt issuance costs of $2.0 million.

N et cash used in operating activities for the year ended December 31, 2022 is primarily comprised of a $68.0 million net loss and $17.8 million of net cash used by working capital, partially offset by non-cash charges, including depreciation and amortization of $27.2 million, share-based compensation expense of $17.9 million, of amortization of debt issuance and discount costs of $3.0 million, capitalized software impairments of $3.0 million, and excess and obsolete inventory provisions of $2.6 million .

Investing activities.

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

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

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

Net cash used in investing activities during the year ended December 31, 2020 was primarily related to the purchases of property, plant and equipment and capitalization of certain costs related to the development of software to be sold in our products, in large part due to the increase in development in support of 5G products and services as well as certain internally developed software projects.

Net cash used in investing activities during the year ended December 31, 2023 is primarily comprised of $9.5 million in of c ash outflows related to the development of software in support of our products and services and $0.7 million of property, plant and equipment and rental asset purchases.

Net cash used in investing activities during the year ended December 31, 2022 was primarily comprised of $11.8 million of cash outflows related to the development of software in support of our products and services and $1.5 million of property, plant and equipment and rental asset purchases.

Financing activities.

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

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

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

Contractual Obligations and Commitments

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

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

As of December 31, 2022, our material contractual obligations consisted of the following:

• $161.9 million in outstanding principal amount of 2025 Notes with required interest payments;

see Part IV Item 15 Note 6.

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

see Part IV Item 15 Note 6.

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

see Part IV Item 15 Note 12.

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

see Part IV Item 15 Note 11.

Commitments and Contingencies .

Critical Accounting Policies and Estimates

Net cash provided by financing activities during the year ended December 31, 2023 is primarily comprised of $6.1 million in proceeds from the public offering, partially offset by $3.8 million of cash outflow related to net repayments of our Credit Facility.

Net cash provided by financing activities during the year ended December 31, 2022 is primarily comprised of $7.9 million net borrowing of our Credit Facility, partially offset by $1.6 million in principal repayme nts of financed assets.

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions.

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

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

limited to, technological feasibility, anticipated future gross revenues, estimated economic life and changes in software and hardware technologies.

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

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The amount by which unamortized software costs exceed the net realizable value, if any, is recognized as a charge to amortization expense in the period it is determined.

Inventories and Provision for Excess and Obsolete Inventory

Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value.

The valuation of inventory requires significant judgment and estimates, including evaluating the need for any adjustments to net realizable value related to excess or obsolete inventory to ensure that the inventory is reported at the lower of cost or net realizable value.

The Company reviews the components of its inventory and its inventory purchase commitments on a regular basis for excess and obsolete inventory based on estimated future usage and sales.

Write-downs in inventory value or losses on inventory purchase commitments depend on various items, including factors related to customer demand, economic and competitive conditions, technological advances or new product introductions by the Company or its customers that vary from its current expectations.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis