INSEEGO CORP. 10-Q

Item 1. Financial Statements. INSEEGO CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value and share data) March 31, 2024 December 31, 2023 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 12,297 $ 7,519 Accounts receivable, net of allowance for expected credit losses of $ 1,060 and $ 1,113 , respectively 23,476 22,616 Inventories 20,797 22,880 Prepaid expenses and other 6,526 5,211 Total current assets 63,096 58,226 Property, plant and equipment, net of accumulated depreciation of $ 29,427 and $ 28,920 , respectively 2,287 2,758 Rental assets, net of accumulated depreciation of $ 7,859 and $ 7,003 , respectively 4,916 5,083 Intangible assets, net of accumulated amortization of $ 42,770 and $ 39,987 , respectively 24,281 27,140 Goodwill 21,922 21,922 Operating lease right-of-use assets 5,182 5,412 Other assets 384 1,256 Total assets $ 122,068 $ 121,797 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $ 24,013 $ 24,795 Accrued expenses and other current liabilities 30,805 27,022 Revolving credit facility 4,677 4,094 Total current liabilities 59,495 55,911 Long-term liabilities: 2025 Notes, net 160,284 159,912 Operating lease liabilities 4,771 5,039 Deferred tax liabilities, net 675 680 Other long-term liabilities 2,432 2,360 Total liabilities 227,657 223,902 Commitments and contingencies (Note 9) Stockholders’ deficit: Preferred stock, par value $ 0.001 ; 2,000,000 shares authorized: Series E Preferred stock, par value $ 0.001 ; 39,500 shares designated, 25,000 shares issued and outstanding as of March 31, 2024 and December 31, 2023 (aggregate liquidation preference of $ 35,913,326 ) — — Common stock, par value $ 0.001 ; 150,000,000 shares authorized, 11,882,844 and 11,878,557 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively 12 12 Additional paid-in capital 811,637 810,138 Accumulated other comprehensive loss ( 5,065 ) ( 5,327 ) Accumulated deficit ( 912,173 ) ( 906,928 ) Total stockholders’ deficit ( 105,589 ) ( 102,105 ) Total liabilities and stockholders’ deficit $ 122,068 $ 121,797 See accompanying notes to condensed consolidated financial statements. INSEEGO CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except share and per share data) (Unaudited) Three Months Ended March 31, 2024 2023 Revenues: Mobile solutions $ 15,270 $ 23,040 Fixed wireless access solutions 14,182 11,870 Product revenues 29,452 34,910 Services and other 15,557 15,884 Total revenues 45,009 50,794 Cost of revenues: Product 22,713 27,967 Services and other 4,904 4,640 Total cost of revenues 27,617 32,607 Gross profit 17,392 18,187 Operating costs and expenses: Research and development 5,043 3,775 Sales and marketing 4,995 6,466 General and administrative 4,983 5,724 Depreciation and amortization 3,635 5,309 Impairment of capitalized software 420 504 Total operating costs and expenses 19,076 21,778 Operating loss ( 1,684 ) ( 3,591 ) Other (expense) income: Interest expense, net ( 2,174 ) ( 1,997 ) Other (expense) income, net ( 360 ) 795 Loss before income taxes ( 4,218 ) ( 4,793 ) Income tax provision 237 311 Net loss ( 4,455 ) ( 5,104 ) Series E preferred stock dividends ( 790 ) ( 723 ) Net loss attributable to common stockholders $ ( 5,245 ) $ ( 5,827 ) Per share data: Net loss per common share: Basic and diluted ( * ) $ ( 0.44 ) $ ( 0.54 ) Weighted-average shares used in computation of net loss per common share: Basic and diluted ( * ) 11,879,719 10,860,189 Other comprehensive income: Foreign currency translation adjustment 262 94 Comprehensive loss $ ( 4,193 ) $ ( 5,010 ) ( * ) Adjusted retroactively for reverse stock split that occurred on January 24, 2024, see Note 1 See accompanying notes to condensed consolidated financial statements. 4 INSEEGO CORP. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (In thousands) (Unaudited) Preferred Stock Common Stock Additional Paid-in Capital (*) Accumulated Deficit Accumulated Other Comprehensive (Loss) Income Total Stockholders’ Deficit Shares Amount Shares (*) Amount (*) Balance, December 31, 2022 25 $ — 10,847 $ 11 $ 793,952 ( 857,751 ) $ ( 6,329 ) $ ( 70,117 ) Net loss — — — — — ( 5,104 ) — ( 5,104 ) Foreign currency translation adjustment — — — — — — 94 94 Vesting of restricted stock units and stock issued under employee stock purchase plan, net of taxes withheld — — 4 — 75 — — 75 Issuance of common shares in connection with a public offering, net of issuance costs 86 529 529 Share-based compensation — — — — 1,800 — — 1,800 Series E preferred stock dividends — — — — 723 ( 723 ) — — Balance, March 31, 2023 25 $ — 10,937 $ 11 $ 797,079 $ ( 863,578 ) $ ( 6,235 ) $ ( 72,723 ) Balance, December 31, 2023 25 $ — 11,879 $ 12 $ 810,138 $ ( 906,928 ) $ ( 5,327 ) $ ( 102,105 ) Net loss — — — — — ( 4,455 ) — ( 4,455 ) Foreign currency translation adjustment — — — — — — 262 262 Vesting of restricted stock units and stock issued under employee stock purchase plan, net of taxes withheld — — 4 — ( 8 ) — — ( 8 ) Share-based compensation — — — — 717 — — 717 Series E preferred stock dividends — — — — 790 ( 790 ) — — Balance, March 31, 2024 25 $ — 11,883 $ 12 $ 811,637 $ ( 912,173 ) $ ( 5,065 ) $ ( 105,589 ) (*) Adjusted retroactively for reverse stock split that occurred on January 24, 2024, see Note 1 See accompanying notes to condensed consolidated financial statements. 5 INSEEGO CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended March 31, 2024 2023 Cash flows from operating activities: Net loss $ ( 4,455 ) $ ( 5,104 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 4,375 5,430 Provision for expected credit losses ( 32 ) 41 Impairment of capitalized software 420 504 Provision for excess and obsolete inventory 108 217 Share-based compensation expense 717 1,800 Amortization of debt discount and debt issuance costs 489 489 Deferred income taxes ( 5 ) 101 Non-cash operating lease expense 405 592 Changes in assets and liabilities: Accounts receivable ( 828 ) ( 1,997 ) Inventories 1,279 3,097 Prepaid expenses and other assets ( 785 ) ( 1,940 ) Accounts payable ( 718 ) 5,544 Accrued expenses and other liabilities 3,999 ( 490 ) Operating lease liabilities ( 423 ) ( 625 ) Net cash provided by operating activities 4,546 7,659 Cash flows from investing activities: Purchases of property, plant and equipment — ( 61 ) Additions to capitalized software development costs and purchases of intangible assets ( 577 ) ( 2,443 ) Net cash used in investing activities ( 577 ) ( 2,504 ) Cash flows from financing activities: Principal payments under finance lease obligations — ( 199 ) Proceeds from a public offering, net of issuance costs — 529 Principal payments on financed assets — ( 360 ) Net borrowings (repayments) on revolving credit facility 583 ( 3,385 ) Proceeds from ESPP — 75 Net cash provided by (used in) financing activities 583 ( 3,340 ) Effect of exchange rates on cash 226 ( 272 ) Net increase in cash and cash equivalents 4,778 1,543 Cash and cash equivalents, beginning of period 7,519 7,143 Cash and cash equivalents, end of period $ 12,297 $ 8,686 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 147 $ 117 Income taxes $ 44 $ 59 Supplemental disclosures of non-cash investing and financing activities: Transfer of inventories to rental assets $ 696 $ 543 Capital expenditures financed through accounts payable or accrued liabilities $ 104 $ 2,164 Right-of-use assets obtained in exchange for operating leases liabilities $ 146 $ 50 See accompanying notes to condensed consolidated financial statements. 6 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) Note 1. Nature of Business and Significant Accounting Policies Basis of Presentation and Consolidation The accompanying unaudited condensed consolidated financial statements (“Financial Statements”) have been prepared by Inseego Corp. (the “Company”, “we”, “us”) in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The Financial Statements include the accounts of the Company and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. These Financial Statements should be read in conjunction with the audited consolidated financial statements and notes as of and for the year ended December 31, 2023, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”). The condensed consolidated balance sheet as of December 31, 2023 was derived from the audited consolidated financial statements as of that date, but does not include all disclosures required by GAAP. In management’s opinion, the accompanying Financial Statements reflect all normal recurring adjustments necessary for their fair presentation. Other than described below, there have been no changes to the Company’s significant accounting policies described in the Form 10-K that have had a material impact on the Company’s Financial Statements. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for any other interim period or for the year as a whole. Segment Information The Company has one reportable segment. The principal executive officer, who is also the Chief Operating Decision Maker, does not manage any part of the Company separately, and the allocation of resources and assessment of performance are based solely on the Company’s consolidated operations and financial results. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent liabilities. Actual results could differ materially from these estimates. Estimates are assessed each period and updated to reflect current information. Significant estimates include revenue recognition, warranty provision, capitalized software costs, allowance for credit losses, provision for excess and obsolete inventory, accrued liabilities related to our contract manufacturers, valuation of tangible and intangible long-lived assets, valuation of goodwill, valuation of derivatives, accruals relating to litigation, income taxes and share-based compensation expense. Reclassifications Certain amounts recorded in the prior period consolidated financial statements have been reclassified to conform to the current period financial statement presentation. These reclassifications had no effect on previously reported operating results. During the fourth quarter of 2023, and as noted in the Form 10-K, the Company reclassified revenue on its Consolidated Statement of Operations. 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 from products and services into the following two categories: Product Revenue, which consists of our Mobile Solutions and Fixed Wireless Access Solutions, and Services and Other. 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. 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 24th were automatically converted into one-tenth (1/10) of a share of common stock. The Reverse Stock Split affected all common stockholders uniformly and did not alter any stockholder's percentage interest in the Company's equity, except to the extent that the Reverse Stock Split would result in a stockholder owning a fractional share. No 7 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) fractional shares were issued in connection with the Reverse Stock Split. Stockholders who otherwise would be entitled to receive a fractional share instead were entitled to receive cash in lieu of such fractional share. 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 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 common share and per-share amounts in this Form 10-Q have been retroactively restated to reflect the effect of the Reverse Stock Split. Liquidity As of March 31, 2024, the Company had available cash and cash equivalents totaling $ 12.3 million and working capital of $ 3.6 million. The Company’s Credit Facility (as defined in Note 4 – Debt), which had an outstanding balance of $ 4.7 million as of March 31, 2024, was voluntarily paid-off and terminated by the Company effective April 18, 2024. The Company generated positive cash flow from operations both for the year ended December 31, 2023 and in the three months ended March 31, 2024. In April 2024, the Company received a $ 15.0 million upfront payment from a customer in connection with a two-year service contract. Based on the factors above, and to reduce financing costs, the Company voluntarily paid-off and terminated the Credit Facility effective April 18, 2024. These factors have had a positive impact on our liquidity. The Company’s 3.25 % convertible senior notes due in May 2025 (the “2025 Notes”) have a principal balance of $ 161.9 million and matures on May 1, 2025. The Company’s intention is to restructure or refinance the 2025 Notes, and the Company is in active negotiations to do so, 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. As the refinancing of the 2025 Notes cannot be assured, accounting guidance requires disclosure that this raises substantial doubt about the Company’s ability to continue as a going concern within one year of the issuance of these financial statements. While the Company’s liquidity has had several positive developments recently, as noted above, the Company has a history of operating and net losses and overall usage of cash from operating and investing activities. The Company’s ability to attain profitable operations and continue to generate positive cash flows is dependent upon achieving a level and mix of revenues adequate to support its evolving cost structure. In order to effect a restructuring or refinancing of the 2025 Notes, or 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 . Note 2. Financial Statement Details Inventories Inventories consist of the following (in thousands): March 31, 2024 December 31, 2023 Finished goods $ 18,705 $ 21,264 Raw materials and components 2,092 1,616 Total inventories $ 20,797 $ 22,880 8 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) Prepaid expenses and other Prepaid expenses and other consists of the following (in thousands): March 31, 2024 December 31, 2023 Rebate receivables $ 2,884 $ 1,950 Receivables from contract manufacturers 2,100 1,823 Other 1,542 1,438 Total prepaid expenses and other $ 6,526 $ 5,211 Accrued expenses and other current liabilities Accrued expenses and other current liabilities consist of the following (in thousands): March 31, 2024 December 31, 2023 Royalties $ 852 $ 845 Payroll and related expenses 5,490 4,159 Warranty obligations 780 480 Accrued interest 2,555 1,038 Deferred revenue 6,562 5,583 Operating lease liabilities 1,684 1,681 Accrued contract manufacturing liabilities 7,077 7,537 Other 5,805 5,699 Total accrued expenses and other current liabilities $ 30,805 $ 27,022 Note 3. Fair Value Measurements The Company’s only financial instrument measured at fair value on a recurring basis is its interest make-whole payment derivative liability on its 2025 Notes (see Note 4 – Debt ). The fair value of that liability was zero as of both March 31, 2024 and December 31, 2023. 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, 2024 December 31, 2023 Volatility 88.60 % 77.00 % Stock price $ 2.80 per share $ 2.20 per share Credit spread 85.09 % 92.20 % Term 1.09 years 1.34 years Dividend yield — % — % Risk-free rate 4.99 % 4.60 % There was no change in the fair value of the interest make-whole liability for the three months ended March 31, 2024 or March 31, 2023. Other Financial Instruments The carrying values of the Company’s other financial assets and liabilities approximate their fair values because of their short-term nature, with the exception of the 2025 Notes. The 2025 Notes are carried at amortized cost, adjusted for changes in the fair value of the embedded derivative. 9 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) Note 4. Debt 2025 Notes In 2020, the Company completed both a registered public offering and a privately negotiated exchange agreement that resulted in the issuance of the 2025 Notes. 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 March 31, 2024 and December 31, 2023. The 2025 Notes were issued under an indenture, dated May 12, 2020 (the “Base Indenture”), between the Company and Wilmington Trust, National Association, as trustee (the “Trustee”), as supplemented by the first supplemental indenture, dated May 12, 2020 (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), between the Company and the Trustee. The 2025 Notes will mature on May 1, 2025, unless earlier repurchased, redeemed or converted. The 2025 Notes are senior unsecured obligations of the Company and bear interest at an annual rate of 3.25 %, payable semi-annually in arrears on May 1 and November 1 of each year. Holders of the 2025 Notes may convert the 2025 Notes into shares of the Company’s common stock (together with cash in lieu of any fractional share), at their option, at any time until the close of business on the scheduled trading day immediately before the maturity date. Upon conversion of the 2025 Notes, the Company will deliver for each $1,000 principal amount of 2025 Notes converted a number of shares of the Company’s common stock (together with cash in lieu of any fractional share), equal to the conversion rate. As of March 31, 2024, the conversion rate for the 2025 Notes is 7.92896 shares of common stock per $1,000 principal amount of 2025 Notes, which represents a conversion price of approximately $ 126.12 per share, and is subject to adjustment upon the occurrence of certain events, including, but not limited to, certain stock dividends, splits and combinations, the issuance of certain rights, options or warrants to holders of the common stock, certain distributions of assets, debt securities, capital stock or other property to holders of the common stock, cash dividends on the common stock and certain Company tender or exchange offers. If a fundamental change (as defined in the Indenture) occurs at any time prior to the maturity date, then the noteholders may require the Company to repurchase their 2025 Notes at a cash repurchase price equal to the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. If a make-whole fundamental change (as defined in the Indenture) occurs, then the Company will in certain circumstances increase the conversion rate for a specified period of time. The 2025 Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after May 6, 2023 through the last scheduled trading day before the maturity date, at a cash redemption price equal to the principal amount of the 2025 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, as long as the last reported sale price per share of the common stock exceeds 130 % of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. The Indenture contains customary events of default. If an event of default (other than certain events of bankruptcy, insolvency or reorganization involving the Company) occurs and is continuing, the Trustee, by notice to the Company, or the holders of the 2025 Notes representing at least 25 % in aggregate principal amount of the outstanding 2025 Notes, by notice to the Company and the Trustee, may declare 100 % of the principal of, and all accrued and unpaid interest on, all of the then outstanding 2025 Notes to be due and payable immediately. Upon the occurrence of certain events of bankruptcy, insolvency or reorganization involving the Company, 100 % of the principal of, and all accrued and unpaid interest on, all of the then outstanding 2025 Notes will automatically become immediately due and payable. Notwithstanding the foregoing, the Indenture provides that, to the extent the Company elects, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture will, for the first 360 days after such event of default, consist exclusively of the right to receive additional interest on the 2025 Notes. Interest make-whole payment The 2025 Notes also include an interest make-whole payment feature whereby if the last reported sale price of the Company’s common stock for each of the five trading days immediately preceding a conversion date is greater than or equal to $ 105.10 , the Company will, in addition to the other consideration payable or deliverable in connection with such conversion, 10 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) make an interest make-whole payment to the converting holder equal to the sum of the present values of the scheduled payments of interest that would have been made on the 2025 Notes to be converted had such notes remained outstanding from the conversion date through the earlier of (i) the date that is three years after the conversion date and (ii) the maturity date. The present values will be computed using a discount rate equal to 1 %. The Company will satisfy its obligation to pay the interest make-whole payment, at its election, in cash or shares of common stock (together with cash in lieu of fractional shares). The Company has determined that this feature is an embedded derivative and has recognized the fair value of this derivative as a liability in the consolidated balance sheets, with subsequent changes to fair value to be recorded at each reporting period on the consolidated statement of operations in other income, net. See Note 3 – Fair Value Measurements, for more information on this derivative liability. As of March 31, 2024 and December 31, 2023, $ 161.9 million of principal amount of the 2025 Notes was outstanding, $ 80.4 million of which were held by related parties. Assuming no repurchases or conversions of the 2025 Notes prior to May 1, 2025, the entire principal balance of $ 161.9 million is due on May 1, 2025. The 2025 Notes consist of the following (in thousands): March 31, 2024 December 31, 2023 Principal $ 161,898 $ 161,898 Add: fair value of embedded derivative — $ — Less: unamortized debt discount ( 899 ) $ ( 1,106 ) Less: unamortized issuance costs ( 715 ) $ ( 880 ) Net carrying amount $ 160,284 $ 159,912 The effective interest rate of the liability component of the 2025 Notes was 4.17 % and 4.23 % for the three months ended March 31, 2024 and 2023, respectively. The following table sets forth total interest expense recog nized related to the 2025 Notes (in thousands): Three Months Ended March 31, 2024 2023 Contractual interest expense $ 1,315 $ 1,315 Amortization of debt discount $ 207 $ 207 Amortization of debt issuance costs $ 165 $ 165 Total interest expense $ 1,687 $ 1,687 The contractual interest expense on the 2025 Notes recorded within interest expense, net on the consolidated statements of operations attributable to related parties was $ 0.7 million in the three months ended March 31, 2024 and 2023. As of March 31, 2024 and December 31, 2023, accrued interest due to related parties of $ 1.1 million and $ 0.4 million, respectively, was included within accrued expenses and other current liabilities on the condensed consolidated balance sheets. Asset-backed Revolving Credit Facility In August 2022, the Company entered into a Loan and Security Agreement (as subsequently amended, the “Credit Agreement”), by and among Siena Lending Group LLC, as lender (“Lender”), Inseego Wireless, Inc., a Delaware corporation (“Inseego Wireless”), a subsidiary of the Company, and Inseego North America LLC, an Oregon limited liability company and indirect subsidiary of the Company, as borrowers (together with Inseego Wireless, the “Borrowers”), and the Company, as guarantor (together with the Borrowers, the “Loan Parties”). Effective April 18, 2024, the Company exercised its right to voluntarily pay-off and terminate the Credit Agreement. See Note 11 – Subsequent Events for more information on the termination of the Credit Agreement. 11 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) The Credit Agreement established a secured asset-backed revolving credit facility which was comprised of a maximum $ 50 million revolving credit facility (“Credit Facility”), with a minimum borrowing amount for interest calculations of $ 4.5 million upon execution of the Credit Agreement. Availability under the Credit Facility was determined monthly by a borrowing base comprised of a percentage of eligible accounts receivable and eligible inventory of the Borrowers. Outstanding amounts exceeding the borrowing base were to be repaid immediately. The Borrowers’ obligations under the Credit Agreement were guaranteed by the Company. The Loan Parties’ obligations under the Credit Agreement were 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 took the form of base rate (“Base Rate”) loans or Secured Overnight Financing Rate (“SOFR”) loans. SOFR loans bore 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 bore interest at a rate per annum equal to the Applicable Margin plus the greatest of (a) the per annum rate of interest which is identified as the “Prime Rate” and normally published in the Money Rates section of The Wall Street Journal, (b) the sum of the Federal Funds Rate (as defined in the Credit Agreement) plus 0.5 % and (c) 3.50 % per annum. The Applicable Margin varied depending on the average outstanding amount for a preceding month. If the average outstanding amount for a preceding month was 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 was 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 was greater than $ 25 million, the Applicable Margin will be 4.5 % for Base Rate loans and 5.50 % for SOFR loans. The Company paid monthly fees of 0.4 % per annum on the unused portion of the Credit Facility. The Credit Agreement contained 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 “Liquidity Covenant”). The Credit Agreement also contained certain customary covenants, including restrictions on indebtedness, liens, fundamental changes, restricted payments, asset sales, and investments, and places limits on various other payments. The Company was in compliance with the financial covenants of the Amended Credit Agreement as of March 31, 2024 . On May 2, 2023, (1) two related parties (the “Participants”) collectively purchased a $ 4.0 million last-out subordinated participation interest in the Credit Agreement (the “Participation Interest”) from the Lender, and (2) the Borrowers entered into an amendment to the Credit Agreement which increased the borrowing base under the Credit Facility by $ 4.0 million, increased the minimum borrowing amount for interest calculations to $ 8.5 million, and modified certain covenants. In connection with the purchase of the Participation Interest, we agreed to pay the Participants an aggregate exit fee ranging from 7.5 % to 12.5 % of the amount of the Participation Interest, payable upon the earlier to occur of (a) the maturity date of the Credit Facility, (b) termination of the Lender’s commitment to make revolving loans prior to the scheduled maturity date of the Credit Facility, and (c) the early redemption of the Participation Interest, as applicable. Further, the purchase of the Participation Interest granted an option for the Participants to purchase the subject revolving loan or to redeem its Participation Interest under certain circumstances. The Participants are each affiliates of beneficial holders of greater than five percent of our outstanding common stock. Accretion of the exit fee attributable to related parties recorded within interest expense, net on the condensed consolidated statements of operations was $ 0.1 million for the three months ended March 31, 2024 . Upon execution of the Credit Agreement in August 2022, the Company incurred $ 1.1 million of debt issuance and related costs, which are being amortized to interest expense throughout the term of the agreement. As of March 31, 2024 and December 31, 2023 , there were $ 0.4 million and $ 0.5 million, respectively, of unamortized debt issuance costs on the Credit Facility included within prepaid expenses and other and other assets on the condensed consolidated balance sheets. As of March 31, 2024 , the Company had outstanding borrowings of $ 4.7 million. The effective interest rate of the average outstanding balance for the Credit Facility was 29.7 %, which includes 8.3 % related to amortization of original issuance costs, and 21.1 %, which includes 10.5 % related to amortization of original issuance costs, for the three months ended March 31, 2024 and 2023, respectively. The following table sets forth total interest expense recognized related to the Credit Facility (in thousands): Three Months Ended March 31, 2024 2023 Contractual interest expense $ 222 $ 118 Amortization of debt issuance costs 117 117 Total interest expense $ 339 $ 235 12 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) Note 5. Share-based Compensation During the three months ended March 31, 2024 and 2023 , the Company granted awards under the 2018 Omnibus Incentive Compensation Plan, previously named the Amended and Restated 2009 Omnibus Incentive Compensation Plan (the “2018 Plan”), and the 2015 Incentive Compensation Plan (the “2015 Plan”). The Compensation Committee of the Board of Directors administers the plans. Under the 2018 Plan, shares of common stock may be issued upon the exercise of stock options, in the form of restricted stock, or in settlement of 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, 2024 and 2023 (in thousands): Three Months Ended March 31, 2024 2023 Cost of revenues $ 31 $ 184 Research and development 160 248 Sales and marketing 165 330 General and administrative 361 1,038 Total $ 717 $ 1,800 Stock Options The Compensation Committee of the Board of Directors determines eligibility, vesting schedules and exercise prices for stock options granted. The Company generally uses the Black-Scholes option pricing model to estimate the fair value of its stock options. For performance stock awards subject to market-based vesting conditions, fair values are determined using the Monte-Carlo simulation model. 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, 2024 : Outstanding — December 31, 2023 545,872 Granted 14,250 Canceled ( 111,994 ) Outstanding — March 31, 2024 448,128 Exercisable — March 31, 2024 338,346 At March 31, 2024, total unrecognized compensatio n expense related to stock options was $ 0.7 million , which is expected to be recognized over a weighted-average period of 3.29 years . Restricted Stock Units Pursuant to the 2018 Plan and the 2015 Plan, the Company may issue RSUs that, upon satisfaction of vesting conditions, allow recipients to receive common stock. Issuances of such awards reduce common stock available under the 2018 Plan and 2015 Plan for stock incentive awards. The Company measures compensation cost associated with grants of RSUs at fair value, which is generally the closing price of the Company’s stock on the date of grant. RSUs generally vest over a three - to four-year period. The following table summarizes the Company’s RSU activity for the three months ended March 31, 2024 : Non-vested — December 31, 2023 203,008 Granted — Vested ( 6,597 ) Forfeited ( 10,590 ) Non-vested — March 31, 2024 185,821 13 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) At March 31, 2024, total unrecognized compensation expense related to RSUs was $ 1.6 million , which is expected to be recognized over a weighted-average period of 1.07 years . Note 6. Loss per Share Basic earnings (loss) per share (“EPS”) excludes dilution and is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock using the treasury stock method. Potentially dilutive securities (consisting primarily of the 2025 Notes calculated using the if-converted method and warrants, stock options and RSUs calculated using the treasury stock method) are excluded from the diluted EPS computation in loss periods and when the applicable exercise price is greater than the market price on the period end date as their effect would be anti-dilutive. The calculation of basic and diluted earnings per share was as follows (in thousands, except share and per share data): Three Months Ended March 31, 2024 2023 Net loss attributable to common stockholders $ ( 5,245 ) $ ( 5,827 ) Weighted-average common shares outstanding* 11,879,719 10,860,189 Basic and diluted net loss per share $ ( 0.44 ) $ ( 0.54 ) (*) Adjusted retroactively for reverse stock split that occurred on January 24, 2024, see Note 1 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): As of March 31, (in thousands) 2024 2023 2025 Notes 1,338 1,409 Non-qualified stock options 448 796 Restricted stock units 186 114 Employee stock purchase plan 26 220 Total 1,998 2,539 Note 7. Public Offering In January 2021, the Company entered into an Equity Distribution Agreement with Canaccord Genuity LLC (the “Agent”), pursuant to which the Company could 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”). During the quarter ended March 31, 2023 the Company sold 85,810 shares of common stock, at an average price of $ 6.17 per share, for net proceeds of $ 0.5 million, after deducting underwriter fees and discounts. 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. Note 8. Geographic Information and Concentrations of Risk Geographic Information The following table details the Company’s revenues by geographic region based on shipping destination (in thousands): Three Months Ended March 31, 2024 2023 United States and Canada $ 35,476 $ 43,205 Europe (including United Kingdom) $ 6,751 $ 5,987 Australia $ 2,780 $ 1,598 Other $ 2 $ 4 Total $ 45,009 $ 50,794 14 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) Concentrations of Credit Risk For the three months ended March 31, 2024, two customers accounted for 39.3 % and 18.2 % of revenues, respectively. For the three months ended March 31, 2023, two customers accounted for 31.1 % and 26.6 % of revenues, respectively. As of March 31, 2024, three customers accounted for 32.0 %, 13.3 %, and 10.9 % of accounts receivable, net, respectively. As of December 31, 2023, two customers accounted for 41.8 % and 10.2 % of accounts receivable, net, respectively. Note 9. Commitments and Contingencies Noncancellable Purchase Obligations The Company typically enters into commitments with its contract manufacturers that require future purchases of goods or services in the three to four quarters following the balance sheet date. Such commitments are noncancellable (“noncancellable purchase obligations”). As of March 31, 2024, future payments under these noncancellable purchase obligations were approximately $ 60.1 million. Legal The Company is, from time to time, party to various legal proceedings arising in the ordinary course of business. The Company is regularly required to directly or indirectly participate in other U.S. patent infringement actions pursuant to its contractual indemnification obligations to certain customers. Based on an evaluation of these matters the Company currently believes that liabilities arising from, or sums paid in settlement of these existing matters, if any, would not have a material adverse effect on its consolidated results of operations or financial condition. Indemnification In the normal course of business, the Company periodically enters into agreements that require the Company to indemnify and defend its customers for, among other things, claims alleging that the Company’s products infringe upon third-party patents or other intellectual property rights. The Company’s maximum exposure under these indemnification provisions cannot be estimated but the Company does not believe that there are any matters individually or collectively that would have a material adverse effect on its consolidated results of operations or financial condition. Note 10. Income Taxes The Company’s income tax provision was $ 0.2 million and $ 0.3 million for the three months ended March 31, 2024 and 2023, 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 provisions for the three months ended March 31, 2024 and 2023, were largely driven by a combination of improved profits and unrealized foreign currency gains at the Company’s foreign subsidiaries. Note 11. Subsequent Events Effective April 18, 2024, the Company exercised its right to voluntarily pay-off and terminate its Credit Facility with Siena Lending Group LLC. As a result of the termination, the Company paid the outstanding balance and related termination fees on the Credit Facility of approximately $ 3.0 million. The Company has also paid an exit fee in the aggregate amount of $ 0.4 million to South Ocean Funding, LLC and North Sound Ventures, LP (collectively, the “Participants”) as a result of the early redemption of the Participants’ $ 4.0 million last-out subordinated participation interest in the Loan and Security Agreement pursuant to a Participation Agreement between the Participants and Siena Lending Group. 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 April 18, 2024, each of Golden Harbor, Ltd. and North Sound Management, Inc. were beneficial owners of in excess of 5% of the Company’s outstanding common stock. 15