What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-13 compared with 2024-08-08 · 125 added, 95 removed, 222 unchanged (50% of the section changed)

12 unchanged sentences

• our ability to make payments on or to refinance our indebtedness;

• the satisfaction of the conditions precedent to the sale of our fleet management and telematics solutions business (the “Telematics Business”);

• our dependence on a small number of customers for a substantial portion of our revenues;

40 unchanged sentences

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

Our telematics solutions are designed to improve business outcomes for enterprise and SMB market segments (see “Recent Developments” below).

We also provide a wireless subscriber management SaaS solution for carriers to manage their government and complex enterprise customer subscriptions.

6 unchanged sentences

Our mobile hotspots, sold under the MiFi ™ brand, have been sold to millions of end users and provide secure and convenient high-speed broadband access to the Internet on the go.

Recent Developments

On September 16, 2024, the Company and its subsidiary Inseego SA (Pty) Ltd (“Seller”) entered into a Share Purchase Agreement (the “Purchase Agreement”) with Light Sabre SPV Limited (which subsequently novated its benefits and obligations under the Purchase Agreement to Ctrack Holdings (the “Purchaser”)), pursuant to which Inseego agreed to sell to the Purchaser the entire issued share capital of the Company’s Inseego International Holdings Limited subsidiary in exchange for approximately $52 million in cash, subject to certain adjustments.

Upon completion of the sale (the “Completion Date”), the Purchaser will acquire the Telematics Business, which has operations in the United Kingdom, the European Union, Australia and New Zealand.

The Purchase Agreement is subject to closing conditions including, among others more fully described in the Purchase Agreement, Purchaser finalizing financing arrangements to fund the purchase price.

Unless fulfilled or otherwise waived by the parties, if any of the closing conditions are not fulfilled by December 31, 2024, the Purchase Agreement shall be terminated and the Sale Transaction shall not be completed.

The Company’s decision to divest its Telematics Business was based on a review of the strategic fit of the business with the Company’s North American-centric 5G wireless solutions business and the Company’s previously stated goal to continue to significantly de-leverage its capital structure.

The sale of the telematics operations further supports the Company’s streamlining of its focus and resources on the strongest growth opportunities around its core product offerings.

The assets and liabilities of the Telematics Business have been classified as held for sale within the Condensed Consolidated Balance Sheet and its operations have been classified as discontinued operations within the Condensed Consolidated Statements of Operations and Comprehensive Income for all periods presented herein.

Refer to Note 2 – Discontinued Operations and Held for Sale included in Item 1 of Part I of this Quarterly Report on Form 10-Q for further discussion regarding the planned divestiture.

Our Sources of Revenue

5 unchanged sentences

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

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, whose revenues are included in Services and other below.

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, whose revenues are included in Services and other below.

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

9 unchanged sentences

We sell certain other types of SaaS solutions.

First is our telematics 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 SaaS wireless subscriber management solution (Inseego Subscribe) for carrier’s management of their government and complex enterprise customer subscriptions.

We provide a SaaS 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.

17 unchanged sentences

Results of Operations

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Revenues for the three months ended June 30, 2024 were $59.1 million, compared to $53.6 million for the same period in 2023.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Revenues for the three months ended September 30, 2024 were $54.0 million, compared to $41.4 million for the same period in 2023.

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

Three Months Ended

June 30, Change

September 30, Change

Product Category 2024 2023 $ %

5 unchanged sentences

Mobile solutions .

The $7.0 million increase in mobile solutions revenues is primarily due to product mix as a result of current period sales of our higher margin premium 5G MiFi category in comparison to sales of the predecessor, lower-cost, 4G MiFi category in the prior year.

The $9.7 million increase in mobile solutions revenues is primarily due to increased sales of our higher margin premium 5G MiFi at multiple carriers, including a promotional offer at one of our carrier partners.

Fixed wireless access solutions.

The $6.2 million decrease in fixed wireless access solutions revenues is primarily due to higher sales in the three months ended June 30, 2023 relating to pre-launch sales of our indoor FWA solution in preparation for the release that occurred in the third quarter of 2023.

Services and other The $4.8 million increase in services and other revenues is primarily due to increased Inseego Subscribe revenues related to the terms of a two-year service contract renewal with a major customer that was effective in April 2024.

The $1.4 million decrease in fixed wireless access solutions revenues is primarily due to decreased sales with one of our carrier partners, partially offset by sales from our channel program, that began in 2024, as initiatives in that space are beginning to drive revenue.

Services and other The $4.3 million increase in services and other revenues is primarily due to increased Inseego Subscribe revenues related to the terms of a two-year service contract renewal with a major customer that was executed in April 2024.

Cost of revenues.

Cost of revenues for the three months ended June 30, 2024 was $36.1 million, or 61.0% of revenues, compared to $34.7 million, or 64.7% of revenues, for the same period in 2023.

Cost of revenues for the three months ended September 30, 2024 was $35.2 million, or 65.2% of revenues, compared to $43.5 million, or 105.2% of revenues, for the same period in 2023.

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

Three Months Ended

June 30, Change

September 30, Change

Product Category 2024 2023 $ %

2 unchanged sentences

Total cost of revenues $ 35,232 $ 43,522 $ (8,290) (19.0)

The $0.1 million decrease in product cost of revenues is primarily due to product mix as a result of current period sales of our higher margin premium 5G MiFi category in comparison to the predecessor, lower margin, 4G MiFi category that was sold during the prior year.

The $9.2 million decrease in product cost of revenues is primarily due to significant inventory reserves and related char ges of $14.4 million reco rded in the three months ended September 30, 2023, partially offset by the impact of increased product revenues.

Services and other.

The $1.6 million increase in services and other cost of revenues is primarily due to increased Inseego Subscribe and telematics services revenues and the related increase in costs incurred to provide these services.

The $0.9 million increase in services and other cost of revenues is primarily due to increased Inseego Subscribe revenues and the related increase in costs incurred to provide these services.

Gross profit.

Gross profit for the three months ended June 30, 2024 was $23.0 million, or a gross margin of 39.0%, compared to $18.9 million, or a gross margin of 35.3%, for the same period in 2023.

The increase in gross profit is primarily due to higher reven ues.

The increase in gross profit margin is primarily due to a larger proportion of higher margin service revenues as a percentage of total revenues and increased margins on the Company’s premium 5G MiFi offerings in the current year in comparison to the lower margin products offered in the prior year.

Gross profit for the three months ended September 30, 2024 was $18.8 million, or a gross margin of 34.8%, compared to a loss of $2.2 million, or a gross margin of (5.2)%, for the same period in 2023.

The increase in gross profit is primarily due to significant inventory reserves recorded in the three months ended September 30, 2023 and higher revenues in the three months ended September 30, 2024.

The increase in gross profit margin is primarily due to the inventory reserves recorded in the three months ended September 30, 2023 and a larger proportion of higher margin service revenues as a percentage of total revenues and increased margins on the Company’s premium 5G MiFi offerings in the current year in comparison to the lower margin products offered in the prior year.

Operating costs and expenses.

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

Three Months Ended June 30, Change

Three Months Ended September 30, Change

Operating costs and expenses 2024 2023 $ %

3 unchanged sentences

Depreciation and amortization 3,154 3,848 (694) (18.0)

Impairment of capitalized software 507 611 (104) (17.0)

Total $ 17,784 $ 16,981 $ 803 4.7

Research and development expenses.

Research and development expenses for the three months ended June 30, 2024 were $5.5 million, or 9.3% of revenues, compared to $6.3 million , or 11.7% of revenues, for the same period in 2023.

Research and development expenses for the three months ended September 30, 2024 were $5.2 million, or 9.6% of revenues, compared to $5.2 million , or 12.6% of revenues, for the same period in 2023.

The decrease in research and development expenses was primarily due to lower research and development personnel-related costs as a result of a decrease in overall research and development headcount, partially offset by increased annual incentive bonus accruals for current year performance.

Sales and marketing expenses.

Sales and marketing expenses for the three months ended June 30, 2024 were $5.4 million, or 9.1% of revenues, compared to $5.8 million, or 10.8% of revenues, for the same period in 2023.

The decrease in sales and marketing expenses was primarily due to lower sales personnel-related costs as a result of a decrease in overall sales headcount and a decrease in consulting and outside services in relation to cost reduction efforts.

Sales and marketing expenses for the three months ended September 30, 2024 were $4.1 million, or 7.6% of revenues, compared to $3.9 million, or 9.4% of revenues, for the same period in 2023.

The increase in sales and marketing expenses was primarily due to increased sales commissions and higher advertising and marketing costs, partially offset by lower sales personnel-related costs as a result of a decrease in overall sales headcount and a decrease in consulting and outside services in relation to cost reduction efforts.

General and administrative expenses.

General and administrative expenses for the three months ended June 30, 2024 were $5.8 million, or 9.8% of revenues, compared to $5.4 million, or 10.1% of revenues, for the same period in 2023.

The increase in general and administrative expense was primarily due to an increase in legal and consulting expenses from our overall capital structure management efforts and increased annual incentive bonus accruals for current year performance, partially offset by a decreased share-based compensation and contractor expenses.

General and administrative expenses for the three months ended September 30, 2024 were $4.8 million, or 8.9% of revenues, compared to $3.4 million, or 8.3% of revenues, for the same period in 2023.

The increase in general and administrative expense was primarily due to an increase in legal and consulting expenses related to our capital structure management efforts and planned divestiture of our Telematics Business, as well as increased annual incentive bonus accruals for current year performance, partially offset by a decreased share-based compensation.

Depreciation and amortization expenses .

Depreciation and amortization expenses for the three months ended June 30, 2024 were $4.0 million , or 6.8% of revenues, compared to $4.7 million , or 8.8% of revenues, for the same period in 2023 .

The decrease in depreciation and amortization expenses was primarily due to lower amortization related to capitalized software projects during the three months ended June 30, 2024 compared to the same period in 2023 .

Depreciation and amortization expenses for the three months ended September 30, 2024 were $3.2 million , or 5.8% of revenues, compared to $3.8 million , or 9.3% of revenues, for the same period in 2023 .

The decrease in depreciation and amortization expenses was primarily due to lower balances of capitalized software projects and property, plant and equipment during the three months ended September 30, 2024 compared to the same period in 2023 .

Impairment of capitalized software.

For the three months ended September 30, 2024 and 2023, w e recorded impairments of $0.5 million and $0.6 million, respectively.

Other (expense) income.

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

Three Months Ended June 30, Change

Three Months Ended September 30, Change

Other (expense) income 2024 2023 $ %

Interest expense, net $ (5,731) $ (2,894) $ (2,837) 98.0 %

Gain on debt restructurings, net 12,366 — 12,366 *

Other income (expense), net (72) 45 (117) *

2 unchanged sentences

Interest expense, net.

The $0.2 million decrease in interest expense, net for the three months ended June 30, 2024 over the same period in 2023 was primarily a result of the termination of the Company’s Credit Facility in April 2024.

The $2.8 million increase in interest expense, net for the three months ended September 30, 2024 over the same period in 2023 was primarily a result of amortization of the debt discount and coupon interest on the Short-Term Loan (as defined below) received in June 2024, partially offset by reductions in the principal balance of the 2025 Convertible Notes (as defined below) and termination of the Company’s Credit Facility (as defined in Note 5 – Debt in the accompanying condensed consolidated financial statements) in April 2024.

Gain on debt restructurings, net The $12.4 million net gain on debt restructurings for the three months ended September 30, 2024 is a result of the Company’s various 2025 Convertible Notes restructurings entered into during 2024 as part of our overall capital structure management efforts, as described below.

Other income (expense), net.

The $0.3 million decrease in other income, net for the three months ended June 30, 2024 over the same period in 2023 is primarily due to foreign currency exchange losses in the current period compared to foreign currency exchange gains in the prior period, partially offset by net gains recorded on our debt restructuring transactions.

Income tax provision.

Income tax provision for the three months ended June 30, 2024 and 2023 was a provision of $0.3 million and $0.3 million, respectively.

Other income (expense), net for the three months ended September 30, 2024 and 2023 was $0.1 million and $0.0 million, respectively.

Income from discontinued operations, net of tax.

Income from discontinued operations, net of tax for the three months ended September 30, 2024 and 2023 was $1.4 million and $0.2 million, respectively.

The increase was primarily due to increased sales of telematics services.

Preferred stock dividends.

During the three months ended June 30, 2024 and 2023, we recorded dividends of $0.8 million and $0.7 million, respectively, on our Preferred Stock.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Revenues for the six months ended June 30, 2024 were $104.2 million, compared to $104.4 million for the same period in 2023.

During the three months ended September 30, 2024 and 2023, we recorded dividends of $0.8 million and $0.8 million, respectively, on our Preferred Stock.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Revenues for the nine months ended September 30, 2024 were $143.2 million, compared to $131.4 million for the same period in 2023.

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

Six Months Ended

June 30, Change

Nine Months Ended

September 30, Change

Product Category 2024 2023 $ %

5 unchanged sentences

Mobile solutions.

The $0.8 million decrease in mobile solutions revenues is primarily a result of reduction of sales of phone line replacement products and investing more of our resources in the premium 5G MiFi category as opposed to developing a low-end, lower margin 5G MiFi, which resulted in lower unit sales during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

The $9.0 million increase in mobile solutions revenues is primarily due to increased sales of our premium 5G MiFis with one of our carrier partners.

Fixed wireless access solutions.

The $3.9 million decrease in fixed wireless access solutions revenues is primarily due to higher sales in the six months ended June 30, 2023 relating to pre-launch sales of our indoor FWA solution in preparation for the release that occurred in the third quarter of 2023 and reduced sales of our indoor router category during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

The $5.3 million decrease in fixed wireless access solutions revenues is primarily due to higher sales in the nine months ended September 30, 2023 relating to pre-launch sales of our indoor FWA solution in preparation for the release that occurred in the third quarter of 2023 and reduced sales of our indoor router category during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Services and other The $8.1 million increase in services and other revenues is primarily due to increased Inseego Subscribe revenues related to the terms of a two-year service contract renewal with a major customer that was executed in April 2024.

Cost of revenues.

Cost of revenues for the six months ended June 30, 2024 was $63.7 million, or 61.2% of revenues, compared to $67.3 million, or 64.5% of revenues, for the same period in 2023.

Cost of revenues for the nine months ended September 30, 2024 was $92.3 million, or 64.5% of revenues, compared to $104.9 million, or 79.9% of revenues, for the same period in 2023.

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

Six Months Ended

June 30, Change

Nine Months Ended

September 30, Change

Product Category 2024 2023 $ %

2 unchanged sentences

Total cost of revenues $ 92,304 $ 104,934 $ (12,630) (12.0)

The $5.4 million decrease in Product cost of revenues is primarily due to product mix as a result of current period sales of our higher margin premium 5G MiFi category in comparison to the predecessor, lower margin, 4G MiFi category that was sold during the prior year and overall decreased product sales in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

The $14.6 million decrease in Product cost of revenues is primarily due to significant inventory reserves recorded in the nine months ended September 30, 2023, partially offset partially offset by the impact of increased product revenues.

Services and other.

The $1.8 million increase in Services and other cost of revenues is primarily due to increased Inseego Subscribe and telematics services revenues and the related increase in costs incurred to provide said services.

The $1.9 million increase in Services and other cost of revenues is primarily due to increased Inseego Subscribe revenues and the related increase in costs incurred to provide said services.

Gross profit.

Gross profit for the six months ended June 30, 2024 was $40.4 million, or a gross margin of 38.8%, compared to $37.1 million, or a gross margin of 35.5%, for the same period in 2023.

The increase in gross profit is primarily due to higher reven ues .

Gross profit for the nine months ended September 30, 2024 was $50.9 million, or a gross margin of 35.5%, compared to $26.4 million, or a gross margin of 20.1%, for the same period in 2023.

The increase in gross profit is primarily due to the inventory reserves recorded in the nine months ended September 30, 2023 and higher revenues in the nine months ended September 30, 2024.

and increased margins on the Company’s premium 5G MiFi offerings in the current year in comparison to the lower margin products offered in the prior year.

Operating costs and expenses.

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

Six Months Ended

June 30, Change

Nine Months Ended

September 30, Change

Operating costs and expenses 2024 2023 $ %

6 unchanged sentences

Research and development expenses.

Research and development expenses for the six months ended June 30, 2024 were $10.5 million, or 10.1% of revenues, compared to $10.0 million, or 9.6% of revenues, for the same period in 2023.

The increase in research and development expenses was primarily due to fewer research and development projects that were capitalizable during the six months ended June 30, 2024, which resulted in a higher percentage of research and development costs being recorded as operating expenses, and increased annual incentive bonus accruals for current year performance, partially offset by lower personnel-related costs as a result of a decrease in overall sales headcount and a decrease in consulting and outside services in relation to cost reduction efforts.

Research and development expenses for the nine months ended September 30, 2024 were $15.0 million, or 10.5% of revenues, compared to $14.4 million, or 10.9% of revenues, for the same period in 2023.

The increase in research and development expenses was primarily due to fewer research and development projects that were capitalizable during the nine months ended September 30, 2024, which resulted in a higher percentage of research and development costs being recorded as operating expenses, and increased annual incentive bonus accruals for current year performance, partially offset by lower personnel-related costs as a result of a decrease in overall sales headcount and a decrease in consulting and outside services in relation to cost reduction efforts.

Sales and marketing expenses.

Sales and marketing expenses for the six months ended June 30, 2024 were $10.4 million, or 10.0% of revenues, compared to $12.3 million, or 11.7% of revenues, for the same period in 2023.

Sales and marketing expenses for the nine months ended September 30, 2024 were $12.2 million, or 8.5% of revenues, compared to $13.7 million, or 10.4% of revenues, for the same period in 2023.

General and administrative expenses.

General and administrative expenses for the six months ended June 30, 2024 were $10.8 million, or 10.4% of revenues, compared to $11.2 million, or 10.7% of revenues, for the same period in 2023.

The decrease in general and administrative expense was primarily due to a decrease in share-based compensation expense and temporary employment costs as part of cost reduction efforts, partially offset by increase in legal and consulting expenses from our overall capital structure management efforts and increased annual incentive bonus accruals for current year performance.

General and administrative expenses for the nine months ended September 30, 2024 were $12.7 million, or 8.9% of revenues, compared to $12.3 million, or 9.4% of revenues, for the same period in 2023.

Depreciation and amortization expenses .

Depreciation and amortization expenses for the six months ended June 30, 2024 were $7.6 million, or 7.3% of revenues, compared to $10.0 million, or 9.6% of revenues, for the same period in 2023.

The decrease in depreciation and amortization expenses was primarily due to lower amortization related to capitalized software projects during the six months ended June 30, 2024 compared to the same period in 2023.

Depreciation and amortization expenses for the nine months ended September 30, 2024 were $10.1 million, or 7.1% of revenues, compared to $13.1 million, or 10.0% of revenues, for the same period in 2023.

The decrease in depreciation and amortization expenses was primarily due to lower balances of capitalized software projects and property, plant and equipment during the nine months ended September 30, 2024 compared to the same period in 2023 .

Impairment of capitalized software.

For the six months ended June 30, 2024 and 2023, we recorded impairments of $0.4 million and $0.5 million, respectively.

For the nine months ended September 30, 2024 and 2023, we recorded impairments of $0.9 million and $1.1 million, respectively.

Other (expense) income.

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

Six Months Ended

June 30, Change

Nine Months Ended

September 30, Change

Other (expense) income 2024 2023 $ %

Interest expense, net $ (9,686) $ (6,910) $ (2,776) 40.2

Loss on extinguishment of revolving credit facility (788) — (788) *

Gain on debt restructurings, net 13,690 — 13,690 *

Other income (expense), net (864) 50 (914) *

2 unchanged sentences

Interest expense, net.

The $0.1 million decrease in interest expense, net for the six months ended June 30, 2024 over the same period in 2023 was primarily a result of the termination of the Company’s Credit Facility in April 2024 as primarily a result of interest expense associated with the Company’s Credit Facility.

The $2.8 million decrease in interest expense, net for the nine months ended September 30, 2024 over the same period in 2023 was primarily a result of amortization of the debt discount and coupon interest on the Short-Term Loan (as defined below) received in June 2024, partially offset by reductions in the principal balance of the 2025 Convertible

Notes (as defined below) and termination of the Company’s Credit Facility (as defined in Note 5 – Debt in the accompanying condensed consolidated financial statements) in April 2024.

Loss on extinguishment of revolving credit facility The $0.8 million loss on extinguishment of revolving credit facility for the nine months ended September 30, 2024 relates to the terminations of the Company’s Credit Facility in April 2024.

Gain on debt restructurings, net The $13.7 million net gain on troubled debt restructurings for the nine months ended September 30, 2024 is a result of the Company’s various 2025 Convertible Notes restructurings entered into during 2024 as part of our overall capital structure management efforts.

Other income (expense), net.

The $1.5 million decrease in other income (expense), net for the six months ended June 30, 2024 over the same period in 2023 is primarily due to foreign currency exchange gains in the prior period, partially offset by net gains recorded on our debt restructuring transactions in the current period.

Other income (expense), net for the nine months ended September 30, 2024 and 2023 was $(0.9) million and $0.1 million, respectively.

Income tax provision.

Income tax provision for the six months ended June 30, 2024 and 2023 was a provision of $0.5 million and $0.6 million, respectively.

Income tax provision for the nine months ended September 30, 2024 and 2023 was a provision of $0.2 million and $0.0 million, respectively.

Income from discontinued operations, net of tax.

Income from discontinued operations, net of tax for the nine months ended September 30, 2024 and 2023 was $3.0 million and $3.3 million, respectively.

The decrease was primarily due to increased sales of telematics services.

Preferred stock dividends.

During the six months ended June 30, 2024 and 2023, we recorded dividends of $1.6 million and $1.5 million, respectively, on our Preferred Stock.

During the nine months ended September 30, 2024 and 2023, we recorded dividends of $2.4 million and $2.2 million, respectively, on our Preferred Stock.

Reverse Stock Split

5 unchanged sentences

Liquidity and Capital Resources

On June 28, 2024, the Company entered into a series of agreements, as part of its overall capital structure management, to reduce its total debt and restructure its outstanding 2025 Convertible Notes.

Specifically, pursuant to agreements summarized in Note 4 – Debt in the accompanying unaudited financial statements, the Company executed three transactions that, together, involved the three largest noteholders of $125.9 million in face value, or 80%, of the 2025 Convertible Notes, as follows:

(1) Convertible Debt Repurchase:

the Company agreed to purchase for cash, all of the $45.9 million in face value of the 2025 Convertible Notes held by certain entities managed by Highbridge Capital Management, LLC (such entities, “Highbridge”), the second largest noteholder, at a discount of 30% to face value;

During 2024, the Company entered into a series of agreements, as part of its overall capital structure management, to reduce its total debt and restructure its outstanding 3.25% convertible notes due 2025 (the “2025 Convertible Notes”), some of which are summarized in Note 5 – Debt in the accompanying unaudited financial statements, as follows:

(1) Convertible Debt Repurchases and Exchanges Completed prior to September 30, 2024 (the “Completed Repurchases and Exchanges”):

(a) the Company repurchased, for cash, all of the $45.9 million principal amount of the 2025 Convertible Notes held by certain entities managed by Highbridge Capital Management, LLC (such entities, “Highbridge”), the second largest note holder as of the date of such purchase, at a discount of 30% to face value, plus accrued interest;

(b) the Company repurchased, for cash, $3.0 million in principal amount of the 2025 Convertible Notes from a separate single holder at discount of 45% to face value, plus accrued interest;

(c) t he Company repurchased from a holder approximately $4.7 million in principal amount of the 2025 Convertible Notes in exchange for 349,740 shares of the Company’s Common Stock and warrants to purchase an aggregate of 236,074 shares of the Company’s Common Stock, plus accrued interest.

See Note 8 – Stockholders' Equity (Deficit) in the accompanying unaudited financial statements for further details regarding these warrants;

(d) the Company repurchased from two related holders approximately $1.5 million in aggregate principal amount of the 2025 Convertible Notes in exchange for 137,533 shares of the Company’s common stock and warrants to purchase an aggregate of 88,534 shares of the Company’s common stock, plus accrued interest.

See Note 8 – Stockholders' Equity (Deficit) in the accompanying unaudited financial statements for further details regarding these warrants;

(2) Short-Term Loan Agreement:

to finance a portion of the Convertible Debt Repurchase, the Company agreed to a $19.5 million loan (“Short-Term Loan”) from (i) South Ocean Funding, LLC (“South Ocean”), which is an affiliate of Golden Harbor Ltd.

to finance a portion of the Completed Repurchases and Exchanges, the Company agreed to a $19.5 million loan (“Short-Term Loan”) from (i) South Ocean Funding, LLC (“South Ocean”), which is an affiliate of Golden Harbor Ltd.

(“Golden Harbor”), and Tavistock Financial, LLC, and (ii) certain participant lenders (the “Participating Lenders”).

The Short-Term Loan matures on September 30, 2024, provided that the Company may request an extension of the maturity date of up to six months, to March 31, 2025, which the Lender and each Participating Lender may grant or deny with respect to each of their respective portions of the Short-Term Loan.

Borrowings under the Short-Term Loan will bear interest at 12.0% per annum.

The Short-Term Loan was originally scheduled to mature on September 30, 2024 but maturity has subsequently been extended to November 30, 2024.

Borrowings under the Short-Term Loan bear interest at 12.0% per annum.

Upon any repayment or prepayment of the amounts borrowed under the Short-Term Loan (including at maturity), the Company will be required to pay an exit fee equal to 4.0% of the aggregate principal amount prepaid or repaid.

See Note 5 – Debt in the accompanying condensed consolidated financial statements for further details regarding the Short-Term Loan;

(3) Convertible Debt Exchange:

the Company entered into binding term sheets (the “Exchange Agreements”) to exchange $80.0 million of face value that represents all of the 2025 Convertible Notes held by North Sound Partners and Golden Harbor (the “Noteholders”), the largest and third-largest bondholders, respectively, for the same 30% discount as the Highbridge Notes purchase, for a combination of new long-term debt and equity.

Specifically, the Noteholders will receive an aggregate of approximately 2.4 million shares of Common Stock and $31.8 million principal amount of new long-term senior secured notes.

In addition the Noteholders will receive warrants to purchase an aggregate of approximately 1.5 million shares of Common Stock.

As of June 30, 2024, the Company had available cash and cash equivalents totaling $49.0 million.

Under the Short-Term Loan Agreement, the Company received $16.5 million in cash on June 28, 2024.

Subsequent to June 30, 2024 (on July 1, 2024), the Company received the remaining $3.0 million under the Short-Term Loan Agreement and closed the Convertible Debt Repurchase, paying $32.1 million to Highbridge, plus accrued interest.

The 2025 Convertible Notes had a principal balance of $158.9 million as of June 30, 2024 and mature on May 1, 2025.

The closing of the Convertible Debt Repurchase on July 1, 2024 reduced the principal balance of the 2025 Convertible Notes by $45.9 million.

Taking into account the Convertible Debt Repurchase, the Convertible Debt Exchange, and certain other transactions with individual holders of the 2025 Convertible Notes through the date of issuance of this report, the Company has repurchased and/or entered into binding agreements to repurchase and/or exchange approximately $141.9 million, or 87.7%, of the face value of the outstanding 2025 Convertible Notes.

Consummation of the Convertible Debt Exchanges are subject to, among other things, the drafting, execution and delivery of one or more final agreements reflecting the terms contained in the Exchange Agreements and other customary and mutually acceptable terms and conditions, which agreements the Company and the Noteholders have agreed to negotiate in good faith.

There can be no assurance that the Convertible Debt Exchanges will be consummated on the terms set forth in the Exchange Agreements, or at all.

As the closing of the Convertible Debt Exchanges 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.

The Company generated positive cash flow from operations both for the year ended December 31, 2023 and in the three and six months ended June 30, 2024.

(3) Convertible Debt Repurchases and Exchanges Completed Subsequent to September 30, 2024 (the “Subsequently Completed Repurchases and Exchanges”):

On November 6, 2024 the Company completed the previously-announced privately-negotiated exchanges of $91.5 million in aggregate principal amount of the 2025 Convertible Notes held by certain holders of the 2025 Convertible Notes pursuant to binding term sheets that were previously entered into with such holders, including the binding term sheets entered into on June 28, 2024 with North Sound Partners and Golden Harbor Ltd..

In connection with the Subsequently Completed Repurchases and Exchanges, the Company issued to these noteholders in concurrent private placement transactions an aggregate of (i) approximately 2.4 million shares of the Company’s Common Stock, (ii) approximately $40.9 million in principal amount of new senior secured notes due in 2029 (the “New Senior Secured Notes”), and (iii) warrants to purchase an aggregate of approximately 2.1 million shares of the Company’s Common Stock.

See Part 1 Item 1 Note 12 – Subsequent Events in this Quarterly Report on Form 10-Q for further details regarding the Subsequently Completed Repurchases and Exchanges, including information about the warrants and New Senior Secured Notes issued in relation to these transactions.

As of September 30, 2024, the Company had available cash and cash equivalents totaling $12.0 million.

During the three-months ended September 30, 2024, the Company voluntarily prepaid $13.5 million of the outstanding principal under the Short-Term Loan Agreement, so that on September 30, 2024, the outstanding principal under the Short-Term Loan was $6.0 million.

The 2025 Convertible Notes had a principal balance of $106.8 million as of September 30, 2024 and mature on May 1, 2025.

Taking into account the Completed Repurchases and Exchanges and the Subsequently Completed Repurchases and Exchanges, the Company has subsequently repurchased and/or exchanged approximately $146.9 million, or 90.8%, of the face value of the 2025 Convertible Notes that was outstanding as of December 31, 2023.

The Company generated positive cash flow from operations both for the year ended December 31, 2023 and in the nine months ended September 30, 2024.

In April 2024, the Company received a $15.0 million upfront payment from a customer in connection with a two-year service contract.

6 unchanged sentences

If additional funds are raised by the issuance of equity securities, or in connection with any restructuring or refinancing of the 2025 Convertible Notes, Company stockholders could experience significant dilution of their ownership interests and securities issued may have rights senior to those of the holders of the Company’s common stock.

During the previous two quarters, the Company had disclosed that there was substantial doubt about its ability to continue as a going concern within one year of the issuance dates of the quarterly reports on Form 10-Q for those quarters, primarily as a result of the outstanding balance and due date of the 2025 Convertible Notes.

In performing this assessment for the current quarter, taking into account the Company’s liquidity position as a whole, including the repurchases and exchanges of 2025 Convertible Notes noted above, the liquidity anticipated to be provided from the sale of the Telematics Business, and cash

inflows expected to be provided by its continuing operations, the Company has concluded that there is no longer substantial doubt about the Company’s ability to continue as a going concern within one year of issuance of these financial statements.

Contractual Obligations and Commitments

As of June 30, 2024, our material contractual obligations consisted of the following:

As of September 30, 2024, 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 June 30, 2024, our future payments under these noncancellable purchase obligations were approximately $78.2 million.

As of September 30, 2024, our future payments under these noncancellable purchase obligations were approximately $64.3 million.

• $106.8 million and $6.0 million in outstanding principal amount of 2025 Convertible Notes and Short-Term Loan, respectively, with required interest payments;

1 unchanged sentence

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

There were no material changes in our other contractual obligations during the three months ended June 30, 2024.

There were no material changes in our other contractual obligations during the three or nine months ended September 30, 2024.

Historical Cash Flows

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

Six Months Ended

Nine Months Ended

September 30,

Net cash provided by operating activities $ 45,375 $ 22,403

Net cash used in investing activities (3,654) (6,517)

Net cash provided by financing activities 10,758 1,227

Net cash used in financing activities (32,811) (2,026)

Effect of exchange rates on cash (1,682) (2,057)

Net increase in cash and cash equivalents 7,228 11,803

Cash, cash equivalents and restricted cash from continuing operations, beginning of period 2,409 3,241

Cash, cash equivalents and restricted cash from discontinued operations, beginning of period 5,110 3,902

Cash and cash equivalents, beginning of period 7,519 7,143

Cash, cash equivalents and restricted cash from continuing operations, end of period $ 11,972 $ 14,424

Cash, cash equivalents and restricted cash from discontinued operations, end of period $ 2,775 $ 4,522

Cash, cash equivalents, and restricted cash, end of period $ 14,747 $ 18,946

Operating activities.

Net cash provided by operating activities for the six months ended June 30, 2024 is comprised of a $3.8 million net loss incurred during the period and a non-cash gain on debt restructurings of $1.3 million, which was offset by net cash provided by working capital of $26.7 million and non-cash charges, including depreciation and amortization of $9.1 million, share-based compensation expense of $1.6 million, and amortization of debt discount and debt issuance costs of $0.9 million.

Net cash provided by operating activities for six months ended June 30, 2023 is comprised of a $10.0 million net loss incurred during the period, which was offset by and net cash provided by working capital of $5.6 million and non-cash charges, including depreciation and amortization of $10.8 million, share-based compensation expense of $3.8 million, and amortization of debt discount and debt issuance costs of $1.0 million.

Net cash provided by operating activities for the nine months ended September 30, 2024 is primarily comprised of $5.1 million net income earned during the period, net cash provided by working capital of $31.0 million, and non-cash charges, including depreciation and amortization of $13.2 million, amortization of debt discount and debt issuance costs of $4.4 million, and share-based compensation expense of $2.8 million, partially offset by a non-cash gain on debt restructurings of $13.7 million.

Net cash provided by operating activities for nine months ended September 30, 2023 is comprised of a $31.8 million net loss incurred during the period, which was offset by and net cash provided by working capital of $20.6 million and non-cash charges, including depreciation and amortization of $16.3 million, share-based compensation expense of $6.0 million, and amortization of debt discount and debt issuance costs of $2.0 million.

Investing activities.

Net cash used in investing activities during the six months ended June 30, 2024 is comprised of $2.3 million of cash outflows related to the development of software in support of our products and services.

Net cash used in investing activities during the same period in 2023 is primarily comprised of $4.4 million of cash outflows related to the development of software in support of our products and services and $0.2 million of property, plant and equipment purchases.

Net cash used in investing activities during the nine months ended September 30, 2024 is comprised of $3.6 million of cash outflows related to the development of software in support of our products and services.

Net cash used in investing activities for the nine months ended September 30, 2023 is primarily comprised of $6.1 million of cash outflows related to the development of software in support of our products and services and $0.4 million of property, plant and equipment purchases.

Financing activities.

Net cash provided by financing activities during the six months ended June 30, 2024 is comprised of $16.5 million from the issuance of the short-term loan and common stock warrants, partially offset by $4.1 million of cash outflow from the termination and repayment of our revolving credit facility and $1.7 million of cash outflow from the repurchase of a portion of our convertible notes.

Net cash provided by financing activities for the same period in 2023 is primarily comprised of $6.1 million in proceeds from the ATM offering, partially offset by $4.6 million of cash outflow related to net repayments of our revolving credit facility.

Net cash used in financing activities during the nine months ended September 30, 2024 is comprised of cash outflows of $33.8 million from the repurchases of a portion of our convertible notes and $4.9 million from the termination and repayment of the Credit Facility, partially offset by net cash inflows of $5.9 million from the issuance and partial repayment of our short-term loan and common stock warrants.

Net cash used in financing activities for the nine months ended September 30, 2023 is primarily comprised of $7.9 million of cash outflow related to net repayments of the Credit Facility, partially offset by $6.1 million in proceeds from the ATM offering (as defined in Note 8 – Stockholders' Equity (Deficit) in the accompanying condensed consolidated financial statements).

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis