INSEEGO CORP. 10-Q

Item 1. Financial Statements. INSEEGO CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value and share data) September 30, 2024 December 31, 2023 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 11,972 $ 2,409 Accounts receivable, net of allowance for expected credit losses of $ 130 and $ 617 , respectively 15,612 18,202 Inventories 18,118 20,555 Prepaid expenses and other 3,627 4,937 Current assets held for sale 35,771 12,123 Total current assets 85,100 58,226 Property, plant and equipment, net of accumulated depreciation of $ 28,629 and $ 27,513 , respectively 1,303 2,389 Intangible assets, net of accumulated amortization of $ 33,130 and $ 31,444 , respectively 19,465 25,718 Goodwill 3,949 3,949 Operating lease right-of-use assets 3,117 4,022 Other assets 456 1,256 Non-current assets held for sale — 26,237 Total assets $ 113,390 $ 121,797 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $ 35,457 $ 23,408 Accrued expenses and other current liabilities 31,147 21,049 Short-term loan 6,000 — 2025 Convertible Notes, net 106,250 — Revolving credit facility — 4,094 Current liabilities held for sale 10,000 7,360 Total current liabilities 188,854 55,911 Long-term liabilities: 2025 Convertible Notes, net — 159,912 Operating lease liabilities 2,979 3,972 Deferred tax liabilities, net 121 112 Other long-term liabilities 6,499 2,351 Non-current liabilities held for sale — 1,644 Total liabilities 198,453 223,902 Commitments and contingencies (Note 10) Stockholders’ deficit: Preferred stock, par value $ 0.001 ; 2,000,000 shares authorized: Preferred stock, par value $ 0.001 ; 39,500 shares designated, 25,000 shares issued and outstanding as of both September 30, 2024 and December 31, 2023 (aggregate liquidation preference of $ 37,547,619 ) — — Common stock, par value $ 0.001 ; 150,000,000 shares authorized, 12,542,691 and 11,878,557 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively 13 12 Additional paid-in capital 825,851 810,138 Accumulated other comprehensive loss ( 6,712 ) ( 5,327 ) Accumulated deficit ( 904,215 ) ( 906,928 ) Total stockholders’ deficit ( 85,063 ) ( 102,105 ) Total liabilities and stockholders’ deficit $ 113,390 $ 121,797 See accompanying notes to condensed consolidated financial statements (unaudited). INSEEGO CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except share and per share data) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenues: Mobile solutions $ 32,282 $ 22,534 $ 73,431 $ 64,469 Fixed wireless access solutions 9,723 11,114 37,222 42,489 Product 42,005 33,648 110,653 106,958 Services and other 12,027 7,709 32,504 24,409 Total revenues 54,032 41,357 143,157 131,367 Cost of revenues: Product 33,592 42,788 86,812 101,375 Services and other 1,640 734 5,492 3,559 Total cost of revenues 35,232 43,522 92,304 104,934 Gross profit (loss) 18,800 ( 2,165 ) 50,853 26,433 Operating costs and expenses: Research and development 5,176 5,200 15,032 14,369 Sales and marketing 4,125 3,893 12,176 13,703 General and administrative 4,822 3,429 12,695 12,326 Depreciation and amortization 3,154 3,848 10,098 13,125 Impairment of capitalized software 507 611 927 1,115 Total operating costs and expenses 17,784 16,981 50,928 54,638 Operating income (loss) 1,016 ( 19,146 ) ( 75 ) ( 28,205 ) Other (expense) income: Interest expense, net ( 5,731 ) ( 2,894 ) ( 9,686 ) ( 6,910 ) Loss on extinguishment of revolving credit facility — — ( 788 ) — Gain on debt restructurings, net 12,366 — 13,690 — Other income (expense), net ( 72 ) 45 ( 864 ) 50 Income (Loss) before income taxes 7,579 ( 21,995 ) 2,277 ( 35,065 ) Income tax provision 36 30 171 44 Income (Loss) from continuing operations 7,543 ( 22,025 ) 2,106 ( 35,109 ) Income from discontinued operations (net of income tax provision (benefit) of $ 266 , $( 46 ), $ 674 , and $ 555 , respectively) 1,426 220 3,032 3,263 Net income (loss) 8,969 ( 21,805 ) 5,138 ( 31,846 ) Preferred stock dividends ( 827 ) ( 756 ) ( 2,425 ) ( 2,218 ) Net income (loss) attributable to common stockholders $ 8,142 $ ( 22,561 ) $ 2,713 $ ( 34,064 ) Per share data: Net earnings (loss) per share Basic Continuing operations $ 0.54 $ ( 1.95 ) $ ( 0.03 ) $ ( 3.33 ) Discontinued operations 0.12 0.02 0.25 0.29 Basic earnings per share ( * ) $ 0.66 $ ( 1.93 ) $ 0.23 $ ( 3.03 ) Diluted Continuing operations $ ( 0.16 ) $ ( 1.95 ) $ ( 0.03 ) $ ( 3.33 ) Discontinued operations 0.11 0.02 0.25 0.29 4 Diluted earnings per share ( * ) $ ( 0.06 ) $ ( 1.93 ) $ 0.23 $ ( 3.03 ) Weighted-average shares used in computation of net earnings (loss) per share Basic ( * ) 12,336,503 11,696,755 12,036,989 11,224,722 Diluted ( * ) 13,218,293 11,696,755 12,036,989 11,224,722 Other comprehensive loss: Foreign currency translation adjustment ( 1,292 ) ( 433 ) ( 1,385 ) ( 958 ) Comprehensive income (loss) $ 7,677 $ ( 22,238 ) $ 3,753 $ ( 32,804 ) ( * ) Adjusted retroactively for reverse stock split that occurred on January 24, 2024, see Note 1. Rounding may affect summation. See accompanying notes to condensed consolidated financial statements (unaudited). 5 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, June 30, 2023 25 $ — 11,687 $ 12 $ 805,282 ( 869,254 ) $ ( 6,855 ) $ ( 70,815 ) Net loss — — — — — ( 21,805 ) — ( 21,805 ) Foreign currency translation adjustment — — — — — — ( 433 ) ( 433 ) Exercises of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan, net of taxes withheld — — 16 — 3 — — 3 Issuance of common shares in connection with a public offering, net of issuance costs — — — — Share-based compensation — — — — 2,267 — — 2,267 Preferred stock dividends — — — — 756 ( 756 ) — — Balance, September 30, 2023 25 $ — 11,703 $ 12 $ 808,308 $ ( 891,815 ) $ ( 7,288 ) $ ( 90,783 ) Balance, June 30, 2024 25 $ — 11,910 $ 12 $ 816,002 $ ( 912,357 ) $ ( 5,420 ) $ ( 101,763 ) Net income — — — — — 8,969 — 8,969 Foreign currency translation adjustment — — — — — — ( 1,292 ) ( 1,292 ) Exercises of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan, net of taxes withheld — — 146 — 213 — — 213 Share-based compensation — — — — 1,229 — — 1,229 Issuance of common stock in connection with debt restructurings — — 487 1 4,924 — — 4,925 Issuance of common stock warrants in connection with debt restructurings — — — — 2,656 — — 2,656 Preferred stock dividends — — — — 827 ( 827 ) — — Balance, September 30, 2024 25 $ — 12,543 $ 13 $ 825,851 $ ( 904,215 ) $ ( 6,712 ) $ ( 85,063 ) (*) Adjusted retroactively for reverse stock split that occurred on January 24, 2024, see Note 1 See accompanying notes to condensed consolidated financial statements (unaudited). 6 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 ) $ ( 6,330 ) $ ( 70,118 ) Net loss — — — — — ( 31,846 ) — ( 31,846 ) Foreign currency translation adjustment — — — — — — ( 958 ) ( 958 ) Exercises of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan, net of taxes withheld — — 52 — 51 — — 51 Issuance of common shares in connection with a public offering, net of issuance costs — — 804 1 6,057 — — 6,058 Share-based compensation — — — — 6,030 — — 6,030 Preferred stock dividends — — — — 2,218 ( 2,218 ) — — Balance, September 30, 2023 25 $ — 11,703 $ 12 $ 808,308 $ ( 891,815 ) $ ( 7,288 ) $ ( 90,783 ) Balance, December 31, 2023 25 $ — 11,879 $ 12 $ 810,138 $ ( 906,928 ) $ ( 5,327 ) $ ( 102,105 ) Net income — — — — — 5,138 — 5,138 Foreign currency translation adjustment — — — — — — ( 1,385 ) ( 1,385 ) Exercises of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan, net of taxes withheld — — 177 — 207 — — 207 Share-based compensation — — — — 2,815 — — 2,815 Issuance of common stock in connection with debt restructurings — — 487 1 4,924 — — 4,925 Issuance of common stock warrants in connection with debt restructurings — — — — 5,342 — — 5,342 Preferred stock dividends — — — — 2,425 ( 2,425 ) — — Balance, September 30, 2024 25 $ — 12,543 $ 13 $ 825,851 $ ( 904,215 ) $ ( 6,712 ) $ ( 85,063 ) (*) Adjusted retroactively for reverse stock split that occurred on January 24, 2024, see Note 1 See accompanying notes to condensed consolidated financial statements (unaudited). 7 INSEEGO CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended September 30, 2024 2023 Cash flows from operating activities: Net income (loss) $ 5,138 $ ( 31,846 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 13,242 16,270 Loss on extinguishment of revolving credit facility 788 — Gain on debt restructurings, net ( 13,690 ) — Provision for expected credit losses ( 231 ) 612 Impairment of capitalized software 927 1,115 Provision for excess and obsolete inventory 901 7,011 Impairment of operating lease right-of-use assets 139 — Share-based compensation expense 2,815 6,030 Amortization of debt discount and debt issuance costs 4,435 2,048 Deferred income taxes 9 177 Non-cash operating lease expense 1,218 437 Other 6 — Changes in assets and liabilities: Accounts receivable 2,432 7,703 Inventories ( 274 ) 7,685 Prepaid expenses and other assets 1,887 1,479 Accounts payable 12,284 1,162 Accrued expenses and other liabilities 14,683 2,561 Operating lease liabilities ( 1,334 ) ( 41 ) Net cash provided by operating activities 45,375 22,403 Cash flows from investing activities: Purchases of property, plant and equipment ( 46 ) ( 403 ) Additions to capitalized software development costs and purchases of intangible assets ( 3,608 ) ( 6,114 ) Net cash used in investing activities ( 3,654 ) ( 6,517 ) Cash flows from financing activities: Payments related to repurchases of 2025 Convertible Notes ( 33,781 ) — Proceeds from issuance of short-term loan and warrants, net of issuance costs 19,350 — Proceeds from a public offering of equity, net of issuance costs — 6,057 Principal payments on financed assets — ( 360 ) Net repayments on revolving credit facility ( 4,882 ) ( 7,851 ) Repayments on short-term loan ( 13,500 ) — Other financing activities 2 128 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 and cash equivalents, end of period $ 14,747 $ 18,946 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 4,283 $ 3,336 Income taxes $ 269 $ 217 Supplemental disclosures of non-cash investing and financing activities: Transfer of inventories to rental assets $ 2,043 $ 1,077 Capital expenditures financed through accounts payable or accrued liabilities $ 262 $ 7,216 Equity value issued in exchange for 2025 Convertible Notes $ 7,088 $ — Right-of-use assets obtained in exchange for operating leases liabilities $ 508 $ 1,030 See accompanying notes to condensed consolidated financial statements (unaudited). 8 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. Planned Divestiture of the Telematics Business 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 fleet management and telematics solutions business of Inseego, which has operations in the United Kingdom, the European Union, Australia and New Zealand (the “Telematics Business”). The Purchase Agreement is subject to closing conditions including, among others more fully described in the Purchase Agreement, the 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. As a result, within these condensed consolidated financial statements, the assets and liabilities associated with the Telematics Business d isposal group 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. Refer to Note 2 – Discontinued Operations and Held for Sale for additional information regarding the Telematics Business, including the assets and liabilities divested and income from discontinued operations. Unless otherwise noted, disclosures within these remaining Notes to Condensed Consolidated Financial Statements relate solely to the Company's continuing operations. Held for Sale and Discontinued Operations In accordance with authoritative guidance for discontinued operations (Accounting Standards Codification (“ASC”) 205-20), the Company determined that the Telematics Business met held-for-sale and discontinued operations accounting criteria during the third quarter of 2024. Accordingly, the Company classified the results of the Telematics Business as discontinued operations in its condensed consolidated statements of operations for all periods presented. Additionally, the related assets and liabilities associated with the Telematics Business are classified as held for sale in the condensed consolidated balance sheets for all periods presented. The cash flows related to discontinued operations have not been segregated and are included in the condensed consolidated statements of cash flows. Depreciation of property, plant and equipment and amortization of intangible and right-of-use assets are not recorded while these assets are classified as held for sale. For each period the disposal group remains classified as held for sale, its recoverability is reassessed and any necessary adjustments are made to its carrying value. No impairment upon classification as held for sale was recorded during the three or nine months ended September 30, 2024. The results of discontinued operations are reported as Income from discontinued operations, net of tax in the Condensed Consolidated Statements of Comprehensive Income for the current and prior periods commencing in the period in which the 9 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) held for sale criteria are met. Income from discontinued operations, net of tax includes direct costs attributable to the discontinued operations and excludes any cost allocations associated with any shared or corporate functions unless otherwise dedicated to the discontinued operations. Income from discontinued operations, net of tax will include any gain or loss recognized upon disposition or from adjustment of the carrying amount to fair value less costs to sell while classified as held for sale. Activity within comprehensive income directly associated with a divested business is not realized as a component of Income from discontinued operations, net of tax until completion of the sale or disposition. 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 was 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 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 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”), as follows: (1) Convertible Debt Repurchases and Exchanges Completed prior to September 30, 2024 (the “Completed Repurchases and Exchanges”): 10 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) (a) the Company repurchased, for cash, all of the $ 45.9 million in 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 of 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 of principal amount of the 2025 Convertible Notes in exchange for approximately 0.3 million shares of the Company’s Common Stock and warrants to purchase an aggregate of approximately 0.2 million shares of the Company’s Common Stock, plus accrued interest. See Note 8 – Stockholders' Equity (Deficit) 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 approximately 0.1 million shares of the Company’s common stock and warrants to purchase an aggregate of approximately 0.1 million shares of the Company’s common stock. See Note 8 – Stockholders' Equity (Deficit) for further details regarding these warrants; (2) Short-Term Loan Agreement: 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 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 below for further details regarding the Short-Term Loan; and (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 Note 12 – Subsequent Events below 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 balance under the Short-Term Loan Agreement, so that on September 30, 2024, the outstanding principal balance 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. Based on the factors above, and to reduce financing costs, the Company voluntarily paid-off and terminated its Credit Facility (as defined below) effective April 18, 2024. These factors have had a positive impact on our liquidity. While the Company’s liquidity and financial results have 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 maintain 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 the restructuring or refinancing of the Company’s obligations, or if events or circumstances occur such that the Company does not meet its operating plan as 11 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) expected, or if the Company becomes obligated to pay unforeseen expenditures, 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. 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. 12 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) Note 2. Discontinued Operations and Held for Sale As noted in Note 1 – Nature of Business and Significant Accounting Policies , on September 16, 2024 , the Company entered into the Purchase Agreement to sell its Telematics Business. As a result, within these condensed consolidated financial statements, the assets and liabilities associated with the Telematics Business d isposal group 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. The following table summarizes Income from discontinued operations, net of tax included in the Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months end ed September 30, 2024 and 2023 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Services and other revenues $ 7,862 $ 7,226 $ 22,895 $ 21,567 Services and other cost of revenues 3,222 3,166 9,876 9,022 Gross profit from discontinued operations 4,640 4,060 13,019 12,545 Operating costs and expenses: Research and development 293 473 967 1,345 Sales and marketing 1,289 1,255 3,625 3,698 General and administrative 1,884 1,146 4,799 3,404 Depreciation and amortization 360 392 1,060 1,112 Total operating costs and expenses 3,826 3,266 10,451 9,559 Operating income from discontinued operations 814 794 2,568 2,986 Other (expense) income: Interest income, net 3 3 10 8 Other income (expense), net 875 ( 623 ) 1,128 824 Income from discontinued operations before income taxes 1,692 174 3,706 3,818 Income tax provision (benefit) 266 ( 46 ) 674 555 Income from discontinued operations, net of tax $ 1,426 $ 220 $ 3,032 $ 3,263 13 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) The following table summarizes the held for sale assets and liabilities included in the Condensed Consolidated Balance Sheet (in thousands): September 30, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 2,775 $ 5,110 Accounts receivable, net 4,803 4,414 Inventories 2,092 2,325 Prepaid expenses and other 380 274 Current assets held for sale ( * ) 10,050 12,123 Non-current assets: Property, plant and equipment, net 323 369 Rental assets, net 4,932 5,083 Intangible assets, net 990 1,422 Goodwill 17,973 17,973 Operating lease right-of-use assets 1,503 1,390 Non-current assets held for sale ( * ) 25,721 26,237 Total assets held for sale ( * ) $ 35,771 $ 38,360 LIABILITIES Current liabilities: Accounts payable $ 1,650 $ 1,387 Accrued expenses and other current liabilities 6,410 5,973 Current liabilities held for sale ( * ) 8,060 7,360 Long-term liabilities: Operating lease liabilities 1,335 1,067 Deferred tax liabilities, net 600 568 Other long-term liabilities 5 9 Non-current liabilities held for sale ( * ) 1,940 1,644 Total liabilities held for sale ( * ) $ 10,000 $ 9,004 ( * ) Assets and liabilities of the held for sale Telematics Business are presented as current in the Condensed Consolidated Balance Sheet at September 30, 2024, as the Company expects to complete the disposition within one year. As permitted under ASC 205-20-50-5b(2), the Company has elected not to adjust the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 to exclude cash flows attributable to discontinued operations. The table below sets forth, for the periods presented, significant selected financial information related to discontinued activities included in the accompanying condensed consolidated financial statements (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Non-cash items included in net (loss) income: Depreciation and amortization $ 969 $ 1,032 $ 2,921 $ 2,867 Share-based compensation $ 35 $ 144 $ 101 $ 390 Cash flows from investing activities: Purchases of property, plant and equipment $ ( 14 ) $ ( 173 ) $ ( 17 ) $ ( 334 ) Non-cash investing activities: Transfer of inventories to rental assets $ 698 $ 412 $ 2,043 $ 1,077 Right-of-use assets obtained in exchange for operating leases liabilities $ 362 $ 93 $ 508 $ 1,030 14 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) Note 3. Financial Statement Details Inventories Inventories consist of the following (in thousands): September 30, 2024 December 31, 2023 Finished goods $ 17,796 $ 18,939 Raw materials and components 322 1,616 Total inventories $ 18,118 $ 20,555 Prepaid expenses and other Prepaid expenses and other consists of the following (in thousands): September 30, 2024 December 31, 2023 Rebate receivables $ 1,407 $ 1,950 Receivables from contract manufacturers 716 1,823 Software licenses 770 504 Other 734 660 Total prepaid expenses and other $ 3,627 $ 4,937 Accrued expenses and other current liabilities Accrued expenses and other current liabilities consist of the following (in thousands): September 30, 2024 December 31, 2023 Royalties $ 968 $ 845 Payroll and related expenses 7,778 3,608 Professional fees — — Accrued interest 2,042 1,038 Deferred revenue 9,212 2,717 Operating lease liabilities 1,303 1,226 Accrued contract manufacturing liabilities 5,049 7,537 Other 4,795 4,078 Total accrued expenses and other current liabilities $ 31,147 $ 21,049 Other long-term liabilities Other long-term liabilities consist of the following (in thousands): September 30, 2024 December 31, 2023 Long-term deferred revenue $ 6,352 $ 1,704 Other 147 647 Total other long-term liabilities $ 6,499 $ 2,351 As of September 30, 2024, of the $ 6.4 million long-term deferred revenue balance, $ 5.9 million relates to performance obligations expected to be satisfied between one and two years, and $ 0.5 million relates to performance obligations expected to be satisfied between two and three years from September 30, 2024. 15 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) Note 4. 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 Convertible Notes (see Note 5 – Debt ). The fair value of that liability was zero as of both September 30, 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: September 30, 2024 December 31, 2023 Volatility 90.80 % 77.00 % Stock price $ 16.33 per share $ 2.20 per share Credit spread 17.08 % 92.20 % Term 0.59 years 1.34 years Dividend yield — % — % Risk-free rate 4.31 % 4.60 % There was no change in the fair value of the interest make-whole liability for the three and nine months ended September 30, 2024 or September 30, 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 Convertible Notes. The 2025 Convertible Notes are carried at amortized cost, adjusted for changes in the fair value of the embedded derivative. Note 5. Debt Short-Term Loan On June 28, 2024, the Company entered into a Loan and Security Agreement (the “Short-Term Loan Agreement”), among South Ocean, as lender (“Lender”), the Participating Lenders, the Company, as borrower, and two of the Company’s wholly-owned subsidiaries, Inseego Wireless, Inc. and Inseego North America LLC as guarantors (collectively, the “Guarantors,” and together with the Company, the “Loan Parties”). The Loan Agreement establishes the Short-Term Loan. The Company’s obligations under the Short-Term Loan Agreement are guaranteed by the Guarantors. Subject to the requirements of the Short-Term Loan Agreement, certain of the Company’s other subsidiaries may become guarantors and Loan Parties of the Loan Agreement after closing. The Loan Parties’ obligations under the Loan Agreement are secured by a continuing security interest in substantially all property of each Loan Party, subject to certain excluded collateral, as defined in the Short-Term Loan Agreement. 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 is required to pay an exit fee equal to 4.0 % of the aggregate principal amount prepaid or repaid. The Short-Term Loan Agreement contains certain customary covenants, which include, but are not limited to, restrictions on indebtedness, liens, fundamental changes, restricted payments, asset sales, and investments, and places limits on various other payments. The Short-Term Loan Agreement contains certain customary provisions with respect to the definition of, and remedies with respect to, events of default. Also on June 28, 2024, as part of the Short-Term Loan Agreement, the Participating Lenders contributed an aggregate of $ 3.0 million of participation interests in the Short-Term Loan Agreement (the “Participation Interests”). The Participating Lenders consist of Philip Brace, the Company’s Executive Chairman, who acquired a $ 1.0 million Participation Interest, and North Sound Ventures, LP, which acquired a $ 2.0 million Participation Interest in the $ 19.5 million Loan. As of the date hereof, affiliates of each of the Lender and North Sound Ventures, LP may be deemed to beneficially own more than 5 % of the Company’s outstanding Common Stock. James B. Avery, a member of the Company’s Board of Directors, currently serves as 16 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) Senior Managing Director of Tavistock Group, an affiliate of the Lender. Accordingly, the Lender and the Participating Lenders are considered related parties of the Company. In connection with entering into the Short-Term Loan Agreement, the Company paid an arrangement and administration fee of $ 0.2 million to the Lender (the “Loan Costs”). Additionally in connection with the Short-Term Loan Agreement, the Company issued to the Lender and the Participating Lenders warrants (the “Loan Warrants”) to purchase an aggregate of 550,000 shares of the Company’s common stock, par value $ 0.001 per share (“Common Stock”). See Note 8 – Stockholders' Equity (Deficit) for further details regarding the Loan Warrants. The gross proceeds received under the Short-Term Loan Agreement, along with the Loan Costs, were allocated between the Short-Term Loan and the Loan Warrants based on their relative fair values at issuance. During the three-months ended September 30, 2024, the Company voluntarily prepaid $ 13.5 million of the outstanding principal balance under the Short-Term Loan Agreement, so that as of September 30, 2024, the outstanding principal balance under the Short-Term Loan Agreement was $ 6.0 million. The debt discount originally recorded as a result of the allocation of the net proceeds between the Short-Term Loan and the Loan Warrants of $ 3.3 million was fully amortized to interest expense during the months ended September 30, 2024. As a result, the amount recorded in the Condensed Consolidated Balance Sheets as of September 30, 2024 is solely comprised of the principal balance outstanding. 2025 Convertible 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 Convertible Notes. After taking into account exchanges and redemptions occurring in prior periods, the outstanding principal balance of the 2025 Convertible Notes was $ 106.8 million and $ 161.9 million as of September 30, 2024 and December 31, 2023, respectively. The 2025 Convertible 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 Convertible Notes will mature on May 1, 2025, unless earlier repurchased, redeemed or converted. The 2025 Convertible 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 Convertible Notes may convert the 2025 Convertible 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 Convertible Notes, the Company will deliver for each $1,000 principal amount of 2025 Convertible 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 September 30, 2024, the conversion rate for the 2025 Convertible Notes is 7.92896 shares of common stock per $1,000 principal amount of 2025 Convertible 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 Convertible Notes at a cash repurchase price equal to the principal amount of the 2025 Convertible 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 Convertible Notes are 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 Convertible 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. 17 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) 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 Convertible Notes representing at least 25 % in aggregate principal amount of the outstanding 2025 Convertible 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 Convertible 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 Convertible 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 Convertible Notes. Interest make-whole payment The 2025 Convertible 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, 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 Convertible 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 4 – Fair Value Measurements, for more information on this derivative liability. 2025 Convertible Note Repurchases and Exchanges On May 24, 2024, the Company entered into a repurchase agreement with a single holder of the 2025 Convertible Notes, resulting in the settlement of $ 3.0 million of outstanding principal at a purchase price of 55 % of par. The repurchase price was equal to the aggregate principal amount at 55 % of par, plus accrued and unpaid interest up to, but excluding, the repurchase date. The total repurchase payment was $ 1.7 million . The repurchase resulted in a gain of $ 1.3 million, net of costs incurred directly with executing the transaction, recorded within gain (loss) on debt restructurings, net in the nine months ended September 30, 2024 on the condensed consolidated statement of operations. On June 28, 2024, the Company agreed to purchase, for cash, all of the $ 45.9 million in face value of the 2025 Convertible Notes held by Highbridge, then the second largest noteholder, at a discount of 30 % to face value. This transaction closed in July 2024 and resulted in a gain of $ 13.4 million recorded within gain (loss) on debt restructurings, net in the nine months ended September 30, 2024 on the condensed consolidated statement of operations. On July 18, 2024, the Company entered into an agreement with a holder of approximately $ 4.7 million in principal amount of the 2025 Convertible Notes, pursuant to which the Company repurchased the holder’s 2025 Convertible Notes in exchange for approximately 0.3 million shares of the Company’s Common Stock and warrants to purchase an aggregate of approximately 0.2 million shares of the Company’s Common Stock, plus accrued interest. See Note 8 – Stockholders' Equity (Deficit) for further details regarding these warrants. On August 2, 2024, the Company entered into an agreement with two related holders of approximately $ 1.5 million in principal amount of the 2025 Convertible Notes, pursuant to which the Company repurchased the holders’ 2025 Convertible Notes in exchange for approximately 0.1 million shares of the Company’s common stock and warrants to purchase an aggregate of approximately 0.1 million shares of the Company’s common stock. See Note 8 – Stockholders' Equity (Deficit) for further details regarding these warrants. As a result of the July 18 and August 2, 2024 repurchases, the Company recorded a loss of $ 1.0 million within gain (loss) on debt restructurings, net in the three and nine months ended September 30, 2024 on the condensed consolidated statement of oper ations As of September 30, 2024 and December 31, 2023, $ 106.8 million and $ 161.9 million of principal amount of the 2025 Convertible Notes was outstanding, respectively, $ 80.4 million of which was held by related parties. 18 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) The 2025 Convertible Notes consist of the following (in thousands): September 30, 2024 December 31, 2023 Principal $ 106,824 $ 161,898 Add: fair value of embedded derivative — $ — Less: unamortized debt discount ( 320 ) $ ( 1,106 ) Less: unamortized issuance costs ( 254 ) $ ( 880 ) Net carrying amount $ 106,250 $ 159,912 The effective interest rate of the liability component of the 2025 Convertible Notes was 4.17 % and 4.23 % for the three months ended September 30, 2024 and 2023, respectively, and 4.17 % and 4.27 % for the nine months ended September 30, 2024 and 2023 , respectively. The following table sets forth total interest expense recog nized related to the 2025 Convertible Notes (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Contractual interest expense $ 879 $ 1,315 $ 3,499 $ 3,946 Amortization of debt discount $ 138 $ 207 550 621 Amortization of debt issuance costs $ 110 $ 165 438 494 Total interest expense $ 1,127 $ 1,687 $ 4,487 $ 5,061 The contractual interest expense on the 2025 Convertible 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 September 30, 2024 and 2023 and $ 2.0 million in the nine months ended September 30, 2024 and 2023. As of September 30, 2024 and December 31, 2023, accrued interest due to related parties of $ 1.1 million and $ 0.4 million was included within accrued expenses and other current liabilities on the condensed consolidated balance sheets, respectively. 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 “Credit Facility Parties”). 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 Credit Facility Parties’ obligations under the Credit Agreement were secured by a continuing security interest in all property of each Credit Facility Party, subject to certain Excluded Collateral (as defined in the Credit Agreement). 19 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) On May 2, 2023, (1) two related parties, South Ocean Funding, LLC and North Sound Ventures, LP (collectively, the “Credit Facility Participants”) collectively purchased a $ 4.0 million last-out subordinated participation interest in the Credit Agreement (the “Credit Facility 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 Credit Facility Participation Interest, we agreed to pay the Credit Facility Participants an aggregate exit fee (the “Exit Fee”) ranging from 7.5 % to 12.5 % of the amount of the Credit Facility 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 Credit Facility Participation Interest, as applicable. Further, the purchase of the Credit Facility Participation Interest granted an option for the Credit Facility Participants to purchase the subject revolving loan or to redeem its Credit Facility Participation Interest under certain circumstances. The Credit Facility Participants are each affiliates of beneficial holders of greater than five percent of our outstanding common stock. Effective April 18, 2024, the Company exercised its right to voluntarily pay-off and terminate the Credit Facility. 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 also paid the Exit Fee in the aggregate amount of $ 0.4 million to the Credit Facility Participants. 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. As a result of the voluntary pay-off, the Company recorded a loss on extinguishment of debt of $ 0.8 million within other (expense) income, net on the c ondensed consolidated statements of operations during the nine months ended September 30, 2024. The effective interest rate of the average outstanding balance for the Credit Facility was 36.1 %, which includes 8.3 % related to amortization of original issuance costs, and 58.7 %, which includes 27.3 % related to amortization of original issuance costs, for the nine months ended September 30, 2024 and 2023, respectively. The following table sets forth total interest expense recognized related to the Credit Facility (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Contractual interest expense $ — $ 587 $ 312 $ 810 Amortization of debt issuance costs — 472 117 705 Total interest expense $ — $ 1,059 $ 429 $ 1,515 Note 6. Share-based Compensation During the three and nine months ended September 30, 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 and nine months end ed September 30, 2024 and 2023 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Cost of revenues $ 23 $ 213 $ 75 $ 580 Research and development 196 598 437 1,288 Sales and marketing 103 315 314 901 General and administrative 871 997 1,888 2,870 Income from discontinued operations, net of tax 36 144 101 391 Total $ 1,229 $ 2,267 $ 2,815 $ 6,030 20 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) 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 activity for the nine months ended September 30, 2024: Outstanding — December 31, 2023 545,872 Granted 44,250 Exercised ( 333 ) Canceled ( 271,438 ) Outstanding — September 30, 2024 318,351 Exercisable — September 30, 2024 196,498 At September 30, 2024, total unrecognized compensation expense related to stock options was $ 0.5 million, which is expected to be recognized over a weighted-average period of 3.16 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 nine months ended September 30, 2024: Non-vested — December 31, 2023 203,008 Granted 1,105,362 Vested ( 154,983 ) Forfeited ( 14,749 ) Non-vested — September 30, 2024 1,138,638 At September 30, 2024, total unrecognized compensation expense related to RSUs was $ 7.8 million , which is expected to be recognized over a weighted-average peri od of 3.41 years. Note 7. Earnings (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 Convertible 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 their effect would be anti-dilutive. 21 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) The calculation of basic and diluted earnings per share was as follows (in thousands, except per share data): Income/(Loss) (Numerator) Shares* (Denominator) Per-Share Amount For the three months ended September 30, 2024 Basic EPS Income (Loss) from continuing operations $ 7,543 Less: preferred stock dividends ( 827 ) Income (loss) from continuing operations attributable to common stockholders 6,716 12,337 $ 0.54 Income from discontinued operations, net of tax 1,426 12,337 $ 0.12 Income (loss) attributable to common stockholders $ 8,142 12,337 $ 0.66 Diluted EPS Income (loss) from continuing operations attributable to common stockholders $ 6,716 12,337 Effect of dilutive 2025 Convertible Notes ( 8,879 ) 882 Diluted EPS from continuing operations $ ( 2,163 ) 13,218 $ ( 0.16 ) Income from discontinued operations, net of tax $ 1,426 12,337 Effect of dilutive 2025 Convertible Notes 882 Diluted EPS from discontinued operations $ 1,426 13,218 $ 0.11 Income (loss) attributable to common stockholders $ 8,142 12,337 Effect of dilutive 2025 Convertible Notes ( 8,879 ) 882 Diluted EPS from net income $ ( 737 ) 13,218 $ ( 0.06 ) For the three months ended September 30, 2023 Basic and Diluted EPS Income (Loss) from continuing operations $ ( 22,025 ) Less: preferred stock dividends ( 756 ) Income (loss) from continuing operations attributable to common stockholders ( 22,781 ) 11,697 $ ( 1.95 ) Income from discontinued operations, net of tax 220 11,697 $ 0.02 Income (loss) attributable to common stockholders $ ( 22,561 ) 11,697 $ ( 1.93 ) For the nine months ended September 30, 2024 Basic and Diluted EPS Income (Loss) from continuing operations $ 2,106 Less: preferred stock dividends ( 2,425 ) Income (loss) from continuing operations attributable to common stockholders ( 319 ) 12,037 $ ( 0.03 ) Income from discontinued operations, net of tax 3,032 12,037 $ 0.25 Income (loss) attributable to common stockholders $ 2,713 12,037 $ 0.23 For the nine months ended September 30, 2023 Basic and Diluted EPS Income (Loss) from continuing operations $ ( 35,109 ) Less: preferred stock dividends ( 2,218 ) Income (loss) from continuing operations attributable to common stockholders ( 37,327 ) 11,225 $ ( 3.33 ) Income from discontinued operations, net of tax 3,263 11,225 $ 0.29 Income (loss) attributable to common stockholders $ ( 34,064 ) 11,225 $ ( 3.03 ) (*) Adjusted retroactively for reverse stock split that occurred on January 24, 2024, see Note 1.Rounding may affect summation. 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 as of September 30, 2024 and 2023 (in thousands): 22 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) As of September 30, 2024 2023 2025 Convertible Notes* 847 1,409 Common stock warrants 875 — Non-qualified stock options 318 732 Restricted stock units 1,139 433 Employee stock purchase plan — 610 Total 3,179 3,184 (*) The impact of the 2025 Convertible Notes was included in the computation of diluted EPS for the three months ended September 30, 2024 as it was dilutive for the period. Additional shares of the Company’s common stock, and warrants to purchase shares of the Company’s common stock, were issued after September 30, 2024. See Note 12. Subsequent Events for further details. Note 8. Stockholders' Equity (Deficit) Loan Warrants As noted in Note 5 – Debt, on June 28, 2024 in connection with the Short-Term Loan Agreement, the Company agreed to issue to the Lender and the Participating Lenders Loan Warrants to purchase an aggregate of 550,000 shares of the Company’s Common Stock. The Loan Warrants have an exercise price of $ 12.12 per share of Common Stock, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions. The Loan Warrants will expire on June 28, 2028, are exercisable on a cash basis, and contain customary registration rights with respect to the shares of Common Stock issuable upon exercise of the Loan Warrants. As of September 30, 2024, none of the Loan Warrants have been exercised. The proceeds from the Short-Term Loan Agreement, along with the related Loan Costs incurred, were allocated to the Loan Warrants and Short-Term Loan based on their relative fair values. This allocation resulted in the Warrants having a net value of $ 3.2 million that the Company recorded within Additional Paid-In Capital within the Company’s Condensed Consolidated Statements of Stockholders’ Deficit. 2025 Convertible Note Repurchases As discussed in Note 5 – Debt, o n July 18, 2024, the Company entered into an agreement with a holder of approximately $ 4.7 million in principal amount of the 2025 Convertible Notes, pursuant to which the Company repurchased the holder’s 2025 Convertible Notes in exchange for approximately 0.3 million shares of the Company’s common stock and warrants to purchase an aggregate of approximately 0.2 million shares of the Company’s common stock, plus accrued interest. The warrants have an exercise price of $ 13.37 , subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions. As discussed in Note 5 – Debt, o n August 2, 2024, the Company entered into an agreement with two related holders of approximately $ 1.5 million in principal amount of the 2025 Convertible Notes, pursuant to which the Company repurchased the holders’ 2025 Convertible Notes in exchange for approximately 0.1 million shares of the Company’s common stock and warrants to purchase an aggregate of approximately 0.1 million shares of the Company’s common stock, plus accrued interest. The warrants have an exercise price of $ 11.03 , subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions. These warrants expire four years from their dates of issuance, are exercisable on a cash basis and are otherwise in substantially the same form as the Loan Warrants. The Company granted the holder customary registration rights with respect to the common shares and the shares of common stock issuable upon exercise of the warrants. As of September 30, 2024, none of these warrants have been exercised. Public Equity 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”) . The Company did not sell any shares under the ATM Offering during the three months ended September 30, 2023. D uring the nine months ended September 30, 2023 the Company sold 803,596 shares of common stock, at an average price of $ 7.54 per share, for net proceeds of $ 6.1 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. 23 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) Preferred Stock The Company has a total of 2,000,000 shares of preferred stock authorized for issuance at a par value of $ 0.001 per share, 150,000 of which have been designated Series D Preferred Stock and 39,500 of which have been designated Series E Preferred Stock. As of September 30, 2024 and December 31, 2023, the Company had 25,000 shares of Series E preferred stock issued and outstanding. Note 9. 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 September 30, Nine Months Ended September 30, 2024 2023 2024 2023 United States and Canada $ 51,072 $ 40,181 $ 137,356 $ 129,458 Europe (including United Kingdom) $ 2,866 $ 1,172 4,243 1,242 Other $ 94 $ 4 1,558 667 Total $ 54,032 $ 41,357 $ 143,157 $ 131,367 Concentrations of Credit Risk For the three months ended September 30, 2024, two customers accounted for 38.6 % and 36.7 % of revenues, respectively. For the three months ended September 30, 2023, two customers accounted for 41.3 % and 34.8 % of revenues, respectively. For the nine months ended September 30, 2024, two customers accounted for 43.3 % and 31.9 % of revenues, respectively. For the nine months ended September 30, 2023, two customers accounted for 36.8 % and 33.5 %, respectively, of revenues. As of September 30, 2024, three customers accounted for 42.4 %, 24.0 %, and 20.9 % of accounts receivable, net, respectively. As of December 31, 2023, two customers accounted for 51.9 % and 12.7 % of accounts receivable, net, respectively. Note 10. 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 September 30, 2024, future payments under these noncancellable purchase obligations were approximately $ 64.3 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 11. Income Taxes Income taxes for both periods consisted primarily of foreign income taxes at certain of the Company’s international entities and state taxes for its U.S.-based entities. The Company’s income tax expense differs from the expected expense based 24 INSEEGO CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) on statutory rates primarily due to full valuation allowances at all of its U.S.-based entities. The increase in the Company’s income tax provision for the nine months ended September 30, 2024 compared to the same period in 2023, was driven primarily by U.S. state taxes in states which have either chosen to temporarily suspend the use of net operating losses or have franchise taxes calculated on modified gross profit. Note 12. Subsequent Events Subsequently Completed Repurchases and Exchanges As discussed in Note 1 – Nature of Business and Significant Accounting Policies above, on November 6, 2024 the Company completed the previously-announced private 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, and (iii) warrants to purchase an aggregate of approximately 2.1 million shares of the Company’s Common Stock. The New Senior Secured Notes bear interest at 9.0 % per annum, to be paid in cash, in arrears, and on a semi-annual basis, and will have a maturity date of May 1, 2029. The New Notes are secured by a first priority lien on substantially all of Company’s assets. The warrants have exercise prices ranging from $ 11.27 to $ 15.77 per share of Common Stock, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions. The warrants expire four years from the date of issuance and will be exercisable on a cash basis. Affiliates of two of the noteholders involved in the Subsequently Completed Repurchases and Exchanges - Golden Harbor Ltd. and North Sound Partners - may be deemed to beneficially own more than 5% of the Company’s outstanding Common Stock. James B. Avery, a member of the Company’s Board of Directors, currently serves as Senior Managing Director of Tavistock Group, an affiliate of Golden Harbor Ltd. 25