UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


FORM						10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2020~~2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-38358


			INSEEGO CORP.
			(Exact name of registrant as specified in its charter)


Delaware		81-3377646
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

12600 Deerfield Parkway, Suite 100
Alpharetta,	Georgia	30004
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (858) 812-3400

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	INSG	Nasdaq Global Select Market
~~Preferred Stock Purchase Rights~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐☒	Accelerated filer	☒☐
Non-accelerated filer	☐	Smaller reporting company	☒☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of ~~November 3, 2020~~August 2, 2021 was ~~98,880,267.~~103,180,708.

TABLE OF CONTENTS


		Page
PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements	32

	Condensed Consolidated Balance Sheets (Unaudited)	32

	Condensed Consolidated Statements of Operations (Unaudited)	4

	Condensed Consolidated Statements of Comprehensive Loss (Unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Deficit (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows (Unaudited)	89

	Notes to Condensed Consolidated Financial Statements (Unaudited)	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3736

Item 4.	Controls and Procedures	3736

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	39

SIGNATURES		40

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

INSEEGO CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share data)


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	41,994	$	12,074	Cash and cash equivalents	$	30,841	$	40,015
Accounts receivable, net of allowance for doubtful accounts of $296 and $1,384, respectively						Accounts receivable, net of allowance for doubtful accounts of $296 and $1,384, respectively	19,983		29,940

Accounts receivable, net of allowance for doubtful accounts of $1,701 and $2,133, respectively		38,042		19,656

Inventories, net		24,241		25,290

Inventories						Inventories	27,544		33,952
Assets held for sale1						Assets held for sale1	42,450		0
Prepaid expenses and other	Prepaid expenses and other	10,962		7,117		Prepaid expenses and other	8,088		10,201

Total current assets	Total current assets	115,239		64,137		Total current assets	128,906		114,108
Property, plant and equipment, net of accumulated depreciation of $18,606 and $16,017, respectively		13,052		10,756
Rental assets, net of accumulated depreciation of $13,934 and $12,791, respectively		5,069		5,385
Intangible assets, net of accumulated amortization of $40,772 and $33,011, respectively		51,974		44,392
Restricted cash						Restricted cash	3,693		0
Property, plant and equipment, net of accumulated depreciation of $19,758 and $21,715, respectively						Property, plant and equipment, net of accumulated depreciation of $19,758 and $21,715, respectively	9,330		13,699
Rental assets, net of accumulated depreciation of $15,055 and $15,754, respectively						Rental assets, net of accumulated depreciation of $15,055 and $15,754, respectively	4,761		6,109
Intangible assets, net of accumulated amortization of $ 35,579 and $63,020, respectively						Intangible assets, net of accumulated amortization of $ 35,579 and $63,020, respectively	47,192		51,487

Goodwill	Goodwill	28,742		33,659		Goodwill	22,175		32,511
Right-of-use assets, net	Right-of-use assets, net	9,279		2,657		Right-of-use assets, net	8,294		9,092
Other assets	Other assets	384		387		Other assets	389		388
Total assets	Total assets	$	223,739	$	161,373	Total assets	$	224,740	$	227,394
LIABILITIES AND STOCKHOLDERS’ DEFICIT	LIABILITIES AND STOCKHOLDERS’ DEFICIT					LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	51,098	$	26,482	Accounts payable	$	31,182	$	52,339
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	23,263		17,861		Accrued expenses and other current liabilities	22,874		23,373

DigiCore bank facilities		130		187

Liabilities related to assets held for sale1						Liabilities related to assets held for sale1	11,132		0

Total current liabilities	Total current liabilities	74,491		44,530		Total current liabilities	65,188		75,712
Long-term liabilities:	Long-term liabilities:					Long-term liabilities:

2025 Notes, net	2025 Notes, net	162,839		0		2025 Notes, net	159,120		165,147
2022 Notes, net		0		101,334
Term loan, net		0		46,538

Deferred tax liabilities, net	Deferred tax liabilities, net	3,278		3,949		Deferred tax liabilities, net	888		4,505
Other long-term liabilities	Other long-term liabilities	10,353		2,380		Other long-term liabilities	8,450		9,929
Total liabilities	Total liabilities	250,961		198,731		Total liabilities	233,646		255,293
Commitments and contingencies	Commitments and contingencies					Commitments and contingencies	0		0
Stockholders’ deficit:	Stockholders’ deficit:					Stockholders’ deficit:
Preferred stock, par value $0.001; 2,000,000 shares authorized:	Preferred stock, par value $0.001; 2,000,000 shares authorized:					Preferred stock, par value $0.001; 2,000,000 shares authorized:
Series E Preferred stock, par value $0.001; 39,500 and 10,000 shares designated, respectively, 35,000 and 10,000 shares issued and outstanding, respectively, liquidation preference of $1,000 per share (plus any accrued but unpaid dividends)		0		0
Common stock, par value $0.001; 150,000,000 shares authorized, 98,788,531 and 81,974,051 shares issued and outstanding, respectively		99		82
Series E Preferred stock, par value $0.001; 39,500 shares designated, 35,000 shares issued and outstanding, liquidation preference of $1,000 per share (plus any accrued but unpaid dividends)						Series E Preferred stock, par value $0.001; 39,500 shares designated, 35,000 shares issued and outstanding, liquidation preference of $1,000 per share (plus any accrued but unpaid dividends)	0		0
Common stock, par value $0.001; 150,000,000 shares authorized, 103,109,346 and 99,399,029 shares issued and outstanding, respectively						Common stock, par value $0.001; 150,000,000 shares authorized, 103,109,346 and 99,399,029 shares issued and outstanding, respectively	103		99
Additional paid-in capital	Additional paid-in capital	706,212		584,862		Additional paid-in capital	761,412		711,487
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(14,613)		(3,879)		Accumulated other comprehensive loss	(6,279)		(6,972)
Accumulated deficit	Accumulated deficit	(718,829)		(618,303)		Accumulated deficit	(764,150)		(732,422)

Total stockholders’ deficit attributable to Inseego Corp.	Total stockholders’ deficit attributable to Inseego Corp.	(27,131)		(37,238)		Total stockholders’ deficit attributable to Inseego Corp.	(8,914)		(27,808)
Noncontrolling interests	Noncontrolling interests	(91)		(120)		Noncontrolling interests	8		(91)
Total stockholders’ deficit	Total stockholders’ deficit	(27,222)		(37,358)		Total stockholders’ deficit	(8,906)		(27,899)
Total liabilities and stockholders’ deficit	Total liabilities and stockholders’ deficit	$	223,739	$	161,373	Total liabilities and stockholders’ deficit	$	224,740	$	227,394

1Assets and liabilities held for sale relate to the expected sale of our Ctrack South Africa operations. Refer to Note 4. Business Divestiture for details.

See accompanying notes to unaudited condensed consolidated financial statements.

INSEEGO CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net revenues:	Net revenues:									Net revenues:
IoT & Mobile Solutions	IoT & Mobile Solutions	$	77,342	$	47,733	$	189,071	$	123,548	IoT & Mobile Solutions	$	51,836	$	69,314	$	94,795	$	111,729
Enterprise SaaS Solutions	Enterprise SaaS Solutions	12,898		14,983		38,698		43,615		Enterprise SaaS Solutions	13,857		11,375		28,495		25,800
Total net revenues	Total net revenues	90,240		62,716		227,769		167,163		Total net revenues	65,693		80,689		123,290		137,529
Cost of net revenues:	Cost of net revenues:									Cost of net revenues:
IoT & Mobile Solutions	IoT & Mobile Solutions	60,135		38,482		148,414		101,607		IoT & Mobile Solutions	39,740		54,240		73,178		88,279
Enterprise SaaS Solutions	Enterprise SaaS Solutions	4,935		5,609		14,958		16,616		Enterprise SaaS Solutions	5,604		4,449		11,288		10,023

Total cost of net revenues	Total cost of net revenues	65,070		44,091		163,372		118,223		Total cost of net revenues	45,344		58,689		84,466		98,302
Gross profit	Gross profit	25,170		18,625		64,397		48,940		Gross profit	20,349		22,000		38,824		39,227
Operating costs and expenses:	Operating costs and expenses:									Operating costs and expenses:
Research and development	Research and development	10,684		6,655		29,448		15,328		Research and development	11,773		10,540		26,328		18,764
Sales and marketing	Sales and marketing	8,446		7,149		25,849		20,769		Sales and marketing	9,821		8,648		20,825		17,403
General and administrative	General and administrative	8,699		7,148		23,257		21,086		General and administrative	7,414		7,396		16,058		14,558
Amortization of purchased intangible assets	Amortization of purchased intangible assets	779		847		2,358		2,575		Amortization of purchased intangible assets	664		753		1,130		1,579

Impairment of capitalized software										Impairment of capitalized software	1,197		0		1,197		0

Total operating costs and expenses	Total operating costs and expenses	28,608		21,799		80,912		59,758		Total operating costs and expenses	30,869		27,337		65,538		52,304
Operating loss	Operating loss	(3,438)		(3,174)		(16,515)		(10,818)		Operating loss	(10,520)		(5,337)		(26,714)		(13,077)
Other income (expense):	Other income (expense):									Other income (expense):

Loss on debt conversion and extinguishment, net	Loss on debt conversion and extinguishment, net	(1,180)		0		(76,354)		0		Loss on debt conversion and extinguishment, net	0		(67,241)		(432)		(75,174)
Interest expense, net	Interest expense, net	(1,657)		(5,119)		(8,197)		(15,336)		Interest expense, net	(1,678)		(3,160)		(3,523)		(6,540)
Other income (expense), net	Other income (expense), net	1,053		(307)		2,818		(66)		Other income (expense), net	(617)		787		1,117		1,765
Loss before income taxes	Loss before income taxes	(5,222)		(8,600)		(98,248)		(26,220)		Loss before income taxes	(12,815)		(74,951)		(29,552)		(93,026)
Income tax provision		217		223		193		793
Income tax provision (benefit)										Income tax provision (benefit)	228		(115)		449		(24)

Net loss	Net loss	(5,439)		(8,823)		(98,441)		(27,013)		Net loss	(13,043)		(74,836)		(30,001)		(93,002)
Less: Net loss (income) attributable to noncontrolling interests	Less: Net loss (income) attributable to noncontrolling interests	(3)		17		(29)		(57)		Less: Net loss (income) attributable to noncontrolling interests	0		6		(214)		(26)
Net loss attributable to Inseego Corp.	Net loss attributable to Inseego Corp.	(5,442)		(8,806)		(98,470)		(27,070)		Net loss attributable to Inseego Corp.	(13,043)		(74,830)		(30,215)		(93,028)
Series E preferred stock dividends	Series E preferred stock dividends	(829)		(131)		(2,056)		(131)		Series E preferred stock dividends	(886)		(835)		(1,753)		(1,227)
Net loss attributable to common shareholders		$	(6,271)	$	(8,937)	$	(100,526)	$	(27,201)
Net loss attributable to common stockholders										Net loss attributable to common stockholders	$	(13,929)	$	(75,665)	$	(31,968)	$	(94,255)
Per share data:	Per share data:									Per share data:
Net loss per common share:	Net loss per common share:									Net loss per common share:

Basic and diluted	Basic and diluted	$	(0.06)	$	(0.11)	$	(1.06)	$	(0.35)	Basic and diluted	$	(0.14)	$	(0.78)	$	(0.31)	$	(1.01)

Weighted-average shares used in computation of net loss per common share:	Weighted-average shares used in computation of net loss per common share:									Weighted-average shares used in computation of net loss per common share:
Basic and diluted	Basic and diluted	98,016,798		79,550,445		95,136,713		77,606,317		Basic and diluted	102,935,213		96,487,344		102,157,146		93,680,846

See accompanying notes to unaudited condensed consolidated financial statements.

INSEEGO CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net loss	Net loss	$	(5,439)	$	(8,823)	$	(98,441)	$	(27,013)	Net loss	$	(13,043)	$	(74,836)	$	(30,001)	$	(93,002)
Foreign currency translation adjustment	Foreign currency translation adjustment	1,170		(4,119)		(10,734)		(2,912)		Foreign currency translation adjustment	2,425		1,576		693		(11,904)

Total comprehensive loss	Total comprehensive loss	$	(4,269)	$	(12,942)	$	(109,175)	$	(29,925)	Total comprehensive loss	$	(10,618)	$	(73,260)	$	(29,308)	$	(104,906)
Comprehensive income attributable to noncontrolling interests										Comprehensive income attributable to noncontrolling interests	0		6		(214)		(26)
Comprehensive loss attributable to Inseego Corp.										Comprehensive loss attributable to Inseego Corp.	$	(10,618)	$	(73,254)	$	(29,522)	$	(104,932)

See accompanying notes to unaudited condensed consolidated financial statements.

INSEEGO CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(In thousands)

(Unaudited)


		Preferred Stock			Common Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Noncontrolling Interests				Total Stockholders’ Deficit				Preferred Stock						Common Stock								Additional Paid-in Capital							Accumulated Other Comprehensive Loss			Accumulated Deficit					Noncontrolling Interests					Total Stockholders’ Equity (Deficit)
		Shares	Amount		Shares	Amount								Total Stockholders’ Deficit			Shares				Amount						Shares			Amount			Additional Paid-in Capital						Accumulated Other Comprehensive Loss			Accumulated Deficit		Noncontrolling Interests
Balance, June 30, 2019		0	$	0	78,985	$	79			$	562,405				$	(3,670)				$	(596,081)			$	(61)	$	(37,328)
Balance, March 31, 2020																									Balance, March 31, 2020	37			$	0		96,180					$	96							$	682,047						$	(17,359)				$	(636,893)				$	(88)		$	27,803
Net loss	Net loss	—	—		—	—		—						—			(8,806)				(17)				(8,823)		Net loss	—			—			—				—					—						—					(74,830)					(6)					(74,836)
Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—	—		—				(4,119)			—			—				(4,119)			Foreign currency translation adjustment	—			—			—			—					—							1,576			—					—					1,576
Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan		—	—		645	0		601				—			—			—				601
Exercise of stock options and vesting of restricted stock units																									Exercise of stock options and vesting of restricted stock units	—			—			838			1					1,662							—			—					—					1,663
Taxes withheld on net settled vesting of restricted stock units	Taxes withheld on net settled vesting of restricted stock units	—	—		—	—		(942)				—			—			—				(942)			Taxes withheld on net settled vesting of restricted stock units	—			—			—			—					(208)							—			—					—					(208)
Issuance of Series E preferred shares		10	—		—	—		10,000				—			—			—				10,000
Issuance of common shares		—	—		196	1		1,037				—			—			—				1,038
Repurchase of Series E preferred stock																									Repurchase of Series E preferred stock	(2)			—			—			—					(2,354)							—			—					—					(2,354)

Share-based compensation	Share-based compensation	—	—		—	—		1,253				—			—			—				1,253			Share-based compensation	—			—			—			—					4,428							—			—					—					4,428
Series E preferred stock dividends	Series E preferred stock dividends	—	—		—	—		131				—			(131)			—				0			Series E preferred stock dividends	—			—			—			—					835							—			(835)					—					0

Balance, September 30, 2019		10	$	0	79,826	$	80	$	574,485			$	(7,789)		$	(605,018)		$	(78)			$	(38,320)
Balance, June 30, 2020																									Balance, June 30, 2020	35			$	0		97,018			$	97				$	686,410						$	(15,783)		$	(712,558)				$	(94)				$	(41,928)

Balance, June 30, 2020		35	$	0	97,018	$	97	$	686,410			$	(15,783)		$	(712,558)		$	(94)			$	(41,928)
Net (loss) income		—	—		—	—		—				—			(5,442)			3				(5,439)
Balance, March 31, 2021																									Balance, March 31, 2021	35			$	0		102,773			$	103				$	757,352						$	(8,704)		$	(750,221)				$	7				$	(1,463)
Net loss																									Net loss	—			—			—			—					—							—			(13,043)					0					(13,043)
Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—	—		—				1,170			—			—				1,170			Foreign currency translation adjustment	—			—			—			—					—							2,425			—					—					2,425
Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan	Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan	—	—		504	1		1,485				—			—			—				1,486			Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan	—			—			336			0					1,282							—			—					—					1,282
Taxes withheld on net settled vesting of restricted stock units	Taxes withheld on net settled vesting of restricted stock units	—	—		—	—		(45)				—			—			—				(45)			Taxes withheld on net settled vesting of restricted stock units	—			—			—			—					(356)							—			—					—					(356)

Issuance of common shares under settlement agreement					90	—		972				—						—				972

Issuance of common stock in connection with the Notes Exchange		—	—		—	—		1				—			—			—				1
Issuance of common shares in connection with a public offering, net of issuance costs																									Issuance of common shares in connection with a public offering, net of issuance costs	—			—			—			—					(59)							—			—					—					(59)

Issuance of common shares in connection with conversion of 2025 Notes		—	—		1,177	1		14,353				—			—			—				14,354

Share-based compensation	Share-based compensation	—	—		—	—		2,207				—			—			—				2,207			Share-based compensation	—			—			—			—					2,307							—			—					—					2,307
Net noncontrolling interest acquired																									Net noncontrolling interest acquired	—			—			—			—					—							—			—					1					1
Series E preferred stock dividends	Series E preferred stock dividends	—	—		—	—		829				—			(829)			—				0			Series E preferred stock dividends	—			—			—			—					886							—			(886)					—					0

Balance, September 30, 2020		35	$	0	98,789	$	99	$	706,212			$	(14,613)		$	(718,829)		$	(91)			$	(27,222)
Balance, June 30, 2021																									Balance, June 30, 2021	35			$	0		103,109			$	103				$	761,412						$	(6,279)		$	(764,150)				$	8				$	(8,906)

INSEEGO CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(In thousands)

(Unaudited)


		Preferred Stock			Common Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Noncontrolling Interests				Total Stockholders’Deficit				Preferred Stock				Common Stock					Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Noncontrolling Interests		Total Stockholders’ Deficit
		Shares	Amount		Shares	Amount								Total Stockholders’Deficit			Shares				Amount						Shares		Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit	Noncontrolling Interests
Balance, December 31, 2018		0	$	0	73,980	$	74			$	546,230				$	(4,877)				$	(577,817)			$	(135)	$	(36,525)
Net (loss) income		—	—		—	—		—						—			(27,070)				57				(27,013)
Foreign currency translation adjustment		—	—		—	—		—				(2,912)			—			—				(2,912)

Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan		—	—		1,382	1		1,516				—			—			—				1,517
Taxes withheld on net settled vesting of restricted stock units		—	—		—	—		(1,260)				—			—			—				(1,260)
Exercise of warrants		—			4,222	4		10,635				—			—			—				10,639
Issuance of Series E preferred shares		10	—		—	—		10,000				—			—			—				10,000
Issuance of common shares		—	—		242	1		1,278				—			—			—				1,279
Share-based compensation		—	—		—	—		5,955				—			—			—				5,955
Series E preferred stock dividends		—	—		—	—		131				—			(131)			—				0

Balance, September 30, 2019		10	$	0	79,826	$	80	$	574,485			$	(7,789)		$	(605,018)		$	(78)			$	(38,320)

Balance, December 31, 2019	Balance, December 31, 2019	10	$	0	81,974	$	82	$	584,862			$	(3,879)		$	(618,303)		$	(120)			$	(37,358)		Balance, December 31, 2019	10		$	0	81,974		$	82		$	584,862			$	(3,879)	$	(618,303)	$	(120)	$	(37,358)
Net (loss) income		—	—		—	—		—				—			(98,470)			29				(98,441)
Net loss																									Net loss	—		—		—		—			—				—		(93,028)		26		(93,002)
Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—	—		—				(10,734)			—			—				(10,734)			Foreign currency translation adjustment	—		—		—		—			—				(11,904)		—		—		(11,904)

Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan	Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan	—	—		1,471	2		3,196				—			—			—				3,198			Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan	—		—		967		1			1,711				—		—		—		1,712
Taxes withheld on net settled vesting of restricted stock units	Taxes withheld on net settled vesting of restricted stock units	—	—		—	—		(326)				—			—			—				(326)			Taxes withheld on net settled vesting of restricted stock units	—		—		—		—			(281)				—		—		—		(281)
Issuance of Series E preferred stock	Issuance of Series E preferred stock	25	—		—	—		25,000				—			—			—				25,000			Issuance of Series E preferred stock	25		—		—		—			25,000				—		—		—		25,000
Issuance of Series E preferred stock in lieu of interest	Issuance of Series E preferred stock in lieu of interest	2	—		—	—		2,330				—			—			—				2,330			Issuance of Series E preferred stock in lieu of interest	2		—		—		—			2,330				—		—		—		2,330
Repurchase of Series E preferred stock	Repurchase of Series E preferred stock	(2)	—		—	—		(2,354)				—			—			—				(2,354)			Repurchase of Series E preferred stock	(2)		—		—		—			(2,354)				—		—		—		(2,354)
Issuance of common shares in connection with private exchanges of 2022 Notes	Issuance of common shares in connection with private exchanges of 2022 Notes	—	—		13,739	14		66,074				—			—			—				66,088			Issuance of common shares in connection with private exchanges of 2022 Notes	—		—		13,739		14			66,073				—		—		—		66,087

Issuance of common shares in connection with conversion of 2025 Notes		—	—		1,177	1		14,353				—			—			—				14,354
Exercise of warrants	Exercise of warrants	—	—		338	0		1,861				—			—			—				1,861			Exercise of warrants	—		—		338		—			1,861				—		—		—		1,861
Share-based compensation	Share-based compensation	—	—		—	—		8,188				—			—			—				8,188			Share-based compensation	—		—		—		—			5,981				—		—		—		5,981
Series E preferred stock dividends	Series E preferred stock dividends	—	—		—	—		2,056				—			(2,056)			—				0			Series E preferred stock dividends	—		—		—		—			1,227				—		(1,227)		—		0
Issuance of common shares under settlement agreement					90	—		972				—			—			—				972
Balance, September 30, 2020		35	$	0	98,789	$	99	$	706,212			$	(14,613)		$	(718,829)		$	(91)			$	(27,222)

Balance, June 30, 2020																									Balance, June 30, 2020	35		$	0	97,018		$	97		$	686,410			$	(15,783)	$	(712,558)	$	(94)	$	(41,928)

Balance, December 31, 2020																									Balance, December 31, 2020	35		$	0	99,399		$	99		$	711,487			$	(6,972)	$	(732,422)	$	(91)	(27,899)
Net loss																									Net loss	—		—		—		—			—						(30,215)		214		(30,001)
Foreign currency translation adjustment																									Foreign currency translation adjustment	—		—		—		—			—				693		—		—		693

Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan																									Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan	—		—		1,765		2			2,842				—		—		—		2,844
Taxes withheld on net settled vesting of restricted stock units																									Taxes withheld on net settled vesting of restricted stock units	—		—		—		—			(825)				—		—		—		(825)

Issuance of common shares in connection with the conversion of 2025 Notes																									Issuance of common shares in connection with the conversion of 2025 Notes	—		—		429		1			5,382				—		—		—		5,383

Issuance of common shares in connection with a public offering, net of issuance costs																									Issuance of common shares in connection with a public offering, net of issuance costs	—		—		1,516		1			29,368				—		—		—		29,369

Share-based compensation																									Share-based compensation	—		—		—		—			11,405				—		—		—		11,405
Series E preferred stock dividends																									Series E preferred stock dividends	—		—		—		—			1,753				—		(1,753)		—		0

Net noncontrolling interest acquired																									Net noncontrolling interest acquired	—		—		—		—			—				—		240		(115)		125
Balance, June 30, 2021																									Balance, June 30, 2021	35		$	0	103,109		$	103		$	761,412			$	(6,279)	$	(764,150)	$	8	$	(8,906)

~~See accompanying notes to unaudited condensed consolidated financial statements.~~

INSEEGO CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended
September 30,
2020 2019
Cash flows from operating activities:
Net loss $ (98,441) $ (27,013)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 15,948 12,770
Provision for bad debts, net of recoveries 240 691
Provision for excess and obsolete inventory, net of recoveries 430 389
Share-based compensation expense 8,188 5,955
Amortization of debt discount and debt issuance costs 3,632 7,329
Fair value adjustment on derivative instrument (1,372) 0
Loss on debt conversion and extinguishment, net 76,354 0
Deferred income taxes 110 (13)
Other 50 1,349
Changes in assets and liabilities:
Accounts receivable (19,065) (1,912)
Inventories (2,078) (2,525)
Prepaid expenses and other assets (3,918) (4,535)
Accounts payable 25,170 (8,887)
Accrued expenses, income taxes, and other 11,464 1,404
Net cash provided by (used in) operating activities 16,712 (14,998)
Cash flows from investing activities:
Purchases of property, plant and equipment (5,084) (4,169)
Proceeds from the sale of property, plant and equipment 327 454
Additions to capitalized software development costs and purchases of intangible assets (20,216) (16,800)
Net cash used in investing activities (24,973) (20,515)
Cash flows from financing activities:
Gross proceeds from the issuance of 2025 Notes 100,000 0
Payment of issuance costs related to 2025 Notes (3,600) 0
Cash paid to investors in private exchange transactions (32,062) 0
Payoff of term loan and related extinguishment costs (48,830) 0
Gross proceeds received from issuance of Series E preferred stock 25,000 10,000
Repurchase of Series E preferred stock (2,354) 0
Proceeds from the exercise of warrants to purchase common stock 1,861 10,639
Net borrowing (repayment) of DigiCore bank and overdraft facilities 110 (1,159)
Principal payments under finance lease obligations (2,243) (795)
Proceeds from stock option exercises and employee stock purchase plan, net of taxes paid on vested restricted stock units 2,872 257
Net cash provided by financing activities 40,754 18,942
Effect of exchange rates on cash (2,573) (560)
Net increase (decrease) in cash, cash equivalents and restricted cash 29,920 (17,131)
Cash, cash equivalents and restricted cash, beginning of period 12,074 31,076
Cash, cash equivalents and restricted cash, end of period $ 41,994 $ 13,945
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 640 $ 6,231
Income taxes $ 286 $ 583
Supplemental disclosures of non-cash activities:
Transfer of inventories to rental assets $ 2,650 $ 2,712
Capital expenditures financed through accounts payable $ 3,786 $ 799
Right-of-use assets obtained in exchange for operating leases liabilities $ 7,704 $ 3,554
Issuance of common stock under Settlement Agreement $ 972 $ 1,279
Preferred stock issued in extinguishment of term loan accrued interest $ 2,330 $ 0
Debt discount and issuance costs extinguished in notes conversion $ 1,728 $ 0
2022 Notes conversion to equity $ 59,907 $ 0
Novatel Wireless Notes conversion to equity $ 250 $ 0
2025 Notes issued to extinguish the 2022 Notes $ 80,375 $ 0
2025 Notes conversion, including shares issued in satisfaction of interest make-whole payment
$ 14,353 $ 0


	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(30,001)	$	(93,002)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	13,051		9,692

Provision for bad debts, net of recoveries	266		74
Impairment of capitalized software	1,197		0
Provision for excess and obsolete inventory	496		180
Share-based compensation expense	11,405		5,981

Amortization of debt discount and debt issuance costs	746		3,245
Fair value adjustment on derivative instrument	(1,823)		(826)
Loss on debt conversion and extinguishment, net	432		75,174




Deferred income taxes	38		10



Other	553		158
Changes in assets and liabilities1:

Accounts receivable	6,483		(21,498)
Inventories	(834)		2,725
Prepaid expenses and other assets	1,158		(5,298)
Accounts payable	(16,015)		22,334
Accrued expenses, income taxes, and other	818		5,713
Net cash (used in) provided by operating activities	(12,030)		4,662
Cash flows from investing activities:
Acquisition of noncontrolling interest	(116)		0

Purchases of property, plant and equipment	(2,455)		(2,831)
Proceeds from the sale of property, plant and equipment	506		235


Additions to capitalized software development costs and purchases of intangible assets	(15,369)		(10,637)


Net cash used in investing activities	(17,434)		(13,233)
Cash flows from financing activities:
Gross proceeds from the issuance of 2025 Notes	0		100,000
Payment of issuance costs related to 2025 Notes	0		(2,544)
Cash paid to investors in private exchange transactions	0		(32,062)
Payoff of term loan and related extinguishment costs	0		(48,830)
Gross proceeds received from issuance of Series E preferred stock	0		25,000
Repurchase of Series E preferred stock	0		(2,354)









Proceeds from the exercise of warrants to purchase common stock	0		1,861
Net borrowing of bank and overdraft facilities	295		104


Principal payments under finance lease obligations	(2,173)		(1,462)

Proceeds from a public offering, net of issuance costs	29,369		0

Proceeds from stock option exercises and employee stock purchase plan, net of taxes paid on vested restricted stock units	2,020		1,431
Net cash provided by financing activities	29,511		41,144
Effect of exchange rates on cash	321		(2,547)





Net increase in cash, cash equivalents and restricted cash	368		30,026
Cash, cash equivalents and restricted cash, beginning of period	40,015		12,074
Cash, cash equivalents and restricted cash, end of period2	$	40,383	$	42,100
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	2,782	$	532
Income taxes	$	252	$	9


Supplemental disclosures of non-cash activities:
Transfer of inventories to rental assets	$	3,403	$	1,511
Capital expenditures financed through accounts payable or accrued liabilities	$	3,641	$	3,393
Right-of-use assets obtained in exchange for operating leases liabilities	$	148	$	4,229





Preferred stock issued in extinguishment of term loan accrued interest	$	0	$	2,330
Debt discount and issuance costs extinguished in notes conversion	$	0	$	1,728
2022 Notes conversion to equity	$	0	$	59,907
Novatel Wireless Notes conversion to equity	$	0	$	250
2025 Notes issued to extinguish the 2022 Notes	$	0	$	80,375
2025 Notes conversion, including shares issued in satisfaction of interest make-whole payment	$	5,383	$	0

1Operating assets and liabilities balances include assets and liabilities classified as held for sale as of June 30, 2021 (see Note 4. Business Divestiture).

2Cash, cash equivalents and restricted cash balance includes restricted cash of $3,693, and cash and cash equivalents of $5,849 classified as held for sale as of June 30, 2021 (see Note 4. Business Divestiture).

See accompanying notes to unaudited condensed consolidated financial statements.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

The information contained herein has been prepared by Inseego Corp. (the “Company”) in accordance with the rules of the Securities and Exchange Commission (the “SEC”). The information at ~~September~~June 30, ~~2020~~2021 and the results of the Company’s operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 are unaudited. The condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring accruals, except otherwise disclosed herein, which are, in the opinion of management, necessary for a fair statement of the results of the interim periods presented. These unaudited condensed consolidated financial statements and notes hereto should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. The year-end condensed consolidated balance sheet data as of December 31, ~~2019~~2020 was derived from the Company’s audited consolidated financial statements and may not include all disclosures required by accounting principles generally accepted in the United States. Certain prior period amounts were reclassified to conform to the current period presentation. These reclassifications did not affect total revenues, costs and expenses, net loss, assets, liabilities or stockholders’ deficit. Except as set forth below, the accounting policies used in preparing these unaudited condensed consolidated financial statements are the same as those described in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. 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.

Risks and Uncertainties

In December 2019, COVID-19 was reported to have surfaced in Wuhan, China, resulting in shutdowns of manufacturing and commerce globally in the months that followed. Since then, the COVID-19 pandemic has spread ~~to multiple countries~~ worldwide, ~~including the United States~~ and has resulted in authorities implementing numerous measures to try to contain the disease or slow its spread, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns. The extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S. government, state and local government officials, and international governments to prevent the spread of the disease, all of which are uncertain and cannot be predicted.

In addition, a global semiconductor supply shortage is having wide-ranging effects across the technology industry. This semiconductor shortage has not materially impacted the Company but may impact the Company’s customers, and may negatively impact the supply of materials needed for our testing and production timeline. Our suppliers, contract manufacturers, and our customers are all taking actions to reduce the impact of the semiconductor shortage; however, if the shortage persists, the impact on our business could be material.

Liquidity

As of ~~September~~June 30, ~~2020,~~2021, the Company had (i) available cash and cash equivalents totaling ~~$42.0~~$36.7 million, including $5.8 million cash and cash equivalents classified as held-for-sale, and excluding restricted cash of $3.7 million, and (ii) working capital of ~~$40.7 million.~~$32.4 million, excluding assets and liabilities classified as held-for-sale.

~~In order to make continued growth investments, on~~On March 6, 2020, the Company issued and sold 25,000 shares of Fixed-Rate Cumulative Perpetual Preferred Stock, Series E, par value $0.001 per share (the “Series E Preferred Stock”), for an aggregate purchase price of $25.0 million.

In the first quarter of 2020, $59.9 million of the Company’s 5.5% convertible senior notes due 2022 (the “2022 Notes” formerly referred to as the “Inseego Notes”) were exchanged for common stock in private exchange transactions. Additionally, in the second quarter of 2020, the Company restructured its outstanding debt by completing a $100.0 million registered public offering (the “Offering”) of 3.25% convertible senior notes due 2025 (the “2025 Notes”) and also entered in privately-negotiated Exchange Agreements, pursuant to which an aggregate of $45.0 million in principal amount of the 2022 Notes were exchanged for an aggregate of $32 million in cash and $80.4 million in principal amount of the 2025 Notes (the “Private Exchange Transactions”). The Company also used a portion of the proceeds from the Offering to repay in full its previous term loan. In the third quarter of 2020, the Company redeemed the remaining $2,000 principal amount of the 2022 Notes.

During the quarter ended September 30, 2020, certain holders of the 2025 Notes converted approximately $13.5 million in principal amount of the 2025 Notes into 1,177,156 shares of the Company’s common stock in accordance with the terms of such notes. As of ~~September~~June 30, ~~2020,~~2021, the Company’s outstanding debt primarily consisted of ~~$166.9~~$161.9 million in principal amount of 2025 Notes.

On January 25, 2021, the Company entered into an Equity Distribution Agreement with Canaccord Genuity LLC (the “Agent”), pursuant to which the Company may offer and sell, from time to time, through or to the Agent, up to $40.0 million of shares of its common stock (the “ATM Offering”). In January 2021, the Company sold 1,516,073 shares of common stock, at an average price of $20.11 per share, for net proceeds of $29.4 million, after deducting underwriter fees and discounts of $0.9 million, and other offering fees, pursuant to the ATM Offering.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

On July 30, 2021, the Company completed the sale of Ctrack South Africa. Initial cash proceeds of approximately $36.6 million were received.

The Company has a history of operating and net losses and overall usage of cash from operating and investing activities. The Company’s management believes that its cash and cash equivalents, together with anticipated cash flows from operations, will be sufficient to meet its cash flow needs for the next twelve months from the filing date of this report. The Company’s ability to attain more profitable operations and continue to generate positive cash flow is dependent upon achieving a level and mix of revenues adequate to support its evolving cost structure. If events or circumstances occur such that the Company does not meet its operating plan as expected, or if the Company becomes obligated to pay unforeseen expenditures as a result of ongoing litigation, the Company may be required to raise capital, reduce planned research and development activities, incur additional restructuring charges or reduce other operating expenses which could have an adverse impact on its ability to achieve its intended business objectives.

~~INSEEGO CORP.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

The Company’s liquidity could be impaired if there is any interruption in its business operations, a material failure to satisfy its contractual commitments or a failure to generate revenue from new or existing products. There can be no assurance that any required or desired restructuring or financing will be available on terms favorable to the Company, or at all. Additionally, the Company is uncertain of the full extent to which the COVID-19 pandemic will impact the Company’s business, operations and financial results.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly- and majority-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Segment Information

Management has determined that the Company has 1 reportable segment. The Chief 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 is based solely on the Company’s consolidated operations and operating results.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. Significant estimates include revenue recognition, capitalized software costs, allowance for doubtful accounts receivable, provision for excess and obsolete inventory, valuation of intangible and long-lived assets, valuation of goodwill, valuation of ~~debt obligations, valuation of~~ derivatives, ~~royalty costs,~~ accruals relating to litigation, income taxes and share-based compensation expense. The inputs related to certain estimates include consideration of the economic impact of the COVID-19 pandemic. As the impact of the COVID-19 pandemic continues to develop, these estimates could carry a higher degree of variability and volatility, and may change materially in future periods.

Sources of Revenue

The Company generates revenue from a broad range of product sales including intelligent wireless hardware products for the worldwide mobile communications, and industrial Internet of Things (“~~IoT”~~IIoT”) markets, Inseego SubscribeTM, a hosted SaaS platform that helps organizations manage the selection, deployment and spend of wireless assets, and various Software as a Service (“SaaS”) products. The Company’s products principally include intelligent mobile hotspots, wireless routers for IoT applications, USB modems, integrated telematics and mobile tracking hardware devices, which are supported by applications software and cloud software services designed to enable customers to easily analyze data insights and configure and manage their hardware.

The Company classifies its revenues from the sale of its products and services into two distinct groupings, specifically IoT & Mobile Solutions and Enterprise SaaS Solutions. Both IoT & Mobile Solutions and Enterprise SaaS Solutions revenues include any hardware and software required for the respective solution.

IoT & Mobile Solutions. The IoT & Mobile Solutions portfolio is comprised of end-to-end edge to cloud solutions including 4G LTE mobile broadband gateways, routers, modems, hotspots, HD quality VoLTE based wireless home phones, cloud management software and an advanced portfolio of 5G products. The solutions are offered under the MiFi™ brand for consumer and enterprise markets, and under the Skyus brand for ~~industrial IoT~~IIoT markets. Effective in the third quarter ended on

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

September 30, 2020, IoT & Mobile Solutions ~~now~~ also includes the Company’s Device Management System (“DMS”), rebranded as Inseego SubscribeTM, ~~a hosted SaaS platform~~ that helps organizations manage the selection, deployment and spend of their customer’s wireless assets, helping them save money on personnel and telecom expenses. The Company reclassified its Inseego Subscribe revenue stream from Enterprise SaaS ~~solutions~~Solutions to better reflect the Company's end user delineation. This reclassification had no impact on previously reported total net revenue, gross profit, or net loss.

Enterprise SaaS Solutions. The Enterprise SaaS Solutions portfolio consists of various subscription offerings to gain access to the Company’s Ctrack telematics platforms, which provide fleet vehicle, aviation ground vehicle and asset tracking and performance information, and other telematics applications.

Reclassification

Certain reclassifications have been made to the prior period condensed consolidated statement of operations to conform to the current period presentation.

~~INSEEGO CORP.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Derivative Financial Instruments~~

The Company evaluates stock options, stock warrants, debt instruments and other contracts to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for under the relevant sections of the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative financial instrument and is marked-to-market at each balance sheet date and recorded as an asset or liability. In the event that the fair value is recorded as an asset or liability, the change in fair value is recorded in the consolidated statements of operations as other income or other expense. Upon conversion, exercise or expiration of a derivative financial instrument, the instrument is marked to fair value.

~~Convertible Debt Instruments~~

The Company accounts for its convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) by separating the liability and equity components of the instruments in a manner that reflects the Company's nonconvertible debt borrowing rate. The Company determines the carrying amount of the liability component by measuring the fair value of similar debt instruments that do not have the conversion feature. If a similar debt instrument does not exist, the Company estimates the fair value by using assumptions that market participants would use in pricing a debt instrument, including market interest rates, credit standing, yield curves and volatility. Determining the fair value of the debt component requires the use of accounting estimates and assumptions. These estimates and assumptions require significant judgment and could have a significant impact on the determination of the debt component and the associated non-cash interest expense.

For convertible debt that may be settled in cash upon conversion, the Company assigns a value to the debt component equal to the estimated fair value of similar debt instruments without the conversion feature, which could result in the Company recording the debt instrument at a discount. If the debt instrument is recorded at a discount, the Company amortizes the debt discount over the life of the debt instrument as additional non-cash interest expense utilizing the effective interest method.

~~The Company evaluates embedded features within convertible debt that will be settled in shares upon conversion under Accounting Standards Codification (“ASC”) 815,~~ ~~Derivatives and Hedging~~ (“ASC 815”), to determine whether the embedded feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings.

If an embedded derivative is bifurcated from share-settled convertible debt, the Company records the debt component at cost less a debt discount equal to the bifurcated derivative’s fair value. The Company amortizes the debt discount over the life of the debt instrument as additional non-cash interest expense utilizing the effective interest method. The convertible debt and the derivative liability are presented in total on the unaudited condensed consolidated balance sheet. The derivative liability will be remeasured at each reporting period with changes in fair value recorded in the consolidated statements of operations in other income (expense), net.

~~New Accounting Pronouncements~~

From time to time, new accounting pronouncements are issued by the FASB, which are adopted by the Company as of the specified date. Unless otherwise discussed, management believes the impact of recently issued standards, some of which are not yet effective, will not have a material impact on the Company’s consolidated financial statements upon adoption.

~~In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06,~~ ~~Debtwith Conversion and Other Options(Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40)-Accounting For Convertible Instruments and Contracts in an Entity's Own Equity.~~ The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for annual and interim periods beginning after December 15, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact that this new guidance will have on its consolidated financial statements.

~~In December 2019, the FASB issued ASU 2019-12,~~ ~~Income Taxes (Topic 740):Simplifying the Accounting for Income Taxes~~, which is intended to simplify the accounting for income taxes. The amendment eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the

~~INSEEGO CORP.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

recognition of deferred tax liabilities for outside basis differences. The amendment also clarifies existing guidance related to the recognition of franchise tax, the evaluation of a step up in the tax basis of goodwill, and the effects of enacted changes in tax laws or rates in the effective tax rate computation, among other clarifications. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company early adopted the pronouncement effective for the fourth quarter 2019, the impact of which was not material to the 2019 consolidated financial statements.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments~~—~~Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, which requires measurement and recognition of expected credit losses for financial assets held. This guidance is effective for interim and annual periods beginning after December 15, 2019. There was no impact from the adoption of this pronouncement to the Company’s condensed consolidated financial statements.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either financing or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less are accounted for similar to previous guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to previous guidance for sales-type leases, direct financing leases and operating leases. The Company adopted the standard on January 1, 2019, the date it became effective for public companies, using the modified retrospective approach whereby the cumulative effect of adoption was recognized on the adoption date and prior periods were not restated. There was no net cumulative effect adjustment to retained earnings as of January 1, 2019 as a result of this adoption. Upon adoption, the Company elected the package of practical expedients permitted within the standard, which among other things, allows for the carryforward of historical lease classification. The Company also elected the practical expedient provided in a subsequent amendment to the standard that removed the requirement to separate lease and non-lease components, provided certain conditions were met. Refer to Note 10, ~~Leases,~~ ~~for the impact of the adoption of this guidance on the Company’s condensed consolidated financial statements.~~

2. Financial Statement Details

Inventories ~~net~~

Inventories, net, consist of the following (in thousands):


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Finished goods	Finished goods	$	20,299	$	21,229	Finished goods	$	24,881	$	27,009
Raw materials and components	Raw materials and components	3,942		4,061		Raw materials and components	2,663		6,943
Total inventories, net		$	24,241	$	25,290
Total inventories1						Total inventories1	$	27,544	$	33,952

1Amounts exclude balances classified as held for sale. See Note 4. Business Divestiture.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

September 30,
2020 December 31,
2019
Royalties $ 2,672 $ 1,415
Payroll and related expenses 5,426 2,716
Professional fees 1,522 483
Accrued interest 2,078 1,543
Deferred revenue 4,295 2,235
Operating lease liabilities 1,327 1,101
Acquisition-related liabilities 0 1,000
Other 5,943 7,368
Total accrued expenses and other current liabilities $ 23,263 $ 17,861


	June 30, 2021		December 31, 2020
Royalties	$	1,932	$	2,410
Payroll and related expenses	9,063		6,006


Professional fees	766		921

Accrued interest	852		888
Deferred revenue	3,398		2,853

Operating lease liabilities	1,637		1,619


Accrued production costs	901		938
Liabilities related to financed assets	490		1,198
Other	3,835		6,540
Total accrued expenses and other current liabilities1	$	22,874	$	23,373

Amounts exclude balances classified as held for sale. See Note 4.

~~INSEEGO CORP.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

Business Divestiture.

~~Cash, Cash Equivalents and Restricted Cash~~

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands):

September 30,
2020 December 31,
2019 September 30,
2019 December 31,
2018
Cash and cash equivalents $ 41,994 $ 12,074 $ 13,945 $ 31,015
Restricted cash 0 0 0 61
Total cash, cash equivalents and restricted cash $ 41,994 $ 12,074 $ 13,945 $ 31,076

3. Fair Value Measurement of Assets and Liabilities

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). A fair value measurement reflects the assumptions market participants would use in pricing an asset or liability based on the best available information. These assumptions include the risk inherent in a particular valuation technique (such as a pricing model) and the risks inherent in the inputs to the model.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Company classifies inputs to measure fair value using a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The categorization of financial instruments within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) and is defined as follows:

Level 1: Pricing inputs are based on quoted market prices for identical assets or liabilities in active markets (e.g., NYSE or NASDAQ). Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2: Pricing inputs include benchmark yields, trade data, reported trades and broker dealer quotes, two-sided markets and industry and economic events, yield to maturity, Municipal Securities Rule Making Board reported trades and vendor trading platform data. Level 2 includes those financial instruments that are valued using various pricing services and broker pricing information including Electronic Communication Networks and broker feeds.

Level 3: Pricing inputs include significant inputs that are generally less observable from objective sources, including the Company’s own assumptions. The fair market value for level 3 securities may be highly sensitive to the use of unobservable inputs and subjective assumptions. Generally, changes in significant unobservable inputs may result in significantly lower or higher fair value measurements.

The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. There have been no transfers of assets or liabilities between fair value measurement classifications during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

The following tables summarize the Company’s financial instruments measured at fair value on a recurring basis in accordance with the authoritative guidance for fair value measurements as of ~~September~~June 30, 2021 and December 31, 2020 (in thousands):

Balance as of
September 30, 2020 Level 1
Assets:
Cash equivalents
Money market funds $ 126 $ 126
Total cash equivalents $ 126 $ 126

~~INSEEGO CORP.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~


		Balance as of September 30, 2020		Level 3			June 30, 2021						December 31, 2020
Liabilities:
							Total Fair Value		Level 3		Level 1		Total Fair Value		Level 3		Level 1
Assets						Assets
Cash equivalents						Cash equivalents
Money market funds						Money market funds	$	126	$	0	$	126	$	126	$	0	$	126
Total assets						Total assets	$	126	$	0	$	126	$	126	$	0	$	126
Liabilities						Liabilities
2025 Notes	2025 Notes					2025 Notes
Interest make-whole payment	Interest make-whole payment	$	2,929	$	2,929	Interest make-whole payment	$	2,929	$	2,929	$	0	$	4,898	$	4,898	$	0

Total embedded derivatives		$	2,929	$	2,929
Total liabilities						Total liabilities	$	2,929	$	2,929	$	0	$	4,898	$	4,898	$	0

The fair value of the interest make-whole payment derivative liability was determined using a Monte Carlo model with the following key assumptions:


		May 12, 2020		September 30, 2020			June 30, 2021		December 31, 2020
Volatility	Volatility	60	%	50	%	Volatility	50	%	50	%
Stock price	Stock price	$10.62 per share		$10.32 per share		Stock price	$10.09 per share		$15.47 per share
Credit spread	Credit spread	14.97	%	21.50	%	Credit spread	15.56	%	19.25	%
Term	Term	4.97 years		4.59 years		Term	3.84 years		4.34 years
Dividend yield	Dividend yield	0	%	0	%	Dividend yield	0	%	0	%
Risk-free rate	Risk-free rate	0.34	%	0.26	%	Risk-free rate	0.63	%	0.30	%

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table sets forth a summary of changes in the fair value of Level 3 liabilities for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 (in thousands):


		Balance as of December 31, 2019		Additions		Conversions		Change in fair value		Balance as of September 30, 2020			Balance as of December 31, 2020		Additions		Conversions		Change in fair value		Balance as of June 30, 2021
Liabilities:	Liabilities:											Liabilities:
Interest make-whole payment	Interest make-whole payment	$	0	$	4,582	$	(281)	$	(1,372)	$	2,929	Interest make-whole payment	$	4,898	$	0	$	(146)	$	(1,823)	$	2,929

The following table summarizes the Company’s financial instruments measured at fair value on a recurring basis in accordance with the authoritative guidance for fair value measurements as of December 31, 2019 (in thousands):

Balance as of
December 31, 2019 Level 1
Assets:
Cash equivalents
Money market funds $ 126 $ 126
Total cash equivalents $ 126 $ 126

~~As of December 31, 2019 the Company had no Level 3 financial instruments.~~

~~INSEEGO CORP.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

Other Financial Instruments

The Company’s financial assets and liabilities are carried at fair value or at amounts that, because of their short-term nature, approximate current fair value, with the exception of the 2025 Notes.

On May 12, 2020, the Company issued $180.4 million in aggregate principal amount of 2025 Notes, and restructured its outstanding debt as described further in Note 4,5, Debt. The Company carries its 2025 Notes at amortized cost adjusted for changes in fair value of the embedded derivative. As of June 30, 2021, $161.9 million in principal amount of the 2025 Notes remain outstanding. It is not practicable to determine the fair value of the 2025 Notes due to the lack of information available to calculate the fair value of such notes.

The Company evaluated the 2025 Notes under ASC 815 and identified an embedded derivative that required bifurcation. The embedded derivative is an interest make-whole payment that was valued at $4.6 million on May 12, 2020.

Changes in the fair value of the interest make-whole payment totaling a loss of $0.1 million for the three months ended June 30, 2021 are included in the Company’s condensed consolidated statement of operations ~~for the current quarter~~ within other income, ~~(expense),~~ net. During the ~~quarter~~six months ended ~~September~~June 30, ~~2020,~~2021, certain holders of the 2025 Notes converted an aggregate of approximately ~~$13.5~~$5.0 million in principal amount of the 2025 Notes into shares of the Company’s common stock in accordance with the terms of such notes and a portion of the embedded derivative was settled in shares of the Company’s common stock resulting in ~~$0.3~~$0.1 million of the derivative liability being extinguished upon conversion. As of ~~September~~June 30, ~~2020,~~2021, the embedded derivative had a fair value of $2.9 million and a ~~$1.4~~$1.8 million gain on the change in fair value was recorded to other income, ~~(expense),~~ net, on the condensed consolidated statement of ~~operations.~~operations in the six months ended June 30, 2021.

During the three and six months ended June 30, 2021 and 2020, there were no transfers between the levels within the fair value hierarchy.

4. Business Divestiture

Sale of Ctrack South Africa Operations

On February 24, 2021, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”) with an affiliate of Convergence Partners (“Convergence”), an investment management firm in South Africa, to sell the Company’s Ctrack business operations in Africa, Pakistan and the Middle East (together, “Ctrack South Africa”), in an all-cash transaction for 528.9 million South African Rand (“ZAR”) (approximately $36.6 million United States Dollars (“USD”)). The Purchase Agreement provides for an adjustment to the purchase price based on a normalized level of net working capital. The final net consideration is subject to working capital adjustments that are expected to be agreed upon and finalized with Convergence no later than 35 business days after completion of the sale. The consummation of the sale was subject to a number of customary conditions precedent. Additionally, the consummation of the sale was subject to Convergence closing an investment fund.

On June 30, 2021, the Company entered into an Addendum to the Purchase Agreement with Convergence. Pursuant to the Addendum, the Company and Convergence have agreed to extend the date by which certain of the closing conditions must be fulfilled or otherwise waived and set the closing date of the transaction to be on or before July 30, 2021.

Effective upon the execution of the Purchase Agreement, the assets and liabilities of the Ctrack South Africa entities that are subject to the sale, meet the criteria for classification of held for sale (“HFS”), since the sale of the Ctrack South Africa operations under the Purchase Agreement is subject only to usual and customary closing conditions, and the sale is expected to

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

be completed in less than one year from the date of the Purchase Agreement. The following table presents assets and liabilities of Ctrack South Africa which are classified as HFS as of June 30, 2021 (in thousands):


	Balance as of June 30, 2021
Assets:
Cash and cash equivalents	$	5,849
Accounts receivable, net	3,640
Inventory	3,650
Prepaid expenses and other	798
Property, plant and equipment, net	4,197
Rental assets, net	2,392
Intangible assets, net	11,010
Goodwill	10,914


Total assets held for sale	$	42,450

Liabilities:
Accounts payable	$	5,302
Accrued expenses and other liabilities	1,294
Deferred tax liabilities, net	3,717
Other long-term liabilities	819
Total liabilities related to assets held for sale	$	11,132

5. Debt

Term Loan

On August 23, 2017, the Company and certain of its direct and indirect subsidiaries, as guarantors, entered into a credit agreement (the “Credit Agreement”) with Cantor Fitzgerald Securities, as administrative agent and collateral agent, and certain funds managed by Highbridge Capital Management, LLC, as lenders (the “Lenders”). Pursuant to the Credit Agreement, the Lenders provided the Company with a term loan in the principal amount of $48.0 million (the “Term Loan”) with a maturity date of August 23, 2020.

On March 31, 2020, the Company issued 2,330 shares of Series E Preferred Stock to South Ocean Funding ~~L.L.C~~L.L.C. (“South Ocean”), the Lender holding all of the aggregate principal amount then outstanding under the Credit Agreement in satisfaction of all then accrued interest under the Credit Agreement.

On May 12, 2020, the Company used a portion of the proceeds from the Offering to repay in full the Term Loan and terminate the Credit Agreement. The amounts paid included $47.5 million in outstanding principal, approximately $0.5 million in interest accrued thereon, and a prepayment fee of $1.4 million. The Company also used a portion of the proceeds of the Offering to repurchase the 2,330 shares of Series E Preferred Stock that had been issued to South Ocean for $2.4 million.

The Term Loan bore interest at a rate per annum equal to the three-month LIBOR, but in no event less than 1.00%, plus 7.625%.

~~The Term Loan consisted of the following (in thousands):~~


	December 31, 2019
~~Principal~~	$	~~47,500~~
~~Less: unamortized debt discount and issuance costs~~	~~(962)~~
~~Net carrying amount~~	$	~~46,538~~

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The effective interest rate ~~on the Term Loan~~ was 15.19% for the ~~nine~~six months ended ~~September~~June 30, 2020. The following table sets forth total interest expense recognized related to the Term Loan (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Contractual interest expense	Contractual interest expense	$	0	$	1,225	$	1,667	$	3,615	Contractual interest expense	$	0	$	516	$	0	$	1,667
Amortization of debt discount	Amortization of debt discount	0		333		859		999		Amortization of debt discount	0		526		0		859
Amortization of debt issuance costs	Amortization of debt issuance costs	0		40		103		120		Amortization of debt issuance costs	0		63		0		103
Total interest expense	Total interest expense	$	0	$	1,598	$	2,629	$	4,734	Total interest expense	$	0	$	1,105	$	0	$	2,629

Convertible Notes

2025 Notes

On May 12, 2020, the Company completed its registered public Offering of $100.0 million aggregate principal amount of 2025 Notes.

On May 12, 2020, the Company also entered into separate privately-negotiated Exchange Agreements with certain holders of the 2022 Notes. Pursuant to the Exchange Agreements, these noteholders agreed to exchange the 2022 Notes that they held (representing an aggregate of $45.0 million principal amount of 2022 Notes with an estimated fair value of approximately $112.4 million as of the date of exchange) for an aggregate of $32.0 million in cash and $80.4 million principal amount of 2025 Notes in private placement transactions that closed concurrently with the registered Offering. In connection therewith, the Company recorded a loss of $67.2 million on debt conversion and extinguishment, net in the condensed consolidated statement of operations. The 2025 Notes issued in the Private Exchange Transactions are part of the same series as the 2025 Notes issued in the registered Offering.

During the ~~quarter~~three months ended ~~September 30, 2020,~~March 31, 2021, certain holders of the 2025 Notes converted an aggregate of approximately ~~$13.5~~$5.0 million in principal amount of the 2025 Notes into ~~1,177,156~~428,669 shares of the Company’s common stock, including ~~108,572~~32,221 shares of common stock issued in satisfaction of the interest make-whole payment. In connection therewith, the Company recorded a loss of ~~$1.2~~$0.4 million on debt conversion, net in the condensed consolidated statement of operations.

The 2025 Notes are issued under an indenture, dated May 12, 2020 (the “Base Indenture”), between the Company and Wilmington Trust, National Association, as trustee (the “Trustee”), as supplemented by the first supplemental indenture, dated May 12, 2020 (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), between the Company and the Trustee.

The 2025 Notes will mature on May 1, 2025, unless earlier repurchased, redeemed or converted. The 2025 Notes are senior unsecured obligations of the Company and bear interest at an annual rate of 3.25%, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on November 1, 2020.

Holders of the 2025 Notes may convert the 2025 Notes into shares of the Company’s common stock (together with cash in lieu of any fractional share), at their option, at any time until the close of business on the scheduled trading day immediately before the maturity date. Upon conversion of the 2025 Notes, the Company will deliver for each $1,000 principal amount of 2025 Notes converted a number of shares of common stock (together with cash in lieu of any fractional share), equal to the conversion rate.

The initial conversion rate for the 2025 Notes is 79.2896 shares of common stock per $1,000 principal amount of 2025 Notes, which represents an initial conversion price of approximately $12.61 per share, and is subject to adjustment upon the occurrence of certain events, including, but not limited to, certain stock dividends, splits and combinations, the issuance of certain rights, options or warrants to holders of the common stock, certain distributions of assets, debt securities, capital stock or other property to holders of the common stock, cash dividends on the common stock and certain Company tender or exchange offers.

If a fundamental change (as defined in the Indenture) occurs at any time prior to the maturity date, then the noteholders may require the Company to repurchase their 2025 Notes at a cash repurchase price equal to the principal amount of the 2025

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. If

~~INSEEGO CORP.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

a make-whole fundamental change (as defined in the Indenture) occurs, then the Company will in certain circumstances increase the conversion rate for a specified period of time.

The 2025 Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after May 6, 2023 and on or before the scheduled trading day before the maturity date, at a cash redemption price equal to the principal amount of the 2025 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, as long as the last reported sale price per share of the common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice.

The Indenture contains customary events of default. If an event of default (other than certain events of bankruptcy, insolvency or reorganization involving the Company) occurs and is continuing, the Trustee, by notice to the Company, or the holders of the 2025 Notes representing at least 25% in aggregate principal amount of the outstanding 2025 Notes, by notice to the Company and the Trustee, may declare 100% of the principal of, and all accrued and unpaid interest on, all of the then outstanding 2025 Notes to be due and payable immediately. Upon the occurrence of certain events of bankruptcy, insolvency or reorganization involving the Company, 100% of the principal of, and all accrued and unpaid interest on, all of the then outstanding 2025 Notes will automatically become immediately due and payable. Notwithstanding the foregoing, the Indenture provides that, to the extent the Company elects, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture will, for the first 360 days after such event of default, consist exclusively of the right to receive additional interest on the 2025 Notes.

Interest make-whole payment

The 2025 Notes also include an interest make-whole payment feature whereby if the last reported sale price of the Company’s common stock for each of the five trading days immediately preceding a conversion date is greater than or equal to $10.51, 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 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 condensed consolidated balance sheets, with subsequent changes to fair value to be recorded at each reporting period on the condensed consolidated statement of operations in other income, ~~(expense),~~ net.

The estimated fair value of the liability component at the date of issuance was determined using significant assumptions which include an implied credit spread rate for notes with a similar term, the expected volatility and dividend yield of the Company’s common stock and the risk-free interest rate.

As of ~~September~~June 30, ~~2020, $166.9~~2021, $161.9 million in principal amount of the 2025 Notes were outstanding, $80.4 million of which were held by related parties.

The 2025 Notes consist of the following (in thousands):


	September 30, 2020
~~Liability component~~
~~Principal~~	$	~~166,898~~
~~Add: fair value of embedded derivative~~	~~2,929~~
~~Less: unamortized debt discount~~	~~(3,915)~~
~~Less: unamortized issuance costs~~	~~(3,073)~~
~~Net carrying amount~~	$	~~162,839~~


	June 30, 2021		December 31, 2020
Liability component
Principal	$	161,898	$	166,898
Add: fair value of embedded derivative	2,929		4,898
Less: unamortized debt discount	(3,178)		(3,703)
Less: unamortized issuance costs	(2,529)		(2,946)
Net carrying amount	$	159,120	$	165,147

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The effective interest rate on the liability component of the 2025 Notes was ~~4.03%~~4.16% for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The following table sets forth total interest expense recognized related to the 2025 Notes (in thousands):


								Three Months Ended June 30,				Six Months Ended June 30,
		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
								2021		2020		2021		2020
Contractual interest expense	Contractual interest expense	$	1,278		$	2,078	Contractual interest expense	$	1,315	$	800	$	2,584	$	800
Amortization of debt discount	Amortization of debt discount	217			341		Amortization of debt discount	207		124		415		124
Amortization of debt issuance costs	Amortization of debt issuance costs	172			268		Amortization of debt issuance costs	165		96		330		96
Total interest expense	Total interest expense	$	1,667		$	2,687	Total interest expense	$	1,687	$	1,020	$	3,329	$	1,020

~~As the offering of the 2025 Notes took place during the nine months ended September 30, 2020, there was no interest expense in the comparable three and nine month periods of 2019.~~

2022 Notes

On January 9, 2017, in connection with the ~~Note Exchange (as defined below)~~settlement of an exchange offer and consent solicitation with respect to the 5.50% convertible senior notes due 2020 (the “Novatel Wireless Notes”), the Company issued approximately $119.8 million aggregate principal amount of 2022 Notes.

During the three months ended March 31, 2020, the Company entered into privately-negotiated exchange agreements with certain investors holding the 2022 Notes. Pursuant to those exchange agreements, the investors exchanged $59.9 million in aggregate principal amount of outstanding 2022 Notes for 13,688,876 shares of common stock. The investors that participated in such exchange agreements agreed to waive any accrued but unpaid interest on the exchanged 2022 Notes. Included in the 13,688,876 shares of common stock issued in the exchange transactions that took place during the three months ended March 31, 2020 were 942,706 shares valued at $7.9 million on the date of issuance at fair value, which were issued pursuant to the terms of the privately-negotiated exchange agreements and were in excess of the consideration issuable under the original conversion terms of the exchanged 2022 Notes. ASC 470, Debt, requires the recognition through earnings of an inducement charge equal to the fair value of the consideration delivered in excess of the consideration issuable under the original conversion terms. This resulted in a non-cash charge of $7.9 million for the three months ended March 31, 2020, which was recorded as inducement expense in the condensed consolidated statement of operations.

Pursuant to the Private Exchange Transactions described above, on May 12, 2020, the holders of an aggregate of $45.0 million principal amount of 2022 Notes exchanged their 2022 Notes for a combination of 2025 Notes and cash. As a result of the Private Exchange Transactions, $2,000 in principal amount of the 2022 Notes were outstanding as of June 30, 2020. On July 22, 2020, pursuant to a redemption notice issued on May 15, 2020, the Company redeemed the remaining $2,000 principal amount of the 2022 Notes.

The ~~2022 Notes consist of the following (in thousands):~~

September 30,
2020 December 31,
2019
Liability component
Principal $ 0 $ 105,125
Less: unamortized debt discount and issuance costs 0 (3,791)
Net carrying amount $ 0 $ 101,334

~~The~~ effective interest rate on the liability component of the 2022 Notes was 12.89% for the ~~nine~~six months ended ~~September~~June 30, 2020. The following table sets forth total interest expense recognized related to the 2022 Notes (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Contractual interest expense	Contractual interest expense	$	0	$	1,446	$	768	$	4,337	Contractual interest expense	$	0	$	286	$	0	$	768
Amortization of debt discount	Amortization of debt discount	0		1,955		1,952		5,866		Amortization of debt discount	0		700		0		1,952
Amortization of debt issuance costs	Amortization of debt issuance costs	0		115		111		344		Amortization of debt issuance costs	0		39		0		111
Total interest expense	Total interest expense	$	0	$	3,516	$	2,831	$	10,547	Total interest expense	$	0	$	1,025	$	0	$	2,831

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~Novatel Wireless Notes~~

On June 10, 2015, Novatel Wireless, Inc., a wholly owned subsidiary of Inseego Corp. (“Novatel Wireless”), issued $120.0 million of 5.50% convertible senior notes due 2020 (the “Novatel Wireless Notes”), which were governed by the terms of an indenture, dated June 10, 2015, between Novatel Wireless, as issuer, Inseego and Wilmington Trust, National Association, as trustee, as amended by certain supplemental indentures (the “Novatel Indenture”). On January 9, 2017, in connection with the settlement of an exchange offer and consent solicitation with respect to the Novatel Wireless Notes (the “Note Exchange”), approximately $119.8 million aggregate principal amount of outstanding Novatel Wireless Notes were validly tendered and accepted for exchange and subsequently canceled. In February 2020, the holders of the remaining $250,000 of the aggregate principal amount of Novatel Wireless Notes that remained outstanding following the Note Exchange, converted their Novatel Wireless Notes into 50,000 shares of Inseego Corp. common stock, at the conversion price of $5.00 per share, in accordance with the terms of the Novatel Indenture. Accordingly, no Novatel Wireless Notes were outstanding as of September 30, 2020.

5.6. Share-based Compensation

The Company included the following amounts for share-based compensation awards in the unaudited condensed consolidated statements of operations (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020			2021		2020
Cost of revenues	Cost of revenues	$	308	$	202	$	1,296	$	899	Cost of revenues	$	234	$	759		$	1,812	$	987
Research and development	Research and development	491		183		2,292		1,315		Research and development	534		1,510			3,762		1,802
Sales and marketing	Sales and marketing	531		307		1,810		1,339		Sales and marketing	559		816			2,547		1,279
General and administrative	General and administrative	877		561		2,790		2,402		General and administrative	980		1,343			3,284		1,913

Total		$	2,207	$	1,253	$	8,188	$	5,955
Total1										Total1	$	2,307	$	4,428		$	11,405	$	5,981

1During the quarter ended March 31, 2021, the Board of Directors of the Company approved and the Company granted restricted stock units to eligible employees under the 2018 Omnibus Incentive Compensation Plan, previously named the Amended and Restated 2009 Omnibus Incentive Compensation Plan (the “2018 Plan”) that were immediately vested, as fiscal 2020 annual bonus payments. The total charges recorded during the quarter ended March 31, 2021 were $7.0 million. Such bonus payments in fiscal 2020 were paid in the quarter ended June 30, 2020, and total charges related to such bonus payments recorded during the quarter ended June 30, 2020 were $2.7 million.

Stock Options

The following table summarizes the Company’s stock option activity:

Outstanding — December 31, ~~2019~~2020

~~9,044,304~~8,479,979

Granted

~~1,526,000~~1,330,000

Exercised

~~(910,490)~~(897,234)

Canceled

~~(450,777)~~(341,731)

Outstanding — ~~September~~June 30, ~~2020~~2021

~~9,209,037~~8,571,014

Exercisable — ~~September~~June 30, ~~2020~~2021

~~4,034,796~~4,596,393

At ~~September~~June 30, ~~2020,~~2021, total unrecognized compensation expense related to stock options was ~~$13.6~~$14.1 million, which is expected to be recognized over a weighted-average period of ~~2.66~~2.71 years.

Restricted Stock Units

The following table summarizes the Company’s restricted stock unit (“RSU”) activity:






Non-vested — December 31, ~~2019~~2020			~~400,315~~417,105
Granted			~~437,413~~830,174
Vested			~~(486,092)~~(793,227)
Forfeited			~~(4,584)~~(34,433)
Non-vested — ~~September~~June 30, ~~2020~~2021			~~347,052~~419,619

At ~~September~~June 30, ~~2020,~~2021, total unrecognized compensation expense related to RSUs was ~~$1.4~~$2.1 million, which is expected to be recognized over a weighted-average period of ~~1.82~~2.60 years.

~~INSEEGO CORP.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

6.7. Earnings Per Share

Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net ~~income (loss)~~loss attributable to Inseego Corp. 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 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 the applicable exercise price is greater than the market price on the period end date as their effect would be anti-dilutive.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the three months ended ~~September~~June 30, ~~2020,~~2021, the computation of diluted EPS excluded ~~26,839,771~~25,831,419 shares related to the convertible notes, stock options and RSUs as their effect would have been anti-dilutive. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the computation of diluted EPS excluded ~~26,839,771~~25,831,419 shares primarily related to the convertible notes, warrants, stock options and RSUs as their effect would have been anti-dilutive.

7.8. Private Placements and Public Offering

Common Stock

On August 6, 2018, the Company completed a private placement of 12,062,000 shares of common stock, par value $0.001 per share, and warrants to purchase an additional 4,221,700 shares of common stock (the “2018 Warrants”), subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, to certain accredited investors. On March 28, 2019, the 2018 Warrants were exercised at an exercise price of $2.52 per share, for aggregate cash proceeds to the Company of approximately $10.6 million. In connection with the exercise of the 2018 Warrants, on March 28, 2019, the Company issued additional warrants to purchase 2,500,000 shares of common stock (the “2019 Warrants”) to the accredited investors. Each 2019 Warrant has an initial exercise price of $7.00 per share, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, became exercisable on September 28, 2019, and will expire on June 30, 2022.

During the first quarter of 2020, the Company received $1.9 million in net cash proceeds from the exercise of 338,454 of the Company’s common stock purchase warrants issued in 2015.

The Company assessed the terms of the warrants under ASC 815. Pursuant to this guidance, the Company has determined that the warrants do not require liability accounting and has classified the warrants as equity.

~~Preferred Stock~~

On ~~August 9, 2019,~~January 25, 2021, the Company ~~completed a private placement~~entered into an Equity Distribution Agreement with the Agent, pursuant to which the Company may offer and sell, from time to time, through or to the Agent, up to $40.0 million of ~~10,000~~ shares of ~~Series E Preferred Stock for~~its common stock. In January 2021, the Company sold 1,516,073 shares of common stock, at an ~~aggregate purchase~~average price of ~~$10.0~~$20.11 per share, for net proceeds of $29.4 million, ~~in accordance with the terms~~after deducting underwriter fees and ~~provisions of a Securities Purchase Agreement, dated August 9, 2019, by~~discounts, and among the Company and certain accredited investors. Each share of Series E Preferred Stock entitles the holder thereof to receive, when, as and if declared by the Company out of assets legally available therefor, cumulative cash dividends at an annual rate of 9.00% payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year, beginning on October 1, 2019. If dividends are not declared and paid in any quarter, or if such dividends are declared but holders of the Series E Preferred Stock elect not to receive them in cash, the quarterly dividend will be deemed to accrue and will be addedother offering fees, pursuant to the ~~Series E Base Amount.~~ATM Offering.

Preferred Stock

On March 6, 2020, the Company issued and sold an additional 25,000 shares of Series E Preferred Stock for an aggregate purchase price of $25.0 million.

On March 31, 2020, ~~Inseego Corp.~~the Company issued 2,330 shares of Series E Preferred Stock to South Ocean, in satisfaction of certain deferred interest obligations pursuant to the terms and conditions of the Credit Agreement.

On May 12, 2020, the Company used a portion of the proceeds from the Offering to repurchase the 2,330 shares of Series E Preferred Stock, which had been issued to satisfy accrued interest under the Credit Agreement, for $2.4 million.

~~INSEEGO CORP.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

8.9. Geographic Information and Concentrations of Risk

Geographic Information

The following table details the Company’s net revenues by geographic region based on shipping destination (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,			Six Months Ended June 30,
		2020		2019		2020		2019				2021		2020		2021		2020
United States and Canada	United States and Canada	$	77,208	$	47,378	$	188,638	$	122,331	United States and Canada		$	51,473	$	69,080	$	94,209	$	111,430
South Africa	South Africa	6,836		9,237		20,930		26,164		South Africa		7,790		5,856		14,898		14,094
Other	Other	6,196		6,101		18,201		18,668		Other		6,430		5,753		14,183		12,005
Total	Total	$	90,240	$	62,716	$	227,769	$	167,163	Total		$	65,693	$	80,689	$	123,290	$	137,529

Concentrations of Risk

For the three months ended ~~September~~June 30, ~~2020 and 2019, one customer~~2021, two customers accounted for ~~58.4% and 57.7%~~68.0% of net ~~revenues, respectively.~~

revenues. For the ~~nine~~three months ended ~~September 30, 2020 and 2019, one customer accounted for 56.4% and 55.8%of net revenues, respectively.~~

~~As of September~~June 30, 2020, one customer accounted for ~~53.0%~~55.6%of net revenues.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the six months ended June 30, 2021, two customers accounted for 65.1% of net revenues. For the six months ended June 30, 2020, one customer accounted for 54.7%of net revenues.

As of June 30, 2021 two customers and one vendor accounted for 35.6%, 12.9%, and 11.3% of accounts receivable, ~~net.~~net, respectively. As of December 31, ~~2019,~~2020, two customers accounted for ~~25.0%~~33.3% and ~~11.2%~~17.2% of accounts receivable, net, respectively.

9.10. Commitments and Contingencies

Legal

The Company is, from time to time, party to various legal proceedings arising in the ordinary course of business. For example, the Company is currently named as a defendant or co-defendant in several patent infringement lawsuits in the U.S. and may be required to 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 and discussions with the Company’s intellectual property litigation counsel, 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 condensed consolidated results of operations or financial condition.

On May 11, 2017, the Company initiated a lawsuit against the former stockholders of RER in the Court of Chancery of the State of Delaware seeking recovery of damages for civil conspiracy, fraud in the inducement, unjust enrichment and breach of fiduciary duty. On January 16, 2018, the former stockholders of RER filed an answer and counterclaim in the matter seeking recovery of certain deferred and earn-out payments allegedly owed to them by the Company in connection with the Company’s acquisition of RER. On July 26, 2018, the Company and the former stockholders of RER entered into a mutual general release and settlement agreement (the “Settlement Agreement”) pursuant to which the parties agreed to release all claims against each other and the Company agreed to (i) pay the former stockholders of RER $1.0 million in cash by August 17, 2018, (ii) immediately instruct its transfer agent to permit the transfer or sale of 973,333 shares of the Company’s common stock that the Company had issued to the former stockholders of RER in March 2017, (iii) immediately issue 500,000 shares of the Company’s common stock to the former stockholders of RER, (iv) within 12 months following the execution of the Settlement Agreement, deliver to the former stockholders of RER an additional $1.0 million in cash, common stock, or a combination thereof, at the Company’s option, (v) within 24 months following the execution of the Settlement Agreement deliver to the former stockholders of RER an additional $1.0 million in cash, common stock, or a combination thereof, at the Company’s option, and (vi) file one or more registration statements with respect to the resale of the shares of the Company’s common stock issued to the former stockholders of RER pursuant to the Settlement Agreement. On July 24, 2020, the Company issued 89,928 shares of common stock to the former stockholders of RER in satisfaction of all remaining liabilities under the Settlement Agreement.

~~INSEEGO CORP.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

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 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 condensed consolidated results of operations or financial condition.

~~10.~~11. Leases

Lessee

The Company is a lessee in lease agreements for office space, automobiles and certain equipment. Certain of the Company’s leases contain provisions that provide for one or more options to renew at the Company’s sole discretion. The majority of the Company’s leases are comprised of fixed lease payments, with a small percentage of its real estate leases including lease payments subject to a rate or index, which may be variable. Certain real estate leases also include executory costs such as common area maintenance (non-lease component). As a practical expedient permitted under the new guidance, ASC 842 Leases, (“ASC 842”), the Company has elected to account for the lease and non-lease components as a single lease component. Lease payments, which may include lease components and non-lease components, are included in the measurement of the Company’s lease liabilities to the extent that such payments are either fixed amounts or variable amounts based on a rate or index (fixed in substance) as stipulated in the lease contract.

None of the Company’s lease agreements contain any material residual value guarantees or material restrictive covenants. As a result of the Company’s election of the package of practical expedients permitted within ASC 842, which among other

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

things, allows for the carryforward of historical lease classification, all of the Company’s lease agreements in existence at the date of adoption that were classified as operating leases under the legacy guidance, ASC 840, have been classified as operating leases under ASC 842. Lease expense for payments related to the Company’s operating leases is recognized on a straight-line basis over the related lease term, which includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments as specified in the lease. Right-of-use assets and lease liabilities related to the Company’s operating leases are recognized at the lease commencement date based on the present value of the remaining lease payments over the lease term. When the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available surrounding the Company’s borrowing rates at the lease commencement date in determining the present value of lease payments. The right-of-use asset also includes any lease payments made at or before lease commencement less any lease incentives. As of ~~September~~June 30, ~~2020,~~2021, the Company had right-of-use assets of ~~$9.3~~$8.3 million and lease liabilities related to its operating leases of ~~$10.0~~$9.2 million. Right-of-use assets are included in right-of-use assets, net, on the condensed consolidated balance sheet and lease liabilities related to the Company’s operating leases are included in accrued expenses and other liabilities and other long-term liabilities on the condensed consolidated balance sheet. As of ~~September~~June 30, ~~2020,~~2021, the Company’s weighted-average remaining lease term and weighted-average discount rate related to its operating leases were ~~6.0~~5.5 years and 9.1%, respectively.

During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the cash paid for amounts included in the measurement of lease liabilities related to the Company’s operating leases was approximately ~~$0.5~~$1.2 million and ~~$1.6~~$0.3 million, respectively, which is included as an operating cash outflow within the consolidated statements of cash flows. During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the operating lease costs related to the Company’s operating leases were ~~approximately $0.7~~approximately $0.8 million and ~~$1.4~~$0.4 million, respectively, which is included in operating costs and expenses in the condensed consolidated statements of operations. During the nine months ended September 30, 2020, the Company entered into a lease agreement for its new corporate offices and renewed the lease on an R&D facility for which right-of-use assets were recorded in exchange for new lease liabilities.

~~INSEEGO CORP.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

The future minimum payments under operating leases were as follows ~~at September~~as of June 30, ~~2020~~2021 (in thousands):


2020 (remainder)		$	495
2021		2,330
2021 (remainder)				2021 (remainder)	$	1,231
2022	2022	2,190		2022	2,282
2023	2023	1,887		2023	1,959
2024	2024	1,769		2024	1,806

2025				2025	1,652
Thereafter	Thereafter	4,437		Thereafter	2,813
Total minimum operating lease payments	Total minimum operating lease payments	13,108		Total minimum operating lease payments	11,743
Less: amounts representing interest	Less: amounts representing interest	(3,126)		Less: amounts representing interest	(2,508)
Present value of net minimum operating lease payments	Present value of net minimum operating lease payments	9,982		Present value of net minimum operating lease payments	9,235
Less: current portion	Less: current portion	(1,327)		Less: current portion	(1,637)
Long-term portion of operating lease obligations	Long-term portion of operating lease obligations	$	8,655	Long-term portion of operating lease obligations	$	7,598

The current and long term portion of operating lease obligations are classified within accrued expenses and other current liabilities and other long-term liabilities, respectively, on the condensed consolidated balance sheets.

~~Lessor~~

Prior to January 1, 2019, and as previously disclosed in the Company’s Form 10-K for the year ended December 31, 2018, the Company derived revenue from customers who lease the Company’s monitoring devices. The Company recorded such revenue in accordance with the previous lease accounting guidance ASC 840, ~~Leases, and determined that the leases qualify as operating leases.~~Lessor

Monitoring device leases in which the Company serves as lessor are classified as operating leases. Accordingly, rental devices are carried at historical cost less accumulated depreciation and impairment, if any, and are included in rental assets, net, on the condensed consolidated balance sheets.

Since the lease components meet the criteria for an operating lease under ASC 842, the Company has elected the practical expedient to combine the lease and the non-lease components because the service is the predominant element in the eyes of the customer and the pattern of service delivery is the same for both elements. The Company accounts for the combined component as a single performance obligation under ASC 606, Revenue from Contracts with Customers.

~~11.~~12. Income Taxes

The Company’s income tax provision (benefit) of $0.2 million and $(0.1) million for ~~each of~~ the three months ended ~~September~~June 30, 2021 and 2020, respectively, and ~~2019, and $0.2~~$0.4 million and ~~$0.8 million~~$(24,000) for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, consisted primarily of foreign income taxes at certain of the Company’s international entities and minimum state taxes for its U.S.-based entities. The Company’s income tax expense is different than the expected expense ~~(or benefit)~~ based on statutory rates primarily due to full valuation allowances at all of its U.S.-based entities and many of its foreign subsidiaries.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

On ~~May 12, 2020,~~March 11, 2021, Congress passed, and the President signed into law, the American Rescue Plan Act, 2021 (the “ARP”), which includes certain business tax provisions. The Company does not expect the ARP to have a material impact on the Company’s effective tax rate or income tax expense for the year ending December 31, 2021.

INSEEGO CORP.

Notes to Condensed Consolidated Financial Statements (Unaudited)

13. Subsequent Events

On July 30, 2021, the Company ~~issued $180.4~~completed the sale of Ctrack South Africa. Initial cash proceeds of approximately $36.6 million million were received. Final cash proceeds net of ~~2025 Notes in a financing which allowed it~~transaction cost are subject to ~~redeem~~foreign exchange rates as well as certain post-closing working capital adjustments that will be provided by Convergence and agreed upon by the ~~remaining outstanding 2022 Notes and pay off~~Company no later than 35 business days after completion of the ~~Term Loan.~~sale. The ~~loss~~estimated gain upon sale is approximately $4.4 million, calculated based on the ~~extinguishment~~foreign exchange rate as of July 30, 2021, The actual gain could differ from this estimate as a result of post-closing working capital adjustments and related foreign exchange fluctuations. Such gain will be recognized as other income, net in the ~~2022 Notes did not impact~~condensed consolidated results of operations during the ~~Company’s tax expense or net deferred tax liabilities given the full valuation allowance against the Company’s significant net operating losses.~~three months ended September 30, 2021.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You should not place undue reliance on these statements. These forward-looking statements include statements that reflect the views of our senior management with respect to our current expectations, assumptions, estimates and projections about Inseego and our industry. These forward-looking statements speak only as of the date of this report. We disclaim any undertaking to publicly update or revise any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Statements that include the words “may,” “could,” “should,” “would,” “estimate,” “anticipate,” “believe,” “expect,” “preliminary,” “intend,” “plan,” “project,” “outlook,” “will” and similar words and phrases identify forward-looking statements. Forward-looking statements address matters that involve risks and uncertainties that could cause actual results to differ materially from those anticipated in these forward-looking statements as of the date of this report. We believe that these factors include those related to:

•our ability to compete in the market for wireless broadband data access products, wireless modem products, and asset management, monitoring, telematics, vehicle tracking and fleet management products;

•our ability to develop and introduce new products and services successfully;

•our ability to meet the price and performance standards of the evolving 5G New Radio (“5G NR”) products and technologies;

•our ability to expand our customer reach/reduce customer concentration;

•our ability to grow the Internet of Things (“IoT”) and mobile portfolio outside of North America;

•our ability to grow our Ctrack/asset tracking solutions within North America;

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

•our ability to make scheduled payments ~~of the principal of, to pay interest~~ on, or to refinance our indebtedness, including our ~~term loan and~~ convertible notes obligations;

•our ability to introduce and sell new products that comply with current and evolving industry standards and government regulations;

•our ability to develop and maintain strategic relationships to expand into new markets;

•our ability to properly manage the growth of our business to avoid significant strains on our management and operations and disruptions to our business;

•our reliance on third parties to manufacture our products;

•our contract manufacturer’s ability to secure necessary supply to build our devices;

•increases in costs, disruption of supply or the shortage of semiconductors or other key components of our products;

•our ability to mitigate the impact of tariffs or other government-imposed sanctions;

•our ability to accurately forecast customer demand and order the manufacture and timely delivery of sufficient product quantities;

•our reliance on sole source suppliers for some products and devices used in our solutions;

•the continuing impact of uncertain global economic conditions on the demand for our products;

•the impact of geopolitical instability on our business;

•the emergence of global public health emergencies, such as the recent outbreak of the 2019 novel coronavirus (2019-nCoV), now known as “COVID-19”, which could extend lead times in our supply chain and lengthen sales cycles with our customers;

•direct and indirect effects of COVID-19 on our employees, customers and supply chain and the economy and financial markets;

•~~the impact that new or adjusted tariffs may have on the costs of components or our products, and our ability to sell products internationally;~~

•our ability to be cost competitive while meeting time-to-market requirements for our customers;

•our ability to meet the product performance needs of our customers in wireless broadband data access in industrial IoT (“IIoT”) markets;

•demand for fleet, vehicle and asset management software-as-a-service (“SaaS”) telematics solutions;

•our dependence on wireless telecommunication operators delivering acceptable wireless services;

•the outcome of any pending or future litigation, including intellectual property litigation;

•infringement claims with respect to intellectual property contained in our solutions;

•our continued ability to license necessary third-party technology for the development and sale of our solutions;

•the introduction of new products that could contain errors or defects;

•conducting business abroad, including foreign currency risks;

•the pace of 5G wireless network rollouts globally and their adoption by customers;

•our ability to be successful in divesting assets or businesses we wish to sell;

•our ability to make focused investments in research and development; and

•our ability to hire, retain and manage additional qualified personnel to maintain and expand our business.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this and other reports we file with or furnish to the Securities and Exchange Commission (“SEC”), including the information in “Item 1A. Risk Factors” included in Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (“Form 10-K”). If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate.

Trademarks

“Inseego”, “Inseego Subscribe”, “Inseego ManageTM ”, the Inseego logo, “DigiCore”, “Novatel Wireless”, the Novatel Wireless logo, “MiFi”, “MiFi Intelligent Mobile Hotspot”, “Ctrack”, the Ctrack logo, “Inseego North America”~~, “Inseego Subscribe”~~, and “Skyus” are trademarks or registered trademarks of Inseego and its subsidiaries. Other trademarks, trade names or service marks used in this report are the property of their respective owners.

As used in this report on Form 10-Q, unless the context otherwise requires, the terms “we,” “us,” “our,” the “Company” and “Inseego” refer to Inseego Corp., a Delaware corporation, and its wholly and majority-owned subsidiaries.

The following information should be read in conjunction with the condensed consolidated financial statements and the accompanying notes included in Part I, Item 1 of this report, as well as the annual consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, ~~2019,~~2020, contained in our Form 10-K.

Business Overview

Inseego Corp. is a leader in the design and development of fixed and mobile wireless solutions (advanced 4G and 5G NR), industrial IoT (“~~IoT”~~IIoT”) and cloud solutions for ~~large enterprise verticals,~~Fortune 500 enterprises, service providers, ~~and~~ small and medium-sized businesses, governments, and consumers around the globe. ~~Our customers include wireless service providers, Fortune 500 enterprises, consumers, governments and first responders.~~ Our product portfolio consists of fixed and mobile device-to-cloud solutions that provide compelling, intelligent, reliable and secure end-to-end IoT services with deep business intelligence. Inseego’s products and solutions, designed and developed in the U.S., power mission critical applications with a “zero unscheduled downtime” mandate, such as our 5G fixed wireless access (“FWA”) gateway solutions, 4G and 5G mobile broadband, ~~IoT~~IIoT applications such as SD WAN failover management, asset tracking and fleet management services. Our solutions are powered by our key wireless innovations in mobile and FWA technologies, including a suite of products employing the 5G NR standards, and purpose-built SaaS cloud platforms.

We have been at the forefront of the ways in which the world stays connected and accesses information, and protects, and derives intelligence from that information. With multiple first-to-market innovations across a number of wireless technologies, including 5G, and a strong and growing portfolio of hardware and software innovations for ~~IoT~~IIoT solutions, Inseego has been advancing technology and driving industry transformations for over 30 years. It is this proven expertise, commitment to quality, obsession with innovation and a relentless focus on execution that makes us a preferred global partner of service providers, distributors, value-added resellers, system integrators, and enterprises worldwide.

On February 24, 2021, we entered into a Share Purchase Agreement (the “Purchase Agreement”) with an affiliate of Convergence Partners (“Convergence”), an investment management firm in South Africa, to sell our Ctrack business operations in Africa, Pakistan and the Middle East (together, “Ctrack South Africa”), in an all-cash transaction for 528.9 million South African Rand (“ZAR”) (approximately $36.6 million United States Dollars (“USD”)) based on an exchange rate on June 30, 2021 of 14.32 ZAR to 1 USD). The Purchase Agreement provides for an adjustment to the purchase price based on a normalized level of net working capital. The consummation of the sale was subject to a number of customary conditions precedent. Additionally, the consummation of the sale was subject to Convergence closing an investment fund.

On July 30, 2021, we completed the sale of Ctrack South Africa. Initial cash proceeds of approximately $36600000.0 million were received. Final cash proceeds net of transaction cost are subject to foreign exchange rates as well as certain post-closing working capital adjustments that will be provided by Convergence and agreed upon by us no later than 35 business days after completion of the sale. The estimated gain upon sale is approximately $4.4 million, calculated based on the foreign exchange rate as of July 30, 2021. The actual gain may differ from this estimate, by up to $1 million to $2 million, as a result of post-closing working capital adjustments and related foreign exchange fluctuations.

Our Sources of Revenue

We provide intelligent wireless ~~3G,~~ 4G and 5G hardware products for the worldwide mobile communications and ~~in IoT~~IIoT markets. Our hardware products address multiple vertical markets including private LTE/5G networks, the First Responders Network Authority/Firstnet, SD-WAN, telematics, remote monitoring and surveillance, and fixed wireless access and mobile broadband devices. Our broad range of products principally includes intelligent 4G and 5G fixed wireless routers and gateways, and mobile hotspots, and wireless gateways and routers for ~~IoT~~IIoT applications, Gb speed 4G LTE hotspots and USB modems, ~~and~~ integrated telematics and mobile tracking hardware devices, which are supported by applications software and cloud services designed to enable customers to easily analyze data insights and configure/manage their hardware remotely. Our products currently operate on most major global cellular wireless networks. Our mobile hotspots sold under the MiFi brand have been sold to millions of end users, and provide subscribers with secure and convenient high-speed access to corporate, public and personal information through the Internet and enterprise networks. Our wireless standalone and USB modems and gateways allow us to address the rapidly growing and underpenetrated IoT market segments. Our telematics and mobile asset tracking hardware devices collect and control critical vehicle data and driver behaviors, and can reliably deliver that information to the cloud, all managed by our services enablement platforms.

Our MiFi customer base is comprised of wireless operators to whom we provide intelligent fixed and mobile wireless devices. These wireless operators include Verizon Wireless, AT&T, T-Mobile and Sprint in the United States, Rogers in Canada, Telstra in Australia, as well as other international wireless operators, distributors and various companies in other vertical markets and geographies.

We sell our wireless routers for ~~IoT,~~IIoT, integrated telematics and mobile tracking hardware devices through our direct sales force, value-added resellers and through distributors. The customer base for our ~~IoT~~IIoT products is comprised of transportation companies, industrial enterprises, manufacturers, application service providers, system integrators and distributors in various

industries, including fleet and vehicle transportation, aviation ground service management, energy and industrial automation, security and safety, medical monitoring and government. Integrated telematics and asset tracking devices are also sold under our Ctrack brand and provided as part of our integrated SaaS solutions.

We sell SaaS, software and services solutions across multiple mobile and ~~IoT~~IIoT vertical markets, including fleet management, vehicle telematics, stolen vehicle recovery, asset tracking, monitoring, business connectivity and subscription management. Our SaaS platforms are device-agnostic and provide a standardized, scalable way to order, connect and manage remote assets and to improve business operations. The platforms are flexible and support both on-premise server or cloud-based deployments and are the basis for the delivery of a wide range of IoT services in multiple industries.

We classify our revenues from the sale of our products and services into two distinct groupings, specifically IoT & Mobile Solutions and Enterprise SaaS Solutions. Both IoT & Mobile Solutions and Enterprise SaaS Solutions revenues include any hardware and software required for the respective solution. Effective in the third quarter ended on September 30, 2020, our IoT & Mobile Solutions now also includes our Device Management System, ~~(“DMS”),~~ rebranded as Inseego SubscribeTM, a hosted SaaS platform that helps organizations manage the selection, deployment and spend of their customer’s wireless assets, helping

them save money on personnel and telecom expenses. We reclassified our Inseego Subscribe revenue stream, from Enterprise SaaS solutions, to better reflect our end user delineation.

Our SaaS delivery platforms include our Ctrack platforms, which provide fleet, vehicle, aviation, asset and other telematics applications. Since the sale of our Ctrack South Africa operations was completed on July 30, 2021, certain portions of our SaaS revenue will no longer be generated, but Inseego will continue to provide telematics solutions in the rest of the world, including in North America, Europe and Australia.

Factors Which May Influence Future Results of Operations

Net Revenues. We believe that our future net revenues may be influenced by a number of factors including:

•economic environment and related market conditions;

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

•acceptance of our products by new vertical markets;

•growth in the aviation ground vertical;

•rate of change to new products;

•~~phase-out of earlier generation wireless technologies (such as 3G);~~

•deployment of 5G infrastructure equipment;

•adoption of 5G end point products;

•competition in the area of 5G technology;

•trade protection measures (such as tariffs and duties) and import or export licensing requirements;

•our contract manufacturer’s ability to secure necessary supply to of semiconductors and other key components to build our devices;

•product pricing;

•the impact of the COVID-19 pandemic on our business; and

•the sale of our Ctrack South Africa operations;

•changes in technologies.

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

We anticipate introducing additional products during the next twelve months, including SaaS telematics solutions and additional service offerings, IoT hardware and services, and other mobile and fixed wireless devices targeting the emerging 5G market. We continue to develop and maintain strategic relationships with service providers and other wireless industry leaders such as Verizon Wireless, T-Mobile, Sprint, and Qualcomm. Through strategic relationships, we have been able to maintain market penetration by leveraging the resources of our channel partners, including their access to distribution resources, increased sales opportunities and market opportunities.

The demand environment for our 5G products during the three months ended ~~September~~June 30, ~~2020~~2021 was consistent with our expectations, with continued demand for our products due to a dramatic increase around the world in remote or tele-work and

learning due to the COVID-19 pandemic. ~~While~~Recently, our IoT & Mobile Solutions have experienced lower sales of LTE gigabit hotspots as COVID-19 pandemic demand ~~for our products continues to be robust, the~~have eased. The macroeconomic environment remains uncertain and the demand for our products in the prior year may not be sustainable for the long term. We will continue to monitor the implications of the COVID-19 pandemic on our business, as well as our customers’ and suppliers’ businesses.

Cost of Net Revenues. Cost of net revenues includes all costs associated with our contract manufacturers, distribution, fulfillment and repair services, delivery of SaaS services, warranty costs, amortization of intangible assets, royalties, operations overhead, costs associated with cancellation of purchase orders and costs related to outside services. Also included in cost of net revenues are costs related to inventory adjustments, including acquisition-related amortization of the fair value of inventory, as well as any write downs for excess and obsolete inventory and abandoned product lines. Inventory adjustments are impacted primarily by demand for our products, which is influenced by the factors discussed above.

Operating Costs and Expenses. Our operating costs consist of three primary categories: research and development; sales and marketing; and general and administrative costs.

Research and development is at the core of our ability to produce innovative, leading-edge products. These expenses consist primarily of engineers and technicians who design and test our highly complex products and the procurement of testing and certification services.

Sales and marketing expenses consist primarily of our sales force and product-marketing professionals. In order to maintain strong sales relationships, we provide co-marketing, trade show support and product training. We are also engaged in

a wide variety of marketing activities, such as awareness and lead generation programs as well as product marketing. Other marketing initiatives include public relations, seminars and co-branding with partners.

General and administrative expenses include primarily corporate functions such as accounting, human resources, legal, administrative support and professional fees. This category also includes the expenses needed to operate as a publicly-traded company, including compliance with the Sarbanes-Oxley Act of 2002, as amended, SEC filings, stock exchange fees and investor relations expense. Although general and administrative expenses are not directly related to revenue levels, certain expenses, such as legal expenses and provisions for bad debts, may cause significant volatility in future general and administrative expenses, which may, in turn, impact net revenue levels.

We have undertaken certain restructuring activities and cost reduction initiatives in an effort to better align our organizational structure and costs with our strategy. Restructuring charges consist primarily of severance costs incurred in connection with the reduction of our workforce and facility exit-related costs, as well as discontinued operations, if any.

As part of our business strategy, we may review acquisition or divestiture opportunities that we believe would be advantageous or complementary to the development of our business. Given our current cash position and recent losses, any additional acquisitions we make would likely involve issuing stock in order to provide the purchase consideration for the acquisitions. If we make any additional acquisitions, we may incur substantial expenditures in conjunction with the acquisition process and the subsequent assimilation of any acquired business, products, technologies or personnel.

Critical Accounting Policies and Estimates

In the notes to our consolidated financial statements and in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Form 10-K, we have disclosed those accounting policies that we consider to be significant in determining our results of operations and financial condition. There have been no material changes to those policies that we consider to be significant since the filing of our Form ~~10-K, other than our policy on derivative financial instruments as disclosed below.~~10-K. The accounting principles used in preparing our unaudited condensed consolidated financial statements conform in all material respects to accounting principles generally accepted in the U.S.

~~Derivative Financial Instruments~~

The Company evaluates stock options, stock warrants, debt instruments and other contracts to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for under the relevant sections of the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative financial instrument and is marked-to-market at each balance sheet date and recorded as an asset or liability. In the event that the fair value is recorded as an asset or liability, the change in fair value is recorded in the consolidated statement of operations as other income or other expense. Upon conversion, exercise or expiration of a derivative financial instrument, the instrument is marked to fair value.

~~Convertible Debt Instruments~~

We account for our convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) by separating the liability and equity components of the instruments in a manner that reflects our nonconvertible debt borrowing rate. We determine the carrying amount of the liability component by measuring the fair value of similar debt instruments that do not have the conversion feature. If a similar debt instrument does not exist, we estimate the fair value by using assumptions that market participants would use in pricing a debt instrument, including market interest rates, credit standing, yield curves and volatility. Determining the fair value of the debt component requires the use of accounting estimates and assumptions. These estimates and assumptions require significant judgment and could have a significant impact on the determination of the debt component and the associated non-cash interest expense.

For convertible debt that may be settled in cash upon conversion, we assign a value to the debt component equal to the estimated fair value of similar debt instruments without the conversion feature, which could result in recording the debt instrument at a discount. If the debt instrument is recorded at a discount, we amortize the debt discount over the life of the debt instrument as additional non-cash interest expense utilizing the effective interest method.

~~We evaluate embedded features within convertible debt that will be settled in shares upon conversion under Accounting Standards Codification (“ASC”) 815,~~ ~~Derivatives and Hedging~~ (“ASC 815”), to determine whether the embedded feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings.

If an embedded derivative is bifurcated from share-settled convertible debt, we record the debt component at cost less a debt discount equal to the bifurcated derivative’s fair value. We amortize the debt discount over the life of the debt instrument as additional non-cash interest expense utilizing the effective interest method. The convertible debt and the derivative liability are presented in total on the unaudited condensed consolidated balance sheet. The derivative liability will be remeasured at each reporting period with changes in fair value recorded in the consolidated statements of operations in other income (expense), net.

Results of Operations

Three Months Ended ~~September~~June 30, ~~2020~~2021 Compared to Three Months Ended ~~September~~June 30, ~~2019~~2020

Net revenues. Net revenues for the three months ended ~~September~~June 30, ~~2020~~2021 were ~~$90.2~~$65.7 million, compared to ~~$62.7~~$80.7 million for the same period in ~~2019.~~2020.

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


		Three Months Ended September 30,				Change					Three Months Ended June 30,				Change
Product Category	Product Category	2020		2019		$		%		Product Category	2021		2020		$		%
IoT & Mobile Solutions	IoT & Mobile Solutions	$	77,342	$	47,733	$	29,609	62.0	%	IoT & Mobile Solutions	$	51,836	$	69,314	$	(17,478)	(25.2)	%
Enterprise SaaS Solutions	Enterprise SaaS Solutions	12,898		14,983		(2,085)		(13.9)	%	Enterprise SaaS Solutions	13,857		11,375		2,482		21.8	%
Total	Total	$	90,240	$	62,716	$	27,524	43.9	%	Total	$	65,693	$	80,689	$	(14,996)	(18.6)	%

IoT & Mobile Solutions. The ~~increase~~decrease in IoT & Mobile Solutions net revenues is primarily ~~a result of increased sales~~due to decreases in our enterprise and carrier offerings within IoT & Mobile Solutions, and lower sales of LTE gigabit hotspots ~~the introduction~~as COVID-19 pandemic demand eased, partially offset by increased sales of our second-generation 5G hotspot related to our MiFi business and increased revenues in our ~~DMS~~Inseego Subscribe business due to subscriber growth. ~~As a result of the COVID-19 pandemic, there has been an increase in demand for our products due to a dramatic increase around the world in remote or tele-work and learning.~~

Enterprise SaaS Solutions. ~~The decrease in~~ Enterprise SaaS Solutions net revenues ~~is primarily a result of lower Ctrack system revenues due to the effects of~~increased year-over-year as we experienced COVID-19 related installation restrictions in fiscal 2020 and ~~the~~such imposed restrictions were lifted in fiscal 2021. The effect of ~~strengthening~~the weakening U.S. Dollar to South Africa Rand foreign exchange rates on international ~~sales.~~sales also contributed to the increase in net revenues.

Cost of net revenues. Cost of net revenues for the three months ended ~~September~~June 30, ~~2020~~2021 was ~~$65.1~~$45.3 million, or ~~72.1%~~69.0% of net revenues, compared to ~~$44.1~~$58.7 million, or ~~70.3%~~72.7% of net revenues, for the same period in ~~2019.~~2020.

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


		Three Months Ended September 30,				Change					Three Months Ended June 30,				Change
Product Category	Product Category	2020		2019		$		%		Product Category	2021		2020		$		%
IoT & Mobile Solutions	IoT & Mobile Solutions	$	60,135	$	38,482	$	21,653	56.3	%	IoT & Mobile Solutions	$	39,740	$	54,240	$	(14,500)	(26.7)	%
Enterprise SaaS Solutions	Enterprise SaaS Solutions	4,935		5,609		(674)		(12.0)	%	Enterprise SaaS Solutions	5,604		4,449		1,155		26.0	%

Total	Total	$	65,070	$	44,091	$	20,979	47.6	%	Total	$	45,344	$	58,689	$	(13,345)	(22.7)	%

IoT & Mobile Solutions. The ~~increase~~decrease in IoT & Mobile Solutions cost of net revenues is primarily a result of ~~the increased~~lower sales of ~~our~~ LTE gigabit hotspots, and 5G hotspots, as well as associated expenses such as freight and royalties. As a result of the COVID-19 pandemic, there has been an increase in demand for our products due to a dramatic increase around the world in remote or tele-work and learning.hotspots.

Enterprise SaaS Solutions. Enterprise SaaS Solutions cost of net revenues ~~decreased as a result of lower Ctrack system revenues, partially offset~~increased by 26.0% compared to the ~~effect of strengthening~~same period in 2020 primarily due to increased sales, and the weakening U.S. Dollar to South Africa Rand foreign exchange rates on international costs.

Gross profit. Gross profit for the three months ended ~~September~~June 30, ~~2020~~2021 was ~~$25.2~~$20.3 million, or a gross margin of ~~27.9%~~31.0%, compared to ~~$18.6~~$22.0 million, or a gross margin of ~~29.7%~~27.3%, for the same period in ~~2019.~~2020. The increase in gross ~~profit~~margin was primarily attributable to the ~~increase in IoT & Mobile Solutions revenues.~~more favorable mix of our product offerings, as well as favorable margins on our Inseego Subscribe revenue.

Research and development expenses. Research and development expenses for the three months ended ~~September~~June 30, ~~2020~~2021 were ~~$10.7~~$11.8 million, or ~~11.8%~~17.9% of net revenues, compared to ~~$6.7~~$10.5 million, or ~~10.6%~~13.1% of net revenues, for the same period in ~~2019.~~2020. The increase was primarily a result of ~~increased~~ staffing, test units, and other development spending related to our 5G product ~~programs.~~programs, partially offset by the timing and amount of bonus grants to eligible employees during the first quarter of fiscal 2021, compared to bonus grants awarded to employees during the second quarter of fiscal 2020. See Note 6.

Share-based Compensation

in the accompanying unaudited condensed consolidated financial statements for further information.

Sales and marketing expenses. Sales and marketing expenses for the three months ended ~~September~~June 30, ~~2020~~2021 were ~~$8.4~~$9.8 million, or ~~9.4%~~14.9% of net revenues, compared to ~~$7.1~~$8.6 million, or ~~11.4%~~10.7% of net revenues, for the same period in ~~2019.~~2020. The increase was primarily a result of ~~an increase~~ higher spend on marketing 5G products, partially offset by the timing and amount of bonus grants to eligible employees during the first quarter of fiscal 2021, compared to bonus grants awarded to employees during the

second quarter of fiscal 2020. See Note 6. Share-based Compensation in ~~employment costs attributable to an increase in headcount.~~the accompanying unaudited condensed consolidated financial statements for further information.

General and administrative expenses. General and administrative expenses for the three months ended ~~September~~June 30, ~~2020~~2021 were ~~$8.7~~$7.4 million, or ~~9.6%~~11.3% of net revenues, compared to ~~$7.1~~$7.4 million, or ~~11.4%~~9.2% of net revenues, for the same period in ~~2019.~~2020. The increase was primarily a ~~result~~result of ~~increased employment costs attributable to an increase in headcount and non-recurring~~higher legal expenses, partially offset by the ~~effect~~timing and amount of ~~strengthening U.S. Dollar foreign exchange rates on international costs.~~bonus grants to eligible employees during the first quarter of 2021, compared to bonus grants awarded to employees during the second quarter of fiscal 2020. See Note 6. Share-based Compensation in the accompanying unaudited condensed consolidated financial statements for further information.

Amortization of purchased intangible assets. Amortization of purchased intangible assets for each of the three months ended ~~September~~June 30, 2021 and 2020 was $0.7 million and ~~2019~~$0.8 million, respectively. The decrease was ~~$0.8 million.~~primarily as a result of certain purchased intangible assets being fully amortized as of the fourth quarter of 2020.

Impairment of capitalized software. During the three months ended June 30, 2021, we recorded a loss of $1.2 million on capitalized software development costs. There was no such expense for the same period in 2020.

Loss on debt conversion and extinguishment, net. The loss on debt conversion and extinguishment, net of ~~$1.2~~$67.2 million ~~for~~during the three months ended ~~September~~June 30, 2020 was primarily ~~represents~~related to the ~~loss on debt conversion~~extinguishment of ~~2025 Notes. There~~the 2022 Notes, while there was no such expense for the same period in ~~2019.~~fiscal 2021.

Interest expense, net. Interest expense, net, for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 was $1.7 million and ~~$5.1~~$3.2 million, respectively. The decrease in interest expense was primarily due to the reduction in debt associated with the conversion of debt into equity during the three months ended June 30, 2020, payment in full of the Term Loan during the three months ended June 30, 2020, as well as a lower interest rate on the 2025 Notes, as compared to the 2022 Notes and our previous term loan, partially offset by the higher principal amount of 2025 Notes.

Other income (expense), net. Other ~~income,~~expense, net, for the three months ended ~~September~~June 30, ~~2020~~2021 was ~~$1.1~~$0.6 million, which primarily includes the fair value adjustment related to our interest make-whole ~~payment.~~arrangement, as well as transaction costs incurred related to the sale of Ctrack South Africa. For the same period in ~~2019,~~2020, other ~~expense,~~income, net, was ~~$0.3~~$0.8 million, which primarily ~~included foreign currency transaction gains and losses.~~includes the fair value adjustment related to our interest make-whole arrangement.

Income tax ~~provision.~~provision (benefit). The income tax provision of $0.2 million for the three months ended ~~September~~June 30, 2021 and the income tax benefit of $0.1 million for the same period in 2020, respectively, primarily relate to provision in fiscal 2021 or benefits in fiscal 2020 from certain of our entities in foreign jurisdictions.

Net loss (income) attributable to noncontrolling interests. Net income attributable to noncontrolling interests for the three months ended June 30, 2021 was nil, compared to a net loss attributable to noncontrolling interests of $6,000 for the same period in 2020.

Series E preferred stock dividends. During the three months ended June 30, 2021 and 2020, we recorded dividends of $0.9 million and $0.8 million, respectively, on our Fixed-Rate Cumulative Perpetual Preferred Stock, Series E, par value $0.001 per share (the “Series E Preferred Stock”). The increase was primarily attributable to the additional shares of Series E Preferred Stock issued in March 2020. See Note 8. Private Placements and Public Offering in the accompanying unaudited condensed consolidated financial statements for further information.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Net revenues. Net revenues for the six months ended June 30, 2021 were $123.3 million, compared to $137.5 million for the same period in 2020.

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


	Six Months Ended June 30,				Change
Product Category	2021		2020		$		%
IoT & Mobile Solutions	94,795		$	111,729	$	(16,934)	(15.2)	%
Enterprise SaaS Solutions	28,495		25,800		2,695		10.4	%
Total	$	123,290	$	137,529	$	(14,239)	(10.4)	%

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

Enterprise SaaS Solutions. Enterprise SaaS Solutions net revenues increased year-over-year as we experienced COVID-19 related installation restrictions in fiscal 2020 and such imposed restrictions were lifted in fiscal 2021. The effect of the weakening U.S. Dollar to South Africa Rand foreign exchange rates on international sales also contributed to the increase in net revenues.

Cost of net revenues. Cost of net revenues for the six months ended June 30, 2021 was $84.5 million or 68.5% of net revenues, compared to $98.3 million or 71.5% of net revenues, for the six months ended June 30, 2020.

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


	Six Months Ended June 30,				Change
Product Category	2021		2020		$		%
IoT & Mobile Solutions	73,178		88,279		(15,101)		(17.1)	%
Enterprise SaaS Solutions	11,288		10,023		1,265		12.6	%
Total	$	84,466	$	98,302	$	(13,836)	(14.1)	%

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

Enterprise SaaS Solutions.Enterprise SaaS Solutionscost of net revenues increased by 12.6% compared to the same period in 2020 primarily due to increased sales, and the weakening U.S. Dollar to South Africa Rand foreign exchange rates on international costs.

Gross profit. Gross profit for the six months ended June 30, 2021 was $38.8 million, or a gross margin of 31.5%, compared to $39.2 million, or a gross margin of 28.5%, for the same period in 2020. The increase in gross margin was primarily attributable to the favorable mix of our product offerings, as well as favorable margins on our Inseego Subscribe revenue.

Research and development expenses. Research and development expenses for the six months ended June 30, 2021 were $26.3 million, or 21.4% of net revenues, compared to $18.8 million, or 13.6% of net revenues, for the same period in 2020. The increase was primarily a result of staffing, test units, other development spending related to 5G product programs, and the amount of bonus grants to eligible employees during the six months ended June 30, 2021 compared to the amount of bonus

grants awarded to eligible employees during the six months ended June 30, 2020. See Note 6. Share-based Compensation in the accompanying unaudited condensed consolidated financial statements for further information.

Sales and marketing expenses. Sales and marketing expenses for the six months ended June 30, 2021 were $20.8 million, or 16.9% of net revenues, compared to $17.4 million, or 12.7% of net revenues, for the same period in 2020. The increase was primarily a result of higher spend on marketing 5G products, and the amount of bonus grants to eligible employees during the six months ended June 30, 2021 compared to the amount of bonus grants awarded to eligible employees during the six months ended June 30, 2020. See Note 6. Share-based Compensation in the accompanying unaudited condensed consolidated financial statements for further information.

General and administrative expenses. General and administrative expenses for the six months ended June 30, 2021 were $16.1 million, or 13.0% of net revenues, compared to $14.6 million, or 10.6% of net revenues, for the same period in 2020. The increase was primarily a result of the amount of bonus grants to eligible employees during the six months ended June 30, 2021 compared to the amount of bonus grants awarded to eligible employees during the six months ended June 30, 2020. See Note 6. Share-based Compensation in the accompanying unaudited condensed consolidated financial statements for further information.

Amortization of purchased intangible assets. Amortization of purchased intangible assets for each of the six months ended June 30, 2021 and 2020 was $1.1 million and $1.6 million, respectively. The decrease was primarily as a result of certain purchased intangible assets being fully amortized as of the fourth quarter of 2020.

Impairment of capitalized software. During the six months ended June 30, 2021, we recorded a loss of $1.2 million on capitalized software development costs. There was no such expense for the same period in 2020.

Loss on debt conversion and extinguishment. The loss on debt conversion and extinguishment, net for each of the six months ended June 30, 2021 and 2020 was $0.4 million and $75.2 million, respectively, and primarily represents the loss on debt conversion of the 2025 Notes and debt conversion and extinguishment of the 2022 Notes, respectively.

Interest expense, net. Interest expense, net for each of the six months ended June 30, 2021 and 2020 was $3.5 million and $6.5 million, respectively. The decrease in interest expense was primarily due to the lower interest rate on the 2025 Notes, as compared to the 2022 Notes and our previous term loan, partially offset by the higher principal amount of the 2025 Notes.

Other income (expense), net. Other income, net, for each of the six months ended June 30, 2021 and 2020 was $1.1 million and $1.8 million, respectively, which primarily includes the fair value adjustment related to our interest make-whole arrangement as well as foreign currency transaction gains and losses.

Income tax provision (benefit). The income tax provision of $0.4 million for the six months ended June 30, 2021 and the income tax benefit of $24,000 for the six months ended June 30, 2020, ~~and 2019,~~respectively, primarily ~~related~~relate to provision in fiscal 2021 or benefits in fiscal 2020 from certain of our entities in foreign jurisdictions.

Net loss (income) attributable to noncontrolling interests. Net income attributable to noncontrolling interests for the ~~three~~six months ended ~~September~~June 30, ~~2020~~2021 was ~~$3,000, compared to a net loss attributable to noncontrolling interests of $17,000 for the same period in 2019.~~

~~Series E preferred stock dividends.~~ During the three months ended September 30, 2020 and 2019, we recorded dividends of $0.8 million and $0.1 million, respectively, on our Fixed-Rate Cumulative Perpetual Preferred Stock, Series E, par value $0.001 per share (the “Series E Preferred Stock”).

~~Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019~~

~~Net revenues. Net revenues for the nine months ended September 30, 2020 were $227.8 million, an increase of $60.6 million, or 36.3%, compared to the same period in 2019.~~

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

Nine Months Ended
September 30, Change
Product Category 2020 2019 $ %
IoT & Mobile Solutions $ 189,071 $ 123,548 $ 65,523 53.0 %
Enterprise SaaS Solutions 38,698 43,615 (4,917) (11.3) %
Total $ 227,769 $ 167,163 $ 60,606 36.3 %

~~IoT & Mobile Solutions.~~ The increase in IoT & Mobile Solutions net revenues is primarily a result of increased sales in our LTE gigabit hotspots, 5G hotspots and USB modems, related to our MiFi business, and increased revenues in our DMS business due to subscriber growth. As a result of the COVID-19 pandemic, there has been an increase in demand for our products due to a dramatic increase around the world in remote or tele-work and learning.

~~Enterprise SaaS Solutions.~~ ~~The decrease in Enterprise SaaS Solutions net revenues is primarily a result of lower Ctrack system revenues due to the effects of COVID-19 in fiscal 2020.~~

~~Cost of net revenues.~~ ~~Cost of net revenues for the nine months ended September 30, 2020 was $163.4 million or 71.7% of net revenues, compared to $118.2 million or 70.7% of net revenues, for same period in 2019.~~

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

Nine Months Ended
September 30, Change
Product Category 2020 2019 $ %
IoT & Mobile Solutions $ 148,414 $ 101,607 $ 46,807 46.1 %
Enterprise SaaS Solutions 14,958 16,616 (1,658) (10.0) %
Total $ 163,372 $ 118,223 $ 45,149 38.2 %

~~IoT & Mobile Solutions.~~The increase in IoT & Mobile Solutions cost of net revenues is primarily a result of the increased sales in our LTE gigabit hotspots, 5G hotspots, and USB modems related to our MiFi business, as well as associated expenses such as freight and royalties. As a result of the COVID-19 pandemic, there has been an increase in demand for our products due to a dramatic increase around the world in remote or tele-work and learning.

~~Enterprise SaaS Solutions.Enterprise SaaS Solutionscost of net revenues decreased slightly as a result of lower Ctrack system revenues, partially offset by the effect of strengthening U.S. Dollar foreign exchange rates on international costs.~~

~~Gross profit.~~ Gross profit for the nine months ended September 30, 2020 was $64.4 million, or a gross margin of 28.3%, compared to $48.9 million, or a gross margin of 29.3%, for the same period in 2019. The increase in gross profit was primarily attributable to the increase in IoT & Mobile Solutions revenues.

~~Research and development expenses.~~ Research and development expenses for the nine months ended September 30, 2020 were $29.4 million, or 12.9% of net revenues, compared to $15.3 million, or 9.2% of net revenues, for the same period in 2019. The increase was primarily a result of increased staffing, test units, and other development spending related to our 5G product programs.

~~Sales and marketing expenses.~~ Sales and marketing expenses for the nine months ended September 30, 2020 were $25.8 million, or 11.3% of net revenues, compared to $20.8 million, or 12.4% of net revenues, for the same period in 2019. The increase was primarily a result of an increase in employment costs attributable to an increase in headcount.

~~General and administrative expenses.~~ General and administrative expenses for the nine months ended September 30, 2020 were $23.3 million, or 10.2% of net revenues, compared to $21.1 million, or 12.6% of net revenues, for the same period in 2019. The increase was primarily a result of an increase in employment costs and non-recurring legal expenses.

~~Amortization of purchased intangible assets~~. The amortization of purchased intangible assets for the nine months ended September 30, 2020 and 2019 was $2.4 million and $2.6 million, respectively, the decrease was primarily the result of changes in foreign exchange rates.

~~Loss on debt conversion and extinguishment.~~ The loss on debt conversion and extinguishment expense of $76.4 million for the nine months ended September 30, 2020 primarily represents the loss on debt conversion and extinguishment of the 2022 Notes, including a $7.9 inducement expense incurred in connection with certain conversions of the 2022 Notes, and loss recorded on debt conversion of 2025 Notes. There was no such expense for the same period in 2019.

~~Interest expense, net.~~ Interest expense, net for each of the nine months ended September 30, 2020 and 2019 was $8.2 million and $15.3 million, respectively. Interest expense is primarily a result of the interest expense and amortization of the debt discount and debt issuance costs related to our Term Loan, 2022 Notes and 2025 Notes. The decrease in interest expense was due to the conversion of debt into equity in the current fiscal year, payment in full of the Term Loan during the nine months ended September 30, 2020, as well as a lower interest rate on the 2025 Notes, as compared to the 2022 Notes.

~~Other income (expense), net.~~ Other income, net, for the nine months ended September 30, 2020 was $2.8 million, which primarily includes the fair value adjustment related to our interest make-whole payment as well as foreign currency transaction gains and losses, and gains on the sale of certain fixed assets. Other expense, net for the same period in 2019 was $0.1 million, which primarily consisted of foreign currency transaction gains and losses.

~~Income tax provision.~~ ~~The income tax provision of~~ $0.2 million, for the nine months ended September 30, 2020 and the income tax provision of $0.8 million for the same period in 2019, respectively, primarily relate to certain of our entities in foreign jurisdictions.

~~Net income attributable to noncontrolling interests.~~ ~~Net income attributable to noncontrolling interests for the nine months ended September 30, 2020 was $29,000,~~ compared to a net income attributable to noncontrolling interests of ~~$57,000~~$26,000 for the same period in ~~2019.~~2020.

Series E preferred stock dividends. During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, and ~~2019,~~2020 we recorded ~~accrued~~ dividends of ~~$2.1~~$1.8 million and ~~$0.1~~$1.2 million, respectively, on our Series E Preferred Stock. The increase was primarily attributable to the additional shares of Series E Preferred Stock issued in March 2020. See Note 8. Private Placements and Public Offering in the accompanying unaudited condensed consolidated financial statements for further information.

Liquidity and Capital Resources

~~Our principal sources~~As of ~~liquidity are our existing~~June 30, 2021, the Company had available cash and cash equivalents ~~and cash generated from operations and financing sources. As of September 30, 2020, we had~~totaling $36.7 million, including $5.8 million cash and cash equivalents ~~of $42.0 million~~classified as held-for-sale, and working capital of ~~$40.7 million.~~

~~On August 6, 2018, we completed a private placement of 12,062,000 shares of common stock~~$32.4 million, excluding assets and ~~warrants to purchase an additional 4,221,700 shares of common stock (the “2018 Warrants”).~~

On March 28, 2019, the 2018 Warrants were exercised at an exercise price of $2.52 per share, for aggregate cash proceeds to the Company of approximately $10.6 million. In connection with the exercise of the 2018 Warrants, on March 28, 2019, the Company issued additional warrants to purchase 2,500,000 shares of common stock. The new warrants have an initial exercise price of $7.00 per share, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, will be exercisable at any time on or after September 28, 2019, and will expire on June 30, 2022.

On August 9, 2019, we completed a private placement of 10,000 shares of Series E Preferred Stock, for an aggregate purchase price of $10.0 million in accordance with the terms and provisions of a Securities Purchase Agreement, dated August 9, 2019, by and among the Company and certain accredited investors.liabilities classified as held-for-sale.

On March 6, 2020, we ~~completed a private placement of~~issued and sold 25,000 ~~additional~~ shares of Series E Preferred Stock for an aggregate purchase price of $25.0 ~~million in accordance with the terms and provisions of a Securities Purchase Agreement, dated March 6, 2020, by and among the Company and an accredited investor.~~million.

In the first quarter of 2020, $59.9 million of our 5.5% convertible senior notes due 2022 (the “2022 Notes” formerly referred to as the “Inseego Notes”) were exchanged for common stock in private exchange transactions. Additionally, in the second quarter of 2020, we restructured our outstanding debt by completing a $100.0 million registered public offering (the “Offering”) of 3.25% convertible senior notes due 2025 (the “2025 Notes”) and also entered into privately-negotiated Exchange Agreements, pursuant to which an aggregate of ~~$45~~$45.0 million in principal amount of the 2022 Notes were exchanged for an aggregate of $32.0 million in cash ~~paid to the lender~~ and $80.4 million in principal amount of the 2025 ~~Notes. (“the Private~~Notes (the “Private Exchange

Transactions”). We also used a portion of the proceeds from the Offering to repay in full our previous term loan. In the third quarter of 2020, we redeemed the remaining $2,000 principal amount of the 2022 Notes.

During the quarter ended September 30, 2020, certain holders of the 2025 Notes converted an aggregate of approximately $13.5 million principal amount of the 2025 Notes into shares of the Company’s common stock in accordance with the terms of such notes.

As of ~~September~~June 30, ~~2020,~~2021, our outstanding debt primarily consisted of ~~$166.9~~$161.9 million in principal amount of 2025 Notes.

On January 25, 2021, we entered into an Equity Distribution Agreement with Canaccord Genuity LLC (the “Agent”), pursuant to which we may offer and sell, from time to time, through or to the Agent, up to $40.0 million of shares of our common stock (the “ATM Offering”). In January 2021, we sold 1,516,073 shares of common stock, at an average price of $20.11 per share, for net proceeds of $29.4 million, after deducting underwriter fees and discounts of $0.9 million, and other offering fees, pursuant to the ATM Offering.

~~Term Loan~~On July 30, 2021, the Company completed the sale of Ctrack South Africa. Initial cash proceeds of approximately $36600000.0 million were received. Final cash proceeds net of transaction cost will be subject to foreign exchange rates as well as certain post-closing working capital adjustments that will be provided by Convergence and agreed upon by the Company no later than 35 business days after completion of the sale.

We have a history of operating and net losses and overall usage of cash from operating and investing activities. Our management believes that our cash and cash equivalents, together with anticipated cash flows from operations, will be sufficient to meet our cash flow needs for the next twelve months from the filing date of this report. Our ability to attain more profitable operations and continue to generate positive cash flow is dependent upon achieving a level and mix of revenues adequate to support our evolving cost structure. If events or circumstances occur such that we do not meet its operating plan as expected, or if we become obligated to pay unforeseen expenditures as a result of ongoing litigation, we may be required to raise capital, reduce planned research and development activities, incur additional restructuring charges or reduce other operating expenses which could have an adverse impact on our ability to achieve our intended business objectives.

Our liquidity could be impaired if there is any interruption in our business operations, a material failure to satisfy our contractual commitments or a failure to generate revenue from new or existing products. There can be no assurance that any required or desired restructuring or financing will be available on terms favorable to us, or at all. Additionally, we are uncertain of the full extent to which the COVID-19 pandemic will impact our business, operations and financial results.

Contractual Obligations and Commitments

On August 23, 2017, the Company and certain of its direct and indirect subsidiaries, as guarantors, entered into a credit agreement (the “Credit Agreement”) with Cantor Fitzgerald Securities, as administrative agent and collateral agent, and certain funds managed by Highbridge Capital Management, LLC, as lenders (the “Lenders”). Pursuant to the Credit Agreement, the Lenders provided the Company with a term loanThere were no material changes in our contractual obligations in the ~~principal amount~~second quarter of ~~$48.0 million (the “Term Loan”) with a maturity date of August 23, 2020.~~

On March 31, 2020, we issued 2,330 shares of Series E Preferred Stock to South Ocean Funding, LLC (“South Ocean”), the Lender holding all of the aggregate principal amount then outstanding under the Credit Agreement in satisfaction of all then accrued interest under the Credit Agreement. South Ocean is an affiliate of Golden Harbor Ltd.

On May 12, 2020, we used a portion of the proceeds from the Offering to repay in full the Term Loan and terminate the Credit Agreement. The amounts paid included $47.5 million in outstanding principal, approximately $0.5 million in interest accrued thereon, and prepayment fees of $1.4 million. We also used a portion of the proceeds from the Offering to repurchase the 2,330 shares of Series E Preferred Stock which had been issued to satisfy accrued interest under the Credit Agreement, for $2.4 million.

~~The Term Loan bore interest at a rate per annum equal to the three-month LIBOR, but in no event less than 1.00%, plus 7.625%.~~2021.

Convertible Notes

2025 Notes

On May 12, 2020, we completed a registered public Offering of $100.0 million aggregate principal amount of 2025 Notes.

On May 12, 2020, we also entered into separate privately-negotiated Exchange Agreements certain holders of the 2022 Notes. Pursuant to the Exchange Agreements, each of these noteholders agreed to exchange the 2022 Notes that they held (representing an aggregate of $45.0 million principal amount of 2022 Notes with an estimated fair value of approximately $112.4 million as of the date of exchange) for an aggregate of $32.0 million in cash and $80.4 million principal amount of 2025 Notes in concurrent Private Exchange Transactions. The 2025 Notes issued in the Private Exchange Transactions are part of the same series as the 2025 Notes issued in the Offering.

We issued the 2025 Notes 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 us and the Trustee.

Holders of the 2025 Notes may convert the 2025 Notes into shares of our common stock (together with cash in lieu of any fractional share), at their option, at any time until the close of business on the scheduled trading day immediately before the maturity date. Upon conversion of the 2025 Notes, we will deliver for each $1,000 principal amount of 2025 Notes converted a number of shares of common stock (together with cash in lieu of any fractional share), equal to the conversion rate.

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.

Holders of the 2025 Notes who convert their 2025 Notes may also be entitled to receive, under certain circumstances, an interest make-whole payment payable in, at the Company’s election, either cash or shares of the Common Stock (together with cash in lieu of any fractional share).

If a fundamental change (as defined in the Indenture) occurs at any time prior to the maturity date, then the noteholders may require us to repurchase their 2025 Notes at a cash repurchase price equal to the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. If a

make-whole fundamental change (as defined in the Indenture) occurs, then we will in certain circumstances increase the conversion rate for a specified period of time.

The 2025 Notes will be redeemable, in whole or in part, at our option at any time, and from time to time, on or after May 6, 2023 and on or before the scheduled trading day before the maturity date, at a cash redemption price equal to the principal amount of the 2025 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, as long as the last reported sale price per share of the common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice; and (ii) the trading day immediately before the date we send such notice.

reorganization involving the Company, 100% of the principal of, and all accrued and unpaid interest on, all of the then outstanding 2025 Notes will automatically become immediately due and payable. Notwithstanding the foregoing, the Indenture provides that, to the extent the Company elects, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture will, for the first 360 days after such event of default, consist exclusively of the right to receive additional interest on the 2025 Notes.

During the quarter ended September 30, 2020, certain holders of the 2025 Notes converted an aggregate of approximately $13.5 million in principal amount of the 2025 Notes into 1,177,156 shares of the Company’s common stock, including 108,572 shares of common stock issued in satisfaction of the interest make-whole payment. As of September 30, 2020, $166.9 million in principal amount of the 2025 Notes were outstanding, $80.4 million of which were held by related parties.

~~2022 Notes~~

~~On January 9, 2017, we issued approximately $119.8 million aggregate principal amount of 2022 Notes.~~

During the three months ended March 31, 2020, we entered into privately-negotiated exchange agreements with certain investors holding the 2022 Notes. Pursuant to those exchange agreements, the investors exchanged $59.9 million in aggregate principal amount of outstanding 2022 Notes for 13,688,876 shares of common stock. The investors that participated in such exchange agreements agreed to waive any accrued but unpaid interest on the exchanged 2022 Notes. Included in the 13,688,876 shares of common stock issued in the exchange transactions that took place during the three months ended March 31, 2020 were 942,706 shares valued at $7.9 million on the date of issuance at fair value, which were issued pursuant to the terms of the privately-negotiated exchange agreements and were in excess of the consideration issuable under the original conversion terms of the exchanged 2022 Notes. ASC 470, ~~Debt~~ requires the recognition through earnings of an inducement charge equal to the fair value of the consideration delivered in excess of the consideration issuable under the original conversion terms. This resulted in a non-cash charge of $7.9 million for the three months ended March 31, 2020, which was recorded as inducement expense in the condensed consolidated statement of operations.

Pursuant to the Private Exchange Transactions described above, on May 12, 2020, the holders of an aggregate of $45.0 million principal amount of 2022 Notes exchanged their 2022 Notes for a combination of 2025 Notes and cash. As a result of the Private Exchange Transactions, $2,000 in principal amount of the 2022 Notes were outstanding as of June 30, 2020. On July 22, 2020, pursuant to a redemption notice issued on May 15, 2020, we redeemed the remaining $2,000 principal amount of the 2022 Notes.

~~Settlement Agreement~~

Pursuant to the amended merger agreement with respect to our acquisition of R.E.R. Enterprises, Inc. (“RER”) and its wholly-owned subsidiary and principal operating asset, Feeney Wireless, LLC (which has been renamed Inseego North America, LLC, the Company agreed to pay a total of $15.0 million in deferred purchase price in five cash installments over a four-year period, beginning in March 2016. The Company also agreed to provide earn-out consideration to the former stockholders of RER in the form of $6.1 million in cash over a four-year period, beginning in March 2016, and issuance of up to 2,920,000 shares of the Company’s common stock in three equal annual installments, beginning in March 2016, contingent upon retention of certain key personnel of RER.

On May 11, 2017, the Company initiated a lawsuit against the former stockholders of RER in the Court of Chancery of the State of Delaware seeking recovery of damages for civil conspiracy, fraud in the inducement, unjust enrichment and breach of fiduciary duty. On January 16, 2018, the former stockholders of RER filed an answer and counterclaim in the matter seeking recovery of certain deferred and earn-out payments allegedly owed to them by the Company in connection with the Company’s acquisition of RER. On July 26, 2018, the Company and the former stockholders of RER entered into a mutual general release and settlement agreement (the “Settlement Agreement”) pursuant to which the parties agreed to release all claims against each other and the Company agreed to (i) pay the former stockholders of RER $1.0 million in cash by August 17, 2018, (ii) immediately instruct its transfer agent to permit the transfer or sale of 973,333 shares of the Company’s common stock that the Company had issued to the former stockholders of RER in March 2017, (iii) immediately issue 500,000 shares of the Company’s common stock to the former stockholders of RER, (iv) within 12 months following the execution of the Settlement Agreement, deliver to the former stockholders of RER an additional $1.0 million in cash, common stock, or a combination thereof, at the Company’s option, (v) within 24 months following the execution of the Settlement Agreement deliver to the former stockholders of RER an additional $1.0 million in cash, common stock, or a combination thereof, at the Company’s option, and (vi) file one or more registration statements with respect to the resale of the shares of the Company’s common stock issued to the former stockholders of RER pursuant to the Settlement Agreement. On July 24, 2020, the Company issued 89,928 shares in satisfaction of all remaining liabilities under the Settlement Agreement.

Historical Cash Flows

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


		Nine Months Ended September 30,					Six Months Ended June 30,
		2020		2019			2021		2020
Net cash provided by (used in) operating activities		$	16,712	$	(14,998)
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	$	(12,030)	$	4,662
Net cash used in investing activities	Net cash used in investing activities	(24,973)		(20,515)		Net cash used in investing activities	(17,434)		(13,233)
Net cash provided by financing activities	Net cash provided by financing activities	40,754		18,942		Net cash provided by financing activities	29,511		41,144
Effect of exchange rates on cash	Effect of exchange rates on cash	(2,573)		(560)		Effect of exchange rates on cash	321		(2,547)
Net increase (decrease) in cash, cash equivalents and restricted cash		29,920		(17,131)
Net increase in cash, cash equivalents and restricted cash						Net increase in cash, cash equivalents and restricted cash	368		30,026
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	12,074		31,076		Cash, cash equivalents and restricted cash, beginning of period	40,015		12,074
Cash, cash equivalents and restricted cash, end of period		$	41,994	$	13,945
Cash, cash equivalents, and restricted cash, end of period1						Cash, cash equivalents, and restricted cash, end of period1	$	40,383	$	42,100

1Cash, cash equivalents and restricted cash balance includes cash, cash equivalents and restricted cash classified as held for sale as of June 30, 2021.

Operating activities. Net cash used in operating activities was $12.0 million for the six months ended June 30, 2021, compared to net cash provided by operating activities ~~was $16.7 million for the nine months ended September 30, 2020, compared to net cash used in operating activities~~ of ~~$15.0~~$4.7 million for the same period in ~~2019.~~2020. Net cash used in operating activities for the six months ended June 30, 2021 was primarily attributable to net loss incurred during the period, net cash used by working capital, and fair value adjustment on derivative instrument, partially offset by depreciation and amortization, share-based compensation expense, and the amortization of debt discount and debt issuance costs. Net cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, 2020 was primarily attributable to net cash provided by working capital, ~~offset by a~~ non-cash ~~loss on~~charges for the debt conversion and extinguishment ~~a non-cash fair value adjustment on derivative instrument, charges for the fair value of inducement shares issued in the privately-negotiated exchange transactions with certain holders~~ of the 2022 Notes, ~~charge for the exchange of 2022 Notes for 2025 Notes in a Private Exchange Transaction, debt exchange,~~ depreciation and amortization, including the

amortization of debt discount and debt issuance costs, and share-based compensation ~~expense. Net cash used in operating activities for the nine months ended September 30, 2019 was primarily attributable to~~expense, partially offset by the net loss in the period and net cash used in working capital, partially offset by non-cash charges for depreciation and amortization, including the amortization of debt discount and debt issuance costs, provisions for bad debts and excess and obsolete inventory and share-based compensation expense.period.

Investing activities. Net cash used in investing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was ~~$25.0~~$17.4 million, compared to net cash used in investing activities of ~~$20.5~~$13.2 million for the same period in ~~2019.~~2020. Cash used in investing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was primarily related to the purchases of property, plant and equipment and capitalization of certain costs related to the research and development of software to be sold in our products, in large part due to the increase in development in support of 5G products and services. Cash used in investing activities during the same period in ~~2019~~2020 was primarily related to the purchases of property, plant and equipment and capitalization of certain costs related to the research and development of software to be sold in our ~~products.~~products, in large part due to the increase in development in support of 5G products and services.

Financing activities. Net cash provided by financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was ~~$40.8~~$29.5 million, compared to net cash provided by financing activities of ~~$18.9~~$41.1 million for the same period in ~~2019.~~2020. Net cash provided by financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was primarily related to net proceeds received from the ATM Offering, ~~Private Exchange Transactions,~~proceeds from stock option exercises and purchases through our employee stock purchase plan, partially offset by the ~~issuance~~principal payments under finance lease obligations and taxes paid on vested restricted stock units. Net cash provided by financing activities for the same period in 2020 was primarily related to proceeds received from the registered Offering of 2025 Notes, the sale of Series E Preferred Stock, the exercise of warrants to purchase common stock, and stock option exercises, ~~and purchases through our employee stock purchase plan,~~ partially offset by payoff of the Term Loan and related expenses, cash paid to investors in the Private Exchange Transactions, payment of debt issuance costs, repurchase of Series E ~~preferred stock,~~Preferred Stock, principal payments under finance lease obligations, and taxes paid on vested restricted stock units, payoff of the Term Loan of $48.8 million and payment of $32 million in cash for the Private Exchange Transactions. Net cash provided by financing activities for the same period in 2019 was primarily related to proceeds received from the issuance of Series E preferred stock, the exercise of warrants to purchase common stock and stock option exercises and purchases through our employee stock purchase plan, partially offset by principal payments under finance lease obligations and taxes paid on vested restricted stock units, and debt repayments related to our previous acquisition of Digicore Holdings Limited.

~~Other Liquidity Needs~~

Based on the above, the Company’s management believes that its current cash and cash equivalents, together with anticipated cash flows from operations, will be sufficient to meet its working capital needs over the next twelve months without additional sources of cash.

The Company’s liquidity could be impaired if there is any interruption in its business operations, a material failure to satisfy its contractual commitments or a failure to generate revenue from new or existing products. Ultimately, the Company’s ability to attain profitability and to generate positive cash flow is dependent upon achieving a level of revenues adequate to support its evolving cost structure and increasing working capital needs. If events or circumstances occur such that the Company does not meet its operating plan as expected, the Company may be required to raise additional capital, reduce planned research and development activities, incur additional restructuring charges or reduce other operating expenses which could have

an adverse impact on its ability to achieve its intended business objectives. There can be no assurance that any required or desired restructuring or financing will be available on terms favorable to the Company, or at all.

The global outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government in March 2020 and has negatively impacted the U.S. and global economy, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets. The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S. government, state and local government officials, and international governments to prevent disease spread, all of which are uncertain and cannot be predicted.

On March 27, 2020, the President of the United States signed and enacted into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), a $2 trillion economic relief bill. Pursuant to the CARES Act's relief related to federal employment taxes, we have elected to defer payment of such taxes beginning in April 2020, with $0.9 million in deferred taxes as of September 30, 2020, which will be due in two equal installments in 2021 and 2022.

units.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

~~Not applicable.~~The Company is exposed to market risk in the ordinary course of our business. Our revenue, earnings, cash flows, receivables, and payables are subject to fluctuations due to changes in foreign currency exchange rates. The ongoing COVID-19 pandemic has increased the volatility of global financial markets, which may increase our foreign currency exchange risk.

Foreign Currency Exchange Risk

The Company’s results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. A majority of the Company’s revenue is denominated in U.S. dollars, and therefore, our revenue is not directly subject to foreign currency risk. However, as we have operations in foreign countries, including South Africa and Europe, a stronger U.S. dollar could make our products and services more expensive in foreign countries and therefore reduce demand. A weaker U.S. dollar could have the opposite effect. Such economic exposure to currency fluctuations is difficult to measure or predict because our sales are also influenced by many other factors.

For the six months ended June 30, 2021, sales denominated in foreign currencies were approximately 23.6% of total revenue. The Company’s expenses are generally denominated in the currencies in which our operations are located, which is primarily in the U.S. and to a lesser extent in South Africa and Europe. The Company’s results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. These foreign functional currencies consist of the South African Rand, pound sterling, Euro, and Australian Dollar (collectively, the “Foreign Functional Currencies”). For the six months ended June 30, 2021, a hypothetical 10% change in foreign functional currency exchange rates would have increased or decreased our revenue by approximately $2.8 million. Actual gains and losses in the future may differ materially from the hypothetical gains and losses discussed above based on changes in the timing and amount of foreign currency exchange rate movements. Additionally, with the completion of Ctrack South Africa operations divestiture, our foreign exchange risk is expected to decrease. Net foreign currency translation losses of $0.7 million were recorded for the six months ended June 30, 2021.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange Act, that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s

management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(b) promulgated under the Exchange Act, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of ~~September~~June 30, ~~2020,~~2021, the end of the period covered by this report. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2020.~~2021.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, during the three months ended ~~September~~June 30, ~~2020,~~2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

The disclosure in Note 9,10, Commitments and Contingencies, in the accompanying unaudited condensed consolidated financial statements includes a discussion of our legal proceedings and is incorporated herein by reference.

The Company is also engaged in various other legal actions arising in the ordinary course of our business and, while there can be no assurance, the Company currently believes that the ultimate outcome of these other legal actions will not have a material adverse effect on its business, results of operations, financial condition or cash flows.

Item 1A. Risk Factors.

There have been no material changes in our risk factors from those disclosed in “Item 1A. Risk Factors” of the Form 10-K, ~~and the Company’s Quarterly Reports on~~ Form 10-Q, ~~for~~and other reports that we have filed with the ~~three months ended March 31, 2020~~SEC. Any of the risks discussed in such reports, as well as additional risks and ~~June 30, 2020.~~uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations, financial condition or prospects.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~None, except as previously disclosed in the Company’s Current Reports on Form 8-K, and except for the issuance described below.~~

On July 24, 2020, the Company issued 89,928 shares of its common stock to the former stockholders of RER in connection with the Settlement Agreement. The shares were issued in reliance upon an exemption from registration pursuant to Section 4(a)(2) of the Securities Act.None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.


Exhibit No.						Description

2.1						Share Purchase Agreement, dated as of February 24, 2021, by and between Inseego Corp. and Main Street 1816 Proprietary Limited (in the process of being renamed Convergence CTSA Proprietary Limited)(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed February 25, 2021).
2.2						Third Addendum dated June 30, 2021 to the Share Purchase Agreement dated February 24, 2021 between Main Street 1816 Proprietary Limited (in the process of being renamed Convergence CTSA Proprietary Limited) and Inseego Corp. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 30, 2021.
2.3						Second Addendum dated April 30, 2021 to the Share Purchase Agreement dated February 24, 2021 between Main Street 1816 Proprietary Limited (in the process of being renamed Convergence CTSA Proprietary Limited) and Inseego Corp. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed June 30, 2021.
2.4						First Addendum dated March 17, 2021 to the Share Purchase Agreement dated February 24, 2021 between Main Street 1816 Proprietary Limited (in the process of being renamed Convergence CTSA Proprietary Limited) and Inseego Corp. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed June 30, 2021.
3.1						Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed November 9, 2016).
3.2						Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed November 9, 2016).
3.3						Certificate of Designation of Series D Junior Participating Preferred Stock of Inseego Corp. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed January 22, 2018).
3.4						Certificate of Designation of Series E Fixed-Rate Cumulative Perpetual Preferred Stock filed with the Secretary of State of the State of Delaware on August 8, 2019 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed August 13, 2019).
3.5						Certificate of Amendment to Certificate of Designation of Series E Fixed-Rate Cumulative Perpetual Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed March 10, 2020).

~~10.1~~10.1*						Amended ~~Inseego Corp. 2018 Omnibus Incentive Compensation Plan~~and Restated Change in Control and Severance Agreement, dated June 7, 2021, by and between the Company and Dan Mondor (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed ~~July 24, 2020)~~June 10, 2021).
10.2*						~~Transition~~ Independent Contractor Services Agreement , dated as of August ~~11, 2020 between Inseego Corp. and Stephen M. Smith.~~
10.3*						~~Offer Letter dated July 26, 2020 between Inseego Corp. and Craig L. Foster.~~
10.4*						~~Change in Control Agreement dated August 17, 2020 between Inseego Corp. and Craig L. Foster.~~5, 2021
31.1*						Certification of our Principal Executive Officer adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of our Principal Financial Officer adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*32.1#						Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*32.2#						Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						Inline XBRL Taxonomy Extension Schema Document.
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

*						Filed herewith.
#						Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~November 6, 2020~~August 5, 2021

Inseego Corp.

By:

/s/ DAN MONDOR

Dan Mondor

Chief Executive Officer

By:

/s/ ~~CRAIG L. FOSTER~~WEI DING

~~Craig L. Foster~~Wei Ding

~~Chief~~Vice President & Corporate Controller
(Principal Financial ~~Officer~~Officer)


	September 30, 2020		December 31, 2019		September 30, 2019		December 31, 2018
Cash and cash equivalents	$	41,994	$	12,074	$	13,945	$	31,015
Restricted cash	0		0		0		61
Total cash, cash equivalents and restricted cash	$	41,994	$	12,074	$	13,945	$	31,076