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UNITED STATES

FORM						10-Q

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

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

For the transition period from                          to                     .  

			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)

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

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  ☐

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

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 April 27, 2022 was 107,397,278.

						Page
PART I—FINANCIAL INFORMATION
Item 1.			Financial Statements			2
			Condensed Consolidated Balance Sheets (Unaudited)			2
			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)			7
			Notes to Condensed Consolidated Financial Statements (Unaudited)			8
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			30
Item 4.			Controls and Procedures			31
PART II—OTHER INFORMATION
Item 1.			Legal Proceedings			33
Item 1A.			Risk Factors			33
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			33
Item 3.			Defaults Upon Senior Securities			33
Item 4.			Mine Safety Disclosures			33
Item 5.			Other Information			33
Item 6.			Exhibits			34
SIGNATURES						36

			March 31, 2022						December 31, 2021
			(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents			$	41,520					$	46,474
Restricted cash			3,661						3,338
Accounts receivable, net of allowance for doubtful accounts of $358 and $408, respectively			21,723						26,781
Inventories			37,474						37,402
Prepaid expenses and other			10,944						13,624
Total current assets			115,322						127,619
Property, plant and equipment, net of accumulated depreciation of $23,334 and $26,692, respectively			7,828						8,102
Rental assets, net of accumulated depreciation of $5,939 and $5,392, respectively			4,713						4,575
Intangible assets, net of accumulated amortization of $54,100 and $48,404, respectively			46,318						46,995
Goodwill			21,922						20,336
Right-of-use assets, net			7,699						7,839
Other assets			378						377
Total assets			$	204,180					$	215,843
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable			$	40,096					$	48,577
Accrued expenses and other current liabilities			32,485						26,253
Total current liabilities			72,581						74,830
Long-term liabilities:
2025 Notes, net			157,629						157,866
Deferred tax liabilities, net			1,051						852
Other long-term liabilities			7,109						7,149
Total liabilities			238,370						240,697
Commitments and contingencies
Stockholders’ deficit:
Preferred stock, par value $0.001; 2,000,000 shares authorized:
Series E Preferred stock, par value $0.001; 39,500 shares designated, 25,000 shares issued and outstanding, liquidation preference of $1,000 per share (plus any accrued but unpaid dividends)			—						—
Common stock, par value $0.001; 150,000,000 shares authorized, 107,389,076 and 105,380,533 shares issued and outstanding, respectively			107						105
Additional paid-in capital			784,267						770,619
Accumulated other comprehensive loss			(5,633)						(8,531)
Accumulated deficit			(812,931)						(787,047)
Total stockholders’ deficit			(34,190)						(24,854)
Total liabilities and stockholders’ deficit			$	204,180					$	215,843

			Three Months Ended March 31,
			2022						2021
Net revenues:
IoT & Mobile Solutions			$	54,505					$	42,959
Enterprise SaaS Solutions			6,879						14,638
Total net revenues			61,384						57,597
Cost of net revenues:
IoT & Mobile Solutions			42,903						33,442
Enterprise SaaS Solutions			3,233						5,682
Total cost of net revenues			46,136						39,124
Gross profit			15,248						18,473
Operating costs and expenses:
Research and development			18,560						14,555
Sales and marketing			9,773						11,004
General and administrative			8,238						8,644
Amortization of purchased intangible assets			444						466
Total operating costs and expenses			37,015						34,669
Operating loss			(21,767)						(16,196)
Other (expense) income:
Loss on debt conversion and extinguishment, net			(450)						(432)
Interest expense, net			(2,923)						(1,845)
Other (expense) income, net			(405)						1,735
Loss before income taxes			(25,545)						(16,738)
Income tax (benefit) provision			(322)						221
Net loss			(25,223)						(16,959)
Less: Net income attributable to noncontrolling interests			—						(214)
Net loss attributable to Inseego Corp.			(25,223)						(17,173)
Series E preferred stock dividends			(661)						(867)
Net loss attributable to common stockholders			$	(25,884)					$	(18,040)
Per share data:
Net loss per common share:
Basic and diluted			$	(0.24)					$	(0.18)
Weighted-average shares used in computation of net loss per common share:
Basic and diluted			105,649,419						101,370,433

			Three Months Ended March 31,
			2022						2021
Net loss			$	(25,223)					$	(16,959)
Foreign currency translation adjustment			2,898						(1,732)
Total comprehensive loss			$	(22,325)					$	(18,691)
Comprehensive income attributable to noncontrolling interests			—						(214)
Comprehensive loss attributable to Inseego Corp.			$	(22,325)					$	(18,905)

			Preferred Stock												Common Stock												Additional Paid-in Capital												Accumulated Deficit						Accumulated Other Comprehensive Income (Loss)						Noncontrolling Interests						Total Stockholders’ Equity (Deficit)
			Shares						Amount						Shares						Amount
Balance, December 31, 2020			35						$	—					99,399						$	99					$	711,487											(732,422)						(6,972)						$	(91)					$	(27,899)
Net loss			—						—						—						—						—												(17,173)						—						214						(16,959)
Foreign currency translation adjustment			—						—						—						—						—												—						(1,732)						—						(1,732)
Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan			—						—						1,429						1						1,560												—						—						—						1,561
Taxes withheld on net settled vesting of restricted stock units			—						—						—						—						(468)												—						—						—						(468)
Issuance of common shares in connection with conversion of 2025 Notes			—						—						429						1						5,382												—						—						—						5,383
Issuance of common shares in connection with a public offering, net of issuance costs			—						—						1,516						2						29,426												—						—						—						29,428
Share-based compensation			—						—						—						—						9,098												—						—						—						9,098
Net noncontrolling interest acquired			—						—						—						—						—												241						—						(116)						125
Series E preferred stock dividends			—						—						—						—						867												(867)						—						—						—
Balance, March 31, 2021			35						$	—					102,773						$	103					$	757,352											$	(750,221)					$	(8,704)					$	7					$	(1,463)
Balance, December 31, 2021			25						$	—					105,381						$	105					$	770,619											$	(787,047)					$	(8,531)					$	—					$	(24,854)
Net loss			—						—						—						—						—												(25,223)						—						—						(25,223)
Foreign currency translation adjustment			—						—						—						—						—												—						2,898						—						2,898
Adjustment relating to extinguishment of 2022 Notes			—						—						—						—						1,728												—						—						—						1,728
Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan			—						—						2,008						2						74												—						—						—						76
Taxes withheld on net settled vesting of restricted stock units			—						—						—						—						(14)												—						—						—						(14)
Share-based compensation			—						—						—						—						11,199												—						—						—						11,199
Series E preferred stock dividends			—						—						—						—						661												(661)						—						—						—
Balance, March 31, 2022			25						$	—					107,389						$	107					$	784,267											$	(812,931)					$	(5,633)					$	—					$	(34,190)

(Unaudited)

			Three Months Ended March 31,
			2022						2021
Cash flows from operating activities:
Net loss			$	(25,223)					$	(16,959)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization			7,243						6,230
Provision for bad debts, net of recoveries			(14)						101
Provision for excess and obsolete inventory			247						(173)
Share-based compensation expense			11,199						9,098
Amortization of debt discount and debt issuance costs			1,650						374
Fair value adjustment on derivative instrument			(609)						(1,951)
Loss on debt conversion and extinguishment, net			450						432
Deferred income taxes			189						326
Right-of-use assets			342						512
Other			—						107
Changes in assets and liabilities, net of effects of divestiture:
Accounts receivable			5,477						2,668
Inventories			(355)						(5,414)
Prepaid expenses and other assets			2,701						1,198
Accounts payable			(10,400)						(1,937)
Accrued expenses, income taxes, and other			6,819						6,898
Operating lease liabilities			(354)						(537)
Net cash (used in) provided by operating activities			(638)						973
Cash flows from investing activities:
Acquisition of noncontrolling interest			—						(116)
Purchases of property, plant and equipment			(763)						(1,324)
Proceeds from the sale of property, plant and equipment			—						21
Additions to capitalized software development costs			(3,127)						(7,977)
Net cash used in investing activities			(3,890)						(9,396)
Cash flows from financing activities:
Net borrowing of bank and overdraft facilities			(54)						263
Principal payments under finance lease obligations			(62)						—
Proceeds from a public offering, net of issuance costs			—						29,428
Principal repayments on financed other assets			(1,007)						(1,237)
Proceeds from stock option exercises and employee stock purchase plan, net of taxes paid on vested restricted stock units			63						1,093
Net cash (used in) provided by financing activities			(1,060)						29,547
Effect of exchange rates on cash			957						(1,589)
Net (decrease) increase in cash, cash equivalents and restricted cash			(4,631)						19,535
Cash, cash equivalents and restricted cash, beginning of period			49,812						40,015
Cash, cash equivalents and restricted cash, end of period			$	45,181					$	59,550
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest			$	—					$	169
Income taxes			$	41					$	29
Supplemental disclosures of non-cash activities:
Transfer of inventories to rental assets			$	225					$	1,289
Capital expenditures financed through accounts payable or accrued liabilities			$	2,105					$	2,890
Right-of-use assets obtained in exchange for operating leases liabilities			$	79					$	148
2025 Notes conversion, including shares issued in satisfaction of interest make-whole payment			$	—					$	5,383

Cash and cash equivalents include highly liquid investments with original maturities of three months or less. The Company’s cash and cash equivalents are generally held with large financial institutions worldwide to reduce the amount of exposure to any credit risk. Restricted cash consists of Company funds in escrow with a financial institution as collateral for potential future uninsured warranty claims related to the divestiture of Ctrack South Africa. Cash, cash equivalents and restricted cash are recorded at market value, which approximates cost. Gains and losses associated with the Company’s foreign currency denominated demand deposits are recorded as a component of other income, net, in the consolidated statements of operations. The following table provides a reconciliation of cash, cash equivalents and restricted cash as reported within the consolidated balance sheets to “Cash, cash equivalents, and restricted cash, end of period” as reported within the consolidated statements of cash flows (in thousands):

			March 31, 2022						December 31, 2021
Cash and cash equivalents			$	41,520					$	46,474
Restricted cash			3,661						3,338
Cash, cash equivalents and restricted cash, end of period			$	45,181					$	49,812

In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt with 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

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company adopted this standard in the first quarter of fiscal 2022 and it did not have an impact to the condensed consolidated financial statements.

			March 31, 2022						December 31, 2021
Finished goods			$	33,351					$	33,112
Raw materials and components			4,123						4,290
Total inventories			$	37,474					$	37,402

Prepaid expenses and other

			March 31, 2022						December 31, 2021
Rebate receivables			$	3,715					$	6,398
Receivables from contract manufacturers			1,553						2,626
Software licenses			2,021						1,261
Insurance			522						1,269
Deposits			960						1,023
Financed assets			1,014						323
Other			1,159						724
			$	10,944					$	13,624

			March 31, 2022						December 31, 2021
Royalties			$	1,828					$	2,243
Payroll and related expenses			14,089						9,326
Warranty obligations			521						473
Professional fees			462						502
Bank overdrafts			350						370
Accrued interest			2,192						877
Contract liabilities			6,425						3,832
Operating lease liabilities			1,759						1,769
Accrued contract manufacturing liabilities			1,199						927
Liabilities related to financed assets			530						1,593
Value added tax payables			443						642
Other			2,687						3,699
Total accrued expenses and other current liabilities			$	32,485					$	26,253

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.

			March 31, 2022																		December 31, 2021
			Total Fair Value						Level 3						Level 1						Total Fair Value						Level 3						Level 1
Assets
Cash equivalents
Money market funds			$	126					$	—					$	126					$	126					$	—					$	126
Total assets			$	126					$	—					$	126					$	126					$	—					$	126
Liabilities
2025 Notes
Interest make-whole payment			$	317					$	317					$	—					$	926					$	926					$	—
Total liabilities			$	317					$	317					$	—					$	926					$	926					$	—

			March 31, 2022						December 31, 2021
Volatility			50		%				50		%
Stock price			$4.05 per share						$5.83 per share
Credit spread			15.53		%				15.93		%
Term			3.09 years						3.34 years
Dividend yield			—		%				—		%
Risk-free rate			2.45		%				1.02		%

			Balance as of December 31, 2021						Additions						Conversions						Change in fair value						Balance as of March 31, 2022
Liabilities:
Interest make-whole payment			$	926					$	—					$	—					$	(609)					$	317

The Company evaluated the 2025 Notes under ASC 815, Derivatives and Hedging, and identified an embedded derivative that required bifurcation. The embedded derivative is an interest make-whole payment. The estimated fair values of the interest make-whole derivative liability at March 31, 2022 and December 31, 2021 were 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.

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. Debt. The Company carries its 2025 Notes at amortized cost adjusted for changes in fair value of the embedded derivative. As of March 31, 2022, $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.

If a fundamental change (as defined in the Indenture) occurs at any time prior to the maturity date, then the noteholders may require the Company to repurchase their 2025 Notes at a cash repurchase price equal to the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. If a make-whole fundamental change (as defined in the Indenture) occurs, then the Company will in certain circumstances increase the conversion rate for a specified period of time.

The 2025 Notes 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, net.

			March 31, 2022						December 31, 2021
Principal			$	161,898					$	161,898
Add: fair value of embedded derivative			317						926
Less: unamortized debt discount			(2,554)						(2,761)
Less: unamortized issuance costs			(2,032)						(2,197)
Net carrying amount			$	157,629					$	157,866

			Three Months Ended March 31,
			2022						2021
Contractual interest expense			$	1,315					$	1,287
Amortization of debt discount			207						208
Amortization of debt issuance costs			165						166
Total interest expense			$	1,687					$	1,661

During the three months ended March 31, 2022, the Company granted awards under the 2018 Omnibus Incentive Compensation Plan, previously named the Amended and Restated 2009 Omnibus Incentive Compensation Plan (the “2018 Plan”), and the 2015 Incentive Compensation Plan (the “2015 Plan”). The Compensation Committee of the Board of Directors administers the plans. Under the 2018 Plan, a maximum of 8,897,084 shares of common stock may be issued upon the exercise of stock options, in the form of restricted stock, or in settlement of restricted stock units (“RSUs”) or other awards, including awards with alternative vesting schedules such as performance-based criteria.

			Three Months Ended March 31,
			2022															2021
Cost of revenues			$	1,415														$	1,578
Research and development			4,070															3,228
Sales and marketing			2,043															1,988
General and administrative			3,671															2,304
Total			$	11,199														$	9,098

During the quarter ended March 31, 2022, the Board of Directors of the Company approved and the Company granted restricted stock units to eligible employees under the 2018 Plan that were immediately vested, as fiscal 2021 annual bonus payments. The total charges recorded during the quarter ended March 31, 2022 were $8.8 million. Such bonus payments in fiscal 2021 were paid and recorded in the quarter ended March 31, 2021 and total charges related to such bonus payments were $7.0 million.

Outstanding — December 31, 2021			8,085,793
Granted			1,302,500
Exercised			(130,790)
Canceled			(583,612)
Outstanding — March 31, 2022			8,673,891
Exercisable — March 31, 2022			4,931,898

Non-vested — December 31, 2021			1,247,723
Granted			2,139,100
Vested			(1,892,613)
Forfeited			(50,700)
Non-vested — March 31, 2022			1,443,510

At March 31, 2022, total unrecognized compensation expense related to RSUs was $5.9 million, which is expected to be recognized over a weighted-average period of 3.34 years.

			Three Months Ended March 31,
			2022						2021
Net loss attributable to common stockholders			$	(25,884)					$	(18,040)
Weighted-average common shares outstanding			105,649,419						101,370,433
Basic and diluted net loss per share			$	(0.24)					$	(0.18)

For the three months ended March 31, 2022, the computation of diluted EPS excluded 27,109,523 shares, primarily related to the 2025 Notes, warrants, stock options, RSUs and employee stock purchase plan for which the effect would have been anti-dilutive.

			Three Months Ended March 31,
(in thousands)			2022						2021
Convertible Notes			14,341						14,341
Warrants			2,500						2,500
Non-qualified stock options			8,675						7,627
Restricted stock units			1,443						400
Employee stock purchase plan			151						13
Total			27,110						24,881

On January 25, 2021, the Company 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 shares of its common stock. 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, and other offering fees, pursuant to the ATM Offering.

									Three Months Ended March 31,
															2022						2021
United States and Canada															$	52,642					$	42,736
Europe															5,620						5,833
South Africa															—						7,108
Other															3,122						1,920
Total															$	61,384					$	57,597

For the three months ended March 31, 2022, two customers accounted for 37.3% and 39.9% of net revenues, respectively. For the three months ended March 31, 2021, two customers accounted for 45.0% and 15.8% of net revenues.

As of March 31, 2022 two customers accounted for 33.0% and 26.2% of accounts receivable, net, respectively. As of December 31, 2021, two customers accounted for 61.7% and 12.6% of accounts receivable, net, respectively.

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.

			Balance Sheet Classification						March 31, 2022						December 31, 2021
Right-of-use assets, net			Right-of-use assets, net						$	7,699					$	7,839
Current operating lease liabilities			Accrued expenses and other current liabilities						$	1,759					$	1,769
Non-current operating lease liabilities			Other long-term liabilities						6,956						7,112
Total operating lease liabilities									$	8,715					$	8,881
Weighted-average remaining lease term (in years)									4.8						5.0
Weighted-average discount rate									9.1		%				9.1		%

			Three Months Ended March 31,
			2022						2021
Operating lease costs included in operating costs and expenses:
Operating leases			$	610					$	510

Supplemental cash flow information related to leases was as follows (in thousands):

						Three Months Ended March 31,
						2022						2021
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows related to operating leases						$	622					$	535
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases						$	79					$	148

2022 (remainder)			$	1,918
2023			2,187
2024			2,019
2025			1,736
2026			1,727
2027			1,152
Thereafter			—
Total minimum operating lease payments			$	10,739
Less: amounts representing interest			(2,024)
Present value of net minimum operating lease payments			8,715
Less: current portion			(1,759)
Long-term portion of operating lease obligations			$	6,956

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.

The Company’s income tax (benefit) provision of $(0.3) million and $0.2 million for the three months ended March 31, 2022 and 2021, 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 based on statutory rates primarily due to full valuation allowances at all of its U.S.-based entities and several of its foreign subsidiaries. The tax benefit for the first quarter of 2022 and the tax expense for the first quarter of 2021 were largely driven by foreign currency losses, and gains, respectively, at the Company’s foreign subsidiaries.

•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 on, or to refinance our indebtedness, including our 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, such as inflation, 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), 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, including government efforts to reduce the spread of the disease, on our employees, customers and supply chain and the economy and financial markets;

•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 international conflicts such as the Russia-Ukraine crisis, and foreign currency risks;

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

•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.

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.

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;

•deployment of 5G infrastructure equipment;

•adoption of 5G end point products;

•competition in the area of 5G technology;

•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

•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 and additional service offerings, industrial 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, 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 March 31, 2022 was consistent with our expectations. Recently, our IoT & Mobile Solutions have experienced lower sales of LTE gigabit hotspots as COVID-19 pandemic demand 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, 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.

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.

Net revenues. Net revenues for the three months ended March 31, 2022 were $61.4 million, compared to $57.6 million for the same period in 2021.

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

						Three Months Ended March 31,												Change
Product Category						2022						2021						$						%
IoT & Mobile Solutions						$	54,505					$	42,959					$	11,546					26.9		%
Enterprise SaaS Solutions						6,879						14,638						(7,759)						(53.0)		%
Total						$	61,384					$	57,597					$	3,787					6.6		%

IoT & Mobile Solutions. The increase in IoT & Mobile Solutions net revenues is primarily due to increases in our enterprise and carrier offerings within IoT & Mobile Solutions, specifically increased sales of our second-generation 5G hotspot related to our MiFi business of $16.0 million and increased revenues in our Inseego Subscribe business due to subscriber growth of $0.7 million, partially offset by $4.6 million decrease in revenues from our 4G products and others.

Enterprise SaaS Solutions. Enterprise SaaS Solutions net revenues decreased year-over-year as a result of the divestiture of Ctrack South Africa as of July 30, 2021. Enterprise SaaS Solutions revenues from the rest of the world stayed relatively flat. SaaS revenue was no longer generated in South Africa beginning in August 2021. We continue to provide telematics solutions in the rest of the world, including in Europe and Australia.

Cost of net revenues. Cost of net revenues for the three months ended March 31, 2022 was $46.1 million, or 75.2% of net revenues, compared to $39.1 million, or 67.9% of net revenues, for the same period in 2021.

						Three Months Ended March 31,												Change
Product Category						2022						2021						$						%
IoT & Mobile Solutions						$	42,903					$	33,442					$	9,461					28.3		%
Enterprise SaaS Solutions						3,233						5,682						(2,449)						(43.1)		%
Total						$	46,136					$	39,124					$	7,012					17.9		%

IoT & Mobile Solutions. The increase in IoT & Mobile Solutions cost of net revenues is primarily attributable to $12.7 million increase from higher sales of our second-generation 5G hotspot, and $1.1 million increase of freight charges, partially offset by $3.6 million decrease from lower sales of our 4G products.

Enterprise SaaS Solutions. Enterprise SaaS Solutions cost of net revenues decreased by $2.4 million compared to the same period in 2021 primarily due to lower sales of Enterprise SaaS Solutions as a result of the divestiture of Ctrack South Africa on July 30, 2021. Enterprise SaaS Solutions cost of net revenues from the rest of the world stayed relatively flat.

Gross profit. Gross profit for the three months ended March 31, 2022 was $15.2 million, or a gross margin of 24.8%, compared to $18.5 million, or a gross margin of 32.1%, for the same period in 2021. The decrease in gross profit was primarily attributable to a decrease in Enterprise SaaS Solutions as a result of the sale of Ctrack South Africa, which had a higher gross profit. This decrease was partially offset by an increase in gross profit from IoT & Mobile Solutions as our 5G revenue and Inseego Subscribe business continued to grow. The following table summarizes operating costs and expenses (dollars in thousands):

						Three Months Ended March 31,												Change
Operating costs and expenses						2022						2021						$						%
Research and development						$	18,560					$	14,555					$	4,005					27.5		%
Sales and marketing						9,773						11,004						(1,231)						(11.2)		%
General and administrative						8,238						8,644						(406)						(4.7)		%
Amortization of purchased intangible assets						444						466						(22)						(4.7)		%
Total						$	37,015					$	34,669					$	2,346					6.8		%

Research and development expenses. Research and development expenses for the three months ended March 31, 2022 were $18.6 million, or 30.2% of net revenues, compared to $14.6 million, or 25.3% of net revenues, for the same period in 2021. The increase was primarily a result of $0.9 million increase in payroll costs that were not capitalized due to timing of meeting technological feasibility milestone for capitalized software for various R&D projects, $2.3 million increase in amortization, and $0.8 million increase in share-based compensation expense.

Sales and marketing expenses. Sales and marketing expenses for the three months ended March 31, 2022 were $9.8 million, or 15.9% of net revenues, compared to $11.0 million, or 19.1% of net revenues, for the same period in 2021. The decrease was primarily a result of the decrease of payroll costs for Ctrack South Africa employees, given the divestiture was completed on July 30, 2021. This decrease was partially offset by the increase in outbound freight charges, consulting expenses and commission to employees which is in line with the revenue increase from IoT & Mobile Solutions.

General and administrative expenses. General and administrative expenses for the three months ended March 31, 2022 were $8.2 million, or 13.4% of net revenues, compared to $8.6 million, or 15.0% of net revenues, for the same period in 2021. The decrease was primarily due to the decrease in payroll costs for Ctrack South Africa employees, given the divestiture was completed on July 30, 2021. The decrease in general and administrative expenses was partially offset by a $1.4 million increase in share-based compensation expense attributed by the impact of higher fiscal 2021 bonus grants paid in the first quarter of 2022 in the form of RSUs. See Note 5. 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 the three months ended March 31, 2022 and 2021 was $0.4 million and $0.5 million, respectively. The decrease was primarily as a result of certain purchased intangible assets being fully amortized as of the fourth quarter of 2021.

						Three Months Ended March 31,												Change
Other (expense) income						2022						2021						$						%
Loss on debt conversion and extinguishment, net						(450)						(432)						(18)						4.2		%
Interest expense, net						(2,923)						(1,845)						(1,078)						58.4		%
Other (expense) income, net						(405)						1,735						(2,140)						(123.3)		%
Total						$	(3,778)					$	(542)					$	(3,236)					597.0		%

Loss on debt conversion and extinguishment, net. The loss on debt conversion and extinguishment, net of $0.5 million during the three months ended March 31, 2022 was primarily a result of certain 2022 Notes debt extinguishments related adjustments in prior years recorded in the current period. For the same period in 2021, loss on debt conversion and extinguishment, net was $0.4 million which was primarily related to the extinguishment of the 2022 Notes.

Interest expense, net. Interest expense, net, for the three months ended March 31, 2022 and 2021 was $2.9 million and $1.8 million, respectively. The increase was primarily a result of certain 2022 Notes debt extinguishments related adjustments in prior years recorded in the current period.

Other (expense) income, net. Other expense, net, for the three months ended March 31, 2022 was $0.4 million, which primarily includes $1.0 million of foreign currency exchange gains and losses partially offset by the $0.6 million fair value adjustment related to our interest make-whole arrangement. For the same period in 2021, other income, net, was $1.7 million, which primarily includes the fair value adjustment related to our interest make-whole arrangement. Fair value input changes between the periods are primarily related to increased interest rates and a lower stock price.

						Three Months Ended March 31,												Change
						2022						2021						$						%
Income tax provision						$	(322)					$	221					$	(543)					(245.7)		%
Net income attributable to noncontrolling interests						—						(214)						214						(100.0)		%
Series E preferred stock dividends						(661)						(867)						206						(23.8)		%

Income tax (benefit) provision. The income tax benefit of $0.3 million for the three months ended March 31, 2022 and the income tax provision of $0.2 million for the same period in 2021, respectively, consisted primarily of foreign income taxes at certain of our international entities and minimum state taxes for our U.S.-based entities. Our income tax expense is different than the expected expense based on statutory rates primarily due to full valuation allowances at all of our U.S.-based entities and several of our foreign subsidiaries. The tax benefit for the first quarter of 2022 and the tax expense for the first quarter of 2021 were largely driven by foreign currency losses, and gains, respectively, at our foreign subsidiaries.

Net income attributable to noncontrolling interests. There was no net income or loss attributable to noncontrolling interests for the three months ended March 31, 2022, compared to a net income attributable to noncontrolling interests of $0.2 million for the same period in 2021, due to the sale of the noncontrolling interests as part of the sale of Ctrack South Africa.

Series E preferred stock dividends. During the three months ended March 31, 2022 and 2021, we recorded dividends of $0.7 million and $0.9 million, respectively, on our Fixed-Rate Cumulative Perpetual Preferred Stock, Series E, par value $0.001 per share (the “Series E Preferred Stock”). The decrease was primarily attributable to a decrease in the recurring preferred stock dividends as 10,000 shares of the original 35,000 shares of preferred stock were extinguished in September 2021, resulting in a lower preferred stock dividend accrued for the period ended March 31, 2022.

On July 30, 2021, we completed the sale of Ctrack South Africa. Initial cash proceeds of $36.6 million were received. Final cash proceeds were subject to certain post-closing working capital adjustments which totaled $2.6 million, $2.2 million of which was received on October 29, 2021, and the remaining $0.4 million was offset with our existing accounts payable balance to the buyer.

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.

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.

			Three Months Ended March 31,
			2022						2021
Net cash (used in) provided by operating activities			$	(638)					$	973
Net cash used in investing activities			(3,890)						(9,396)
Net cash (used in) provided by financing activities			(1,060)						29,547
Effect of exchange rates on cash			957						(1,589)
Net (decrease) increase in cash, cash equivalents and restricted cash			(4,631)						19,535
Cash, cash equivalents and restricted cash, beginning of period			49,812						40,015
Cash, cash equivalents, and restricted cash, end of period			$	45,181					$	59,550

Operating activities. Net cash used in operating activities was $0.6 million for the three months ended March 31, 2022, compared to net cash provided by operating activities of $1.0 million for the same period in 2021. Net cash used in operating activities for the three months ended March 31, 2022 was primarily attributable to $25.2 million net loss incurred during the period and a $0.6 million non-cash gain as a result of the fair value adjustment on derivative instruments, partially offset by net cash provided by working capital of $4.2 million, depreciation and amortization of $7.2 million, share-based compensation expense of $11.2 million, amortization of debt discount and debt issuance costs of $1.7 million, and loss on debt conversion of $0.5 million. Net cash provided by operating activities for the three months ended March 31, 2021 was primarily attributable to net cash provided by working capital of $3.4 million, depreciation and amortization of $6.2 million, amortization of debt discount and debt issuance costs of $0.4 million, loss on debt conversion of $0.4 million, and share-based compensation expense of $9.1 million, offset by $17.0 million net loss incurred during the period, and a $2.0 million non-cash gain as a result of the fair value adjustment on derivative instruments.

Investing activities. Net cash used in investing activities during the three months ended March 31, 2022 was $3.9 million, compared to net cash used in investing activities of $9.4 million for the same period in 2021. Cash used in investing activities during the three months ended March 31, 2022 was primarily related to $0.8 million purchases of property, plant and equipment and $3.1 million spending on certain costs related to the development of software to be sold in our products, in large part due to the increase in development in support of 5G products and services. Cash used in investing activities during the same period in 2021 was primarily related to $1.3 million purchases of property, plant and equipment and $8.0 million spending on 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.

Financing activities. Net cash used in financing activities during the three months ended March 31, 2022 was $1.1 million, compared to net cash provided by financing activities of $29.5 million for the same period in 2021. Net cash used in financing activities during the three months ended March 31, 2022 was primarily related to $1.0 million principal payments for financed other assets. Net cash provided by financing activities for the same period in 2021 was primarily related to $29.4 million net proceeds received from the ATM Offering, $1.1 million proceeds from stock option exercises and purchases through our employee stock purchase plan, partially offset by $1.2 million principal payments under finance lease obligations and taxes paid on vested restricted stock units.

Off-Balance Sheet Arrangements

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

Item 3.     Quantitative and Qualitative Disclosures About Market Risk.

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.

The 2025 Notes include an embedded derivative which was marked to fair value at March 31, 2022 and December 31, 2021 of $0.3 million and $0.9 million, respectively. The fair value inputs to the derivative valuation include dividend yield, term, volatility, stock price, and risk-free rate. Consequently we may incur gains and losses on the derivative as changes occur in the stock price, volatility, and risk-free rate at each reporting period. Additional details regarding our 2025 Notes and the embedded derivative are included in Item I Part 1 Note 3. Fair Value Measurement of Assets and Liabilities and Note 4. Debt in this Quarterly Report on Form 10-Q.

For the three months ended March 31, 2022, sales denominated in foreign currencies were approximately 14.2% of total revenue. Our expenses are generally denominated in the currencies in which our operations are located, which are primarily in the U.S. and to a lesser extent in Europe. Our 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 pound sterling, Euro, and Australian Dollar (collectively, the “Foreign Functional Currencies”). For the three months ended March 31, 2022, a hypothetical 10% change in Foreign Functional Currency exchange rates would have increased or decreased our revenue by approximately $0.9 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. With the completion of Ctrack South Africa divestiture in July 2021, our foreign currency transaction risk is expected to decrease.