PART I—FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Q2 2020 financials show significant revenue growth, but a major debt restructuring led to a substantial net loss and reshaped the balance sheet [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to **$211.9 million** and liabilities to **$253.8 million** by June 30, 2020, driven by new convertible notes and increased cash Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $42,100 | $12,074 | | Total current assets | $114,705 | $64,137 | | Total assets | $211,912 | $161,373 | | **Liabilities & Stockholders' Deficit** | | | | Total current liabilities | $67,936 | $44,530 | | Convertible 3.25% senior notes, net | $176,171 | $— | | Convertible 5.5% senior notes, net | $— | $101,334 | | Term loan, net | $— | $46,538 | | Total liabilities | $253,840 | $198,731 | | Total stockholders' deficit | $(41,928) | $(37,358) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2020 net revenues grew **44.4%** to **$80.7 million**, but a **$67.2 million** debt extinguishment loss led to a **$75.7 million** net loss Q2 2020 vs Q2 2019 Statement of Operations (in thousands, except per share data) | Metric | Q2 2020 | Q2 2019 | | :--- | :--- | :--- | | Total net revenues | $80,689 | $55,891 | | - IoT & Mobile Solutions | $66,243 | $39,983 | | - Enterprise SaaS Solutions | $14,446 | $15,908 | | Gross profit | $22,000 | $15,555 | | Operating loss | $(5,337) | $(5,183) | | Loss on debt conversion and extinguishment, net | $(67,241) | $— | | Net loss attributable to common shareholders | $(75,665) | $(10,779) | | Net loss per common share (Basic and diluted) | $(0.78) | $(0.14) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities generated **$4.7 million** cash in H1 2020, with financing providing **$41.1 million** from new notes, increasing cash to **$42.1 million** Six Months Ended June 30 Cash Flow Summary (in thousands) | Cash Flow Category | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $4,662 | $(10,055) | | Net cash used in investing activities | $(13,233) | $(11,320) | | Net cash provided by financing activities | $41,144 | $10,311 | | Net increase (decrease) in cash | $30,026 | $(10,747) | | Cash, cash equivalents and restricted cash, end of period | $42,100 | $20,329 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail COVID-19 impact, a **$100 million** debt restructuring in May 2020, revenue recognition, and significant customer concentration - In May 2020, the company restructured its debt by issuing **$100.0 million** of 3.25% senior notes due 2025, exchanging **$45.0 million** of existing 5.5% notes for cash and new notes, and using proceeds to repay its **$47.5 million** term loan[28](index=28&type=chunk)[36](index=36&type=chunk)[90](index=90&type=chunk) - The debt restructuring resulted in a loss on debt conversion and extinguishment of **$67.2 million** in Q2 2020[99](index=99&type=chunk)[192](index=192&type=chunk) - For Q2 2020, one customer accounted for **55.6%** of net revenues. As of June 30, 2020, three customers accounted for **44.3%**, **6.0%**, and **5.3%** of net accounts receivable[135](index=135&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses **44.4%** Q2 2020 revenue growth, the impact of May 2020 debt restructuring on liquidity, and future outlook including 5G and COVID-19 [Results of Operations](index=40&type=section&id=Results%20of%20Operations) Q2 2020 net revenues rose **44.4%** to **$80.7 million** from IoT & Mobile Solutions, while R&D doubled and a **$67.2 million** debt conversion loss impacted net loss Net Revenues by Product Category - Q2 2020 vs Q2 2019 (in thousands) | Product Category | Q2 2020 | Q2 2019 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | IoT & Mobile Solutions | $66,243 | $39,983 | $26,260 | 65.7% | | Enterprise SaaS Solutions | $14,446 | $15,908 | $(1,462) | (9.2)% | | **Total** | **$80,689** | **$55,891** | **$24,798** | **44.4%** | - Research and development expenses increased to **$10.5 million** (**13.1%** of net revenues) in Q2 2020 from **$5.2 million** (**9.3%** of net revenues) in Q2 2019, primarily due to increased staffing and development spending on 5G product programs[188](index=188&type=chunk) - A loss on debt conversion and extinguishment of **$67.2 million** was recorded in Q2 2020 related to the 2022 Notes, with no comparable expense in 2019[192](index=192&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity significantly improved in Q2 2020, with cash rising to **$42.1 million** due to a **$100 million** convertible note offering and debt restructuring - Cash and cash equivalents increased to **$42.1 million** as of June 30, 2020, compared to **$12.1 million** as of December 31, 2019[212](index=212&type=chunk) - In May 2020, the company completed a **$100.0 million** offering of 3.25% convertible senior notes due 2025 and used proceeds to repay its Term Loan and exchange its 2022 Notes[216](index=216&type=chunk)[221](index=221&type=chunk) - Management believes that current cash and anticipated cash flows from operations will be sufficient to meet working capital needs for the next twelve months[246](index=246&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable for the current reporting period - Not applicable[251](index=251&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2020[253](index=253&type=chunk) - No changes in internal control over financial reporting occurred during the three months ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[254](index=254&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, not expected to materially impact financials, with details in Note 9 - The company is involved in various legal actions from the ordinary course of business but does not expect them to have a material adverse effect[256](index=256&type=chunk) - Disclosure regarding legal proceedings, including a settlement agreement, is detailed in Note 9 of the financial statements[255](index=255&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) Updated risk factors include significant debt service for **$180.4 million** in 2025 Notes, potential dilution, and concentrated ownership by affiliated investors - The company faces significant debt service requirements from the **$180.4 million** of 2025 Notes issued in Q2 2020[258](index=258&type=chunk) - Conversion of the 2025 Notes could cause significant dilution to existing stockholders and adversely affect the stock's market price[260](index=260&type=chunk) - As of June 30, 2020, two affiliated investors (North Sound Trading, L.P. and Golden Harbor Ltd.) and their affiliates own approximately **29.2%** of outstanding common stock and **44.3%** of the 2025 Notes, resulting in concentrated ownership and significant influence[262](index=262&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) On May 12, 2020, the company privately exchanged **$375,000** of new 2025 Notes for **$150,000** of existing 2022 Notes, exempt from registration - On May 12, 2020, the company conducted a private exchange, issuing **$375,000** of new 2025 Notes for **$150,000** of existing 2022 Notes. This transaction was exempt from registration[266](index=266&type=chunk) [Item 3. Defaults Upon Senior Securities](index=49&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - None[267](index=267&type=chunk) [Item 4. Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not applicable[268](index=268&type=chunk) [Item 5. Other Information](index=49&type=section&id=Item%205.%20Other%20Information) No other information was reported for this period - None[269](index=269&type=chunk) [Item 6. Exhibits](index=50&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including the underwriting agreement, indenture for 2025 notes, and officer certifications - Lists key legal and financial documents filed with the report, including: - Underwriting Agreement for the May 2020 note offering - Base Indenture and First Supplemental Indenture for the 3.25% convertible senior notes due 2025 - Officer certifications pursuant to the Sarbanes-Oxley Act[270](index=270&type=chunk)

Inseego Corp. (NASDAQ:INSG) Q2 2020 Earnings Conference Call August 5, 2020 5:00 PM ET Company Participants Dan Mondor – Chairman and Chief Executive Officer Steve Smith – Executive Vice President and Chief Financial Officer Conference Call Participants Mike Walkley – Canaccord Genuity Jaeson Schmidt – Lake Street Scott Searle – ROTH Capital Scott Fessler – Stifel Chris Sinnott – Cowen Operator Hello, everyone, and welcome to Inseego Corp.’s Second Quarter 2020 Financial Results Conference Call. Please note ...

[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section presents the unaudited financial statements and management's discussion for Inseego Corp. for Q1 2020 [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Inseego Corp.'s unaudited condensed consolidated financial statements for Q1 2020, including balance sheets, operations, comprehensive loss, equity, and cash flows, with detailed explanatory notes [Condensed Consolidated Balance Sheets (Unaudited)](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) This table presents the unaudited condensed consolidated balance sheets for Inseego Corp. as of March 31, 2020, and December 31, 2019 Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $30,541 | $12,074 | | Total current assets | $79,840 | $64,137 | | Total assets | $173,341 | $161,373 | | Total current liabilities | $92,201 | $44,530 | | Convertible senior notes, net | $44,230 | $101,334 | | Total liabilities | $145,538 | $198,731 | | Total stockholders' equity (deficit) | $27,803 | $(37,358) | [Condensed Consolidated Statements of Operations (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) This table presents the unaudited condensed consolidated statements of operations for Inseego Corp. for the three months ended March 31, 2020 and 2019 Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net revenues: | | | | IoT & Mobile Solutions | $40,381 | $32,781 | | Enterprise SaaS Solutions | $16,459 | $15,775 | | **Total net revenues** | **$56,840** | **$48,556** | | Gross profit | $17,227 | $14,760 | | Operating loss | $(7,740) | $(2,461) | | Net loss attributable to common shareholders | $(18,590) | $(7,485) | | Basic and diluted net loss per common share | $(0.20) | $(0.10) | [Condensed Consolidated Statements of Comprehensive Loss (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss%20(Unaudited)) This table presents the unaudited condensed consolidated statements of comprehensive loss for Inseego Corp. for the three months ended March 31, 2020 and 2019 Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net loss | $(18,166) | $(7,471) | | Foreign currency translation adjustment | $(13,480) | $(583) | | **Total comprehensive loss** | **$(31,646)** | **$(8,054)** | [Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)%20(Unaudited)) This table presents the unaudited condensed consolidated statements of stockholders' equity (deficit) for Inseego Corp. for the period ended March 31, 2020 Changes in Stockholders' Equity (Deficit) (in thousands) | Metric | Balance, December 31, 2019 | Net income (loss) | Foreign currency translation adjustment | Issuance of Series E preferred shares | Issuance of common shares in connection with Notes Exchange | Balance, March 31, 2020 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Common Stock Amount | $82 | — | — | — | $14 | $96 | | Additional Paid-in Capital | $584,862 | — | — | $27,330 | $66,073 | $682,047 | | Accumulated Other Comprehensive Income (Loss) | $(3,879) | — | $(13,480) | — | — | $(17,359) | | Accumulated Deficit | $(618,303) | $(18,198) | — | $(392) | — | $(636,893) | | Total Stockholders' Equity (Deficit) | $(37,358) | $(18,166) | $(13,480) | $27,330 | $66,087 | $27,803 | [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) This table presents the unaudited condensed consolidated statements of cash flows for Inseego Corp. for the three months ended March 31, 2020 and 2019 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $328 | $(5,033) | | Net cash used in investing activities | $(4,857) | $(4,320) | | Net cash provided by financing activities | $26,314 | $10,623 | | Effect of exchange rates on cash | $(3,318) | $(407) | | Net increase in cash, cash equivalents and restricted cash | $18,467 | $863 | | Cash, cash equivalents and restricted cash, end of period | $30,541 | $31,939 | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed notes to the unaudited condensed consolidated financial statements, explaining accounting policies and financial details [1. Basis of Presentation](index=10&type=section&id=1.%20Basis%20of%20Presentation) This note outlines the fundamental principles and assumptions underlying the preparation of the financial statements [Liquidity](index=10&type=section&id=Liquidity) This section discusses the Company's cash position, working capital, and ability to meet short-term obligations, highlighting going concern risks - As of March 31, 2020, the Company had **$30.5 million** in cash and cash equivalents but a working capital deficit of **$12.4 million**, raising substantial doubt about its ability to continue as a going concern without additional financing or debt restructuring[21](index=21&type=chunk)[26](index=26&type=chunk)[28](index=28&type=chunk) - The Company issued **25,000 shares** of Series E Preferred Stock for **$25.0 million** and exchanged **$59.9 million** of Inseego Notes for common stock in Q1 2020 to support its growth plan and improve liquidity[21](index=21&type=chunk)[22](index=22&type=chunk) - Substantially all remaining Inseego Note holders waived their right to require repurchase on June 15, 2020, and the Term Loan maturity date may be extended to after March 15, 2021, subject to agreement[23](index=23&type=chunk)[25](index=25&type=chunk) - The global COVID-19 pandemic has negatively impacted the economy and supply chains, creating uncertainty regarding its future impact on the Company's operational and financial performance[20](index=20&type=chunk) [Principles of Consolidation](index=11&type=section&id=Principles%20of%20Consolidation) This section describes the consolidation policy for Inseego Corp. and its subsidiaries, including the elimination of intercompany transactions - The financial statements consolidate the accounts of Inseego Corp. and its wholly- and majority-owned subsidiaries, eliminating all intercompany transactions and balances[30](index=30&type=chunk) [Segment Information](index=11&type=section&id=Segment%20Information) This section clarifies that the Company operates as a single reportable segment, with performance assessed on a consolidated basis - Management has determined that the Company operates as a single reportable segment, with resource allocation and performance assessment based solely on consolidated operations[31](index=31&type=chunk) [Use of Estimates](index=11&type=section&id=Use%20of%20Estimates) This section highlights the significant management estimates and assumptions required for financial statement preparation, including revenue recognition and going concern - The preparation of financial statements requires management to make significant estimates and assumptions, including those related to revenue recognition, capitalized software costs, inventory valuation, intangible assets, goodwill, and the Company's ability to continue as a going concern[32](index=32&type=chunk) [Revenue Recognition](index=11&type=section&id=Revenue%20Recognition) This section details the Company's policies for recognizing revenue from its IoT & Mobile Solutions and Enterprise SaaS Solutions segments - The Company generates revenue from two distinct groupings: IoT & Mobile Solutions (4G LTE/5G mobile broadband gateways, routers, modems, hotspots, cloud management software) and Enterprise SaaS Solutions (Ctrack telematics platforms and Device Management System subscriptions)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[39](index=39&type=chunk) - Revenue for hardware sales is recognized at a point in time when control is transferred to the customer (typically at delivery/shipment/installation), while SaaS subscription revenue is recognized over time on a ratable basis over the contract term (majority **1-3 years**)[44](index=44&type=chunk)[47](index=47&type=chunk)[59](index=59&type=chunk) - The Company applies a five-step process for revenue recognition, identifying contracts, performance obligations, transaction price, allocation, and recognition upon satisfaction of obligations[41](index=41&type=chunk)[45](index=45&type=chunk) [New Accounting Pronouncements](index=16&type=section&id=New%20Accounting%20Pronouncements) This section discusses the adoption of recent accounting pronouncements and their impact on the Company's financial statements - The Company early adopted ASU 2019-12, Income Taxes, in Q4 2019 with no material impact. ASU 2016-13, Financial Instruments—Credit Losses, adopted January 1, 2020, also had no impact. ASC 842, Leases, adopted January 1, 2019, resulted in recording right-of-use assets and lease liabilities[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk) [2. Financial Statement Details](index=18&type=section&id=2.%20Financial%20Statement%20Details) This note provides disaggregated details for specific line items within the financial statements, including inventories and accrued expenses [Inventories, net](index=18&type=section&id=Inventories,%20net) This table details the composition of inventories, net, as of March 31, 2020, and December 31, 2019 Inventories, net (in thousands) | Category | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Finished goods | $9,602 | $21,229 | | Raw materials and components | $4,657 | $4,061 | | **Total inventories, net** | **$14,259** | **$25,290** | [Accrued Expenses and Other Current Liabilities](index=18&type=section&id=Accrued%20Expenses%20and%20Other%20Current%20Liabilities) This table details the components of accrued expenses and other current liabilities as of March 31, 2020, and December 31, 2019 Accrued Expenses and Other Current Liabilities (in thousands) | Category | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Royalties | $1,646 | $1,415 | | Payroll and related expenses | $3,572 | $2,716 | | Accrued interest | $713 | $1,543 | | Deferred revenue | $2,317 | $2,235 | | Operating lease liabilities | $1,121 | $1,101 | | Acquisition-related liabilities | $1,000 | $1,000 | | Other | $6,969 | $7,368 | | **Total** | **$17,618** | **$17,861** | [Cash, Cash Equivalents and Restricted Cash](index=18&type=section&id=Cash,%20Cash%20Equivalents%20and%20Restricted%20Cash) This table details the components of cash, cash equivalents, and restricted cash as of March 31, 2020, and December 31, 2019 Cash, Cash Equivalents and Restricted Cash (in thousands) | Category | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $30,541 | $12,074 | | Restricted cash | — | — | | **Total** | **$30,541** | **$12,074** | [3. Fair Value Measurement of Assets and Liabilities](index=18&type=section&id=3.%20Fair%20Value%20Measurement%20of%20Assets%20and%20Liabilities) This note describes the Company's fair value measurement hierarchy for assets and liabilities and presents relevant financial instruments - The Company classifies fair value measurements using a three-level hierarchy (Level 1: quoted prices in active markets; Level 2: observable inputs other than quoted prices; Level 3: unobservable inputs)[73](index=73&type=chunk)[77](index=77&type=chunk) - The Company's Convertible Notes are carried at amortized cost, with a carrying value of **$44.2 million** as of March 31, 2020, and **$101.3 million** as of December 31, 2019. Fair value is not practicable to determine due to lack of information[76](index=76&type=chunk) Financial Instruments Measured at Fair Value (in thousands) | Asset Category | March 31, 2020 (Level 1) | December 31, 2019 (Level 1) | | :--- | :--- | :--- | | Money market funds | $126 | $126 | | **Total cash equivalents** | **$126** | **$126** | [4. Debt](index=19&type=section&id=4.%20Debt) This note provides detailed information on the Company's debt instruments, including the Term Loan and Convertible Senior Notes [Term Loan](index=19&type=section&id=Term%20Loan) This section details the Term Loan's principal, interest rate, maturity, and related party holdings, along with recent amendments - The Term Loan has a principal amount of **$47.5 million**, bears interest at three-month LIBOR plus **7.625%** (**9.238%** at March 31, 2020), and matures on August 23, 2020. Related parties hold **100%** of the principal[80](index=80&type=chunk)[83](index=83&type=chunk)[86](index=86&type=chunk) - In March 2020, the Company issued **2,330 shares** of Series E Preferred Stock to satisfy accrued interest on the Term Loan and entered an agreement to extend the maturity date to no earlier than March 15, 2021[84](index=84&type=chunk)[85](index=85&type=chunk) Term Loan Interest Expense (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Contractual interest expense | $1,151 | $1,180 | | Amortization of debt discount | $333 | $333 | | Amortization of debt issuance costs | $40 | $40 | | **Total interest expense** | **$1,524** | **$1,553** | [Convertible Senior Notes](index=23&type=section&id=Convertible%20Senior%20Notes) This section details the Company's Convertible Senior Notes, including conversions, exchanges, and outstanding principal amounts - In February 2020, the remaining **$250,000** Novatel Wireless Notes were converted into **50,000 shares** of common stock, resulting in no outstanding Novatel Wireless Notes as of March 31, 2020[89](index=89&type=chunk) - During Q1 2020, **$59.9 million** of Inseego Notes were exchanged for **13,688,876 shares** of common stock, leading to a **$7.9 million** non-cash inducement expense due to shares issued in excess of original conversion terms[104](index=104&type=chunk)[105](index=105&type=chunk) - The Inseego Notes, with a principal of **$44.968 million** outstanding as of March 31, 2020, are convertible under specific conditions (e.g., stock price exceeding **130%** of conversion price) and holders waived their optional repurchase right on June 15, 2020[106](index=106&type=chunk)[92](index=92&type=chunk)[100](index=100&type=chunk) Convertible Notes Interest Expense (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Contractual interest expense | $618 | $1,446 | | Amortization of debt discount | $1,252 | $1,956 | | Amortization of debt issuance costs | $72 | $114 | | **Total interest expense** | **$1,942** | **$3,516** | [5. Share-based Compensation](index=27&type=section&id=5.%20Share-based%20Compensation) This note details the Company's share-based compensation expense and unrecognized compensation for stock options and RSUs Share-based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Cost of revenues | $228 | $123 | | Research and development | $292 | $175 | | Sales and marketing | $463 | $214 | | General and administrative | $570 | $545 | | **Total** | **$1,553** | **$1,057** | - As of March 31, 2020, total unrecognized compensation expense for stock options was **$11.7 million** (expected to be recognized over **2.87 years**) and for Restricted Stock Units (RSUs) was **$0.7 million** (over **1.33 years**)[110](index=110&type=chunk)[111](index=111&type=chunk) [6. Earnings Per Share](index=27&type=section&id=6.%20Earnings%20Per%20Share) This note explains the calculation of basic and diluted earnings per share, including the treatment of potentially dilutive securities - Basic EPS excludes dilution, while diluted EPS reflects potential dilution from securities like Convertible Notes, warrants, stock options, and RSUs. These potentially dilutive securities are excluded in loss periods or when anti-dilutive[112](index=112&type=chunk)[113](index=113&type=chunk)[115](index=115&type=chunk) - For Q1 2020, **22,028,548 shares** related to Convertible Notes, warrants, stock options, and RSUs were excluded from diluted EPS computation as their effect would have been anti-dilutive[116](index=116&type=chunk) [7. Private Placements](index=29&type=section&id=7.%20Private%20Placements) This note details the Company's private placements of common and preferred stock, including warrant exercises and Series E Preferred Stock issuance [Common Stock](index=29&type=section&id=Common%20Stock) This section describes the issuance of common stock through warrant exercises during the reported period - In Q1 2020, the Company received **$1.9 million** in net cash proceeds from the exercise of **338,454** common stock purchase warrants issued in 2015[118](index=118&type=chunk) - The 2018 Warrants were exercised in March 2019 for **$10.6 million**, leading to the issuance of **2,500,000** new 2019 Warrants with an exercise price of **$7.00 per share**, exercisable from September 28, 2019, to June 30, 2022[117](index=117&type=chunk) [Preferred Stock](index=29&type=section&id=Preferred%20Stock) This section details the issuance of Series E Preferred Stock, including its terms and use for interest obligations - On March 6, 2020, the Company issued an additional **25,000 shares** of Series E Preferred Stock for **$25.0 million**. These shares carry a **9.00%** cumulative cash dividend, payable quarterly, and have no voting rights unless required by law[120](index=120&type=chunk)[119](index=119&type=chunk) - On March 31, 2020, **2,330 shares** of Series E Preferred Stock were issued to South Ocean to satisfy deferred interest obligations under the Credit Agreement[121](index=121&type=chunk) [8. Geographic Information and Concentrations of Risk](index=31&type=section&id=8.%20Geographic%20Information%20and%20Concentrations%20of%20Risk) This note provides a breakdown of net revenues by geographic region and highlights significant customer concentration risks Net Revenues by Geographic Region (in thousands) | Region | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | United States and Canada | $42,350 | $33,494 | | South Africa | $8,238 | $8,369 | | Other | $6,252 | $6,693 | | **Total** | **$56,840** | **$48,556** | - One customer accounted for **53.4%** of net revenues for Q1 2020 and **42.0%** of accounts receivable as of March 31, 2020, indicating significant customer concentration[124](index=124&type=chunk) [9. Commitments and Contingencies](index=31&type=section&id=9.%20Commitments%20and%20Contingencies) This note outlines the Company's legal proceedings, settlement liabilities, and indemnification agreements - The Company is involved in various legal proceedings, including patent infringement lawsuits, but believes that liabilities from these matters will not have a material adverse effect on its financial condition[125](index=125&type=chunk) - The Company has a remaining liability of approximately **$1.0 million** in current liabilities under a July 2018 settlement agreement related to the RER acquisition[126](index=126&type=chunk) - The Company periodically enters into indemnification agreements with customers for intellectual property claims, with maximum exposure not estimable but not expected to have a material adverse effect[127](index=127&type=chunk) [10. Leases](index=33&type=section&id=10.%20Leases) This note details the Company's lease arrangements, both as a lessee for office space and equipment, and as a lessor for monitoring devices [Lessee](index=33&type=section&id=Lessee) This section details the Company's operating lease obligations as a lessee, including right-of-use assets and lease liabilities - As of March 31, 2020, the Company, as a lessee, had right-of-use assets of **$6.5 million** and lease liabilities of **$6.7 million** related to operating leases for office space, automobiles, and equipment[131](index=131&type=chunk) - Operating lease costs were approximately **$0.3 million** for Q1 2020, and the weighted-average remaining lease term was **5.7 years** with a weighted-average discount rate of **9.1%**[131](index=131&type=chunk)[132](index=132&type=chunk) Future Minimum Operating Lease Payments (in thousands) | Year | Amount | | :--- | :--- | | 2020 (remainder) | $1,073 | | 2021 | $1,718 | | 2022 | $1,463 | | 2023 | $1,145 | | 2024 | $1,015 | | Thereafter | $2,425 | | **Total minimum operating lease payments** | **$8,839** | | Less: amounts representing interest | $(2,115) | | **Present value of net minimum operating lease payments** | **$6,724** | [Lessor](index=35&type=section&id=Lessor) This section describes the Company's role as a lessor for monitoring device operating leases and related revenue recognition - The Company, as a lessor, classifies monitoring device leases as operating leases, carrying rental devices at historical cost less depreciation. Revenue from these combined lease and non-lease components is recognized as a single performance obligation under ASC 606[137](index=137&type=chunk)[138](index=138&type=chunk) [11. Income Taxes](index=35&type=section&id=11.%20Income%20Taxes) This note discusses the Company's income tax provision, the impact of valuation allowances, and the assessment of the CARES Act - The income tax provision for Q1 2020 was **$0.1 million**, primarily due to foreign income taxes and minimum state taxes, with an income tax expense rather than a benefit due to full valuation allowances at most entities[140](index=140&type=chunk) - The Company is assessing the impact of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) on its tax position[139](index=139&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of Inseego Corp.'s financial condition and operating results for Q1 2020, covering business overview, revenue, influencing factors, accounting policies, and liquidity [Forward Looking Statements](index=36&type=section&id=Forward%20Looking%20Statements) This section highlights that the report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ - The report contains forward-looking statements regarding future expectations, assumptions, estimates, and projections, which involve risks and uncertainties that could cause actual results to differ materially[142](index=142&type=chunk) - Key risk factors include competition, ability to develop new products (especially 5G NR), customer concentration, debt refinancing, supply chain reliance, tariffs, geopolitical instability, and the impact of global public health emergencies like COVID-19[142](index=142&type=chunk)[147](index=147&type=chunk) [Business Overview](index=39&type=section&id=Business%20Overview) This section describes Inseego Corp.'s core business as a leader in 4G/5G wireless, IIoT, and cloud solutions for global markets - Inseego Corp. is a leader in designing and developing fixed and mobile wireless solutions (4G and 5G NR), Industrial IoT (IIoT), and cloud solutions for various markets globally, including service providers, enterprises, and governments[149](index=149&type=chunk) - The Company's product portfolio includes device-to-cloud solutions that offer intelligent, reliable, and secure end-to-end IoT services with deep business intelligence, powering mission-critical applications like 5G fixed wireless access and fleet management[149](index=149&type=chunk) [Our Sources of Revenue](index=39&type=section&id=Our%20Sources%20of%20Revenue) This section outlines the Company's revenue streams from intelligent wireless hardware products and SaaS solutions across mobile and IIoT markets - Revenue is generated from intelligent wireless 3G, 4G, and 5G hardware products for mobile communications and IIoT markets, including mobile hotspots (MiFi™ brand), wireless routers for IIoT, USB modems, and integrated telematics devices[151](index=151&type=chunk) - The Company also sells SaaS, software, and services solutions across mobile and IIoT vertical markets, such as fleet management, vehicle telematics, and asset tracking, through its Ctrack platforms and Device Management Solutions[154](index=154&type=chunk)[155](index=155&type=chunk) - Key customers include wireless operators like Verizon Wireless, AT&T, and Sprint for MiFi products, and transportation companies, industrial enterprises, and system integrators for IIoT products[152](index=152&type=chunk)[153](index=153&type=chunk) [Factors Which May Influence Future Results of Operations](index=40&type=section&id=Factors%20Which%20May%20Influence%20Future%20Results%20of%20Operations) This section discusses various internal and external factors that could impact the Company's future financial performance, including economic conditions and 5G adoption - Future net revenues are influenced by economic conditions, competition, product acceptance in new markets, 5G deployment and adoption, pricing, supply chain stability, and changes in technology[156](index=156&type=chunk)[162](index=162&type=chunk) - Cost of net revenues includes manufacturing, distribution, warranty, amortization, royalties, and inventory adjustments, which are impacted by product demand[158](index=158&type=chunk) - Operating costs (R&D, sales & marketing, G&A) are driven by staffing, product development (especially 5G), marketing initiatives, and corporate functions, with potential volatility from legal fees and bad debts[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[163](index=163&type=chunk) [Critical Accounting Policies and Estimates](index=42&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms that there have been no material changes to the Company's critical accounting policies and estimates since the prior annual report - There have been no material changes to the Company's critical accounting policies and estimates since the filing of its Annual Report on Form 10-K for the year ended December 31, 2019[166](index=166&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the Company's operating results for the three months ended March 31, 2020, compared to the prior year [Net revenues](index=42&type=section&id=Net%20revenues) This section analyzes the changes in net revenues by product category for Q1 2020 compared to Q1 2019 Net Revenues by Product Category (in thousands) | Product Category | March 31, 2020 | March 31, 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | IoT & Mobile Solutions | $40,381 | $32,781 | $7,600 | 23.2% | | Enterprise SaaS Solutions | $16,459 | $15,775 | $684 | 4.3% | | **Total** | **$56,840** | **$48,556** | **$8,284** | **17.1%** | - The **23.2%** increase in IoT & Mobile Solutions net revenues was primarily driven by increased sales of LTE gigabit hotspots, USB modems, the introduction of 5G hotspots, and higher IoT sales[168](index=168&type=chunk) - Enterprise SaaS Solutions net revenues increased by **4.3%** due to higher Device Management System and Ctrack system revenues, partially offset by the strengthening U.S. Dollar's effect on international sales[169](index=169&type=chunk) [Cost of net revenues](index=42&type=section&id=Cost%20of%20net%20revenues) This section analyzes the changes in the cost of net revenues by product category for Q1 2020 compared to Q1 2019 Cost of Net Revenues by Product Category (in thousands) | Product Category | March 31, 2020 | March 31, 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | IoT & Mobile Solutions | $32,864 | $27,600 | $5,264 | 19.1% | | Enterprise SaaS Solutions | $6,749 | $6,196 | $553 | 8.9% | | **Total** | **$39,613** | **$33,796** | **$5,817** | **17.2%** | - IoT & Mobile Solutions cost of net revenues increased by **19.1%** primarily due to higher sales volume of LTE gigabit hotspots, USB modems, 5G hotspots, and IoT products, along with associated freight and royalties[170](index=170&type=chunk) - Enterprise SaaS Solutions cost of net revenues rose by **8.9%** due to increased costs to service Device Management System and Ctrack system revenues, partially offset by favorable foreign exchange rates[171](index=171&type=chunk) [Gross profit](index=43&type=section&id=Gross%20profit) This section analyzes the changes in gross profit and gross margin for Q1 2020 compared to Q1 2019 Gross Profit and Margin (in thousands) | Metric | March 31, 2020 | March 31, 2019 | | :--- | :--- | :--- | | Gross profit | $17,227 | $14,760 | | Gross margin | 30.3% | 30.4% | - Gross profit increased by **$2.4 million**, primarily attributable to the increase in IoT & Mobile Solutions revenues and improvements in MiFi gross margins, despite a slight decrease in gross margin percentage[172](index=172&type=chunk) [Research and development expenses](index=43&type=section&id=Research%20and%20development%20expenses) This section analyzes the changes in research and development expenses for Q1 2020 compared to Q1 2019 Research and Development Expenses (in thousands) | Metric | March 31, 2020 | March 31, 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | R&D Expenses | $8,224 | $3,485 | $4,739 | 135.9% | | % of Net Revenues | 14.5% | 7.2% | | | - Research and development expenses more than doubled (**135.9%** increase) due to increased staffing, test units, and other development spending related to 5G product programs[173](index=173&type=chunk) [Sales and marketing expenses](index=43&type=section&id=Sales%20and%20marketing%20expenses) This section analyzes the changes in sales and marketing expenses for Q1 2020 compared to Q1 2019 Sales and Marketing Expenses (in thousands) | Metric | March 31, 2020 | March 31, 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | S&M Expenses | $8,755 | $6,391 | $2,364 | 37.0% | | % of Net Revenues | 15.4% | 13.2% | | | - Sales and marketing expenses increased by **37.0%** primarily as a result of an increase in employment costs attributable to an increase in headcount[174](index=174&type=chunk) [General and administrative expenses](index=43&type=section&id=General%20and%20administrative%20expenses) This section analyzes the changes in general and administrative expenses for Q1 2020 compared to Q1 2019 General and Administrative Expenses (in thousands) | Metric | March 31, 2020 | March 31, 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | G&A Expenses | $7,162 | $6,474 | $688 | 10.6% | | % of Net Revenues | 12.6% | 13.3% | | | - General and administrative expenses increased by **10.6%** primarily due to an increase in employment costs attributable to an increase in headcount and non-recurring legal fees[175](index=175&type=chunk) [Amortization of purchased intangible assets](index=43&type=section&id=Amortization%20of%20purchased%20intangible%20assets) This section presents the amortization expense for purchased intangible assets for Q1 2020 and Q1 2019 Amortization of Purchased Intangible Assets (in thousands) | Metric | March 31, 2020 | March 31, 2019 | | :--- | :--- | :--- | | Amortization | $826 | $871 | [Inducement expense](index=43&type=section&id=Inducement%20expense) This section discusses the inducement expense recorded for Q1 2020 related to privately-negotiated debt-to-equity exchanges - An inducement expense of **$7.9 million** was recorded for Q1 2020, representing the fair value of inducement shares issued in privately-negotiated exchange transactions with certain Inseego Notes holders[176](index=176&type=chunk) [Interest expense, net](index=43&type=section&id=Interest%20expense,%20net) This section analyzes the changes in net interest expense for Q1 2020 compared to Q1 2019 Interest Expense, Net (in thousands) | Metric | March 31, 2020 | March 31, 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Interest Expense, net | $3,380 | $5,075 | $(1,695) | -33.4% | - Net interest expense decreased by **33.4%** due to the reduction in debt associated with the conversion of debt into equity during Q1 2020[177](index=177&type=chunk) [Other income, net](index=43&type=section&id=Other%20income,%20net) This section presents other income, net, primarily consisting of foreign currency transaction gains and losses Other Income, Net (in thousands) | Metric | March 31, 2020 | March 31, 2019 | | :--- | :--- | :--- | | Other income, net | $978 | $313 | - Other income, net, primarily consisted of foreign currency transaction gains and losses[178](index=178&type=chunk) [Income tax provision](index=43&type=section&id=Income%20tax%20provision) This section presents the income tax provision for Q1 2020 and Q1 2019, primarily related to foreign jurisdictions Income Tax Provision (in thousands) | Metric | March 31, 2020 | March 31, 2019 | | :--- | :--- | :--- | | Income tax provision | $91 | $248 | - The income tax provision primarily related to profitable entities in foreign jurisdictions[178](index=178&type=chunk) [Net income attributable to noncontrolling interests](index=43&type=section&id=Net%20income%20attributable%20to%20noncontrolling%20interests) This section presents the net income attributable to noncontrolling interests for Q1 2020 and Q1 2019 Net Income Attributable to Noncontrolling Interests (in thousands) | Metric | March 31, 2020 | March 31, 2019 | | :--- | :--- | :--- | | Net income attributable to noncontrolling interests | $32 | $14 | [Series E preferred stock dividends](index=43&type=section&id=Series%20E%20preferred%20stock%20dividends) This section presents the Series E preferred stock dividends for Q1 2020 and Q1 2019 Series E Preferred Stock Dividends (in thousands) | Metric | March 31, 2020 | March 31, 2019 | | :--- | :--- | :--- | | Series E preferred stock dividends | $392 | — | [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's liquidity position, capital resources, debt obligations, financing activities, and the impact of COVID-19 [Term Loan](index=45&type=section&id=Term%20Loan) This section details the Term Loan's principal, maturity, and compliance with covenants, along with efforts to extend its maturity - The Term Loan has a principal amount of **$48.0 million**, with a maturity date of August 23, 2020. The Company is working to amend or refinance it to extend maturity beyond March 15, 2021[187](index=187&type=chunk)[191](index=191&type=chunk) - In Q1 2020, the Company issued **2,330 shares** of Series E Preferred Stock to satisfy accrued interest on the Term Loan, and related parties hold **100%** of the principal amount[190](index=190&type=chunk)[193](index=193&type=chunk) - The Company obtained a waiver of the capital expenditure restriction and was in compliance with all financial covenants under the Credit Agreement as of March 31, 2020[189](index=189&type=chunk) [Convertible Senior Notes](index=45&type=section&id=Convertible%20Senior%20Notes) This section details the conversion and exchange of Convertible Senior Notes, including the elimination of Novatel Wireless Notes - In February 2020, the remaining **$250,000** Novatel Wireless Notes were converted into **50,000 shares** of common stock, eliminating all outstanding Novatel Wireless Notes[194](index=194&type=chunk) - During Q1 2020, **$59.9 million** of Inseego Notes were exchanged for **13,688,876 shares** of common stock, resulting in a **$7.9 million** non-cash inducement expense[207](index=207&type=chunk)[208](index=208&type=chunk) - Holders of substantially all outstanding Inseego Notes waived their optional right to require the Company to repurchase the notes on June 15, 2020[202](index=202&type=chunk) [Settlement Agreement](index=48&type=section&id=Settlement%20Agreement) This section outlines the remaining liability under a July 2018 settlement agreement related to the RER acquisition - The Company has a remaining liability of approximately **$1.0 million** in current liabilities under a July 2018 settlement agreement related to the RER acquisition[210](index=210&type=chunk) [Rights Agreement](index=48&type=section&id=Rights%20Agreement) This section describes the Company's preferred share purchase rights agreement and its amendment regarding 'Acquiring Person' definition - The Company issued preferred share purchase rights in January 2018, exercisable under certain circumstances, which expire on January 22, 2021[211](index=211&type=chunk)[212](index=212&type=chunk) - An amendment in March 2019 modified the 'Acquiring Person' definition to allow certain investors (North Sound Trading, L.P. and Golden Harbor Ltd.) to remain Grandfathered Stockholders, provided they do not acquire more than **0.50%** of outstanding common stock[214](index=214&type=chunk)[215](index=215&type=chunk) [Historical Cash Flows](index=49&type=section&id=Historical%20Cash%20Flows) This section provides a summary and analysis of the Company's cash flows from operating, investing, and financing activities Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Operating Activities | $328 | $(5,033) | | Investing Activities | $(4,857) | $(4,320) | | Financing Activities | $26,314 | $10,623 | | Net Increase in Cash | $18,467 | $863 | | End of Period Cash | $30,541 | $31,939 | - Net cash provided by operating activities improved significantly to **$0.3 million** in Q1 2020 from a **$5.0 million** outflow in Q1 2019, primarily due to non-cash charges for inducement shares and improved working capital[216](index=216&type=chunk) - Net cash provided by financing activities increased to **$26.3 million** in Q1 2020, driven by proceeds from Series E Preferred Stock issuance and warrant exercises[218](index=218&type=chunk) [Other Liquidity Needs](index=50&type=section&id=Other%20Liquidity%20Needs) This section discusses the Company's future liquidity needs, going concern risks, mitigation plans, and the potential impact of the COVID-19 pandemic - Management believes current cash and anticipated operating cash flows are insufficient to meet working capital needs, including Term Loan repayment, without additional financing, raising substantial doubt about the Company's ability to continue as a going concern[222](index=222&type=chunk) - The Company's plan to mitigate going concern doubt involves debt restructuring or issuing additional debt or equity securities, with no assurance of favorable terms or availability[222](index=222&type=chunk)[223](index=223&type=chunk) - The COVID-19 pandemic introduces significant uncertainty, potentially impacting liquidity through supply chain disruptions, extended sales cycles, payment delays, and slower 5G network rollouts[224](index=224&type=chunk) [Off-Balance Sheet Arrangements](index=50&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms that the Company does not engage in any off-balance sheet arrangements - The Company does not engage in any off-balance sheet arrangements[226](index=226&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section confirms no material quantitative or qualitative disclosures about market risk are applicable for the reported period - The Company has no applicable quantitative and qualitative disclosures about market risk for the period[227](index=227&type=chunk) [Item 4. Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the Company's evaluation of disclosure controls and procedures and reports on changes in internal control over financial reporting - The Company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of March 31, 2020[229](index=229&type=chunk) - There were no changes in the Company's internal control over financial reporting during the three months ended March 31, 2020, that materially affected or are reasonably likely to materially affect internal control over financial reporting[230](index=230&type=chunk) [PART II—OTHER INFORMATION](index=35&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and equity sales [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates legal proceedings from Note 9 and states that other legal actions are not expected to have a material adverse effect - The disclosure regarding legal proceedings from Note 9, Commitments and Contingencies, is incorporated by reference[232](index=232&type=chunk) - The Company believes the ultimate outcome of other legal actions arising in the ordinary course of business will not have a material adverse effect on its business, results of operations, financial condition, or cash flows[233](index=233&type=chunk) [Item 1A. Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, emphasizing the uncertain and potentially adverse effects of the COVID-19 pandemic on the Company's business and financial performance - The global COVID-19 pandemic is a new material risk factor, negatively impacting the U.S. and global economy, disrupting supply chains, and creating significant financial market disruption[235](index=235&type=chunk) - COVID-19 could lead to delays or disruptions in product supply from third-party manufacturers, impact the ability to meet customer demand, and potentially result in adverse effects on sales and financial results if mitigation efforts are unsuccessful[237](index=237&type=chunk) - The pandemic's prolonged impact could cause customer payment delays, slow regulatory approvals for new products, and delay 5G network rollouts, further affecting operating results and longer-term demand[238](index=238&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details unregistered equity sales, including privately-negotiated exchanges of Inseego Notes for common stock and warrant exercises Unregistered Sales of Equity Securities (Q1 2020) | Date of Exchange Agreement | Number of Exchange Shares | Principal Amount of Exchanged Notes | | :--- | :--- | :--- | | February 5, 2020 | 233,730 | $1,000,000 | | February 11, 2020 | 57,250 | $250,000 | | March 5, 2020 | 626,531 | $2,769,000 | - These exchange shares were issued in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act[241](index=241&type=chunk) - Common stock was also issued upon the exercise of outstanding warrants, totaling **338,454 shares** for **$1,861,947** in consideration during Q1 2020, exempt under Section 4(a)(2) of the Securities Act[242](index=242&type=chunk) [Item 3. Defaults Upon Senior Securities](index=54&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms no defaults on senior securities occurred during the reported period - The Company reported no defaults upon senior securities[243](index=243&type=chunk) [Item 4. Mine Safety Disclosures](index=54&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section confirms that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[244](index=244&type=chunk) [Item 5. Other Information](index=54&type=section&id=Item%205.%20Other%20Information) This section indicates no other information is required to be reported for the period - The Company reported no other information[245](index=245&type=chunk) [Item 6. Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate documents, agreements, and certifications - The report includes a comprehensive list of exhibits, such as Amended and Restated Certificate of Incorporation, Bylaws, Certificates of Designation for Preferred Stock, Supplemental Indentures, Securities Purchase Agreements, and various certifications[247](index=247&type=chunk) [SIGNATURES](index=57&type=section&id=SIGNATURES) This section contains the required signatures of the Company's principal executive and financial officers - The report is duly signed on May 7, 2020, by Dan Mondor, Chief Executive Officer, and Stephen Smith, Chief Financial Officer, pursuant to the requirements of the Securities Exchange Act of 1934[250](index=250&type=chunk)[251](index=251&type=chunk)

Financial Data and Key Metrics Changes - Inseego reported Q1 revenue of $56.8 million, up 17% year-over-year and 9% sequentially from Q4 [22][8] - The company achieved positive operating cash flow in Q1, marking a significant milestone [30] - Non-GAAP net loss for Q1 was $5.7 million or $0.06 per share, an improvement from a loss of $8 million or $0.10 per share in the previous quarter [29] Business Line Data and Key Metrics Changes - IoT and mobile revenue reached $40.4 million, up 23% year-over-year and 14% sequentially, driven by increased demand for 4G and 5G products [22][24] - Enterprise SaaS Solutions revenue was $16.5 million, approximately 4% growth compared to the same period last year [23] - Gross margin for IoT and mobile business was 19.4%, up 4.4 points sequentially [24] Market Data and Key Metrics Changes - The demand for mobile hotspots surged due to the work-from-home trend, with significant increases noted in March [22][12] - The company is experiencing a rolling demand for its products, indicating sustained interest beyond initial spikes [48] Company Strategy and Development Direction - Inseego is focusing on expanding its relationships with U.S. government entities to enhance its position as a supplier for secure 5G networks [20] - The company plans to launch five mobile hotspot and three fixed wireless 5G products with six carriers globally in the second half of the year [17] - A strategic shift has been made to strengthen the supply chain by partnering with Foxconn for manufacturing and logistics [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the sustainability of demand, indicating that the current surge is likely to plateau at a higher level [48] - The company anticipates Q2 revenue in the range of $75 million to $85 million, reflecting continued strong demand [10][31] - Management highlighted the importance of remote work and telehealth trends as long-term drivers for their business [12][13] Other Important Information - The company has successfully converted $60 million of senior convertible notes into equity, significantly reducing debt and cash interest expenses [23] - Inseego's gross margins are expected to improve further as the product mix shifts towards higher-margin 5G products [25] Q&A Session Summary Question: Supply chain support for guidance - Management confirmed that there are no supply limitations currently, with Foxconn effectively managing production and procurement [39] Question: Demand sustainability - Management indicated that the demand surge is expected to continue throughout 2020, with orders rolling in consistently [48] Question: Gross margin expectations - Management expects gross margins to improve as new 5G products are launched, with a target of approaching 30% by year-end [71] Question: Strength in Ctrack business - Management attributed the growth in South Africa to turnaround efforts and improved product-market fit [50] Question: Free cash flow expectations - Management expects the cash on hand to last until the company reaches free cash flow positivity [88]

[Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section details forward-looking statements, their inherent risks, and the company's disclaimer on updating them [Forward-Looking Statements Overview](index=4&type=section&id=Forward-Looking%20Statements%20Overview) This overview highlights forward-looking statements, their reliance on current expectations, and the various risks that could cause actual results to differ - Forward-looking statements are based on current expectations, assumptions, estimates, and projections, and are subject to risks and uncertainties that could cause actual results to differ materially[12](index=12&type=chunk) - Key risk factors include the ability to compete in wireless broadband and IoT markets, successfully develop and introduce new products (especially 5G NR), expand customer reach, manage debt, and mitigate impacts of global economic conditions and health emergencies[12](index=12&type=chunk)[16](index=16&type=chunk) - The company disclaims any undertaking to publicly update or revise any forward-looking statements[12](index=12&type=chunk) [Trademarks](index=6&type=section&id=Trademarks) This section identifies trademarks and registered trademarks owned by Inseego Corp. and its subsidiaries [Trademarks Overview](index=6&type=section&id=Trademarks%20Overview) This section identifies trademarks and registered trademarks owned by Inseego Corp. and its subsidiaries - Inseego owns several trademarks and registered trademarks, including "Inseego", "DigiCore", "Novatel Wireless", "MiFi", "MiFi Intelligent Mobile Hotspot", "Ctrack", "Inseego North America", and "Skyus"[15](index=15&type=chunk) - Other trademarks, trade names, or service marks mentioned in the report are the property of their respective owners[15](index=15&type=chunk) [PART I](index=7&type=section&id=PART%20I) This part covers Inseego's business operations, strategic initiatives, competitive landscape, and associated risk factors [Item 1. Business](index=7&type=section&id=Item%201.%20Business) Inseego Corp. leads in 4G/5G wireless, IIoT, and cloud solutions, focusing on mission-critical enterprise applications and strategic growth - Inseego Corp. is a leader in designing and developing fixed and mobile wireless solutions (advanced 4G and 5G NR), Industrial IoT (IIoT), and cloud solutions globally[18](index=18&type=chunk) - The company's product portfolio offers intelligent, reliable, and secure end-to-end IoT services with deep business intelligence, powering mission-critical applications like 5G FWA gateways, 4G/5G mobile broadband, SD WAN failover, asset tracking, and fleet management[18](index=18&type=chunk) - Inseego's strategy includes capitalizing on direct relationships with wireless operators, expanding its IoT solutions portfolio, aggressively expanding go-to-market offerings, improving SaaS solution penetration, and increasing the value of its offerings through advanced technologies like 5G NR, predictive analytics, machine learning, and edge intelligence[29](index=29&type=chunk)[30](index=30&type=chunk) [Overview](index=7&type=section&id=Overview) Inseego Corp., formed in 2016, is a global leader in 4G/5G wireless, IIoT, and cloud solutions for mission-critical applications - Inseego Corp. is a Delaware corporation formed in 2016, succeeding Novatel Wireless, Inc. (formed in 1996)[17](index=17&type=chunk) - The company is a leader in fixed and mobile wireless solutions (advanced 4G and 5G NR), Industrial IoT (IIoT), and cloud solutions for various business sizes globally[18](index=18&type=chunk) - Inseego's solutions provide intelligent, reliable, and secure end-to-end IoT services with deep business intelligence, powering mission-critical applications like 5G FWA gateways, 4G/5G mobile broadband, SD WAN failover, asset tracking, and fleet management[18](index=18&type=chunk) [Industry Trends](index=7&type=section&id=Industry%20Trends) The mobile industry is rapidly advancing with 5G NR, enabling diverse use cases and significant growth in IoT connections - The mobile industry has seen tremendous advancements and growth, with 5G NR (the 4th industrial revolution) expected to bring multi-gigabit data rates, sub-millisecond latency, and wider spectrum bandwidths[20](index=20&type=chunk)[21](index=21&type=chunk) - 5G is designed for diverse use cases, including autonomous vehicles, telemedicine, ultra-HD video streaming, cloud gaming, edge computing, augmented reality, and robotics for smart manufacturing[21](index=21&type=chunk) - IoT connections are projected to grow to **25.2 billion by 2025**, with 5G enabling massive numbers of fixed and mobile wireless devices and supporting 'wireless edge technologies' for various industrial applications[26](index=26&type=chunk) [Our Strategy](index=9&type=section&id=Our%20Strategy) Inseego aims to lead in high-performance 5G fixed, mobile, and IIoT device-to-cloud solutions through strategic partnerships and advanced technology - Inseego aims to be a leader in high-performance 5G fixed, mobile, and IIoT device-to-cloud solutions for enterprises and service providers[29](index=29&type=chunk) - Key strategic elements include capitalizing on direct relationships with wireless operators and suppliers, expanding the IoT solutions portfolio, aggressively expanding go-to-market offerings, improving SaaS solution penetration, and increasing the value of offerings through cutting-edge IoT, mobile, and cloud solutions with a focus on predictive analytics, machine learning, and edge intelligence[30](index=30&type=chunk) [Our Sources of Revenue](index=10&type=section&id=Our%20Sources%20of%20Revenue) Revenue is generated from intelligent wireless hardware products and SaaS solutions across mobile and industrial IoT markets - Revenue is generated from intelligent wireless 3G, 4G, and 5G hardware products for mobile communications and industrial IoT markets, including fixed wireless routers, mobile hotspots (MiFi brand), and integrated telematics devices (Ctrack brand)[31](index=31&type=chunk) - The company also sells SaaS, software, and services solutions across multiple mobile and industrial IoT vertical markets, such as fleet management, vehicle telematics, asset tracking, and device management (Ctrack platforms and Device Management Solutions)[34](index=34&type=chunk)[35](index=35&type=chunk) Total Net Revenues (2019 vs 2018) | Year Ended December 31, | 2019 (Millions USD) | 2018 (Millions USD) | | :---------------------- | :------------------ | :------------------ | | Total Net Revenues | $219.5 | $202.5 | [Our Business](index=10&type=section&id=Our%20Business) Inseego's business segments include IoT for enterprise, mobile for consumer/enterprise, and telematics/asset tracking globally - The IoT business focuses on applications for large enterprise verticals and industrial IoT markets, including smart city infrastructure, remote monitoring, SD WAN failover, and enterprise connectivity, with Skyus-branded solutions[36](index=36&type=chunk) - The mobile business drives advanced mobile technologies for consumer and enterprise applications, offering intelligent mobile broadband solutions (MiFi brand), HD quality VoLTE products, and an advanced 5G portfolio[37](index=37&type=chunk)[39](index=39&type=chunk) - The Telematics and Asset Tracking business, primarily through Ctrack, provides advanced fleet management telematics and asset tracking solutions using GPS, cellular communications, and sensory technologies, operating in over **50 countries**[40](index=40&type=chunk)[41](index=41&type=chunk) [Sales and Marketing](index=12&type=section&id=Sales%20and%20Marketing) The company employs diverse sales and marketing strategies to drive market leadership and global demand - The company engages in diverse sales and marketing activities, including product marketing, corporate communications, brand marketing, and demand generation, to drive market leadership and global demand[43](index=43&type=chunk) [Competition](index=12&type=section&id=Competition) Inseego operates in a rapidly evolving and highly competitive market, facing diverse competitors across its mobile, IoT, and telematics segments - The market for Inseego's mobile, IoT, and asset tracking/telematics services is rapidly evolving and highly competitive, influenced by new product introductions and industry participants[44](index=44&type=chunk) - Principal competitive factors include features, functionality, performance, quality, and brand. The company aims to expand its customer base, invest in R&D, grow distribution, and leverage strategic relationships to maintain its competitive position[45](index=45&type=chunk) - Competitors include Fleetmatics, Masternaut, TomTom (fleet management), Netgear, Franklin Wireless, WNC, Sierra Wireless, Nokia, TCL, ZTE, Huawei (mobile hotspots), Cradlepoint, Sierra Wireless (IoT solutions), and Amdocs (customer experience software)[46](index=46&type=chunk)[47](index=47&type=chunk) [Research and Development](index=12&type=section&id=Research%20and%20Development) R&D focuses on developing innovative 4G LTE and 5G mobile, IoT, and telematics solutions, emphasizing quality and time-to-market - R&D efforts focus on developing innovative mobile devices, including IoT and advanced gateway solutions in 4G LTE and 5G markets, and telematics solutions, while improving existing products[47](index=47&type=chunk) - The company aims to introduce new SaaS, IoT, and mobile solutions, with an emphasis on next-generation wireless product platforms targeting high-growth verticals and technologies like 5G NR[48](index=48&type=chunk) - Product development follows a structured life-cycle process, emphasizing quality, reliability, performance, time-to-market, industry standards, cost reduction, and manufacturability[49](index=49&type=chunk) [Intellectual Property](index=13&type=section&id=Intellectual%20Property) Inseego's solutions are protected by a portfolio of 79 owned patents and various trademarks - Inseego's solutions are supported by a portfolio of intellectual property, including **79 owned patents** (expiring between 2020 and 2035) and **3 pending patent applications**[50](index=50&type=chunk) - The company and its subsidiaries hold various trademarks or registered trademarks, such as "Inseego", "Ctrack", "Skyus", and "MiFi"[51](index=51&type=chunk) [Key Partners and Customers](index=13&type=section&id=Key%20Partners%20and%20Customers) Inseego maintains strategic relationships with leading OEMs, wireless service providers, and serves diverse industries, with significant customer concentration - Inseego maintains strategic technology, development, and marketing relationships with leading OEMs, wireless telecom service providers (e.g., Verizon Wireless, AT&T, Sprint, Rogers, Telstra), network infrastructure providers (Ericsson, Nokia), value-added resellers, and distributors[52](index=52&type=chunk) - Customers span various industries, including transportation, industrial, government, manufacturing, and medical monitoring[53](index=53&type=chunk) - **Verizon Wireless** accounted for approximately **53% of total revenues in 2019**, highlighting a significant customer concentration that the company intends to diversify[55](index=55&type=chunk)[106](index=106&type=chunk) [Manufacturing and Operations](index=13&type=section&id=Manufacturing%20and%20Operations) Hardware manufacturing is outsourced to contract manufacturers outside mainland China, focusing on core competencies and supply chain management - Hardware manufacturing is outsourced to contract manufacturers like Hon Hai Precision Industry Co., Ltd. (Foxconn) and Inventec Appliance Corporation (IAC), located outside mainland China[56](index=56&type=chunk)[179](index=179&type=chunk) - Outsourcing aims to focus on core competencies, minimize capital expenditures, achieve economies of scale, ensure production scalability, and access best-in-class component procurement[57](index=57&type=chunk) - The operations team manages relationships with contract manufacturers and suppliers, focusing on supply chain, logistics, product quality, inventory, cost optimization, customer fulfillment, and new product introduction[58](index=58&type=chunk) [Employees](index=14&type=section&id=Employees) As of December 31, 2019, Inseego had 938 employees, with good employee relations - As of December 31, 2019, Inseego had **938 employees**, with a small number in South Africa represented by collective bargaining units. The company considers its employee relations to be good[59](index=59&type=chunk) [Website Access to SEC Filings](index=14&type=section&id=Website%20Access%20to%20SEC%20Filings) The company provides free online access to its SEC filings on its website - The company provides free access to its SEC filings (10-K, 10-Q, 8-K) on its website, www.inseego.com, as soon as practicable after electronic filing[60](index=60&type=chunk) [Item 1A. Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various risks, including operational fluctuations, profitability challenges, market competition, customer concentration, international operations, regulatory compliance, and stock ownership - The company's quarterly operating results have fluctuated and may continue to do so due to factors like customer attraction/retention, forecasting accuracy, competition, and global economic conditions, including the COVID-19 outbreak[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[67](index=67&type=chunk) - Inseego has reported net losses for the last four fiscal years and may not achieve or sustain profitability, requiring significant expenditures for business development[65](index=65&type=chunk) - Dependence on **Verizon Wireless** for a substantial portion of revenues (**53% in 2019**) poses a significant risk, as any adverse change in this relationship could negatively impact the business[106](index=106&type=chunk) - The company faces risks related to its substantial debt service requirements, potential increases in interest rates (LIBOR), and compliance with restrictive covenants in its credit agreements[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) - International operations, particularly in South Africa, expose the company to political and economic instability, foreign currency exchange rate fluctuations (South African Rand), and compliance with diverse international laws and regulations (e.g., anti-corruption, data privacy, labor laws)[142](index=142&type=chunk)[149](index=149&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[154](index=154&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[163](index=163&type=chunk)[165](index=165&type=chunk) [General Risk Factors Relating to Our Business](index=14&type=section&id=GENERAL%20RISK%20FACTORS%20RELATING%20TO%20OUR%20BUSINESS) Business risks include fluctuating operating results, inability to achieve profitability, challenges in integrating acquisitions, and delays in 5G market materialization - Quarterly operating results are subject to fluctuations due to factors like customer acquisition/retention, demand forecasting, competition, new product introductions, and global economic conditions (including COVID-19)[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[67](index=67&type=chunk) - The company has an accumulated deficit and may not achieve or sustain profitability, requiring significant future expenditures[65](index=65&type=chunk) - Failure to successfully integrate acquired companies (Feeney Wireless, Ctrack) could adversely affect business and operations due to system integration challenges and changes in business nature[66](index=66&type=chunk)[68](index=68&type=chunk) - The 5G market may take longer to materialize or, if rapid, the company may struggle to meet development schedules and customer demands, impacting financial condition[67](index=67&type=chunk) [Risks Related to Corporate Development Activities](index=20&type=section&id=RISKS%20RELATED%20TO%20CORPORATE%20DEVELOPMENT%20ACTIVITIES) Improper business development, acquisitions, and divestitures can strain operations, incur debt, dilute stockholders, and introduce undisclosed liabilities - Improper management of business development can strain management and operations, leading to disruptions and challenges in meeting customer demand[92](index=92&type=chunk) - Acquisitions and divestitures, part of the growth strategy, carry risks such as using substantial cash, incurring debt, diluting existing stockholders, assuming contingent liabilities, and facing integration difficulties[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - Acquired businesses may have undisclosed liabilities or adverse operating issues, and the reorganized business may not perform as expected, impacting stock price and operating results[94](index=94&type=chunk)[95](index=95&type=chunk) [Risks Related to Competition](index=21&type=section&id=RISKS%20RELATED%20TO%20COMPETITION) The company faces intense competition in rapidly evolving markets, with competitors often having greater resources and more aggressive strategies - The market for Inseego's products and services is rapidly evolving and highly competitive, with many competitors possessing greater financial, technical, operational, and marketing resources[96](index=96&type=chunk) - Competitors may respond faster to new technologies, changes in customer requirements, or market shifts, and may offer more aggressive pricing or bundled products[96](index=96&type=chunk)[97](index=97&type=chunk) - Specific competitive challenges exist in the mobile hotspot business (low margins, high costs, competition from larger players like Huawei, ZTE, Samsung) and the 5G fixed wireless access gateway business (competition from Samsung, Ericsson, Nokia)[80](index=80&type=chunk)[100](index=100&type=chunk) - The asset management and fleet management solutions markets are highly fragmented with low barriers to entry, facing competition from mobile service providers, GPS device makers, wireless carriers, and vehicle OEMs[101](index=101&type=chunk) [Risks Related to Our Customers and Demand for Our Solutions](index=22&type=section&id=RISKS%20RELATED%20TO%20OUR%20CUSTOMERS%20AND%20DEMAND%20FOR%20OUR%20SOLUTIONS) Risks include inability to adapt to technological changes, failure to maintain strategic relationships, high dependence on Verizon Wireless, and challenges in customer retention - Inability to adapt to rapid technological change in markets (aviation, automotive, telematics, wireless telemetry, GPS navigation) could impair competitiveness and adversely affect results[103](index=103&type=chunk)[104](index=104&type=chunk) - Failure to develop and maintain strategic relationships is a risk, as market penetration depends on these partnerships[105](index=105&type=chunk) - **Verizon Wireless** accounted for **53% of consolidated net revenues in 2019**, making the company highly dependent on this customer. Any adverse change in this relationship or product sell-through could significantly impact revenue and cash position[106](index=106&type=chunk) - Inability to retain existing customers or increase sales of new features and solutions could negatively impact financial results, as customers are not obligated to renew multi-year agreements[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) - Adverse economic conditions or reduced spending on IT solutions could impact revenue and profitability, and the marketability of products depends on wireless telecommunications operators delivering acceptable services[112](index=112&type=chunk)[113](index=113&type=chunk) [Risks Related to Developing, Manufacturing and Delivering Our Solutions](index=24&type=section&id=RISKS%20RELATED%20TO%20DEVELOPING,%20MANUFACTURING%20AND%20DELIVERING%20OUR%20SOLUTIONS) Risks include reliance on third-party manufacturers and sole-source suppliers, supply chain disruptions, product defects, software errors, network reliance, and cybersecurity threats - Reliance on third-party manufacturers (e.g., Foxconn, AsiaTelco, Telit) for products exposes the company to risks like delays, disruptions, capacity constraints, quality control issues, and price increases[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - Dependence on sole source suppliers for critical components (e.g., Telit for modules, Qualcomm for chipsets) means shortages or interruptions could harm service availability and sales[120](index=120&type=chunk)[121](index=121&type=chunk) - Natural disasters, public health crises (like COVID-19), political crises, or cyberattacks could damage facilities, disrupt business operations, impact consumer spending, and affect the supply chain[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) - Product liability, replacement, or recall costs could adversely affect business and financial performance if products are defective, potentially leading to significant adverse publicity or litigation[126](index=126&type=chunk) - Reliance on third-party software and intellectual property means increased licensing costs or defects could harm the business, and incompatibility with third-party technologies could lead to loss of functionality and customers[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) - Software may contain undetected errors or defects, and failure to correct them could damage reputation or operating results. "Over-the-air" firmware updates also pose a risk of third-party interference or malware[130](index=130&type=chunk)[131](index=131&type=chunk) - Solutions rely on cellular and GPS networks; any disruption, failure, or cost increase could impede profitability. Mobile carriers discontinuing older radio frequency technologies (e.g., 3G) could limit future prospects if solutions aren't designed for new technologies like 4G, 4G LTE, and 5G[132](index=132&type=chunk)[133](index=133&type=chunk) - Significant service disruptions on websites or computer systems could damage reputation and lead to customer loss. Failure to maintain security of information and technology networks, including customer and employee data, could result in security breaches, litigation, regulatory actions, and reputational harm[134](index=134&type=chunk)[135](index=135&type=chunk)[138](index=138&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) [Risks Related to International Operations](index=29&type=section&id=RISKS%20RELATED%20TO%20INTERNATIONAL%20OPERATIONS) Global operations expose the company to political, economic, and currency risks, along with challenges in managing international sales and compliance - Global operations, with a significant subsidiary (Ctrack) in South Africa and employees outside the U.S., expose the company to political and economic risks[142](index=142&type=chunk) - Risks include difficulties managing international sales and logistics, limitations on local enterprise ownership, unfamiliarity with foreign laws (employment, product liability, privacy), increased compliance costs (FCPA, OFAC), and adverse tax consequences[142](index=142&type=chunk)[145](index=145&type=chunk) - Fluctuations in foreign currency exchange rates, especially the **South African Rand against the U.S. Dollar**, could adversely affect operating results, as a significant portion of revenues and costs are denominated in foreign currencies[149](index=149&type=chunk) - Unionization efforts in countries like South Africa could increase costs or limit operational flexibility[151](index=151&type=chunk) [Risks Related to Regulations, Taxation and Accounting Matters](index=32&type=section&id=RISKS%20RELATED%20TO%20REGULATIONS,%20TAXATION%20AND%20ACCOUNTING%20MATTERS) International operations increase exposure to anti-corruption laws, trade protection, foreign tax regulations, data privacy laws, and accounting estimate risks - International operations increase exposure to potential liability under anti-corruption laws (FCPA), trade protection measures, and foreign tax regulations, which can be unclear and subject to sudden change[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) - Governmental challenges to transfer pricing policies could impose significant costs, and failure to achieve Black Economic Empowerment (BBBEE) objectives in South Africa could result in loss of government contracts and revenue[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) - Evolving data privacy regulations (e.g., CCPA, GDPR, POPI Act in South Africa) may increase compliance expenditures or limit solution offerings, potentially leading to litigation, regulatory investigations, or civil/criminal penalties[165](index=165&type=chunk)[167](index=167&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) - Failure to maintain effective internal controls over financial reporting could delay timely and accurate financial reporting, adversely affecting investor confidence and stock price[173](index=173&type=chunk)[174](index=174&type=chunk) - Inaccurate accounting estimates and assumptions, or changes to accounting pronouncements and taxation rules, may adversely affect reported financial results[175](index=175&type=chunk)[177](index=177&type=chunk) - Enhanced U.S. fiscal, tax, and trade restrictions (e.g., tariffs on Chinese imports) could increase operating costs and reduce margins. Removal of such restrictions could also reduce business from U.S. carriers that diverted business to Inseego[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) [Risks Related to Owning Our Securities](index=36&type=section&id=RISKS%20RELATED%20TO%20OWNING%20OUR%20SECURITIES) Risks include stock price volatility, uncertain future capital needs, potential dilution from equity issuances, and concentrated common stock ownership - The company's share price has been and could remain highly volatile due to various factors, including analyst comments, operating results, personnel changes, acquisitions, technological innovations, and market fluctuations[182](index=182&type=chunk) - Future capital needs are uncertain, and the company may need to raise additional funds through equity or debt, potentially leading to stockholder dilution or restrictive covenants[184](index=184&type=chunk)[185](index=185&type=chunk) - Future issuances of common stock from warrants (**2,838,454 shares outstanding as of Dec 31, 2019**) or conversions of Convertible Notes (**40,649,225 shares reserved**) may cause dilution to existing stockholders and adversely affect stock price[187](index=187&type=chunk)[188](index=188&type=chunk)[190](index=190&type=chunk)[562](index=562&type=chunk) - Ownership of common stock is concentrated, with North Sound Trading, L.P. and Golden Harbor Ltd. (Investors) and their affiliates owning approximately **32.1% of outstanding shares** (**39.7% assuming full conversion/exercise**), giving them significant influence over company matters and potentially delaying takeovers[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk) - Outstanding Series E Preferred Stock or future equity offerings could adversely affect common stockholders due to senior dividend and liquidation preferences[196](index=196&type=chunk)[197](index=197&type=chunk) [Item 1B. Unresolved Staff Comments](index=39&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This section confirms the absence of unresolved staff comments from the SEC - There are no unresolved staff comments[198](index=198&type=chunk) [Item 2. Properties](index=39&type=section&id=Item%202.%20Properties) Inseego's principal offices are in Alpharetta, Georgia, and San Diego, California, with adequate global facilities - Principal executive office is in Alpharetta, Georgia; corporate offices in San Diego, California (leasing ~**25,000 sq ft** until July 2027 and ~**12,000 sq ft** until June 2020)[199](index=199&type=chunk) - Other properties include leased space in Eugene, Oregon (~**14,000 sq ft** until Jan 2023) and owned property in Centurion, South Africa (~**28,000 sq ft**), plus various international sales and engineering offices[199](index=199&type=chunk) - Existing facilities are considered adequate for current needs, with options for renewal or alternative space on commercially reasonable terms[199](index=199&type=chunk) [Item 3. Legal Proceedings](index=39&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course legal actions, not expected to materially impact its financial condition - Inseego is engaged in legal actions that arise in the ordinary course of business[200](index=200&type=chunk) - The company believes the ultimate outcome of these legal actions will not have a material adverse effect on its business, results of operations, financial condition, or cash flows[200](index=200&type=chunk) - Further discussion of legal proceedings is incorporated by reference from Note 10, Commitments and Contingencies, in the consolidated financial statements[201](index=201&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section confirms the absence of mine safety disclosures for the company - There are no mine safety disclosures[202](index=202&type=chunk) [PART II](index=40&type=section&id=PART%20II) This part details the market for common equity, financial data, management's discussion and analysis, and internal controls [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=40&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Inseego's common stock trades on Nasdaq, with approximately 31 record holders, no cash dividends, and recent warrant exercises - Inseego's common stock is quoted and traded on The Nasdaq Global Select Market under the symbol "INSG"[205](index=205&type=chunk) - As of March 9, 2020, there were approximately **31 holders of record** of common stock[206](index=206&type=chunk) - The company has never declared or paid cash dividends and intends to retain all available funds for business operations and development, with future dividend policy at the discretion of the Board of Directors and subject to restrictions from the Credit Agreement and Inseego Indenture[207](index=207&type=chunk) Unregistered Sales of Common Stock upon Warrant Exercise (December 2019) | Date | Shares of Common Stock Issued upon Exercise of Outstanding Warrants | Consideration Received | | :--------------- | :---------------------------------------------------------------- | :--------------------- | | December 9, 2019 | 190,100 | $1,045,550 | | December 10, 2019| 102,000 | $561,000 | | December 11, 2019| 351,483 | $1,880,434 | | December 12, 2019| 478,300 | $2,558,905 | | December 13, 2019| 25,000 | $133,750 | | December 18, 2019| 11,700 | $62,595 | | December 19, 2019| 8,200 | $43,870 | | December 20, 2019| 7,500 | $40,125 | | December 23, 2019| 80,846 | $432,526 | [Item 6. Selected Financial Data](index=40&type=section&id=Item%206.%20Selected%20Financial%20Data) This section indicates that selected financial data is not applicable to this report - Selected Financial Data is not applicable[209](index=209&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Inseego's financial condition and operations, detailing revenue drivers, cost structures, and liquidity challenges amidst a net loss in 2019 - Inseego Corp. is a leader in the design and development of fixed and mobile wireless solutions (advanced 4G and 5G NR), IIoT, and cloud solutions, powering mission-critical applications[213](index=213&type=chunk) - Future net revenues will be influenced by economic conditions, competition, acceptance of products in new markets, 5G infrastructure deployment and adoption, and product pricing[216](index=216&type=chunk)[218](index=218&type=chunk) Key Financial Performance (2019 vs 2018) | Metric | 2019 (Millions USD) | 2018 (Millions USD) | Change ($M) | Change (%) | | :-------------------------------------- | :------------------ | :------------------ | :---------- | :--------- | | Total Net Revenues | $219.5 | $202.5 | $17.0 | 8.4% | | Cost of Net Revenues | $155.5 | $131.9 | $23.6 | 17.9% | | Gross Profit | $64.0 | $70.6 | $(6.6) | (9.3%) | | Gross Margin | 29.2% | 34.9% | (5.7 pp) | | | Operating Income (Loss) | $(19.5) | $14.0 | $(33.5) | (239.3%) | | Net Loss attributable to Inseego Corp. | $(40.1) | $(8.1) | $(32.0) | (395.1%) | | Basic and Diluted Net Loss Per Share | $(0.52) | $(0.12) | $(0.40) | (333.3%) | - As of December 31, 2019, cash and cash equivalents were **$12.1 million**, down from **$31.0 million in 2018**. Working capital was **$19.6 million**[247](index=247&type=chunk)[280](index=280&type=chunk) - The company's liquidity could be compromised by business interruptions, failure to meet contractual commitments, or inability to generate revenue from new or existing products, potentially requiring additional capital or reduced R&D[282](index=282&type=chunk) [Business Overview and Background](index=41&type=section&id=Business%20Overview%20and%20Background) Inseego Corp., formed in 2016, is a global leader in 4G/5G wireless, IIoT, and cloud solutions for mission-critical applications, operating as a single segment - Inseego Corp. was formed in 2016 as the successor to Novatel Wireless, Inc., a Delaware corporation formed in 1996[212](index=212&type=chunk) - The company is a leader in designing and developing fixed and mobile wireless solutions (advanced 4G and 5G NR), Industrial IoT (IIoT), and cloud solutions globally[213](index=213&type=chunk) - Inseego's products and solutions power mission-critical applications with a "zero unscheduled downtime" mandate, including 5G FWA gateway solutions, 4G/5G mobile broadband, IIoT applications, asset tracking, and fleet management services[213](index=213&type=chunk) - The Chief Executive Officer, as Chief Operating Decision Maker, evaluates the business as a single entity, resulting in one reportable segment[215](index=215&type=chunk) [Factors Which May Influence Future Results of Operations](index=41&type=section&id=Factors%20Which%20May%20Influence%20Future%20Results%20of%20Operations) Future results are influenced by economic conditions, competition, market acceptance, 5G adoption, product pricing, and strategic R&D investments - Future net revenues are influenced by economic environment, competition (especially in 5G), acceptance of products in new vertical markets, growth in aviation ground vertical, rate of change to new products, phase-out of older wireless technologies (3G), deployment of 5G infrastructure, adoption of 5G endpoint products, and product pricing[216](index=216&type=chunk)[218](index=218&type=chunk) - The company plans to introduce additional products, including SaaS telematics solutions, industrial IoT hardware/services, and mobile/fixed wireless devices targeting the 5G market, while maintaining strategic relationships with service providers like Verizon Wireless, T-Mobile, Sprint, and Qualcomm[219](index=219&type=chunk) - Cost of net revenues includes manufacturing, distribution, SaaS delivery, warranty, amortization of intangibles, royalties, and inventory adjustments (influenced by demand)[220](index=220&type=chunk) - Operating costs include R&D (engineers, testing, certification), sales and marketing (sales force, co-marketing, demand generation), and general and administrative (corporate functions, public company compliance)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk) - Restructuring charges primarily consist of severance and facility exit costs. Future acquisitions may involve issuing stock and incurring substantial expenditures[224](index=224&type=chunk)[225](index=225&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) In 2019, total net revenues increased, but gross profit and margin declined, leading to a significant increase in net loss due to higher operating expenses Consolidated Statements of Operations (as a percentage of net revenues) | Metric | 2019 (%) | 2018 (%) | | :---------------------------------------- | :------- | :------- | | IoT & Mobile Solutions Net Revenues | 70.2 | 66.9 | | Enterprise SaaS Solutions Net Revenues | 29.8 | 33.1 | | Total Net Revenues | 100.0 | 100.0 | | IoT & Mobile Solutions Cost of Revenues | 59.2 | 52.0 | | Enterprise SaaS Solutions Cost of Revenues| 11.6 | 12.9 | | Total Cost of Net Revenues | 70.8 | 65.1 | | Gross Profit | 29.2 | 34.9 | | Research and Development | 10.9 | 10.2 | | Sales and Marketing | 13.2 | 11.4 | | General and Administrative | 12.4 | 12.5 | | Amortization of Purchased Intangible Assets| 1.6 | 1.8 | | Extinguishment of Acquisition-Related Liabilities| — | (8.5) | | Restructuring Charges, net of recoveries | — | 0.6 | | Total Operating Costs and Expenses | 38.1 | 27.9 | | Operating Income (Loss) | (8.9) | 6.9 | | Interest Expense, Net | (9.3) | (10.1) | | Other Income (Expense), Net | 0.2 | (0.4) | | Loss Before Income Taxes | (18.0) | (3.6) | | Income Tax Provision | 0.2 | 0.4 | | Net Loss | (18.2) | (4.0) | | Net Loss Attributable to Common Shareholders| (18.4) | (4.0) | Net Revenues by Product Category (2019 vs 2018) | Product Category | 2019 (Thousands USD) | 2018 (Thousands USD) | Change ($K) | Change (%) | | :-------------------- | :------------------- | :------------------- | :---------- | :--------- | | IoT & Mobile Solutions| $154,167 | $135,349 | $18,818 | 13.9% | | Enterprise SaaS Solutions| $65,329 | $67,114 | $(1,785) | (2.7%) | | Total | $219,496 | $202,463 | $17,033 | 8.4% | - IoT & Mobile Solutions revenue increased by **13.9%** due to higher sales of LTE gigabit hotspots and the introduction of 5G hotspots, partially offset by reduced IoT sales[230](index=230&type=chunk) - Enterprise SaaS Solutions revenue decreased slightly by **2.7%** due to strengthening U.S. Dollar foreign exchange rates on international sales, partially offset by increased subscription revenues[231](index=231&type=chunk) Cost of Net Revenues by Product Category (2019 vs 2018) | Product Category | 2019 (Thousands USD) | 2018 (Thousands USD) | Change ($K) | Change (%) | | :-------------------- | :------------------- | :------------------- | :---------- | :--------- | | IoT & Mobile Solutions| $129,957 | $105,344 | $24,613 | 23.4% | | Enterprise SaaS Solutions| $25,568 | $26,167 | $(599) | (2.3%) | | Impairment of abandoned product line, net of recoveries| $— | $355 | $(355) | (100.0%) | | Total | $155,525 | $131,866 | $23,659 | 17.9% | - Gross profit decreased by **$6.6 million (9.3%)** to **$64.0 million in 2019**, with gross margin declining from **34.9% to 29.2%**, primarily due to a decline in MiFi gross margins and higher cost per unit for 5G hotspots[235](index=235&type=chunk)[232](index=232&type=chunk) - R&D expenses increased by **$3.3 million (16.0%)** to **$23.9 million**, mainly due to increased spending on 5G product programs and additional headcount, partially offset by capitalization of certain R&D costs[236](index=236&type=chunk) - Sales and marketing expenses increased by **$5.9 million (25.6%)** to **$28.9 million**, driven by higher employment costs and share-based compensation[237](index=237&type=chunk) - General and administrative expenses increased by **$2.0 million (7.9%)** to **$27.3 million**, primarily due to increased headcount, non-recurring legal fees, and share-based compensation[238](index=238&type=chunk)[240](index=240&type=chunk) - The company recorded a **$17.2 million gain** from extinguishment of acquisition-related liabilities in 2018, with no such gain in 2019[241](index=241&type=chunk) - Net loss attributable to common stockholders increased significantly from **$8.1 million in 2018** to **$40.5 million in 2019**, partly due to Series E preferred stock dividends (**$0.4 million in 2019**)[246](index=246&type=chunk)[370](index=370&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and equivalents decreased in 2019, with liquidity supported by recent private placements and warrant exercises, but debt obligations remain significant Cash and Cash Equivalents (2019 vs 2018) | Metric | December 31, 2019 (Millions USD) | December 31, 2018 (Millions USD) | | :---------------------- | :------------------------------- | :------------------------------- | | Cash and Cash Equivalents | $12.1 | $31.0 | - Working capital as of December 31, 2019, was **$19.6 million**[280](index=280&type=chunk) - In August 2019, the company completed a private placement of **10,000 shares of Series E Preferred Stock for $10.0 million**. An additional **25,000 shares were sold for $25.0 million in March 2020**[249](index=249&type=chunk)[252](index=252&type=chunk) - In December 2019, the company received **$6.9 million in net cash proceeds** from the exercise of **1,255,129 common stock purchase warrants**[250](index=250&type=chunk) - The Term Loan (principal **$48.0 million**, maturity Aug 23, 2020) bears interest at LIBOR + **7.625%** (**9.535% at Dec 31, 2019**). Related parties hold **100% of the principal amount**. An amendment in March 2020 permits Series E Preferred Stock for interest payments, and the maturity date may be extended to March 15, 2021[253](index=253&type=chunk)[254](index=254&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk)[258](index=258&type=chunk) - Convertible Senior Notes (Inseego Notes, **$119.8 million aggregate principal**, due June 15, 2022) bear **5.50% interest**. As of March 6, 2020, holders waived their right to require repurchase on June 15, 2020. In Q1 2020, **$59.9 million of Inseego Notes were exchanged for 13,688,876 common shares**, resulting in an expected **$7.9 million induced conversion expense**[260](index=260&type=chunk)[261](index=261&type=chunk)[263](index=263&type=chunk)[265](index=265&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk) Historical Cash Flows (2019 vs 2018) | Cash Flow Activity | 2019 (Thousands USD) | 2018 (Thousands USD) | | :------------------------------ | :------------------- | :------------------- | | Net cash used in operating activities | $(17,999) | $(1,765) | | Net cash used in investing activities | $(28,213) | $(4,234) | | Net cash provided by financing activities | $27,469 | $17,667 | | Effect of exchange rates on cash| $(259) | $(1,851) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(19,002) | $9,817 | | Cash, cash equivalents and restricted cash, end of period | $12,074 | $31,076 | - Net cash used in operating activities increased significantly in 2019 to **$18.0 million** (from **$1.8 million in 2018**) due to net loss and working capital usage. Net cash used in investing activities increased to **$28.2 million** (from **$4.2 million**) primarily due to purchases of property, plant, and equipment and capitalization of software development costs for 5G products[277](index=277&type=chunk)[278](index=278&type=chunk) [Off-Balance Sheet Arrangements](index=53&type=section&id=Off-Balance%20Sheet%20Arrangements) The company does not have any off-balance sheet arrangements - The company does not have any off-balance sheet arrangements[283](index=283&type=chunk) [Critical Accounting Policies and Estimates](index=53&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Financial statement preparation involves critical estimates for revenue recognition, capitalized software, inventory, asset valuation, debt, and share-based compensation - Preparation of financial statements requires management to make estimates and assumptions, which affect reported amounts and disclosures. Key estimates include revenue recognition, capitalized software costs, allowance for doubtful accounts, inventory provisions, valuation of intangible/long-lived assets, goodwill, royalty costs, litigation accruals, income taxes, share-based compensation, and going concern assessment[284](index=284&type=chunk)[394](index=394&type=chunk) - Revenue is recognized upon transfer of control of products or services to customers, based on a five-step model (ASC 606). Hardware revenue is recognized at delivery/shipment, while SaaS subscription revenue is recognized ratably over the contract term[290](index=290&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk) - The company capitalizes sales commissions as contract assets if incremental and recoverable, amortizing them over the period of benefit. Incremental costs with an amortization period of one year or less are expensed as incurred[305](index=305&type=chunk)[306](index=306&type=chunk)[441](index=441&type=chunk)[442](index=442&type=chunk) - Inventories are valued at the lower of cost (FIFO) or net realizable value, with regular reviews for excess and obsolescence based on estimated future usage and sales[310](index=310&type=chunk)[398](index=398&type=chunk) - Goodwill and indefinite-lived intangible assets are tested for impairment at least annually, or more frequently if triggering events occur, by comparing fair value to carrying amount[318](index=318&type=chunk)[409](index=409&type=chunk) - Convertible debt instruments are accounted for by separating liability and equity components, with the liability component measured at the fair value of similar nonconvertible debt and amortized as non-cash interest expense[319](index=319&type=chunk)[320](index=320&type=chunk)[414](index=414&type=chunk)[415](index=415&type=chunk) - Share-based compensation for stock options and stock purchase rights is estimated using the Black-Scholes model, while restricted stock units are measured at the closing price on the grant date. Expense is recognized over the vesting period[322](index=322&type=chunk)[323](index=323&type=chunk)[324](index=324&type=chunk)[456](index=456&type=chunk)[461](index=461&type=chunk)[462](index=462&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section indicates that market risk disclosures are not applicable to this report - Quantitative and Qualitative Disclosures About Market Risk is not applicable[325](index=325&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=60&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Consolidated financial statements and auditor reports are included in Part IV of this report - Consolidated financial statements and reports of Independent Registered Public Accounting Firms are included in Part IV of this report[326](index=326&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=60&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This section confirms no changes or disagreements with accountants on financial disclosure - There have been no changes in and disagreements with accountants on accounting and financial disclosure[327](index=327&type=chunk) [Item 9A. Controls and Procedures](index=60&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and auditors concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2019 - As of December 31, 2019, Inseego's disclosure controls and procedures were evaluated and deemed effective by management, including the principal executive and financial officers[329](index=329&type=chunk) - Management concluded that the internal control over financial reporting was effective as of December 31, 2019, based on the COSO (2013 framework)[331](index=331&type=chunk) - The independent registered public accounting firm, Marcum LLP, also audited and expressed an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2019[332](index=332&type=chunk)[337](index=337&type=chunk) - No material changes in internal control over financial reporting occurred during the last fiscal quarter[333](index=333&type=chunk) [Item 9B. Other Information](index=60&type=section&id=Item%209B.%20Other%20Information) This section confirms no other information to report - There is no other information to report[334](index=334&type=chunk) [PART III](index=63&type=section&id=PART%20III) This part incorporates by reference information on directors, executive compensation, security ownership, and related party transactions [Items 10, 11, 12, 13 and 14.](index=63&type=section&id=Items%2010,%2011,%2012,%2013%20and%2014.) Information for these items is incorporated by reference from the 2020 Annual Meeting of Stockholders proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's definitive proxy statement for the 2020 Annual Meeting of Stockholders[345](index=345&type=chunk) [PART IV](index=63&type=section&id=PART%20IV) This part includes exhibits, financial statement schedules, signatures, and the index to consolidated financial statements [Item 15. Exhibits, Financial Statement Schedules](index=63&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section lists all exhibits, including consolidated financial statements, auditor reports, corporate documents, and debt agreements - The company's consolidated financial statements and the report of Marcum LLP, Independent Registered Public Accounting Firm, are included in Section IV of this report[347](index=347&type=chunk) - Schedules have been omitted as they are not applicable, not required, or the information is included in the consolidated financial statements or related notes[347](index=347&type=chunk) - A comprehensive list of exhibits is provided, including corporate governance documents (e.g., Certificate of Incorporation, Bylaws, Certificates of Designation for Preferred Stock), debt instruments (Indentures for Convertible Senior Notes, Credit Agreement amendments), equity-related agreements (Rights Agreement, Warrant agreements, Securities Purchase Agreements), and compensation plans[347](index=347&type=chunk)[348](index=348&type=chunk)[349](index=349&type=chunk)[350](index=350&type=chunk) [Item 16. Form 10-K Summary](index=68&type=section&id=Item%2016.%20Form%2010-K%20Summary) This section confirms the absence of a Form 10-K Summary - There is no Form 10-K Summary[351](index=351&type=chunk) [SIGNATURES](index=69&type=section&id=SIGNATURES) This section contains the required signatures for the Annual Report on Form 10-K, dated March 13, 2020 - The report is signed by Dan Mondor (Chief Executive Officer and Principal Executive Officer) and Stephen Smith (Chief Financial Officer and Principal Financial and Accounting Officer), along with other directors[355](index=355&type=chunk)[358](index=358&type=chunk) - The signing date for the report is March 13, 2020[354](index=354&type=chunk)[358](index=358&type=chunk) [INDEX TO CONSOLIDATED FINANCIAL STATEMENTS](index=70&type=section&id=INDEX%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides an index to the consolidated financial statements, including auditor reports and detailed notes - The index lists the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Comprehensive Loss, Consolidated Statements of Stockholders' Deficit, Consolidated Statements of Cash Flows, and Notes to Consolidated Financial Statements[360](index=360&type=chunk) [Report of Independent Registered Public Accounting Firm](index=71&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Marcum LLP issued unqualified opinions on Inseego's consolidated financial statements and internal control over financial reporting as of December 31, 2019 - Marcum LLP, the independent registered public accounting firm, issued an unqualified opinion on Inseego Corp.'s consolidated financial statements as of December 31, 2019 and 2018, and for the two years ended December 31, 2019[362](index=362&type=chunk) - They also expressed an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2019, based on the COSO (2013) framework[363](index=363&type=chunk) - Marcum LLP has served as the company's auditor since 2018[366](index=366&type=chunk) [Consolidated Balance Sheets](index=72&type=section&id=Consolidated%20Balance%20Sheets) Total assets slightly decreased, while total liabilities remained stable, and stockholders' deficit increased from 2018 to 2019 Consolidated Balance Sheet Highlights (Thousands USD) | Metric | December 31, 2019 | December 31, 2018 | | :---------------------------- | :---------------- | :---------------- | | **ASSETS** | | | | Cash and cash equivalents | $12,074 | $31,015 | | Total current assets | $64,137 | $84,352 | | Property, plant and equipment, net | $10,756 | $6,698 | | Intangible assets, net | $44,392 | $31,985 | | Goodwill | $33,659 | $32,942 | | Total assets | $161,373 | $162,256 | | **LIABILITIES AND STOCKHOLDERS' DEFICIT** | | | | Total current liabilities | $44,530 | $53,681 | | Convertible senior notes, net | $101,334 | $93,054 | | Term loan, net | $46,538 | $45,046 | | Total liabilities | $198,731 | $198,781 | | Total stockholders' deficit | $(37,358) | $(36,525) | - Total assets slightly decreased from **$162.3 million in 2018** to **$161.4 million in 2019**, while total liabilities remained relatively stable at **$198.8 million**[368](index=368&type=chunk) - Stockholders' deficit increased from **$(36.5) million in 2018** to **$(37.4) million in 2019**[368](index=368&type=chunk) [Consolidated Statements of Operations](index=73&type=section&id=Consolidated%20Statements%20of%20Operations) Total net revenues increased in 2019, but gross profit declined, leading to a significant increase in net loss attributable to common stockholders Consolidated Statements of Operations (Thousands USD, except per share data) | Metric | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | | :-------------------------------------- | :---------------------- | :---------------------- | | Total net revenues | $219,496 | $202,463 | | Total cost of net revenues | $155,525 | $131,866 | | Gross profit | $63,971 | $70,597 | | Total operating costs and expenses | $83,515 | $56,586 | | Operating income (loss) | $(19,544) | $14,011 | | Interest expense, net | $(20,381) | $(20,444) | | Loss before income taxes | $(39,574) | $(7,328) | | Income tax provision | $536 | $815 | | Net loss | $(40,110) | $(8,143) | | Net loss attributable to common stockholders | $(40,486) | $(8,058) | | Basic and diluted net loss per share | $(0.52) | $(0.12) | - Total net revenues increased by **8.4%** from **$202.5 million in 2018** to **$219.5 million in 2019**[370](index=370&type=chunk) - Gross profit decreased by **9.3%** from **$70.6 million in 2018** to **$64.0 million in 2019**[370](index=370&type=chunk) - The company reported a net loss attributable to common stockholders of **$(40.5) million in 2019**, significantly higher than **$(8.1) million in 2018**[370](index=370&type=chunk) [Consolidated Statements of Comprehensive Loss](index=74&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) Total comprehensive loss increased in 2019, with a foreign currency translation adjustment gain reversing the prior year's loss Consolidated Statements of Comprehensive Loss (Thousands USD) | Metric | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | | :------------------------------ | :---------------------- | :---------------------- | | Net loss | $(40,110) | $(8,143) | | Foreign currency translation adjustment | $998 | $(9,481) | | Total comprehensive loss | $(39,112) | $(17,624) | - Total comprehensive loss for 2019 was **$(39.1) million**, compared to **$(17.6) million in 2018**[372](index=372&type=chunk) - Foreign currency translation adjustment resulted in a gain of **$998 thousand in 2019**, a reversal from a loss of **$(9,481) thousand in 2018**[372](index=372&type=chunk) [Consolidated Statements of Stockholders' Deficit](index=75&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Deficit) Additional paid-in capital increased, while accumulated deficit grew, resulting in a slightly higher total stockholders' deficit in 2019 Consolidated Statements of Stockholders' Deficit Highlights (Thousands USD) | Metric | Balance, Dec 31, 2017 | Balance, Dec 31, 2018 | Balance, Dec 31, 2019 | | :-------------------------------------- | :-------------------- | :-------------------- | :-------------------- | | Common Stock (Shares) | 58,645 | 73,980 | 81,974 | | Common Stock (Amount) | $59 | $74 | $82 | | Additional Paid-in Capital | $519,531 | $546,230 | $584,862 | | Accumulated Deficit | $(569,759) | $(577,817) | $(618,303) | | Total Stockholders' Deficit attributable to Inseego Corp. | $(45,615) | $(36,525) | $(37,358) | - Additional paid-in capital increased from **$546.2 million in 2018** to **$584.9 million in 2019**, driven by issuance of Series E preferred shares, common shares, and exercise of warrants[376](index=376&type=chunk) - Accumulated deficit increased from **$(577.8) million in 2018** to **$(618.3) million in 2019**, reflecting the net losses[376](index=376&type=chunk) - Total stockholders' deficit attributable to Inseego Corp. was **$(37.4) million** at December 31, 2019[376](index=376&type=chunk) [Consolidated Statements of Cash Flows](index=76&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating and investing activities significantly increased in 2019, while financing activities provided more cash Consolidated Statements of Cash Flows (Thousands USD) | Cash Flow Activity | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | | :------------------------------ | :---------------------- | :---------------------- | | Net cash used in operating activities | $(17,999) | $(1,765) | | Net cash used in investing activities | $(28,213) | $(4,234) | | Net cash provided by financing activities | $27,469 | $17,667 | | Effect of exchange rates on cash| $(259) | $(1,851) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(19,002) | $9,817 | | Cash, cash equivalents and restricted cash, end of period | $12,074 | $31,076 | - Net cash used in operating activities increased significantly to **$(18.0) million in 2019** from **$(1.8) million in 2018**, primarily due to net loss and working capital changes[379](index=379&type=chunk)[277](index=277&type=chunk) - Net cash used in investing activities increased to **$(28.2) million in 2019** from **$(4.2) million in 2018**, mainly due to increased purchases of property, plant, and equipment and capitalized software development costs for 5G products[379](index=379&type=chunk)[278](index=278&type=chunk) - Net cash provided by financing activities increased to **$27.5 million in 2019** from **$17.7 million in 2018**, driven by proceeds from Series E preferred stock issuance and warrant exercises[379](index=379&type=chunk)[279](index=279&type=chunk) [Notes to Consolidated Financial Statements](index=78&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed information on the company's business, significant accounting policies, financial statement components, debt, equity, and other commitments [1. Nature of Business and Significant Accounting Policies](index=78&type=section&id=1.%20Nature%20of%20Business%20and%20Significant%20Accounting%20Policies) This note details Inseego's business as a 4G/5G wireless and IoT leader, its financial performance, recent financing, and key accounting policies - Inseego Corp. is a leader in 4G/5G wireless, IoT, and cloud solutions, formed in 2016 as successor to Novatel Wireless, Inc.[382](index=382&type=chunk)[383](index=383&type=chunk) - The company had a net loss of **$40.5 million in 2019**, with **$12.1 million in cash** and **$19.6 million in working capital** as of Decembe

Inseego Corp. (NASDAQ:INSG) Q4 2019 Earnings Conference Call March 11, 2020 5:00 PM ET Company Participants Dan Mondor - Chairman and Chief Executive Officer Stephen Smith - Executive Vice President and Chief Financial Officer Ashish Sharma - President of IoT and Mobile Solutions Douglas Kahn - Executive Vice President of Operations and Customer Success John Weldon - Senior Vice President of Enterprise SaaS Solutions Wendy Caceres - Chief Marketing Officer and Head of Investor Relations Conference Call Part ...

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 30, 2019 OR ☐ 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 Incorpo ...

Financial Data and Key Metrics Changes - Inseego recorded the highest revenue quarter in recent history at $62.7 million, representing a 24% year-over-year increase and a 12% sequential increase [8][24] - Non-GAAP net loss was $3.1 million, with a non-GAAP loss per share of $0.04 and positive adjusted EBITDA of $4.4 million [30] - Total non-GAAP gross margin was 30.8%, up 1.1 points sequentially [27] Business Line Data and Key Metrics Changes - IoT and mobile solutions revenue was $45.9 million, up almost 33% year-over-year and 15% sequentially, driven by the strength of the 4G LTE portfolio and initial sales of 5G devices [24] - Enterprise SaaS solutions revenue was $16.8 million, up 5% year-over-year and 5.5% sequentially, reflecting positive actions taken in South Africa and Australia [24][20] Market Data and Key Metrics Changes - The company is seeing strong demand for its 4G products, with successful launches such as the FirstNet-certified USB800 modem with AT&T [10] - In the enterprise SaaS segment, Australian bookings were up 45% year-to-date and South African bookings were up 54% [20] Company Strategy and Development Direction - The company is focused on leveraging its first-mover advantage in 5G technology, with expectations of significant revenue and cash flow generation starting in mid-2020 [8][12] - Inseego aims to strengthen its balance sheet through non-dilutive options and is evaluating the optimal path forward [9][25] - The company is expanding its industrial IoT portfolio and has established strategic partnerships in the SD WAN market [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in 5G prospects and anticipates 20% to 25% revenue growth in 2020 [12][32] - The management team acknowledged a recent disappointment due to a promotional change by Verizon affecting the 4G hotspot sales, but remains optimistic about overall demand [10][32] Other Important Information - The company is investing in R&D, sales, and marketing to support its growth strategy, with a focus on hiring to meet 2020 goals [22][29] - A new cloud platform called Pegasus is set to launch in Q4 to enhance customer retention and accelerate sales [20][28] Q&A Session Summary Question: R&D level in Q4 and 2020 - Management expects R&D expenses to remain high through Q4, with most hiring concluding by the end of the quarter [37][38] Question: 2020 growth cadence - The company anticipates significant growth in the second half of 2020 driven by next-generation chipsets and increased 5G deployments [39][42] Question: Q4 gross margin expectations - Management expects gross margins to continue to rise sequentially in Q4 [43][44] Question: EBITDA guidance for Q4 - Non-GAAP operating expenses are expected to increase modestly in Q4, with gross margins continuing to improve [47][49] Question: 5G revenue contribution - The $10 million in 5G revenue is expected to come from 10 customers across nine countries, indicating a diversified revenue source [66] Question: Industrial IoT gateway business - The company is targeting various vertical markets, including connected transportation and infrastructure, and is seeing growth in SD WAN and FirstNet [75][76]

```markdown PART I—FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements as of June 30, 2019, show a working capital deficit of **$117.3 million** and a **net loss** of **$10.7 million** for the quarter. Total assets were **$164.7 million**, while total liabilities stood at **$202.0 million**, resulting in a total stockholders' deficit of **$37.3 million**. A significant portion of debt, including the **Term Loan** and **Convertible Senior Notes**, has been reclassified as **current liabilities** due to a potential repurchase event in **June 2020**. The notes to the financial statements highlight a **substantial doubt** about the company's ability to continue as a going concern without restructuring its debt or raising additional capital [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of **June 30, 2019**, the company had total assets of **$164.7 million** and total liabilities of **$202.0 million**, resulting in a stockholders' deficit of **$37.3 million**. Compared to **December 31, 2018**, cash and cash equivalents **decreased** from **$31.0 million** to **$20.3 million**. A significant change is the reclassification of the **Convertible Senior Notes** (**$97.2 million**) and **Term Loan** (**$45.8 million**) from long-term to **current liabilities**, leading to a **substantial working capital deficit** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 (Unaudited) | December 31, 2018 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $20,268 | $31,015 | | Total current assets | $76,636 | $84,352 | | Total assets | $164,654 | $162,256 | | **Liabilities & Stockholders' Deficit** | | | | Total current liabilities | $193,976 | $53,681 | | Total liabilities | $201,982 | $198,781 | | Total stockholders' deficit | ($37,328) | ($36,525) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended **June 30, 2019**, total net revenues **increased** to **$55.9 million** from **$49.1 million** year-over-year, driven by **IoT & Mobile Solutions**. However, gross profit **decreased** to **$15.6 million** from **$17.7 million**, and the operating **loss widened** to **$5.2 million** from **$0.8 million**. The **net loss** attributable to Inseego Corp. **increased** to **$10.8 million**, or (**$0.14**) per share, compared to a **net loss** of **$6.7 million**, or (**$0.11**) per share, in the prior-year period Q2 2019 vs Q2 2018 Statement of Operations (in thousands, except per share data) | Metric | Q2 2019 | Q2 2018 | | :--- | :--- | :--- | | Total net revenues | $55,891 | $49,057 | | Gross profit | $15,555 | $17,657 | | Operating loss | ($5,183) | ($822) | | Net loss attributable to Inseego Corp. | ($10,779) | ($6,660) | | Net loss per share (Basic and diluted) | ($0.14) | ($0.11) | Six Months Ended June 30, 2019 vs 2018 Statement of Operations (in thousands, except per share data) | Metric | 6M 2019 | 6M 2018 | | :--- | :--- | :--- | | Total net revenues | $104,447 | $95,790 | | Gross profit | $30,315 | $33,200 | | Operating loss | ($7,644) | ($3,406) | | Net loss attributable to Inseego Corp. | ($18,264) | ($14,710) | | Net loss per share (Basic and diluted) | ($0.24) | ($0.24) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended **June 30, 2019**, net cash used in operating activities was **$10.1 million**, a significant **decline** from **$0.9 million** provided by operations in the same period of **2018**. Net cash used in investing activities **increased** to **$11.3 million**. Net cash provided by financing activities was **$10.3 million**, primarily due to proceeds from a warrant exercise. Overall, cash, cash equivalents, and restricted cash **decreased** by **$10.7 million** during the period Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | ($10,055) | $903 | | Net cash used in investing activities | ($11,320) | ($1,722) | | Net cash provided by (used in) financing activities | $10,311 | ($175) | | **Net decrease in cash, cash equivalents and restricted cash** | **($10,747)** | **($2,362)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies and events. Key disclosures include a going concern warning due to a **working capital deficit** and upcoming debt obligations. The company's debt, including a **$48.0 million Term Loan** and **$105.1 million** in **Convertible Notes**, is now classified as current. One customer accounted for **56%** of revenue in **Q2 2019**. Subsequent to the quarter's end, the company raised **$10.0 million** through the issuance of **Series E Preferred Stock** - Management has concluded that the company's current cash and anticipated cash flows will be **insufficient** to meet its **working capital deficit** needs and potential debt repurchases in **June 2020**. These circumstances raise **substantial doubt** about the Company's ability to continue as a going concern[21](index=21&type=chunk) - The company's plan to mitigate the going concern risk is through restructuring its existing debt or issuing additional debt or equity securities[21](index=21&type=chunk) - The **Term Loan** and **Convertible Senior Notes** are classified as **current liabilities** because holders of the **Inseego Notes** have an option to require repurchase on **June 15, 2020**, which would also trigger a default under the Credit Agreement[20](index=20&type=chunk)[77](index=77&type=chunk)[90](index=90&type=chunk) - For **Q2 2019**, one customer accounted for **56.0%** of net revenues. As of **June 30, 2019**, two customers accounted for **27.3%** and **11.0%** of accounts receivable[106](index=106&type=chunk) - On **August 9, 2019**, the company completed a private placement of **10,000** shares of **Series E Preferred Stock** for an aggregate purchase price of **$10.0 million**[125](index=125&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a **13.9%** year-over-year revenue **increase** for **Q2 2019**, driven by strong sales of LTE gigabit hotspots in the **IoT & Mobile Solutions** segment. However, this was offset by a **decline** in gross margin from **36.0%** to **27.8%** due to a less favorable product mix and foreign exchange impacts. The company's liquidity position is **critical**, with a **working capital deficit** of **$117.3 million** and cash of **$20.3 million**. Management explicitly states that current cash is **insufficient** to cover potential debt repurchases in **June 2020**, creating **substantial doubt** about its ability to continue as a going concern, and outlines plans to restructure debt or raise capital [Business Overview](index=36&type=section&id=Business%20Overview) Inseego is a provider of mobile (**4G/5G**), IoT, and cloud solutions. Its revenue is generated from two main categories: **IoT & Mobile Solutions**, which includes hotspots, gateways, and routers sold under brands like MiFi and Skyus, and **Enterprise SaaS Solutions**, which includes Ctrack telematics and Device Management System platforms - The company designs and develops mobile (**4G/5G NR**), IoT, and cloud solutions for service providers, enterprises, and small-to-medium businesses[137](index=137&type=chunk) - Key product lines include MiFi mobile hotspots, Skyus IoT routers, and Ctrack SaaS platforms for fleet and asset management[139](index=139&type=chunk)[143](index=143&type=chunk) [Results of Operations](index=41&type=section&id=Results%20of%20Operations) For **Q2 2019**, net revenues **increased 13.9%** to **$55.9 million** compared to **Q2 2018**, driven by a **26.0% rise** in **IoT & Mobile Solutions** revenue from new LTE gigabit hotspots. This was partially offset by an **8.1% decline** in **Enterprise SaaS** revenue, mainly due to unfavorable foreign exchange rates. Gross margin **fell** significantly to **27.8%** from **36.0%** due to the higher cost and lower margin of the new hotspots. Operating expenses **increased**, resulting in a **wider** operating **loss** of **$5.2 million** versus **$0.8 million** in the prior year Net Revenues by Product Category - Q2 2019 vs Q2 2018 (in thousands) | Product Category | Q2 2019 | Q2 2018 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | IoT & Mobile Solutions | $39,983 | $31,741 | $8,242 | 26.0% | | Enterprise SaaS Solutions | $15,908 | $17,316 | ($1,408) | (8.1)% | | **Total** | **$55,891** | **$49,057** | **$6,834** | **13.9%** | - The **increase** in **IoT & Mobile Solutions** revenue was primarily from **increased** sales of LTE gigabit hotspots[162](index=162&type=chunk) - Gross profit for **Q2 2019** was **$15.6 million** (**27.8%** margin), a **decrease** from **$17.7 million** (**36.0%** margin) in **Q2 2018**. The **decline** was attributed to lower MiFi gross margins, reduced IoT volumes, and unfavorable foreign exchange rates[167](index=167&type=chunk) - Operating expenses (R&D, S&M, G&A) **increased** in **Q2 2019** compared to **Q2 2018**, primarily due to higher employment costs from **increased** headcount and share-based compensation[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is under significant pressure. As of **June 30, 2019**, it had **$20.3 million** in cash and a **working capital deficit** of **$117.3 million**. Management states that current cash and operational cash flow will not be **sufficient** to fund operations and cover potential debt repurchases on the **June 15, 2020** Optional Repurchase Date for its **Inseego Notes**. This situation raises **substantial doubt** about the company's ability to continue as a going concern. To address this, management plans to pursue a debt restructuring or raise additional capital. Subsequent to the quarter, the company raised **$10.0 million** via a preferred stock placement - As of **June 30, 2019**, the company had cash and cash equivalents of **$20.3 million** and a **working capital deficit** of **$117.3 million**[191](index=191&type=chunk)[210](index=210&type=chunk) - Management acknowledges that current cash and anticipated cash flows are **insufficient** to meet **working capital deficit** needs and potential debt repurchases on **June 15, 2020**, which would also trigger a default on its **Term Loan**[212](index=212&type=chunk) - The company plans to address its liquidity concerns through a recapitalization or restructuring transaction prior to the Optional Repurchase Date[212](index=212&type=chunk) - Net cash used in operating activities was **$10.1 million** for the first six months of **2019**, compared to **$0.9 million** provided in the same period of **2018**, primarily due to the **net loss** and use of cash in **working capital deficit**[207](index=207&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is **not applicable** as per the report - **Not applicable**[215](index=215&type=chunk) [Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were **effective** as of **June 30, 2019**. There were no **material changes** in internal control over financial reporting during the quarter - Based on an evaluation as of **June 30, 2019**, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were **effective**[217](index=217&type=chunk) - There were no changes in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[218](index=218&type=chunk) PART II—OTHER INFORMATION [Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) The company is party to various legal proceedings arising in the ordinary course of business. The disclosure refers to Note 9, which details a settlement agreement with former stockholders of RER. Management believes the ultimate outcome of other legal actions will not have a material adverse effect - The disclosure regarding legal proceedings is incorporated by reference from Note 9, Commitments and Contingencies[219](index=219&type=chunk) [Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) There have been no **material changes** in the company's risk factors from those disclosed in its **Annual Report on Form 10-K** - There have been no **material changes** in risk factors from those disclosed in the **Form 10-K**[221](index=221&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) On **May 24, 2019**, the company issued **45,871** shares of its common stock to a third party to resolve an intellectual property dispute. The shares were issued in a private transaction exempt from registration - On **May 24, 2019**, the Company issued **45,871** shares of common stock to a third party to resolve an intellectual property dispute[222](index=222&type=chunk) [Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the **Form 10-Q**, including merger agreements, corporate governance documents, and officer certifications ```

Inseego Corp. (NASDAQ:INSG) Q2 2019 Results Conference Call August 6, 2019 5:00 PM ET Company Participants Dan Mondor – Chairman and Chief Executive Officer Steve Smith – Executive Vice President and Chief Financial Officer Ashish Sharma – Chief Marketing Officer and Executive Vice President-IoT & Mobile Solutions John Weldon – Senior Vice President-Enterprise SaaS Solutions Conference Call Participants Scott Searles – Roth Capital Mike Walkley – Canaccord Genuity Jaeson Schmidt – Lake Street Lance Vitanza ...