Forward Looking Statements
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). You should not place undue reliance on these statements. These
forward-looking statements include statements that reflect the views of our
senior management with respect to our current expectations, assumptions,
estimates and projections about Inseego and our industry. These forward-looking
statements speak only as of the date of this report. We disclaim any undertaking
to publicly update or revise any forward-looking statements contained herein to
reflect any change in our expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.
Statements that include the words "may," "could," "should," "would," "estimate,"
"anticipate," "believe," "expect," "preliminary," "intend," "plan," "project,"
"outlook," "will" and similar words and phrases identify forward-looking
statements. Forward-looking statements address matters that involve risks and
uncertainties that could cause actual results to differ materially from those
anticipated in these forward-looking statements as of the date of this report.
We believe that these factors include those related to:
•our ability to compete in the market for wireless broadband data access
products, wireless modem products, and asset management, monitoring, telematics,
vehicle tracking and fleet management products;
•our ability to develop and introduce new products and services successfully;
•our ability to meet the price and performance standards of the evolving 5G New
Radio ("5G NR") products and technologies;
•our ability to expand our customer reach/reduce customer concentration;
•our ability to grow the Internet of Things ("IoT") and mobile portfolio outside
of North America;
•our ability to grow our Ctrack/asset tracking solutions within North America;
•our dependence on a small number of customers for a substantial portion of our
revenues;
•our ability to make scheduled payments of the principal of, to pay interest on,
or to refinance our indebtedness, including our term loan and convertible notes
obligations;
•our ability to introduce and sell new products that comply with current and
evolving industry standards and government regulations;
•our ability to develop and maintain strategic relationships to expand into new
markets;
•our ability to properly manage the growth of our business to avoid significant
strains on our management and operations and disruptions to our business;
•our reliance on third parties to manufacture our products;
•our contract manufacturer's ability to secure necessary supply to build our
devices;
•our ability to mitigate the impact of tariffs or other government-imposed
sanctions;
•our ability to accurately forecast customer demand and order the manufacture
and timely delivery of sufficient product quantities;
•our reliance on sole source suppliers for some products and devices used in our
solutions;
•the continuing impact of uncertain global economic conditions on the demand for
our products;
•the impact of geopolitical instability on our business;
•the emergence of global public health emergencies, such as the recent outbreak
of the 2019 novel coronavirus (2019-nCoV), now known as "COVID-19", which could
extend lead times in our supply chain and lengthen sales cycles with our
customers;
•direct and indirect effects of COVID-19 on our employees, customers and supply
chain and the economy and financial markets;
•the impact that new or adjusted tariffs may have on the costs of components or
our products, and our ability to sell products internationally;
•our ability to be cost competitive while meeting time-to-market requirements
for our customers;
•our ability to meet the product performance needs of our customers in wireless
broadband data access in industrial IoT markets;
                                       25

--------------------------------------------------------------------------------



•demand for fleet, vehicle and asset management software-as-a-service ("SaaS")
telematics solutions;
•our dependence on wireless telecommunication operators delivering acceptable
wireless services;
•the outcome of any pending or future litigation, including intellectual
property litigation;
•infringement claims with respect to intellectual property contained in our
solutions;
•our continued ability to license necessary third-party technology for the
development and sale of our solutions;
•the introduction of new products that could contain errors or defects;
•conducting business abroad, including foreign currency risks;
•the pace of 5G wireless network rollouts globally and their adoption by
customers;
•our ability to make focused investments in research and development; and
•our ability to hire, retain and manage additional qualified personnel to
maintain and expand our business.
The foregoing factors should not be construed as exhaustive and should be read
together with the other cautionary statements included in this and other reports
we file with or furnish to the Securities and Exchange Commission ("SEC"),
including the information in "Item 1A. Risk Factors" included in Part I of our
Annual Report on Form 10-K for the year ended December 31, 2019 ("Form 10-K").
If one or more events related to these or other risks or uncertainties
materialize, or if our underlying assumptions prove to be incorrect, actual
results may differ materially from what we anticipate.
Trademarks
"Inseego", the Inseego logo, "DigiCore", "Novatel Wireless", the Novatel
Wireless logo, "MiFi", "MiFi Intelligent Mobile Hotspot", "Ctrack", the Ctrack
logo, "Inseego North America", "Inseego Subscribe", and "Skyus" are trademarks
or registered trademarks of Inseego and its subsidiaries. Other trademarks,
trade names or service marks used in this report are the property of their
respective owners.
As used in this report on Form 10-Q, unless the context otherwise requires, the
terms "we," "us," "our," the "Company" and "Inseego" refer to Inseego Corp., a
Delaware corporation, and its wholly and majority-owned subsidiaries.

                                       26

--------------------------------------------------------------------------------



The following information should be read in conjunction with the condensed
consolidated financial statements and the accompanying notes included in Part I,
Item 1 of this report, as well as the annual consolidated financial statements
and accompanying notes and Management's Discussion and Analysis of Financial
Condition and Results of Operations for the year ended December 31, 2019,
contained in our Form 10-K.
Business Overview
Inseego Corp. is a leader in the design and development of fixed and mobile
wireless solutions (advanced 4G and 5G NR), industrial IoT ("IoT") and cloud
solutions for large enterprise verticals, service providers and small and
medium-sized businesses around the globe. Our customers include wireless service
providers, Fortune 500 enterprises, consumers, governments and first responders.
Our product portfolio consists of fixed and mobile device-to-cloud solutions
that provide compelling, intelligent, reliable and secure end-to-end IoT
services with deep business intelligence. Inseego's products and solutions,
designed and developed in the U.S., power mission critical applications with a
"zero unscheduled downtime" mandate, such as our 5G fixed wireless access
("FWA") gateway solutions, 4G and 5G mobile broadband, IoT applications such as
SD WAN failover management, asset tracking and fleet management services. Our
solutions are powered by our key wireless innovations in mobile and FWA
technologies, including a suite of products employing the 5G NR standards, and
purpose-built SaaS cloud platforms.
We have been at the forefront of the ways in which the world stays connected and
accesses information, and protects, and derives intelligence from that
information. With multiple first-to-market innovations across a number of
wireless technologies, including 5G, and a strong and growing portfolio of
hardware and software innovations for IoT solutions, Inseego has been advancing
technology and driving industry transformations for over 30 years. It is this
proven expertise, commitment to quality, obsession with innovation and a
relentless focus on execution that makes us a preferred global partner of
service providers, distributors, value-added resellers, system integrators, and
enterprises worldwide.
Our Sources of Revenue
We provide intelligent wireless 3G, 4G and 5G hardware products for the
worldwide mobile communications and in IoT markets. Our hardware products
address multiple vertical markets including private LTE/5G networks, the First
Responders Network Authority/Firstnet, SD-WAN, telematics, remote monitoring and
surveillance, and fixed wireless access and mobile broadband devices. Our broad
range of products principally includes intelligent 4G and 5G fixed wireless
routers and gateways, and mobile hotspots, and wireless gateways and routers for
IoT applications, Gb speed 4G LTE hotspots and USB modems and integrated
telematics and mobile tracking hardware devices, which are supported by
applications software and cloud services designed to enable customers to easily
analyze data insights and configure/manage their hardware remotely. Our products
currently operate on most major global cellular wireless networks. Our mobile
hotspots sold under the MiFi brand have been sold to millions of end users, and
provide subscribers with secure and convenient high-speed access to corporate,
public and personal information through the Internet and enterprise networks.
Our wireless standalone and USB modems and gateways allow us to address the
rapidly growing and underpenetrated IoT market segments. Our telematics and
mobile asset tracking hardware devices collect and control critical vehicle data
and driver behaviors, and can reliably deliver that information to the cloud,
all managed by our services enablement platforms.
Our MiFi customer base is comprised of wireless operators to whom we provide
intelligent fixed and mobile wireless devices. These wireless operators include
Verizon Wireless, AT&T, and Sprint in the United States, Rogers in Canada,
Telstra in Australia, as well as other international wireless operators,
distributors and various companies in other vertical markets and geographies.
We sell our wireless routers for IoT, integrated telematics and mobile tracking
hardware devices through our direct sales force, value-added resellers and
through distributors. The customer base for our IoT products is comprised of
transportation companies, industrial enterprises, manufacturers, application
service providers, system integrators and distributors in various industries,
including fleet and vehicle transportation, aviation ground service management,
energy and industrial automation, security and safety, medical monitoring and
government. Integrated telematics and asset tracking devices are also sold under
our Ctrack brand and provided as part of our integrated SaaS solutions.
We sell SaaS, software and services solutions across multiple mobile and IoT
vertical markets, including fleet management, vehicle telematics, stolen vehicle
recovery, asset tracking, monitoring, business connectivity and subscription
management. Our SaaS platforms are device-agnostic and provide a standardized,
scalable way to order, connect and manage remote assets and to improve business
operations. The platforms are flexible and support both on-premise server or
cloud-based deployments and are the basis for the delivery of a wide range of
IoT services in multiple industries.
We classify our revenues from the sale of our products and services into two
distinct groupings, specifically IoT & Mobile Solutions and Enterprise SaaS
Solutions. Both IoT & Mobile Solutions and Enterprise SaaS Solutions revenues
include any hardware and software required for the respective solution.
Effective in the third quarter ended on September 30, 2020, our IoT & Mobile
Solutions now also includes our Device Management System ("DMS"), rebranded as
Inseego SubscribeTM, a hosted SaaS platform that helps organizations manage the
selection, deployment and spend of their customer's wireless assets, helping
                                       27

--------------------------------------------------------------------------------

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



Our SaaS delivery platforms include our Ctrack platforms, which provide fleet,
vehicle, aviation, asset and other telematics applications.
Factors Which May Influence Future Results of Operations
Net Revenues. We believe that our future net revenues may be influenced by a
number of factors including:
•economic environment and related market conditions;
•increased competition from other fleet and vehicle telematics solutions, as
well as suppliers of emerging devices that contain wireless data access or
device management features;
•acceptance of our products by new vertical markets;
•growth in the aviation ground vertical;
•rate of change to new products;
•phase-out of earlier generation wireless technologies (such as 3G);
•deployment of 5G infrastructure equipment;
•adoption of 5G end point products;
•competition in the area of 5G technology;
•trade protection measures (such as tariffs and duties) and import or export
licensing requirements;
•our contract manufacturer's ability to secure necessary supply to build our
devices;
•product pricing;
•the impact of the COVID-19 pandemic on our business; and
•changes in technologies.
Our revenues are also significantly dependent upon the availability of materials
and components used in our hardware products.
We anticipate introducing additional products during the next twelve months,
including SaaS telematics solutions and additional service offerings, IoT
hardware and services, and other mobile and fixed wireless devices targeting the
emerging 5G market. We continue to develop and maintain strategic relationships
with service providers and other wireless industry leaders such as Verizon
Wireless, T-Mobile, Sprint, and Qualcomm. Through strategic relationships, we
have been able to maintain market penetration by leveraging the resources of our
channel partners, including their access to distribution resources, increased
sales opportunities and market opportunities.
In December 2019, COVID-19 was reported to have surfaced in Wuhan, China,
resulting in shutdowns of manufacturing and commerce globally in the months that
followed. Since then, the COVID-19 pandemic has spread to multiple countries
worldwide, including the United States, and has resulted in authorities
implementing numerous measures to try to contain the disease or slow its spread,
such as travel bans and restrictions, quarantines, shelter-in-place orders and
shutdowns.

The demand environment for our 5G products during the three months ended
September 30, 2020 was consistent with our expectations, with continued demand
for our products due to a dramatic increase around the world in remote or
tele-work and learning due to the COVID-19 pandemic. While demand for our
products continues to be robust, the macroeconomic environment remains uncertain
and the demand for our products may not be sustainable for the long term. We
continue to monitor the implications of the COVID-19 pandemic on our business,
as well as our customers' and suppliers' businesses.
Cost of Net Revenues. Cost of net revenues includes all costs associated with
our contract manufacturers, distribution, fulfillment and repair services,
delivery of SaaS services, warranty costs, amortization of intangible assets,
royalties, operations overhead, costs associated with cancellation of purchase
orders and costs related to outside services. Also included in cost of net
revenues are costs related to inventory adjustments, including
acquisition-related amortization of the fair value of inventory, as well as any
write downs for excess and obsolete inventory and abandoned product lines.
Inventory adjustments are impacted primarily by demand for our products, which
is influenced by the factors discussed above.
Operating Costs and Expenses. Our operating costs consist of three primary
categories: research and development; sales and marketing; and general and
administrative costs.
Research and development is at the core of our ability to produce innovative,
leading-edge products. These expenses consist primarily of engineers and
technicians who design and test our highly complex products and the procurement
of testing and certification services.
Sales and marketing expenses consist primarily of our sales force and
product-marketing professionals. In order to maintain strong sales
relationships, we provide co-marketing, trade show support and product training.
We are also engaged in
                                       28

--------------------------------------------------------------------------------



a wide variety of marketing activities, such as awareness and lead generation
programs as well as product marketing. Other marketing initiatives include
public relations, seminars and co-branding with partners.
General and administrative expenses include primarily corporate functions such
as accounting, human resources, legal, administrative support and professional
fees. This category also includes the expenses needed to operate as a
publicly-traded company, including compliance with the Sarbanes-Oxley Act of
2002, as amended, SEC filings, stock exchange fees and investor relations
expense. Although general and administrative expenses are not directly related
to revenue levels, certain expenses, such as legal expenses and provisions for
bad debts, may cause significant volatility in future general and administrative
expenses which may, in turn, impact net revenue levels.
We have undertaken certain restructuring activities and cost reduction
initiatives in an effort to better align our organizational structure and costs
with our strategy. Restructuring charges consist primarily of severance costs
incurred in connection with the reduction of our workforce and facility
exit-related costs, as well as discontinued operations, if any.
As part of our business strategy, we may review acquisition or divestiture
opportunities that we believe would be advantageous or complementary to the
development of our business. Given our current cash position and recent losses,
any additional acquisitions we make would likely involve issuing stock in order
to provide the purchase consideration for the acquisitions. If we make any
additional acquisitions, we may incur substantial expenditures in conjunction
with the acquisition process and the subsequent assimilation of any acquired
business, products, technologies or personnel.
Critical Accounting Policies and Estimates
In the notes to our consolidated financial statements and in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in our Form 10-K, we have disclosed those accounting
policies that we consider to be significant in determining our results of
operations and financial condition. There have been no material changes to those
policies that we consider to be significant since the filing of our Form 10-K,
other than our policy on derivative financial instruments as disclosed below.
The accounting principles used in preparing our unaudited condensed consolidated
financial statements conform in all material respects to accounting principles
generally accepted in the U.S.
Derivative Financial Instruments

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

Convertible Debt Instruments

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

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

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


                                       29

--------------------------------------------------------------------------------

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



Results of Operations
Three Months Ended September 30, 2020 Compared to Three Months Ended
September 30, 2019
Net revenues. Net revenues for the three months ended September 30, 2020 were
$90.2 million, compared to $62.7 million for the same period in 2019.
The following table summarizes net revenues by our two product categories (in
thousands):
                                    Three Months Ended
                                      September 30,                   Change
Product Category                    2020           2019           $             %
IoT & Mobile Solutions          $   77,342      $ 47,733      $ 29,609        62.0  %
Enterprise SaaS Solutions           12,898        14,983        (2,085)      (13.9) %
Total                           $   90,240      $ 62,716      $ 27,524        43.9  %


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

Enterprise SaaS Solutions. The decrease in Enterprise SaaS Solutions net revenues is primarily a result of lower Ctrack system revenues due to the effects of COVID-19 and the effect of strengthening U.S. Dollar foreign exchange rates on international sales. Cost of net revenues. Cost of net revenues for the three months ended September 30, 2020 was $65.1 million, or 72.1% of net revenues, compared to $44.1 million, or 70.3% of net revenues, for the same period in 2019. The following table summarizes cost of net revenues by our two product categories (in thousands):


                                    Three Months Ended
                                      September 30,                   Change
Product Category                    2020           2019           $             %
IoT & Mobile Solutions          $   60,135      $ 38,482      $ 21,653        56.3  %
Enterprise SaaS Solutions            4,935         5,609          (674)      (12.0) %

Total                           $   65,070      $ 44,091      $ 20,979        47.6  %


IoT & Mobile Solutions. The increase in IoT & Mobile Solutions cost of net
revenues is primarily a result of the increased sales of our LTE gigabit
hotspots, and 5G hotspots, as well as associated expenses such as freight and
royalties. As a result of the COVID-19 pandemic, there has been an increase in
demand for our products due to a dramatic increase around the world in remote or
tele-work and learning.
Enterprise SaaS Solutions. Enterprise SaaS Solutions cost of net revenues
decreased as a result of lower Ctrack system revenues, partially offset by the
effect of strengthening U.S. Dollar foreign exchange rates on international
costs.
Gross profit. Gross profit for the three months ended September 30, 2020 was
$25.2 million, or a gross margin of 27.9%, compared to $18.6 million, or a gross
margin of 29.7%, for the same period in 2019. The increase in gross profit was
primarily attributable to the increase in IoT & Mobile Solutions revenues.
Research and development expenses. Research and development expenses for the
three months ended September 30, 2020 were $10.7 million, or 11.8% of net
revenues, compared to $6.7 million, or 10.6% of net revenues, for the same
period in 2019. The increase was primarily a result of increased staffing, test
units, and other development spending related to our 5G product programs.
                                       30

--------------------------------------------------------------------------------



Sales and marketing expenses. Sales and marketing expenses for the three months
ended September 30, 2020 were $8.4 million, or 9.4% of net revenues, compared to
$7.1 million, or 11.4% of net revenues, for the same period in 2019. The
increase was primarily a result of an increase in employment costs attributable
to an increase in headcount.
General and administrative expenses. General and administrative expenses for the
three months ended September 30, 2020 were $8.7 million, or 9.6% of net
revenues, compared to $7.1 million, or 11.4% of net revenues, for the same
period in 2019. The increase was primarily a result of increased employment
costs attributable to an increase in headcount and non-recurring legal expenses,
offset by the effect of strengthening U.S. Dollar foreign exchange rates on
international costs.
Amortization of purchased intangible assets. Amortization of purchased
intangible assets for each of the three months ended September 30, 2020 and 2019
was $0.8 million.
Loss on debt conversion and extinguishment, net. The loss on debt conversion of
$1.2 million for the three months ended September 30, 2020 primarily represents
the loss on debt conversion of 2025 Notes. There was no such expense for the
same period in 2019.
Interest expense, net. Interest expense, net, for the three months ended
September 30, 2020 and 2019 was $1.7 million and $5.1 million, respectively. The
decrease in interest expense was due to the reduction in debt associated with
the conversion of debt into equity during the three months ended June 30, 2020,
payment in full of the Term Loan during the three months ended June 30, 2020, as
well as a lower interest rate on the 2025 Notes, as compared to the 2022 Notes.
Other income (expense), net. Other income, net, for the three months ended
September 30, 2020 was $1.1 million, which primarily includes the fair value
adjustment related to our interest make-whole payment. For the same period in
2019, other expense, net, was $0.3 million which primarily included foreign
currency transaction gains and losses.
Income tax provision. The income tax provision of $0.2 million for the three
months ended September 30, 2020 and 2019, primarily related to certain of our
entities in foreign jurisdictions.
Net loss (income) attributable to noncontrolling interests. Net income
attributable to noncontrolling interests for the three months ended
September 30, 2020 was $3,000, compared to a net loss attributable to
noncontrolling interests of $17,000 for the same period in 2019.
Series E preferred stock dividends. During the three months ended September 30,
2020 and 2019, we recorded dividends of $0.8 million and $0.1 million,
respectively, on our Fixed-Rate Cumulative Perpetual Preferred Stock, Series E,
par value $0.001 per share (the "Series E Preferred Stock").
Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30,
2019
Net revenues. Net revenues for the nine months ended September 30, 2020 were
$227.8 million, an increase of $60.6 million, or 36.3%, compared to the same
period in 2019.
The following table summarizes net revenues by our two product categories
(dollars in thousands):
                                    Nine Months Ended
                                      September 30,                   Change
Product Category                   2020           2019            $             %
IoT & Mobile Solutions          $ 189,071      $ 123,548      $ 65,523        53.0  %
Enterprise SaaS Solutions          38,698         43,615        (4,917)      (11.3) %
Total                           $ 227,769      $ 167,163      $ 60,606        36.3  %

IoT & Mobile Solutions. The increase in IoT & Mobile Solutions net revenues is primarily a result of increased sales in our LTE gigabit hotspots, 5G hotspots and USB modems, related to our MiFi business, and increased revenues in our DMS business due to subscriber growth. As a result of the COVID-19 pandemic, there has been an increase in demand for our products due to a dramatic increase around the world in remote or tele-work and learning. Enterprise SaaS Solutions. The decrease in Enterprise SaaS Solutions net revenues is primarily a result of lower Ctrack system revenues due to the effects of COVID-19 in fiscal 2020. Cost of net revenues. Cost of net revenues for the nine months ended September 30, 2020 was $163.4 million or 71.7% of net revenues, compared to $118.2 million or 70.7% of net revenues, for same period in 2019.


                                       31

--------------------------------------------------------------------------------

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


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

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



Enterprise SaaS Solutions. Enterprise SaaS Solutions cost of net revenues
decreased slightly as a result of lower Ctrack system revenues, partially offset
by the effect of strengthening U.S. Dollar foreign exchange rates on
international costs.
Gross profit. Gross profit for the nine months ended September 30, 2020 was
$64.4 million, or a gross margin of 28.3%, compared to $48.9 million, or a gross
margin of 29.3%, for the same period in 2019. The increase in gross profit was
primarily attributable to the increase in IoT & Mobile Solutions revenues.
Research and development expenses. Research and development expenses for the
nine months ended September 30, 2020 were $29.4 million, or 12.9% of net
revenues, compared to $15.3 million, or 9.2% of net revenues, for the same
period in 2019. The increase was primarily a result of increased staffing, test
units, and other development spending related to our 5G product programs.
Sales and marketing expenses. Sales and marketing expenses for the nine months
ended September 30, 2020 were $25.8 million, or 11.3% of net revenues, compared
to $20.8 million, or 12.4% of net revenues, for the same period in 2019. The
increase was primarily a result of an increase in employment costs attributable
to an increase in headcount.
General and administrative expenses. General and administrative expenses for the
nine months ended September 30, 2020 were $23.3 million, or 10.2% of net
revenues, compared to $21.1 million, or 12.6% of net revenues, for the same
period in 2019. The increase was primarily a result of an increase in employment
costs and non-recurring legal expenses.
Amortization of purchased intangible assets. The amortization of purchased
intangible assets for the nine months ended September 30, 2020 and 2019 was $2.4
million and $2.6 million, respectively, the decrease was primarily the result of
changes in foreign exchange rates.
Loss on debt conversion and extinguishment. The loss on debt conversion and
extinguishment expense of $76.4 million for the nine months ended September 30,
2020 primarily represents the loss on debt conversion and extinguishment of the
2022 Notes, including a $7.9 inducement expense incurred in connection with
certain conversions of the 2022 Notes, and loss recorded on debt conversion of
2025 Notes. There was no such expense for the same period in 2019.
Interest expense, net. Interest expense, net for each of the nine months ended
September 30, 2020 and 2019 was $8.2 million and $15.3 million, respectively.
Interest expense is primarily a result of the interest expense and amortization
of the debt discount and debt issuance costs related to our Term Loan, 2022
Notes and 2025 Notes. The decrease in interest expense was due to the conversion
of debt into equity in the current fiscal year, payment in full of the Term Loan
during the nine months ended September 30, 2020, as well as a lower interest
rate on the 2025 Notes, as compared to the 2022 Notes.
Other income (expense), net. Other income, net, for the nine months ended
September 30, 2020 was $2.8 million, which primarily includes the fair value
adjustment related to our interest make-whole payment as well as foreign
currency transaction gains and losses, and gains on the sale of certain fixed
assets. Other expense, net for the same period in 2019 was $0.1 million, which
primarily consisted of foreign currency transaction gains and losses.
Income tax provision. The income tax provision of $0.2 million for the nine
months ended September 30, 2020 and the income tax provision of $0.8 million for
the same period in 2019, respectively, primarily relate to certain of our
entities in foreign jurisdictions.
                                       32

--------------------------------------------------------------------------------



Net income attributable to noncontrolling interests. Net income attributable to
noncontrolling interests for the nine months ended September 30, 2020 was
$29,000, compared to a net income attributable to noncontrolling interests of
$57,000 for the same period in 2019.
Series E preferred stock dividends. During the nine months ended September 30,
2020 and 2019, we recorded accrued dividends of $2.1 million and $0.1 million,
respectively, on our Series E Preferred Stock.
Liquidity and Capital Resources
Our principal sources of liquidity are our existing cash and cash equivalents
and cash generated from operations and financing sources. As of September 30,
2020, we had cash and cash equivalents of $42.0 million and working capital of
$40.7 million.
On August 6, 2018, we completed a private placement of 12,062,000 shares of
common stock and warrants to purchase an additional 4,221,700 shares of common
stock (the "2018 Warrants").
On March 28, 2019, the 2018 Warrants were exercised at an exercise price of
$2.52 per share, for aggregate cash proceeds to the Company of approximately
$10.6 million. In connection with the exercise of the 2018 Warrants, on March
28, 2019, the Company issued additional warrants to purchase 2,500,000 shares of
common stock. The new warrants have an initial exercise price of $7.00 per
share, subject to adjustment for stock splits, reverse stock splits, stock
dividends and similar transactions, will be exercisable at any time on or after
September 28, 2019, and will expire on June 30, 2022.

On August 9, 2019, we completed a private placement of 10,000 shares of Series E Preferred Stock, for an aggregate purchase price of $10.0 million in accordance with the terms and provisions of a Securities Purchase Agreement, dated August 9, 2019, by and among the Company and certain accredited investors. On March 6, 2020, we completed a private placement of 25,000 additional shares of Series E Preferred Stock, for an aggregate purchase price of $25.0 million in accordance with the terms and provisions of a Securities Purchase Agreement, dated March 6, 2020, by and among the Company and an accredited investor. In the first quarter of 2020, $59.9 million of our 5.5% convertible senior notes due 2022 (the "2022 Notes" formerly referred to as the "Inseego Notes") were exchanged for common stock in private exchange transactions. Additionally, in the second quarter of 2020, we restructured our outstanding debt by completing a $100.0 million registered public offering (the "Offering") of 3.25% convertible senior notes due 2025 (the "2025 Notes") and also entered into privately-negotiated Exchange Agreements, pursuant to which an aggregate of $45 million in principal amount of 2022 Notes were exchanged for an aggregate of $32.0 million in cash paid to the lender and $80.4 million in principal amount of the 2025 Notes. ("the Private Exchange Transactions"). In the third quarter of 2020, we redeemed the remaining $2,000 principal amount of the 2022 Notes. During the quarter ended September 30, 2020, certain holders of the 2025 Notes converted an aggregate of approximately $13.5 million principal amount of the 2025 Notes into shares of the Company's common stock in accordance with the terms of such notes. As of September 30, 2020, our outstanding debt primarily consisted of $166.9 million in principal amount of 2025 Notes.

Term Loan

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

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

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



                                       33

--------------------------------------------------------------------------------

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

Convertible Notes

2025 Notes

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

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

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

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

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

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

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

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

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

The Indenture contains customary events of default. If an event of default (other than certain events of bankruptcy, insolvency or reorganization involving the Company) occurs and is continuing, the Trustee, by notice to the Company, or the holders of the 2025 Notes representing at least 25% in aggregate principal amount of the outstanding 2025 Notes, by notice to the Company and the Trustee, may declare 100% of the principal of, and all accrued and unpaid interest on, all of the then outstanding 2025 Notes to be due and payable immediately. Upon the occurrence of certain events of bankruptcy, insolvency or


                                       34

--------------------------------------------------------------------------------

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

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

2022 Notes

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

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

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

Settlement Agreement Pursuant to the amended merger agreement with respect to our acquisition of R.E.R. Enterprises, Inc. ("RER") and its wholly-owned subsidiary and principal operating asset, Feeney Wireless, LLC (which has been renamed Inseego North America, LLC, the Company agreed to pay a total of $15.0 million in deferred purchase price in five cash installments over a four-year period, beginning in March 2016. The Company also agreed to provide earn-out consideration to the former stockholders of RER in the form of $6.1 million in cash over a four-year period, beginning in March 2016, and issuance of up to 2,920,000 shares of the Company's common stock in three equal annual installments, beginning in March 2016, contingent upon retention of certain key personnel of RER. On May 11, 2017, the Company initiated a lawsuit against the former stockholders of RER in the Court of Chancery of the State of Delaware seeking recovery of damages for civil conspiracy, fraud in the inducement, unjust enrichment and breach of fiduciary duty. On January 16, 2018, the former stockholders of RER filed an answer and counterclaim in the matter seeking recovery of certain deferred and earn-out payments allegedly owed to them by the Company in connection with the Company's acquisition of RER. On July 26, 2018, the Company and the former stockholders of RER entered into a mutual general release and settlement agreement (the "Settlement Agreement") pursuant to which the parties agreed to release all claims against each other and the Company agreed to (i) pay the former stockholders of RER $1.0 million in cash by August 17, 2018, (ii) immediately instruct its transfer agent to permit the transfer or sale of 973,333 shares of the Company's common stock that the Company had issued to the former stockholders of RER in March 2017, (iii) immediately issue 500,000 shares of the Company's common stock to the former stockholders of RER, (iv) within 12 months following the execution of the Settlement Agreement, deliver to the former stockholders of RER an additional $1.0 million in cash, common stock, or a combination thereof, at the Company's option, (v) within 24 months following the execution of the Settlement Agreement deliver to the former stockholders of RER an additional $1.0 million in cash, common stock, or a combination thereof, at the Company's option, and (vi) file one or more registration statements with respect to the resale of the shares of the Company's common stock issued to the former stockholders of RER pursuant to the Settlement Agreement. On July 24, 2020, the Company issued 89,928 shares in satisfaction of all remaining liabilities under the Settlement Agreement.



                                       35

--------------------------------------------------------------------------------

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


                                                                              Nine Months Ended
                                                                                September 30,
                                                                           2020               2019
Net cash provided by (used in) operating activities                    $  16,712          $ (14,998)
Net cash used in investing activities                                    (24,973)           (20,515)
Net cash provided by financing activities                                 40,754             18,942
Effect of exchange rates on cash                                          (2,573)              (560)
Net increase (decrease) in cash, cash equivalents and restricted cash     29,920            (17,131)
Cash, cash equivalents and restricted cash, beginning of period           12,074             31,076
Cash, cash equivalents and restricted cash, end of period              $  41,994          $  13,945



Operating activities. Net cash provided by operating activities was $16.7
million for the nine months ended September 30, 2020, compared to net cash used
in operating activities of $15.0 million for the same period in 2019. Net cash
provided by operating activities for the nine months ended September 30, 2020
was primarily attributable to net cash provided by working capital, offset by a
non-cash loss on debt conversion and extinguishment, a non-cash fair value
adjustment on derivative instrument, charges for the fair value of inducement
shares issued in the privately-negotiated exchange transactions with certain
holders of the 2022 Notes, charge for the exchange of 2022 Notes for 2025 Notes
in a Private Exchange Transaction, debt exchange, depreciation and amortization,
including the amortization of debt discount and debt issuance costs, and
share-based compensation expense. Net cash used in operating activities for the
nine months ended September 30, 2019 was primarily attributable to the net loss
in the period and net cash used in working capital, partially offset by non-cash
charges for depreciation and amortization, including the amortization of debt
discount and debt issuance costs, provisions for bad debts and excess and
obsolete inventory and share-based compensation expense.
Investing activities. Net cash used in investing activities during the nine
months ended September 30, 2020 was $25.0 million, compared to net cash used in
investing activities of $20.5 million for the same period in 2019. Cash used in
investing activities during the nine months ended September 30, 2020 was
primarily related to the purchases of property, plant and equipment and
capitalization of certain costs related to the research and development of
software to be sold in our products, in large part due to the increase in
development in support of 5G products and services. Cash used in investing
activities during the same period in 2019 was primarily related to the purchases
of property, plant and equipment and capitalization of certain costs related to
the research and development of software to be sold in our products.
Financing activities. Net cash provided by financing activities during the nine
months ended September 30, 2020 was $40.8 million, compared to net cash provided
by financing activities of $18.9 million for the same period in 2019. Net cash
provided by financing activities during the nine months ended September 30, 2020
was primarily related to net proceeds received from the Offering, Private
Exchange Transactions, the issuance of Series E Preferred Stock, the exercise of
warrants to purchase common stock and stock option exercises and purchases
through our employee stock purchase plan, partially offset by the repurchase of
Series E preferred stock, principal payments under finance lease obligations and
taxes paid on vested restricted stock units, payoff of the Term Loan of $48.8
million and payment of $32 million in cash for the Private Exchange
Transactions. Net cash provided by financing activities for the same period in
2019 was primarily related to proceeds received from the issuance of Series E
preferred stock, the exercise of warrants to purchase common stock and stock
option exercises and purchases through our employee stock purchase plan,
partially offset by principal payments under finance lease obligations and taxes
paid on vested restricted stock units, and debt repayments related to our
previous acquisition of Digicore Holdings Limited.
Other Liquidity Needs
Based on the above, the Company's management believes that its current cash and
cash equivalents, together with anticipated cash flows from operations, will be
sufficient to meet its working capital needs over the next twelve months without
additional sources of cash.
The Company's liquidity could be impaired if there is any interruption in its
business operations, a material failure to satisfy its contractual commitments
or a failure to generate revenue from new or existing products. Ultimately, the
Company's ability to attain profitability and to generate positive cash flow is
dependent upon achieving a level of revenues adequate to support its evolving
cost structure and increasing working capital needs. If events or circumstances
occur such that the Company does not meet its operating plan as expected, the
Company may be required to raise additional capital, reduce planned research and
development activities, incur additional restructuring charges or reduce other
operating expenses which could have
                                       36

--------------------------------------------------------------------------------

an adverse impact on its ability to achieve its intended business objectives. There can be no assurance that any required or desired restructuring or financing will be available on terms favorable to the Company, or at all. The global outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government in March 2020 and has negatively impacted the U.S. and global economy, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to "shelter-in-place," and created significant disruption of the financial markets. The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S. government, state and local government officials, and international governments to prevent disease spread, all of which are uncertain and cannot be predicted. On March 27, 2020, the President of the United States signed and enacted into law the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), a $2 trillion economic relief bill. Pursuant to the CARES Act's relief related to federal employment taxes, we have elected to defer payment of such taxes beginning in April 2020, with $0.9 million in deferred taxes as of September 30, 2020, which will be due in two equal installments in 2021 and 2022.



Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet arrangements.

© Edgar Online, source Glimpses