UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2021
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
(Exact name of registrant as specified in its charter) |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | ||||||||||
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (858 ) 812-3400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of the registrant’s common stock outstanding as of August 2, 2021 was 103,180,708 .
TABLE OF CONTENTS
Page | ||||||||
Item 1. | ||||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
Item 1. | ||||||||
Item 1A. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
Item 5. | ||||||||
Item 6. | ||||||||
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
INSEEGO CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share data)
June 30, 2021 | December 31, 2020 | ||||||||||
(Unaudited) | |||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowance for doubtful accounts of $296 and $1,384, respectively | |||||||||||
Inventories | |||||||||||
Assets held for sale1 | |||||||||||
Prepaid expenses and other | |||||||||||
Total current assets | |||||||||||
Restricted cash | |||||||||||
Property, plant and equipment, net of accumulated depreciation of $19,758 and $21,715, respectively | |||||||||||
Rental assets, net of accumulated depreciation of $15,055 and $15,754, respectively | |||||||||||
Intangible assets, net of accumulated amortization of $ 35,579 and $63,020, respectively | |||||||||||
Goodwill | |||||||||||
Right-of-use assets, net | |||||||||||
Other assets | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses and other current liabilities | |||||||||||
Liabilities related to assets held for sale1 | |||||||||||
Total current liabilities | |||||||||||
Long-term liabilities: | |||||||||||
2025 Notes, net | |||||||||||
Deferred tax liabilities, net | |||||||||||
Other long-term liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies | |||||||||||
Stockholders’ deficit: | |||||||||||
Preferred stock, par value $0.001; 2,000,000 shares authorized: | |||||||||||
Series E Preferred stock, par value $0.001; 39,500 shares designated, 35,000 shares issued and outstanding, liquidation preference of $1,000 per share (plus any accrued but unpaid dividends) | |||||||||||
Common stock, par value $0.001; 150,000,000 shares authorized, 103,109,346 and 99,399,029 shares issued and outstanding, respectively | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Accumulated deficit | ( | ( | |||||||||
Total stockholders’ deficit attributable to Inseego Corp. | ( | ( | |||||||||
Noncontrolling interests | ( | ||||||||||
Total stockholders’ deficit | ( | ( | |||||||||
Total liabilities and stockholders’ deficit | $ | $ |
1Assets and liabilities held for sale relate to the expected sale of our Ctrack South Africa operations. Refer to Note 4. Business Divestiture for details.
See accompanying notes to unaudited condensed consolidated financial statements.
3
INSEEGO CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Net revenues: | |||||||||||||||||||||||
IoT & Mobile Solutions | $ | $ | $ | $ | |||||||||||||||||||
Enterprise SaaS Solutions | |||||||||||||||||||||||
Total net revenues | |||||||||||||||||||||||
Cost of net revenues: | |||||||||||||||||||||||
IoT & Mobile Solutions | |||||||||||||||||||||||
Enterprise SaaS Solutions | |||||||||||||||||||||||
Total cost of net revenues | |||||||||||||||||||||||
Gross profit | |||||||||||||||||||||||
Operating costs and expenses: | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
Sales and marketing | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Amortization of purchased intangible assets | |||||||||||||||||||||||
Impairment of capitalized software | |||||||||||||||||||||||
Total operating costs and expenses | |||||||||||||||||||||||
Operating loss | ( | ( | ( | ( | |||||||||||||||||||
Other income (expense): | |||||||||||||||||||||||
Loss on debt conversion and extinguishment, net | ( | ( | ( | ||||||||||||||||||||
Interest expense, net | ( | ( | ( | ( | |||||||||||||||||||
Other income (expense), net | ( | ||||||||||||||||||||||
Loss before income taxes | ( | ( | ( | ( | |||||||||||||||||||
Income tax provision (benefit) | ( | ( | |||||||||||||||||||||
Net loss | ( | ( | ( | ( | |||||||||||||||||||
Less: Net loss (income) attributable to noncontrolling interests | ( | ( | |||||||||||||||||||||
Net loss attributable to Inseego Corp. | ( | ( | ( | ( | |||||||||||||||||||
Series E preferred stock dividends | ( | ( | ( | ( | |||||||||||||||||||
Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Per share data: | |||||||||||||||||||||||
Net loss per common share: | |||||||||||||||||||||||
Basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Weighted-average shares used in computation of net loss per common share: | |||||||||||||||||||||||
Basic and diluted | |||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
4
INSEEGO CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Foreign currency translation adjustment | ( | ||||||||||||||||||||||
Total comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Comprehensive income attributable to noncontrolling interests | ( | ( | |||||||||||||||||||||
Comprehensive loss attributable to Inseego Corp. | $ | ( | $ | ( | $ | ( | $ | ( |
See accompanying notes to unaudited condensed consolidated financial statements.
5
INSEEGO CORP.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(In thousands)
(Unaudited)
Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Noncontrolling Interests | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2020 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and vesting of restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Taxes withheld on net settled vesting of restricted stock units | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Repurchase of Series E preferred stock | ( | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Series E preferred stock dividends | — | — | — | — | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2020 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Taxes withheld on net settled vesting of restricted stock units | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Issuance of common shares in connection with a public offering, net of issuance costs | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Net noncontrolling interest acquired | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Series E preferred stock dividends | — | — | — | — | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( |
6
INSEEGO CORP.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(In thousands)
(Unaudited)
Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Noncontrolling Interests | Total Stockholders’ Deficit | |||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2019 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Taxes withheld on net settled vesting of restricted stock units | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Issuance of Series E preferred stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Series E preferred stock in lieu of interest | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of Series E preferred stock | ( | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Issuance of common shares in connection with private exchanges of 2022 Notes | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of warrants | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Series E preferred stock dividends | — | — | — | — | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2020 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2020 | $ | $ | $ | $ | ( | $ | ( | $ | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options, vesting of restricted stock units and stock issued under employee stock purchase plan | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Taxes withheld on net settled vesting of restricted stock units | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Issuance of common shares in connection with the conversion of 2025 Notes | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common shares in connection with a public offering, net of issuance costs | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Series E preferred stock dividends | — | — | — | — | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||||
Net noncontrolling interest acquired | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( |
7
INSEEGO CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
8
Six Months Ended June 30, | |||||||||||
2021 | 2020 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Provision for bad debts, net of recoveries | |||||||||||
Impairment of capitalized software | |||||||||||
Provision for excess and obsolete inventory | |||||||||||
Share-based compensation expense | |||||||||||
Amortization of debt discount and debt issuance costs | |||||||||||
Fair value adjustment on derivative instrument | ( | ( | |||||||||
Loss on debt conversion and extinguishment, net | |||||||||||
Deferred income taxes | |||||||||||
Other | |||||||||||
Changes in assets and liabilities1: | |||||||||||
Accounts receivable | ( | ||||||||||
Inventories | ( | ||||||||||
Prepaid expenses and other assets | ( | ||||||||||
Accounts payable | ( | ||||||||||
Accrued expenses, income taxes, and other | |||||||||||
Net cash (used in) provided by operating activities | ( | ||||||||||
Cash flows from investing activities: | |||||||||||
Acquisition of noncontrolling interest | ( | ||||||||||
Purchases of property, plant and equipment | ( | ( | |||||||||
Proceeds from the sale of property, plant and equipment | |||||||||||
Additions to capitalized software development costs and purchases of intangible assets | ( | ( | |||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities: | |||||||||||
Gross proceeds from the issuance of 2025 Notes | |||||||||||
Payment of issuance costs related to 2025 Notes | ( | ||||||||||
Cash paid to investors in private exchange transactions | ( | ||||||||||
Payoff of term loan and related extinguishment costs | ( | ||||||||||
Gross proceeds received from issuance of Series E preferred stock | |||||||||||
Repurchase of Series E preferred stock | ( | ||||||||||
Proceeds from the exercise of warrants to purchase common stock | |||||||||||
Net borrowing of bank and overdraft facilities | |||||||||||
Principal payments under finance lease obligations | ( | ( | |||||||||
Proceeds from a public offering, net of issuance costs | |||||||||||
Proceeds from stock option exercises and employee stock purchase plan, net of taxes paid on vested restricted stock units | |||||||||||
Net cash provided by financing activities | |||||||||||
Effect of exchange rates on cash | ( | ||||||||||
Net increase in cash, cash equivalents and restricted cash | |||||||||||
Cash, cash equivalents and restricted cash, beginning of period | |||||||||||
Cash, cash equivalents and restricted cash, end of period2 | $ | $ | |||||||||
Supplemental disclosures of cash flow information: | |||||||||||
Cash paid during the year for: | |||||||||||
Interest | $ | $ | |||||||||
Income taxes | $ | $ | |||||||||
Supplemental disclosures of non-cash activities: | |||||||||||
Transfer of inventories to rental assets | $ | $ | |||||||||
Capital expenditures financed through accounts payable or accrued liabilities | $ | $ | |||||||||
Right-of-use assets obtained in exchange for operating leases liabilities | $ | $ | |||||||||
Preferred stock issued in extinguishment of term loan accrued interest | $ | $ | |||||||||
Debt discount and issuance costs extinguished in notes conversion | $ | $ | |||||||||
2022 Notes conversion to equity | $ | $ | |||||||||
Novatel Wireless Notes conversion to equity | $ | $ | |||||||||
2025 Notes issued to extinguish the 2022 Notes | $ | $ | |||||||||
2025 Notes conversion, including shares issued in satisfaction of interest make-whole payment | $ | $ | |||||||||
1Operating assets and liabilities balances include assets and liabilities classified as held for sale as of June 30, 2021 (see Note 4. Business Divestiture).
2Cash, cash equivalents and restricted cash balance includes restricted cash of $3,693 , and cash and cash equivalents of $5,849 classified as held for sale as of June 30, 2021 (see Note 4. Business Divestiture ).
See accompanying notes to unaudited condensed consolidated financial statements.
9
INSEEGO CORP.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
Risks and Uncertainties
In December 2019, COVID-19 was reported to have surfaced in Wuhan, China, resulting in shutdowns of manufacturing and commerce globally in the months that followed. Since then, the COVID-19 pandemic has spread worldwide, and has resulted in authorities implementing numerous measures to try to contain the disease or slow its spread, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns. The extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S. government, state and local government officials, and international governments to prevent the spread of the disease, all of which are uncertain and cannot be predicted.
In addition, a global semiconductor supply shortage is having wide-ranging effects across the technology industry. This semiconductor shortage has not materially impacted the Company but may impact the Company’s customers, and may negatively impact the supply of materials needed for our testing and production timeline. Our suppliers, contract manufacturers, and our customers are all taking actions to reduce the impact of the semiconductor shortage; however, if the shortage persists, the impact on our business could be material.
Liquidity
As of June 30, 2021, the Company had (i) available cash and cash equivalents totaling $36.7 million, including $5.8 million cash and cash equivalents classified as held-for-sale, and excluding restricted cash of $3.7 million, and (ii) working capital of $32.4 million, excluding assets and liabilities classified as held-for-sale.
On March 6, 2020, the Company issued and sold 25,000 shares of Fixed-Rate Cumulative Perpetual Preferred Stock, Series E, par value $0.001 per share (the “Series E Preferred Stock”), for an aggregate purchase price of $25.0 million.
In the first quarter of 2020, $59.9 million of the Company’s 5.5 % convertible senior notes due 2022 (the “2022 Notes” formerly referred to as the “Inseego Notes”) were exchanged for common stock in private exchange transactions. Additionally, in the second quarter of 2020, the Company restructured its outstanding debt by completing a $100.0 million registered public offering (the “Offering”) of 3.25 % convertible senior notes due 2025 (the “2025 Notes”) and also entered in privately-negotiated Exchange Agreements, pursuant to which an aggregate of $45.0 million in principal amount of the 2022 Notes were exchanged for an aggregate of $32 million in cash and $80.4 million in principal amount of the 2025 Notes (the “Private Exchange Transactions”). The Company also used a portion of the proceeds from the Offering to repay in full its previous term loan. In the third quarter of 2020, the Company redeemed the remaining $2,000 principal amount of the 2022 Notes.
During the quarter ended September 30, 2020, certain holders of the 2025 Notes converted approximately $13.5 million in principal amount of the 2025 Notes into 1,177,156 shares of the Company’s common stock in accordance with the terms of such notes. As of June 30, 2021, the Company’s outstanding debt primarily consisted of $161.9 million in principal amount of 2025 Notes.
On January 25, 2021, the Company entered into an Equity Distribution Agreement with Canaccord Genuity LLC (the “Agent”), pursuant to which the Company may offer and sell, from time to time, through or to the Agent, up to $40.0 million of shares of its common stock (the “ATM Offering”). In January 2021, the Company sold 1,516,073 shares of common stock, at an average price of $20.11 per share, for net proceeds of $29.4 million, after deducting underwriter fees and discounts of $0.9 million, and other offering fees, pursuant to the ATM Offering.
10
INSEEGO CORP.
Notes to Condensed Consolidated Financial Statements (Unaudited)
On July 30, 2021, the Company completed the sale of Ctrack South Africa. Initial cash proceeds of approximately $36.6 million were received.
The Company has a history of operating and net losses and overall usage of cash from operating and investing activities. The Company’s management believes that its cash and cash equivalents, together with anticipated cash flows from operations, will be sufficient to meet its cash flow needs for the next twelve months from the filing date of this report. The Company’s ability to attain more profitable operations and continue to generate positive cash flow is dependent upon achieving a level and mix of revenues adequate to support its evolving cost structure. If events or circumstances occur such that the Company does not meet its operating plan as expected, or if the Company becomes obligated to pay unforeseen expenditures as a result of ongoing litigation, the Company may be required to raise capital, reduce planned research and development activities, incur additional restructuring charges or reduce other operating expenses which could have an adverse impact on its ability to achieve its intended business objectives.
The Company’s liquidity could be impaired if there is any interruption in its business operations, a material failure to satisfy its contractual commitments or a failure to generate revenue from new or existing products. There can be no assurance that any required or desired restructuring or financing will be available on terms favorable to the Company, or at all. Additionally, the Company is uncertain of the full extent to which the COVID-19 pandemic will impact the Company’s business, operations and financial results.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly- and majority-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent liabilities. Actual results could differ materially from these estimates. Significant estimates include revenue recognition, capitalized software costs, allowance for doubtful accounts receivable, provision for excess and obsolete inventory, valuation of intangible and long-lived assets, valuation of goodwill, valuation of derivatives, accruals relating to litigation, income taxes and share-based compensation expense. The inputs related to certain estimates include consideration of the economic impact of the COVID-19 pandemic. As the impact of the COVID-19 pandemic continues to develop, these estimates could carry a higher degree of variability and volatility, and may change materially in future periods.
Sources of Revenue
The Company generates revenue from a broad range of product sales including intelligent wireless hardware products for the worldwide mobile communications, and industrial Internet of Things (“IIoT”) markets, Inseego SubscribeTM, a hosted SaaS platform that helps organizations manage the selection, deployment and spend of wireless assets, and various Software as a Service (“SaaS”) products. The Company’s products principally include intelligent mobile hotspots, wireless routers for IoT applications, USB modems, integrated telematics and mobile tracking hardware devices, which are supported by applications software and cloud software services designed to enable customers to easily analyze data insights and configure and manage their hardware.
The Company classifies its revenues from the sale of its products and services into two distinct groupings, specifically IoT & Mobile Solutions and Enterprise SaaS Solutions. Both IoT & Mobile Solutions and Enterprise SaaS Solutions revenues include any hardware and software required for the respective solution.
IoT & Mobile Solutions. The IoT & Mobile Solutions portfolio is comprised of end-to-end edge to cloud solutions including 4G LTE mobile broadband gateways, routers, modems, hotspots, HD quality VoLTE based wireless home phones, cloud management software and an advanced portfolio of 5G products. The solutions are offered under the MiFi™ brand for consumer and enterprise markets, and under the Skyus brand for IIoT markets. Effective in the third quarter ended on
11
INSEEGO CORP.
Notes to Condensed Consolidated Financial Statements (Unaudited)
2. Financial Statement Details
Inventories
Inventories, net, consist of the following (in thousands):
June 30, 2021 | December 31, 2020 | ||||||||||
Finished goods | $ | $ | |||||||||
Raw materials and components | |||||||||||
Total inventories1 | $ | $ |
1Amounts exclude balances classified as held for sale. See Note 4. Business Divestiture.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):
June 30, 2021 | December 31, 2020 | ||||||||||
Royalties | $ | $ | |||||||||
Payroll and related expenses | |||||||||||
Professional fees | |||||||||||
Accrued interest | |||||||||||
Deferred revenue | |||||||||||
Operating lease liabilities | |||||||||||
Accrued production costs | |||||||||||
Liabilities related to financed assets | |||||||||||
Other | |||||||||||
Total accrued expenses and other current liabilities1 | $ | $ |
1Amounts exclude balances classified as held for sale. See Note 4. Business Divestiture.
3. Fair Value Measurement of Assets and Liabilities
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INSEEGO CORP.
Notes to Condensed Consolidated Financial Statements (Unaudited)