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, 2022
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, 2022 was 107,665,368 .
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, 2022 | December 31, 2021 | ||||||||||
(Unaudited) | |||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Accounts receivable, net of allowance for doubtful accounts of $ | |||||||||||
Inventories | |||||||||||
Prepaid expenses and other | |||||||||||
Total current assets | |||||||||||
Property, plant and equipment, net of accumulated depreciation of $ | |||||||||||
Rental assets, net of accumulated depreciation of $ | |||||||||||
Intangible assets, net of accumulated amortization of $ | |||||||||||
Goodwill | |||||||||||
Right-of-use assets, net | |||||||||||
Other assets | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses and other current liabilities | |||||||||||
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 $ | |||||||||||
Series E Preferred stock, par value $ | |||||||||||
Common stock, par value $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Accumulated deficit | ( | ( | |||||||||
Total stockholders’ deficit | ( | ( | |||||||||
Total liabilities and stockholders’ deficit | $ | $ |
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, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
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 | ( | ( | ( | ( | |||||||||||||||||||
Loss on debt conversion and extinguishment, net | ( | ( | |||||||||||||||||||||
Interest expense, net | ( | ( | ( | ( | |||||||||||||||||||
Other (expense) income, net | ( | ( | ( | ||||||||||||||||||||
Loss before income taxes | ( | ( | ( | ( | |||||||||||||||||||
Income tax (benefit) provision | ( | ( | |||||||||||||||||||||
Net loss | ( | ( | ( | ( | |||||||||||||||||||
Less: Net 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, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
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 Deficit | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
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 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||
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 | — | — | — | — | ( | $ | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | $ | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Series E preferred stock dividends | — | — | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( |
6
INSEEGO CORP.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(In thousands)
(Unaudited)
Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | Total Stockholders’ Deficit | |||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
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 | $ | $ | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | — | $ | ( | ||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Adjustment relating to extinguishment of 2022 Notes | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
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 | — | — | ( | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Series E preferred stock dividends | — | — | — | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( |
7
INSEEGO CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30, | |||||||||||
2022 | 2021 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
(Recoveries) provision for bad debts | ( | ||||||||||
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 | ( | ||||||||||
Right-of-use assets | |||||||||||
Other | ( | ||||||||||
Changes in assets and liabilities, net of effects of divestiture: | |||||||||||
Accounts receivable | |||||||||||
Inventories | ( | ( | |||||||||
Prepaid expenses and other assets | |||||||||||
Accounts payable | ( | ( | |||||||||
Accrued expenses, income taxes, and other | ( | ||||||||||
Operating lease liabilities | ( | ( | |||||||||
Net cash used in 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 | ( | ( | |||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities: | |||||||||||
Net borrowing of bank and overdraft facilities | ( | ||||||||||
Principal payments under finance lease obligations | ( | ( | |||||||||
Proceeds from a public offering, net of issuance costs | |||||||||||
Principal payments on financed assets | ( | ||||||||||
Proceeds from stock option exercises and employee stock purchase plan, net of taxes paid on vested restricted stock units | |||||||||||
Net cash (used in) provided by financing activities | ( | ||||||||||
Effect of exchange rates on cash | |||||||||||
Net (decrease) 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 period | $ | $ | |||||||||
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 | $ | $ | |||||||||
2025 Notes conversion, including shares issued in satisfaction of interest make-whole payment | $ | $ | |||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
8
INSEEGO CORP.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
Risks and Uncertainties
In December 2019, the novel coronavirus (“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, 2022, the Company had available cash and cash equivalents totaling $21.1 million, excluding restricted cash of $3.3 million.
On August 5, 2022, Inseego Corp. (“Inseego” or the “Company”) entered into a Loan and Security Agreement (the “Credit Agreement”), by and among Siena Lending Group LLC, as lender (“Lender”), Inseego Wireless, Inc., a Delaware corporation (“Inseego Wireless”), and Inseego North America LLC, an Oregon limited liability company, as borrowers (“Inseego North America” and, together with Inseego Wireless, the “Borrowers”), and the Company, as guarantor (together with the Borrowers, the “Loan Parties”). The Credit Agreement establishes a secured asset-backed revolving credit facility which is comprised of a $50 million revolving credit facility (the “Credit Facility”), with a minimum draw of $4.5 million upon execution of the Credit Agreement. The Credit Facility matures on December 31, 2024. Availability under the Credit Facility is determined by a Borrowing Base (as defined in the Credit Agreement) comprised of a percentage of eligible accounts receivable and eligible inventory of the Borrowers. The Borrowers’ obligations under the Credit Agreement are guaranteed by the Company. The Loan Parties’ obligations under the Credit Agreement are secured by a continuing security interest in all property of each Loan Party, subject to certain Excluded Collateral (as defined in the Credit Agreement).
Borrowings under the Credit Facility may take the form of base rate loans or Secured Overnight Financing Rate (“SOFR”) loans. SOFR loans will bear interest at a rate per annum equal to Term SOFR (as defined in the Credit Agreement) plus an adjustment based on the outstanding amount for a preceding month. If the outstanding amount for a preceding month is less than $15 million, the interest rate on the Credit Agreement is Term SOFR (as defined in the Credit Agreement) plus 3.50 %, with a Term SOFR floor of 1.00 %. If the outstanding amount for a preceding month is greater than $15 million, the interest rate is calculated by Term SOFR plus 4.00 %, with a Term SOFR floor of 1.00 %. If the outstanding amount for a preceding month is greater than $25 million, the interest rate is calculated by Term SOFR plus 5.50 %, with a Term SOFR floor of 1.00 %. The Credit Agreement is also subject to closing costs and financial covenants.
9
INSEEGO CORP.
Notes to Condensed Consolidated Financial Statements (Unaudited)
On July 30, 2021, the Company completed the sale of its Ctrack business operations in Africa, Pakistan and the Middle East (together “Ctrack South Africa”). Initial cash proceeds of approximately $36.6 million were received. Net cash proceeds received were $31.5 million, net of cash divested of $5.0 million. Final cash proceeds were subject to certain post-closing working capital adjustments which totaled $2.6 million, out of which $2.2 million was received on October 29, 2021, and the remaining $0.4 million was offset with the Company’s existing accounts payable balance to an affiliate of Convergence Partners (“Convergence”), an investment management firm in South Africa.
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.
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-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
10
INSEEGO CORP.
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2022 | December 31, 2021 | ||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Cash, cash equivalents and restricted cash, end of period | $ | $ |
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40)-Accounting For Convertible Instruments and Contracts in an Entity's Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for annual and interim periods beginning after December 15, 2021. The Company adopted this standard in the first quarter of fiscal 2022 and it did not have an impact to the condensed consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company adopted this standard in the first quarter of fiscal 2022 and it did not have an impact to the condensed consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
Other than the above mentioned recently adopted accounting pronouncements, there have been no recent accounting pronouncements, changes in accounting pronouncements or recent accounting pronouncements not yet adopted during the six months ended June 30, 2022 that are of significance or potential significance to the Company’s financial position, results of operations and cash flows.
2. Financial Statement Details
Inventories
June 30, 2022 | December 31, 2021 | ||||||||||
Finished goods | $ | $ | |||||||||
Raw materials and components | |||||||||||
Total inventories | $ | $ |
11
INSEEGO CORP.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Prepaid expenses and other
Prepaid expenses and other consists of the following (in thousands):
June 30, 2022 | December 31, 2021 | ||||||||||
Rebate receivables | $ | $ | |||||||||
Receivables from contract manufacturers | |||||||||||
Software licenses | |||||||||||
Insurance | |||||||||||
Deposits | |||||||||||
Financed assets | |||||||||||
Other | |||||||||||
$ | $ |
Accrued expenses and other current liabilities
June 30, 2022 | December 31, 2021 | ||||||||||
Royalties | $ | $ | |||||||||
Payroll and related expenses | |||||||||||
Warranty obligations | |||||||||||
Professional fees | |||||||||||
Bank overdrafts | |||||||||||
Accrued interest | |||||||||||
Contract liabilities | |||||||||||
Operating lease liabilities | |||||||||||
Accrued contract manufacturing liabilities | |||||||||||
Liabilities related to financed assets | |||||||||||
Value added tax payables | |||||||||||
Other | |||||||||||
Total accrued expenses and other current liabilities | $ | $ |
3. Fair Value Measurement of Assets and Liabilities
The Company classifies inputs to measure fair value using a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The categorization of financial instruments within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) and is defined as follows:
Level 1: Pricing inputs are based on quoted market prices for identical assets or liabilities in active markets (e.g., NYSE or NASDAQ). Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
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INSEEGO CORP.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Level 2: Pricing inputs include benchmark yields, trade data, reported trades and broker dealer quotes, two-sided markets and industry and economic events, yield to maturity, Municipal Securities Rule Making Board reported trades and vendor trading platform data. Level 2 includes those financial instruments that are valued using various pricing services and broker pricing information including Electronic Communication Networks and broker feeds.
Level 3: Pricing inputs include significant inputs that are generally less observable from objective sources, including the Company’s own assumptions. The fair market value for level 3 securities may be highly sensitive to the use of unobservable inputs and subjective assumptions. Generally, changes in significant unobservable inputs may result in significantly lower or higher fair value measurements.
June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
Total Fair Value | Level 3 | Level 1 | Total Fair Value | Level 3 | Level 1 | ||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||
Cash equivalents | |||||||||||||||||||||||||||||||||||
Money market funds | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Total assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||
2025 Notes | |||||||||||||||||||||||||||||||||||
Interest make-whole payment | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Total liabilities | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||