Debt (Tables)

9 Months Ended

Sep. 30, 2023

The 2025 Notes consist of the following (in thousands):


	September 30, 2023		December 31, 2022
Principal	$	161,898	$	161,898
Add: fair value of embedded derivative	$	—	$	—
Less: unamortized debt discount	$	(1,313)	$	(1,933)
Less: unamortized issuance costs	$	(1,045)	$	(1,538)
Net carrying amount	$	159,540	$	158,427

The effective interest rate on the liability component of the 2025 Notes was 4.23% and 4.13% for the three months ended September 30, 2023 and 2022, respectively, and 4.27% and 4.18% for the nine months ended September 30, 2023 and 2022, respectively.

Schedule of Interest Expense

The following table sets forth total interest expense recognized related to the 2025 Notes (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,

	2023		2022		2023		2022
Contractual interest expense	$	1,315	$	1,315	$	3,946	$	3,946
Amortization of debt discount	$	207	$	207	$	621	$	621
Amortization of debt issuance costs	$	165	$	165	$	494	$	494
Total interest expense	$	1,687	$	1,687	$	5,061	$	5,061

Asset-backed Revolving Credit Facility

On August 5, 2022, 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 (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 maximum $50 million revolving credit facility (“Credit Facility”), with a minimum borrowing amount for interest calculations 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 monthly by a borrowing base comprised of a percentage of eligible accounts receivable and eligible inventory of the Borrowers. Outstanding amounts exceeding the borrowing base must be repaid immediately. 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 (“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 as the Term SOFR Reference Rate for a term of one month on the day) plus the Applicable Margin (as defined in the Credit Agreement), with a Term SOFR floor of 1%. Base Rate loans will bear interest at a rate per annum equal to the Applicable Margin plus the greatest of (a) the per annum rate of interest which is identified as the “Prime Rate” and normally published in the Money Rates section of The Wall Street Journal, (b) the sum of the Federal Funds Rate (as defined in the Credit Agreement) plus 0.5% and (c) 3.50% per annum.

The Applicable Margin varies depending on the average outstanding amount for a preceding month. If the average outstanding amount for a preceding month is less than $15 million, the Applicable Margin will be 2.50% for Base Rate loans and 3.50% for SOFR loans. If the average outstanding amount for a preceding month is between $15 million and $25 million, the Applicable Margin will be 3.00% for Base Rate loans and 4.00% for SOFR loans. If the average outstanding amount for a preceding month is greater than $25 million, the Applicable Margin will be 4.5% for Base Rate loans and 5.50% for SOFR loans.

The Credit Agreement contains a financial covenant whereby the Loan Parties shall not permit the consolidated Liquidity (as defined in the Credit Agreement) to be less than $10 million at any time. The Credit Agreement also contains certain customary covenants, which include, but are not limited to, restrictions on indebtedness, liens, fundamental changes, restricted payments, asset sales, and investments, and places limits on various other payments. The Company determined that the term “Eligible Accounts”, as defined in the Credit Agreement would have excluded certain balances used in the determination of eligible collateral upon which the Company’s borrowing base is calculated and that exclusion would have resulted in a violation of the Liquidity Covenant as of December 31, 2022. Accordingly, to clarify this matter and others, the Loan Parties agreed to amend the Credit Agreement (as amended, the “Amended Credit Agreement”) to modify and clarify the definitions of “Eligible Accounts”, “Permitted Indebtedness” and also “Eligible Inventory”. The Amended Credit Agreement was entered into on February 25, 2023 with an effective date of December 15, 2022. The Company was in compliance with the financial covenants of the Amended Credit Agreement as of September 30, 2023.

The Company incurred $1.1 million of debt issuance and related costs, which is being amortized to interest expense on a pro rata basis over the term of the Credit Agreement. As of September 30, 2023, the Company had no outstanding borrowings, excess availability (collateral value less lender reserves) of $10.2 million and availability to borrow of approximately $5.2 million. The Company’s policy is to classify outstanding borrowings as long-term so long as such borrowings are not

expected to exceed the borrowing base over the 12 months subsequent to the balance sheet date, in which case, any excess borrowings would be classified as short-term.

The following tables set forth the principal amount outstanding and interest expense for the periods (in thousands):


	September 30, 2023		December 31, 2022
Principal	$	—	$	7,851
Less: unamortized issuance costs (a)	$	—	$	(932)
Net carrying amount	$	—	$	6,919

(a) Unamortized issuance costs of $958 were reclassified to other long term assets.

The effective interest rate of the Credit Facility was 58.7%, which includes 27.3% related to amortization of original issuance costs, for the nine months ended September 30, 2023.

The following table sets forth total interest expense recognized related to the Credit Facility (in thousands):


	Nine Months Ended September 30, 2023
Contractual interest expense	$	810
Amortization of debt issuance costs	$	705
Total interest expense	$	1,515