UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023.
☐ 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: 001-39080
POWERFLEET, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
123 Tice Boulevard, Woodcliff Lake, New Jersey
(Address of principal executive offices)
83-4366463
(IRS Employer
Identification No.)
07677
(Zip Code)
(201) 996-9000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $0.01 per share
(Title of class)
PWFL
(Trading Symbol)
The Nasdaq Global Market
(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
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.
Large accelerated filer ☐
Non-accelerated filer ☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☒
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock held by non-affiliates, computed by reference to the price at which the common stock was last sold as of June 30,
2023, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $105.8 million.
The number of shares of the registrant’s Common Stock outstanding as of May 1, 2024 was 107,349,987 shares.
EXPLANATORY NOTE
References in this document to “Powerfleet”, “the Company”, “we”, “our”, or “us” are intended to mean Powerfleet, Inc., individually, or as the context requires, collectively
with its subsidiaries on a consolidated basis. This Annual Report on Form 10-K (this “Form 10-K”) contains the Company’s audited financial statements for the year ended
December 31, 2023 and restates certain financial information and related footnote disclosures in the Company’s previously issued Annual Reports on Form 10-K for the years
ended December 31, 2022 and 2021 (collectively, the “Audited Financial Statements”), Quarterly Reports on Form 10-Q for the quarterly and year-to-date periods ended
September 30, 2023 and 2022, Quarterly Reports on Form 10-Q for the quarterly and year-to-date periods ended June 30, 2023 and 2022 and Quarterly Reports on Form 10-Q
for the quarterly and year-to-date periods ended March 31, 2023 and 2022 (collectively, the “Interim Unaudited Financial Statements”) to make certain changes as described
below.
In connection with the preparation of its audited consolidated financial statements for the year ended December 31, 2023, the Company determined that the accounting for the
redemption premium associated with its Series A convertible preferred stock (the “Series A Preferred Stock”) was understated resulting in an understatement of “net loss
attributable to common stockholders” and “net loss per share attributable to common stockholders” for each period, an understatement of the value of the “convertible
redeemable preferred stock” as of each balance sheet date, and an overstatement of the “additional paid-in capital” as of each balance sheet date. The required adjustments to
correct the redemption value calculation of the Series A Preferred Stock and the related accretion of the value of the preferred stock in the consolidated statement of operations,
include the recording of non-cash accretion resulting in an increase in the net loss attributable to common stockholders, an increase in the convertible redeemable preferred
stock and a decrease in additional paid-in capital in the Company’s consolidated financial statements. Because the correction of this misstatement is material to the previously
reported results of operations of the Company included in our previously issued Audited Financial Statements and Interim Unaudited Financial Statements, the audit committee
of the board of directors of the Company (the “Audit Committee”) concluded that the consolidated financial statements included in the Audited Financial Statements and
Interim Unaudited Financial Statements should no longer be relied upon. In connection with the restatement to correct for this error, the Company determined that it is
appropriate to revise the previously filed consolidated financial statements included in this Form 10-K to correct other unrelated errors that were either unrecorded or addressed
as out-of-period adjustments in previously filed consolidated financial statements that were not material, individually or in the aggregate, to such financial statements.
Due to the discovery of this error, the Company’s management identified a material weakness in the Company’s internal control over financial reporting that existed as of
December 31, 2023 and prior periods, relating to the measurement and valuation of the Company’s Series A Preferred Stock. For a discussion of management’s consideration of
the Company’s disclosure controls and procedures, internal control over financial reporting, and the material weaknesses identified, see Part II, Item 9A, “Controls and
Procedures” of this Form 10-K.
We have not filed, and do not intend to file, any amendments to our previously filed Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q for the restated
periods. Accordingly, investors should rely only on the financial information and other disclosures regarding the restated periods in this Form 10-K or in our future filings with
the Securities and Exchange Commission (the “SEC”), as applicable, and not on any previously issued or filed reports, earnings releases, investor presentations or other similar
communications relating to the restated periods.
See Note 2 to our financial statements, included in Part II, Item 8 of this Form 10-K, for additional information on the restatement of, and the related effects on, our
consolidated financial statements for the restated periods.
POWERFLEET, INC.
TABLE OF CONTENTS
PART I.
Item 1.
Item 1A.
Item 1B.
Item1C.
Item 2.
Item 3.
Item 4.
PART II.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV.
Item 15.
Item 16.
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statement and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
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PART I
Cautionary Note Regarding Forward-Looking Statements
In addition to historical information, this Form 10-K 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”)), which may include information concerning our beliefs, plans,
objectives, goals, expectations, strategies, anticipations, assumptions, estimates, intentions, future events, future revenues or performance, capital expenditures and other
information that is not historical information. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may be beyond our control,
and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such
forward-looking statements. Many of these statements appear, in particular, under the headings “Business” and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” in this Form 10-K. When used in this report, the words “seek,” “estimate,” “expect,” “anticipate,” “project,” “plan,” “contemplate,” “plan,”
“continue,” “intend,” “believe” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are
based upon our current expectations and various assumptions. We believe there is a reasonable basis for our expectations and beliefs, but there can be no assurance that we will
realize our expectations or that our beliefs will prove to be correct.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this report. Important
factors that could cause our actual results to differ materially from those expressed as forward-looking statements herein include, but are not limited, to:
● future economic and business conditions, including the conflict between Israel and Hamas;
● integration of our and MiX Telematics’ businesses and the ability to recognize the anticipated synergies and benefits of the business combination with MiX Telematics
Limited (“MiX Telematics”);
● the commercial, reputational and regulatory risks to our business that may arise as a consequence of our need to restate certain of our consolidated financial statements
for the Non-Reliance Periods;
● the loss of any of our key customers or reduction in the purchase of our products by any such customers;
● the failure of the markets for our products to continue to develop;
● our inability to adequately protect our intellectual property;
● our inability to manage growth;
● the effects of competition from a wide variety of local, regional, national and other providers of wireless solutions;
● changes in laws and regulations or changes in generally accepted accounting policies, rules and practices;
● changes in technology or products, which may be more difficult or costly, or less effective, than anticipated; and
● those risks and uncertainties set forth under the heading “Risk Factors” in Item 1A of this report.
There may be other factors of which we are currently unaware or which we currently deem immaterial that may cause our actual results to differ materially from the forward-
looking statements. All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date they are made and are expressly qualified in their
entirety by the cautionary statements included in this report. Except as may be required by law, we undertake no obligation to publicly update or revise any forward-looking
statement to reflect events or circumstances occurring after the date they were made or to reflect the occurrence of unanticipated events, or otherwise.
Note Regarding Trademarks
We have, or have applied for, U.S. and/or foreign trademark protection for I.D. SYSTEMS® and Design, the I.D. SYSTEMS Logo®, VEHICLE ASSET COMMUNICATOR®,
POWERFLEET®, POWERFLEET VISION®, POWERFLEET IQ®, POWERFLEET YARD®, VERIWISE IQ®, didBOX®, FREIGHTCAM, KEYTROLLER®,
REEFERMATE®, POWERFLEET and DESIGN®, CAMERA Design®, Mix Telematics, Mix Telematics – Logo, Matrix Vehicle Tracking Logo, Datatrak, Tracking. Simply
Sorted, Beame Character Device, Beame Logo 2012, Beame Logo 2010, Mix-Drive, FM-WEB, Matrix – right by your side (2013 logo), Mix Vision, Mix Safedrive, FM
Communicator, MIX ROVI, Beame Logo, Our Customers Are People, Not Vehicles, Tripmaster, Life Takes You Places, Matrix Brings you Home, MiX Intuition, Recovery.
Simply Sorted, Geoloc Advanced Alert, MiX Now, Mix Recovery Protect, Mix Fleet Manager, Connected and Protected Fleet.
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Item 1. Business.
Overview
Powerfleet is a global leader of Internet-of-Things (“IoT”) solutions providing valuable business intelligence for managing high-value enterprise assets that improve operational
efficiencies.
We are headquartered in Woodcliff Lake, New Jersey, with offices located around the globe.
On April 2, 2024, we consummated the transactions contemplated by the Implementation Agreement, dated as of October 10, 2023 (the “Implementation Agreement”), that we
entered into with Main Street 2000 Proprietary Limited, a private company incorporated in the Republic of South Africa and our wholly owned subsidiary (“Powerfleet Sub”),
and MiX Telematics, a public company incorporated under the laws of the Republic of South Africa (the “MiX Combination”). On such closing date, Powerfleet Sub acquired
all the issued ordinary shares of MiX Telematics (including those represented by MiX Telematics’ American Depositary Shares) through the implementation of a scheme of
arrangement (the “Scheme”) in accordance with Sections 114 and 115 of the South African Companies Act, No. 71 of 2008, as amended (the “Companies Act”), in exchange
for shares of our common stock. As a result, MiX Telematics became our indirect, wholly owned subsidiary.
Our Powerfleet for Warehouse solutions are designed to provide on-premise or in-facility asset and operator management, monitoring, and visibility for warehouse trucks such
as forklifts, man-lifts, tuggers and ground support equipment at airports. These solutions utilize a variety of communications capabilities such as Bluetooth®, WiFi, and
proprietary radio frequency.
Our Powerfleet for Logistics solutions are designed to provide bumper-to-bumper asset management, monitoring, and visibility for over-the-road based assets such as heavy
trucks, dry-van trailers, refrigerated trailers and shipping containers and their associated cargo. These systems provide mobile-asset tracking and condition-monitoring solutions
to meet the transportation market’s desire for greater visibility, safety, security, and productivity throughout global supply chains.
Our Powerfleet for Vehicles solutions are designed both to enhance the vehicle fleet management process, whether it’s a rental car, a private fleet, or automotive original
equipment manufacturer (“OEM”) partners. We achieve this by providing critical information that can be used to increase revenues, reduce costs and improve customer service.
Our patented technologies are a proven solution for organizations that must monitor and analyze their assets to improve safety, increase efficiency, reduce costs, and drive
profitability. Our offerings are sold under the global brands Powerfleet, Pointer, and Cellocator.
We have an established history of IoT device development and innovation creating devices that can withstand harsh and rugged environments. With 46 patents and patent
applications and over 25 years’ experience, we believe we are well positioned to evolve our offerings for even greater value to customers through our cloud-based applications
for unified operations.
We deliver advanced data solutions that connect mobile assets to increase visibility, operational efficiency and profitability. Across our spectrum of vertical markets, we
differentiate ourselves by developing mobility platforms that collect data from unique sensors. Further, because we are OEM agnostic, we help organizations view and manage
their mixed assets homogeneously. All of our solutions are paired with software as a service (“SaaS”) and analytics platforms to provide an even deeper level of insights and
understanding of how assets are utilized and how drivers and operators operate those assets. These insights include a full set of Key Performance Indicators (“KPIs”) to drive
operational and strategic decisions. Our customers typically get a return on their investment in less than 12 months from deployment.
Our enterprise software applications have machine learning capabilities and are built to integrate with our customers’ management systems to provide a single, integrated view
of asset and operator activity across multiple locations while providing real-time enterprise-wide benchmarks and peer-industry comparisons. We look for analytics, as well as
the data contained therein, to differentiate us from our competitors, adding significant value to customers’ business operations, and helping to contribute to their bottom line.
Our solutions also feature open application programming interfaces (“APIs”) for additional integrations and development to boost other enterprise management systems and
third-party applications.
We market and sell our connected IoT data solutions to a wide range of customers in the commercial and government sectors. Our customers operate in diverse markets, such as
manufacturing, automotive manufacturing, wholesale and retail, food and grocery distribution, pharmaceutical and medical distribution, construction, mining, utilities,
aerospace, vehicle rental, as well as logistics, shipping, transportation, and field services. Traditionally, these businesses have relied on manual, often paper-based, processes or
on-premise legacy software to operate their high-value assets, manage workforce resources, and distributed sites; and face environmental, safety, and other regulatory
requirements. In today’s landscape, it is crucial for these businesses to invest in solutions that enable easy analysis and sharing of real-time information.
Our Solutions
We provide critical actionable information that powers unified operations throughout organizations. We are solving the challenge of inefficient data collection, real-time
visibility, and analysis that leads to transformative business operations. Our SaaS cloud-based applications take data from our IoT devices and ecosystem of third-party and
partner applications to present actionable information for customers to increase efficiencies, improve safety and security, and increase their profitability in easy-to-understand
reports, dashboards, and real-time alerts.
Key Applications of Our IoT Solutions
We provide real-time intelligence for organizations with high-value assets allowing them to make informed decisions and ultimately improve their operations, safety, and
bottom line. Our applications enable organizations to capture IoT data from various types of assets with devices and sensors creating a holistic view for analysis and action.
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The core applications that our IoT solutions address include:
End-to-End Visibility: Organizations with expensive assets such as vehicles, machinery, or equipment need to keep track of where the assets are located, monitor for misuse,
and understand how and when assets are being used. By having complete visibility of their assets, customers can improve security, utilization and customer service. In addition,
our visibility solutions help with personnel workflows and resource management, freight visibility through load status, equipment availability status, dwell and idle time,
geofencing, two-way temperature control and management, multizone temperature monitoring, arrival and departure times, and supply chain allocation.
Regulatory Compliance: Businesses must comply with government regulations and provide proof of compliance, which is commonly an onerous process to enforce and
maintain. Our solutions provide critical data points and reports to help customers stay within compliance, avoid fines for non-compliance, and automate the reporting process.
We deliver real-time position reports, hours-of-service, temperature monitoring and control, electronic safety checklists, workflow management, controlling vehicle access to
only authorized operators, inspection reports, and history logs of use.
Improve Safety: Our applications are designed to provide asset and operator management, monitoring, and visibility for safer environments. Our solutions allow our customers
to monitor their fleet of vehicles on various parameters, including but not limited to, vehicle location, speed, engine fault codes, driver behavior, eco-driving, and ancillary
sensors and can receive reports and alerts, either automatically or upon request wirelessly via the internet, email, mobile phone or an SMS. In addition, our dash camera
provides critical video capture that can be used to help exonerate drivers when in accidents or help bolster training and coaching programs of employees. We also offer
preventative solutions such as safety warning products to alert vehicle operators of objects or pedestrians in their pathway to prevent accidents, injuries, and damage. Our
analytics platform features dashboards with KPIs and can help managers identify patterns, trends and outliers that can be used as flags for interventions.
Drive Operational Efficiency & Productivity: To increase utilization of mobile assets, our solutions enable the identification of a change in status, real-time location, geo-
fencing alerts when an asset is approaching or leaving its destination, cargo status, and on-board intelligence utilizing a motion sensor and proprietary logic that identifies the
beginning of a drive and the end of a drive. Having this information enables customers to increase capacity, speed of service, right-size their fleets, and improve communication
internally and with customers. In addition, customers can increase revenue per mile, reduce claims and claims processing times, and reduce the number of assets needed. This is
achieved through proving such things as two-way integrated workflows for drivers, control assignments and work change, Electronic Driver Logging and automated record
keeping for regulatory compliance, monitoring of asset pools and geofence violations, and various reporting insights that flag under-utilized assets, the closest assets, and alerts
on dwell time and exceeding the allotted time for loading and unloading.
We help customers to automate processes and increase productivity of their employees. Our applications enable customers to determine where operators are assigned and can
temporarily reassign them based on peak needs, evaluate any disparity in the amount employees are paid compared to the time they actually spend operating a vehicle. Our
applications help answer the question of why does it take some employees longer than others to do specific tasks, where to focus labor resources, and how to forecast vehicles
and operators needed for future workflow.
In addition, for our rental car vertical, our applications automatically upload vehicle identification number, mileage and fuel data as a vehicle enters and exits the rental lot,
which can significantly expedite the rental and return processes for travelers, and provide the rental company with more timely inventory status, more accurate billing data that
can generate higher fuel-related revenue, and an opportunity to utilize customer service personnel for more productive activities, such as inspecting vehicles for damage and
helping customers with luggage.
Our solution for “car sharing” permits a rental car company to remotely control, track and monitor their rental vehicles wherever they are parked. Whether for traditional “pod-
based” rental or for the emerging rent-anywhere model, the system, through APIs integrated into any rental company’s fleet management system, (i) manages member
reservations by smart phone or Internet, and (ii) charges members for vehicle use by the hour.
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For our customers with a variety of make-model-years in their fleet, we have developed an unmatched library of certified vehicle code interfaces through our second-generation
On-Board Diagnostics, industry standard. Our patented fleet management system helps fleet owners improve asset utilization, reduce capital costs, and cut operating expenses,
such as vehicle maintenance or service and support.
Increase Security: Our solutions allow our customers to reduce theft and improve inventory management. Customers can lockdown their assets with automated e-mail or text
message alerts, emergency tracking of assets (higher frequency of reports) if theft is expected, geo-fencing alerts when an asset enters a prohibited geography or location, and
near real-time sensors that alert based on changes in temperature and shock, among other things. We also provide stolen vehicle retrieval (“SVR”) services. Most of the SVR
products used to provide our SVR services are mainly sold to (i) local car dealers and importers that in turn sell the products equipped in the vehicle to the end users who
purchase the SVR services directly from us, or (ii) leasing companies which purchase our SVR services in order to secure their own vehicles.
Reduce Costs
We enable our customers to improve asset utilization, reduce capital costs, and cut operating expenses, such as vehicle maintenance or service and support. Our solutions
provide engine performance, machine diagnostics, fuel consumption, and battery life to improve preventative maintenance scheduling, increase uptime, and gain a longer
service life of equipment. Through our software applications, customers can optimize capacity, analyze resource allocation, and improve utilization of assets to reduce capital
expenses such as purchasing new or leasing additional equipment. Our applications provide root cause analysis for any cargo claims and help with exoneration of drivers in
accidents via dash camera visibility.
Analytics and Machine Learning
Our analytics platforms provide our customers with a holistic view of their asset activity across their enterprise. For example, our image machine learning system allows us to
process images from our freight camera and other sources and identify key aspects of operations and geospatial information such as location, work being accomplished, type of
cargo, how cargo is loaded and if there are any visible issues such as damage.
Key Performance Indicators & Benchmarks
Our cloud-based software applications provide a single, integrated view of asset activity across multiple locations, generating enterprise-wide benchmarks, peer-industry
comparisons, and deeper insights into asset operations. In addition, our customers can set real-time alerts for exception-based reporting or critical activity that needs immediate
attention. This enables management teams to make more informed, effective decisions, raise asset performance standards, increase productivity, reduce costs, and enhance
safety.
Specifically, our analytics platforms allow users to quantify best-practice enterprise benchmarks for asset utilization and safety, reveal variations and inefficiencies in asset
activity across both sites and geographic regions, or identify opportunities to eliminate or reallocate assets, to reduce capital and operating costs. We provide an extensive set of
decision-making tools and a variety of standard and customized reports to help businesses improve overall operations.
We look for analytics and machine learning to make a growing contribution to drive platform and SaaS revenue, further differentiate our offerings and add value to our
solutions. We also use our analytics platform for our own internal platform quality control.
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Services
Hosting Services: We provide the use of our systems as a remotely hosted service, with the system server and application software residing in our colocation center or on a
cloud platform provider’s infrastructure (e.g., Azure, AWS). This approach helps us reduce support costs and improve quality control. It separates the system from the
restrictions of the customers’ local IT networks, which helps reduce their system support efforts and makes it easier for them to receive the benefits of system enhancements and
upgrades. Our hosting services are typically offered with extended maintenance and support services over a multi-year term of service, with automatic renewals following the
end of the initial term.
Software as a Service: We provide system monitoring, help desk technical support, escalation procedure development, routine diagnostic data analysis and software updates
services as part of the ongoing contract term. These services ensure deployed systems remain in optimal performance condition throughout the contract term and provide access
to newly developed features and functions on an annual basis.
Maintenance Services: We provide a warranty on the hardware components of our system. During the warranty period, we either replace or repair defective hardware. We also
make extended maintenance contracts available to customers and offer ongoing maintenance and support on a time and materials basis.
Customer Support and Consulting Services for Ease of Use, Adoption, and Added Value: We have developed a framework for the various phases of system training and
support that offer our customers both structure and flexibility. Major training phases include hardware installation and troubleshooting, software installation and
troubleshooting, “train-the-trainer” training on asset hardware operation, preliminary software user training, system administrator training, information technology issue
training, ad hoc training during system launch and advanced software user training.
Increasingly, training services are provided through scalable online interactive training tools. Support and consulting services are priced based on the extent of training that the
customer requests. To help our customers derive the most benefit from our system, we supply a broad range of documentation and support including videos, interactive online
tools, hardware user guides, software manuals, vehicle installation overviews, troubleshooting guides, and issue escalation procedures.
We provide our consulting services both as a standalone service to study the potential benefits of implementing an IoT business intelligence solution and as part of the system
implementation itself. In some instances, customers prepay us for extended maintenance, support and consulting services. In those instances, the payment amount is recorded as
deferred revenue and revenue is recognized over the service period.
Growth Strategy
Our objective is to become a leading global provider of IoT SaaS solutions for high-value enterprise assets to drive optimized operations and create safer environments. In
2023, we consolidated and augmented many of our existing capabilities on a single customer software platform branded as “Unity.” We have designed our Unity platform to
enable rapid and deep integration with IoT devices and third-party business systems to a highly scalable data pipeline that powers artificial intelligence-driven insights to help
companies save lives, time, and money. Unity is an increasingly important initiative to meet our objective of becoming a leading global provider of IoT SaaS solutions for high-
value enterprise assets to drive optimized operations and create safer environments. To achieve this goal, we intend to prove value, retain and grow business with existing
customers and pursue opportunities with new customers by:
● focusing our business solutions by vertical markets and go to market strategies to each market;
● positioning ourselves as an innovative thought leader;
● maintaining a world class sales and marketing team;
● identifying, seizing, and managing revenue opportunities;
● expanding our customer base, achieving wider market penetration and educating customers with mixed assets in their organization about our other applications;
● implementing improved marketing, sales and support strategies;
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● shortening our initial sales cycles by helping our customers through:
○ identifying and quantifying benefits expected from our solutions;
○ accelerating transitions from implementation to roll-out; and
○ building service revenue through long-term SaaS contracts;
● differentiating our product offering through analytics, machine learning, unique sensors, and value-added services;
● producing incremental revenue at a high profit margin; and
● expanding our partnerships and integrations.
We also plan to expand into new applications and markets by:
● pursuing opportunities to integrate our system with computer hardware and software vendors, including:
○ OEMs;
○ transportation management systems;
○ warehouse management systems;
○ labor and timecard systems;
○ enterprise resource planning; and
○ yard management systems.
● establishing relationships with global distributors; and
● evaluating and pursuing strategically sound acquisitions of companies.
Sales and Marketing
Our sales and marketing objectives are to achieve broad market awareness and penetration, with an emphasis both on expanding business opportunities with existing customers
and on securing new customers.
We market our systems directly to commercial and government organizations and through indirect sales channels, such as OEMs, vehicle importers, distributors, and warehouse
equipment dealers.
In addition, we are actively pursuing strategic relationships with key companies in our target markets - including complementary hardware and software vendors and service
providers - to further penetrate these markets by embedding our products in the assets our systems monitor and integrating our solutions with other systems.
We sell our systems to corporate-level executives, division heads and site-level management within the enterprise. Typically, our initial system deployment serves as a basis for
potential expansion across the customer’s organization.
We work closely with customers to demonstrate a return on investment, which is usually less than 12 months, and help maximize the utilization and benefits of our system and
demonstrate the value of enterprise-wide deployments. Post-implementation, we consult with our customers to further extend and customize the benefits to the enterprise by
delivering enhanced analytics capabilities.
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Customers
We market and sell our wireless solutions to a wide range of customers in the commercial and government sectors. Our customers operate in diverse markets, such as
automotive manufacturing, retail, food and grocery distribution, logistics, shipping, freight transportation, heavy industry, wholesale distribution, manufacturing, aerospace and
vehicle rental.
We enter into master agreements with our customers in the normal course of business. These agreements define the terms of any sales of products and/or services by us to the
applicable customer, including, but not limited to, terms regarding payment, support services, termination and assignment rights. These agreements generally obligate us only
when products or services are actually sold to the customer thereunder.
We strive to establish long-term relationships with our customers in order to maximize opportunities for new application development and increased sales. Some of our global
customers that benefit from the Company’s combined solutions to power their specific IoT and machine to machine mobility needs include Avis, Walmart, Toyota, and XPO
Logistics. No individual customer generates revenue equal to or greater than 10% of the Company’s consolidated total revenue.
Competition
The market for our solutions is rapidly evolving, highly competitive and fragmented. Our target markets are also subject to quickly changing product technologies, shifting
customer needs, regulatory requirements and frequent introductions of new products and services.
In each of our global markets, we encounter different competitors due to the dynamics of each market. A significant number of companies have developed or are developing
and marketing software and hardware for wireless products that currently compete or will compete directly with our solutions. We compete with organizations varying in size,
including many small, start-up companies as well as large, well-capitalized organizations.
While some of our competitors focus exclusively on providing wireless asset management solutions, many are involved in wireless technology as an extension of a broader
business. Many of our larger competitors are able to dedicate extensive financial resources to the research and development and deployment of wireless solutions. As
government and commercial entities expand the use of wireless technologies, we expect that competition will continue to increase within our target markets.
Research and Development
Our research and development team has expertise in areas such as hardware, software and firmware development and testing, database design and data analytics, wireless
communications, artificial intelligence methods, mechanical and electrical engineering, and both product and project management. In addition, we utilize external contractors to
supplement our team in the areas of software and firmware development, digital design, test development and product-level testing.
Generally, our research and development efforts are focused on expanding the capabilities of our products; differentiating our offerings through our Unity platform build,
simplifying the implementation, support and utilization of our solutions, reducing the cost of our solutions, increasing the reliability of our solutions, expanding the
functionality of our solutions to meet customer and market requirements, applying new advances in technology to enhance existing solutions, and building further competitive
advantages through our intellectual property portfolio.
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Intellectual Property
Patents
We attempt to protect our technology and products through a variety of intellectual property protections, including the pursuit of patent protection in the United States and
certain foreign jurisdictions. Because of the differences in patent laws and laws concerning proprietary rights, the extent of protection provided by U.S. patents or proprietary
rights owned by us may differ from that of their foreign counterparts. Where strategically appropriate, we will attempt to pursue suspected violators of our patents and,
whenever possible, monetize our intellectual property.
We built a portfolio of patents and patent applications relating to various aspects of our technology and products, including our wireless asset management systems, connected
car products, and vehicle management systems. As of February 29, 2024, our patent portfolio includes 39 U.S. patents, 3 pending U.S. patent applications, 2 pending foreign
patent applications, and 2 foreign patents. With the timely payment of all maintenance fees, the U.S. patents have expiration dates falling between 2024 and 2040. No single
patent or patent family is considered material to our business.
Trademarks
We have, or have applied for, U.S. and/or foreign trademark protection for I.D. SYSTEMS® and Design, the I.D. SYSTEMS Logo®, VEHICLE ASSET COMMUNICATOR®,
POWERFLEET®, POWERFLEET VISION®, POWERFLEET IQ®, POWERFLEET YARD®, VERIWISE IQ®, didBOX®, FREIGHTCAM, KEYTROLLER®,
REEFERMATE®, POWERFLEET and DESIGN® and CAMERA Design®. Following the MiX Combination, we have additional trademarks for Mix Telematics, Mix
Telematics – Logo, Matrix Vehicle Tracking Logo, Datatrak, Tracking. Simply Sorted, Beame Character Device, Beame Logo 2012, Beame Logo 2010, Mix-Drive, FM-WEB,
Matrix – right by your side (2013 logo), Mix Vision, Mix Safedrive, FM Communicator, MIX ROVI, Beame Logo, Our Customers Are People, Not Vehicles, Tripmaster, Life
Takes You Places, Matrix Brings you Home, MiX Intuition, Recovery. Simply Sorted, Geoloc Advanced Alert, MiX Now, Mix Recovery Protect, Mix Fleet Manager,
Connected and Protected Fleet.
We attempt to avoid infringing known proprietary rights of third parties in our product development and sales efforts. However, it is difficult to proceed with certainty in a
rapidly evolving technological environment in which there may be numerous patent applications pending, many of which are confidential at the time of the application filing,
with regard to similar technologies. If we were to discover that our products violate third-party proprietary rights, we may not be able to:
● obtain licenses to continue offering such products without substantial reengineering;
● re-engineer our products successfully to avoid infringement;
● obtain licenses on commercially reasonable terms, if at all;
● litigate an alleged infringement successfully; or
● settle without substantial expense and damage awards.
Any claims against us relating to the infringement of third-party proprietary rights, even if without merit, could result in the expenditure of significant financial and managerial
resources or in injunctions preventing us from distributing certain products. Such claims could materially adversely affect our business, financial condition and results of
operations.
Our software products are susceptible to unauthorized copying and uses that may go undetected, and policing such unauthorized use is difficult. In general, our efforts to protect
our intellectual property rights through patent, copyright, trademark and trade secret laws and contractual safeguards may not be effective to prevent misappropriation of our
technology, or to prevent the development and design by others of products or technologies similar to, or competitive with, those developed by us. Our failure or inability to
protect our proprietary rights could materially and adversely affect our business, financial condition and results of operations.
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Manufacturing
We outsource our hardware manufacturing operations to contract manufacturers. This strategy enables us to focus on our core competencies - designing hardware and software
systems and delivering solutions to customers - and avoid investing in capital-intensive electronics manufacturing infrastructure. Outsourcing also provides us with the ability
to ramp up deliveries to meet increases in demand without increasing fixed expenses.
Our manufacturers are responsible for obtaining the necessary components and supplies to manufacture our products. While components and supplies are generally available
from a variety of sources, manufacturers generally depend on a limited number of suppliers. In the past, unexpected demand for communication products has caused worldwide
shortages of certain electronic parts and allocation of such parts by suppliers that had an adverse impact on the ability of manufacturers to deliver products as well as on the cost
of producing such products.
Due to the general availability of manufacturers for our products, we do not believe that the loss of any of our manufacturers would have a long-term material adverse effect on
our business, although there could be a short-term adverse effect on our business.
We generally attempt to maintain sufficient inventory to meet customer demand for products, as well as to meet anticipated sales levels. If our product mix changes in
unanticipated ways, or if sales for particular products do not materialize as anticipated, we may have excess inventory or inventory that becomes obsolete. In such cases, our
operating results could be negatively affected.
Government Regulations
The use of radio emissions is subject to regulation in the United States by various federal agencies, including the Federal Communications Commission (the “FCC”) and the
Occupational Safety and Health Administration. Various state agencies also have promulgated regulations which concern the use of lasers and radio/electromagnetic emissions
standards.
Regulatory changes in the United States and other countries in which we may operate in the future could require modifications to some of our products in order for us to
continue manufacturing and marketing our products in those areas.
Our products intentionally transmit radio signals, including narrow band and spread spectrum signals, as part of their normal operation. We have obtained certification from the
FCC for our products that require certification. Users of these products in the United States do not require any license from the FCC to use or operate our products. To market
and sell our integrated wireless solutions in the European Union, we also utilize unlicensed radio spectra and have obtained the required European Norm certifications.
In addition, some of our operations use substances regulated under various federal, state and local laws governing the environment and worker health and safety, including
those governing the discharge of pollutants into the ground, air and water, the management and disposal of hazardous substances and wastes and the cleanup of contaminated
sites. Certain of our products are subject to various federal, state and local laws governing chemical substances in electronic products.
The adoption of unfavorable regulations, or unfavorable interpretations of existing regulations by courts or regulatory bodies, could require us to incur significant compliance
costs, cause the development of the affected markets to become impractical or otherwise adversely affect our ability to produce or market our products.
Since 1996, our subsidiary Pointer Telocation Ltd. (“Pointer”) has held an operational license, which is renewed on a regular basis, from the Ministry of Communications in
Israel to operate our wireless messaging system over 2 MHz in the 966 to 968 MHz radio spectrum band. It also obtains licenses from the Israeli Ministry of Communications
in order to manufacture, import, market and sell its products in Israel.
Our subsidiary Pointer Argentina S.A. (“Pointer Argentina”) obtains domestic licenses for the deployment of our SVR operation in Argentina and local operators are required to
obtain a specific license for their operations.
We are currently registered by the Federal Department of Security in Mexico to provide our services.
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Certain of our South African subsidiaries, including Pointer SA (PTY) Ltd. (“Pointer South Africa”), are currently registered as security service providers under the Private
Security Industry Regulation Act, 2001 in South Africa. Our products are also listed with the Independent Communications Authority of South Africa.
While the use of our cellular monitoring units does not require regulatory approvals, in Israel, the use of our radio frequency products is subject to regulatory approvals from
government agencies. In general, applications for regulatory approvals to date have not been problematic. However, we cannot guarantee that approvals already obtained are or
will remain sufficient in the view of regulatory authorities indefinitely.
Employees
As of April 15, 2024, we had 780 total employees globally, 100% of whom are full-time employees. We believe that our relationships with our employees are good.
Recent Developments
Higher interest rates and lingering inflation, fluctuations in currency values, continued supply chain disruptions, and ongoing geopolitical conflicts, such as the wars between
Russia and Ukraine and between Israel and Hamas, have resulted in significant economic disruption and adversely impacted the broader global economy, including our
customers and suppliers. Given the dynamic and uncertain nature of the current macroeconomic environment, we cannot reasonably estimate the impact of such developments
on our financial condition, results of operations or cash flows into the foreseeable future. The ultimate extent of the effects of these developments remain highly uncertain, and
such effects could exist for an extended period of time.
Other Information
I.D. Systems, Inc. (“I.D. Systems”) was incorporated in the State of Delaware in 1993. Powerfleet, Inc. was incorporated in the State of Delaware in February 2019 for the
purpose of effectuating the transactions pursuant to which we acquired Pointer (the “Pointer Merger”). Upon the closing of the Pointer Merger, Powerfleet became the parent
entity of I.D. Systems and Pointer.
Our primary website is www.powerfleet.com. We make available on this website, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and amendments to those reports pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such
material with, or furnish such information to, the SEC. Reports and other information we file with the SEC may also be viewed at the SEC’s website at www.sec.gov. We also
make available on this website, free of charge, our Code of Ethics for Senior Financial Officers, which applies to our principal executive officer, principal financial officer and
principal accounting officer.
Item 1A. Risk Factors.
In addition to the other information contained in this Form 10-K, the following risk factors should be considered carefully in evaluating the Company’s business. Our business,
financial condition or results of operations could be materially and adversely affected by any of these risks. Additional risks not presently known to the Company or that the
Company currently deems immaterial may also adversely affect our business, financial condition or results of operations.
Risk Factor Summary
Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this summary. These risks
include, among others, the following:
● We may not realize the anticipated benefits and cost savings of the MiX Combination.
● Integrating our business and MiX Telematics’ business may be more difficult, time-consuming or costly than expected.
● The market price for shares of our common stock may decline as a result of the MiX Combination, including as a result of some of our stockholders adjusting their
portfolios.
● The MiX Combination may not be accretive, and may be dilutive, to the combined company’s earnings per share, which may negatively affect the market price of
shares of our common stock.
● We have incurred significant losses and have a substantial accumulated deficit. If we cannot achieve profitability, the market price of our common stock could decline
significantly.
● The inability of our supply chain to deliver certain key components, such as semiconductors, could materially adversely affect our business, financial condition and
results of operations.
● Our expansion into new products, services, and technologies subjects us to additional risks.
● If we are unable to keep up with rapid technological change, we may be unable to meet the needs of our customers, which could materially and adversely affect our
financial condition and results of operations and reduce our ability to grow our market share.
● Inaccurate output from artificial intelligence could result in brand and reputation damage.
● We are subject to breaches of our information technology systems, which could damage our reputation, vendor, and customer relationships, and our customers’ access
to our services.
● The industry in which we operate is highly competitive, and competitive pressures from existing and new companies could have a material adverse effect on our
financial condition and results of operations.
● We may not be able to successfully execute our strategic initiatives or meet our long-term financial goals.
● We are an international company and may be susceptible to a number of political, economic and geographic risks that could harm our business.
● Conditions and changes in the global economic environment may adversely affect our business and financial results.
● The international scope of our business exposes us to risks associated with foreign exchange rates.
● We may need to obtain additional capital to fund our operations that could have negative consequences on our business.
● If the market for our technology does not develop or become sustainable, expands more slowly than we expect or becomes saturated, our revenues will decline and our
financial condition and results of operations could be materially and adversely affected.
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● We rely significantly on channel partners to sell our products, and disruptions to, or our failure to develop and manage our channel partners would harm our business.
● If we are unable to protect our intellectual property rights, our financial condition and results of operations could be materially and adversely affected.
● We have been, and may continue to become, involved in intellectual property disputes that could subject us to significant liability and divert the time and attention of
our management and prevent us from selling our products.
● Our Israeli subsidiaries have incurred significant indebtedness.
● The terms of the A&R Credit Agreement restrict Powerfleet Israel’s and Pointer’s current and future operations, particularly their ability to respond to changes or take
certain actions.
● In connection with the MiX Combination, we have incurred significant additional indebtedness to finance the redemption of our Series A preferred stock.
● The restatement of our previously issued consolidated financial statements and the related analysis and ongoing remedial measures have been time-consuming and
expensive and could expose us to additional risks that could materially adversely affect our financial position, results of operations and cash flows.
● In connection with the preparation of our annual financial statements for the fiscal year ended December 31, 2023, we identified material weaknesses in our internal
control over financial reporting. Any failure to maintain effective internal control over financial reporting could harm us.
● We rely on subcontractors to manufacture and deliver our products.
● Our manufacturers rely on a limited number of suppliers for several significant components used in our products.
● The federal government or independent standards organizations may implement significant regulations or standards that could adversely affect our ability to produce
or market our products.
● Because our products are complex, they may have undetected errors or failures when they are introduced, which could seriously harm our business, and our product
liability insurance may not adequately protect us.
● Changes in practices of insurance companies in the markets in which we provide and sell our SVR services and products could adversely affect our revenues and
growth potential.
● A decline in sales of consumer or commercial vehicles in the markets in which we operate could result in reduced demand for our products and services.
● A reduction in vehicle theft rates may adversely impact demand for our SVR services and products.
● The increasing availability of handheld general packet radio service GPRS devices may reduce the demand for our products for small fleet management.
● The use of our products is subject to international regulations.
● The adoption of industry standards that do not incorporate the technology we use may decrease or eliminate the demand for our services or products and could harm
our results of operations.
● Our financial statements may not reflect certain payments we may be required to make to employees.
● Some of our employees in our subsidiaries are members of labor unions and a dispute between us and any such labor union could result in a labor strike that could
delay or preclude altogether our ability to generate revenues in the markets where such employees are located.
● Under the current laws in jurisdictions in which we operate, we may not be able to enforce non-compete covenants and therefore may be unable to prevent our
competitors from benefiting from the expertise of some of our former employees.
● Manufacturing of many of our products is highly complex, and an interruption by suppliers, subcontractors or vendors could adversely affect our business, financial
condition or results of operations.
● If we lose our executive officers, or are unable to recruit additional personnel, our ability to manage our business could be materially and adversely affected.
● We provide financing to our customers for the purchase of our products, which may increase our credit risks in the event of a deterioration in a customer’s financial
condition or in global credit conditions.
● Our cash and cash equivalents could be adversely affected by a downturn in the financial and credit markets.
● Goodwill impairment or intangible impairment charges may affect our results of operations in the future.
● We have operations located in Israel, and therefore our results may be adversely affected by political, military and economic conditions in Israel.
● Many of our employees in Israel are required to perform military reserve duty.
● Economic uncertainty and volatility in Mexico may adversely affect our business.
● Fluctuations in the value of the South African Rand may have a significant impact on our reported revenue and results of operations, which may make it difficult to
evaluate our business performance between reporting periods.
● If we do not achieve applicable Broad-Based Black Economic Empowerment objectives in our South African businesses, we risk not being able to renew certain of our
existing contracts which service South African government and quasi-governmental customers, as well as not being awarded future corporate and governmental
contracts, each of which would result in the loss of revenue.
● Socio-economic inequality in South Africa or regionally may subject us to political and economic risks, which may affect the ownership or operation of our business.
● The concentration of common stock ownership among our executive officers and directors could limit the ability of other stockholders of the Company to influence the
outcome of corporate transactions or other matters submitted for stockholder approval.
● Future sales of our common stock, including sales of our common stock acquired upon the exercise of outstanding options, may cause the market price of our common
stock to decline.
● Our Amended and Restated Certificate of Incorporation, as amended provides that the Court of Chancery of the State of Delaware will be the exclusive forum for
certain legal actions between us and our stockholders, which could limit stockholders’ ability to obtain a judicial forum viewed by the stockholders as more favorable
for disputes with us or our directors, officers or employees, and the enforceability of the exclusive forum provision may be subject to uncertainty.
● Provisions of Delaware law or the Charter could delay or prevent an acquisition of the Company, even if the acquisition would be beneficial to our stockholders and
could make it more difficult for stockholders to change our management.
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Risks Related to Our Business
We may not realize the anticipated benefits and cost savings of the MiX Combination.
The success of the MiX Combination will depend, in part, on our ability to realize the anticipated benefits and cost savings from combining the two businesses. Our ability to
realize these anticipated benefits and cost savings is subject to certain risks, including, among others:
● the parties’ ability to successfully combine their respective businesses;
● the risk that the combined businesses will not perform as expected;
● the extent to which the parties will be able to realize the expected synergies, which include realizing potential savings from re-assessing priority assets and aligning
investments, eliminating duplication and redundancy, adopting an optimized operating model between both companies and leveraging scale, and creating value
resulting from the combination of the two businesses;
● the possibility that the aggregate consideration being paid for MiX Telematics is greater than the value we will derive from the MiX Combination;
● the possibility that the combined company will not achieve the unlevered free cash flow that the parties have projected;
● the incurrence of additional indebtedness in connection with the MiX Combination and the resulting limitations placed on the combined company’s operations; and
● the assumption of known and unknown liabilities of MiX Telematics, including potential tax and employee-related liabilities.
If we are not able to successfully integrate the businesses within the anticipated time frame, or at all, the anticipated cost savings, synergies operational efficiencies and other
benefits of the MiX Combination may not be realized fully or may take longer to realize than expected, and the combined company may not perform as expected.
Integrating our business and MiX Telematics’ business may be more difficult, time-consuming or costly than expected.
We and MiX Telematics have operated independently prior to completion of the MiX Combination on April 2, 2024, and there can be no assurances that our businesses can be
integrated successfully. It is possible that the integration process could result in the loss of key employees, the disruption of our company’s ongoing business or unexpected
integration issues, such as higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. Specifically,
issues that must be addressed in integrating the operations of our company and MiX Telematics in order to realize the anticipated benefits of the MiX Combination so that the
combined business performs as expected include, among others:
● combining the companies’ separate operational, financial, reporting and corporate functions;
● integrating the companies’ technologies, products and services;
● identifying and eliminating redundant and underperforming operations and assets;
● harmonizing the companies’ operating practices, employee development, compensation and benefit programs, internal controls and other policies, procedures and
processes;
● addressing possible differences in corporate cultures and management philosophies;
● maintaining employee morale and retaining key management and other employees;
● attracting and recruiting prospective employees;
● consolidating the companies’ corporate, administrative and information technology infrastructure;
● coordinating sales, distribution and marketing efforts;
● managing the movement of certain businesses and positions to different locations;
● maintaining existing agreements with customers and vendors and avoiding delays in entering into new agreements with prospective customers and vendors;
● coordinating geographically dispersed organizations; and
● effecting potential actions that may be required in connection with obtaining regulatory approvals.
In addition, at times, the attention of certain members of our management and our resources may be focused on the integration of the businesses of the two companies and
diverted from day-to-day business operations, which may disrupt our ongoing business and, consequently, the business of the combined company.
The market price for shares of our common stock may decline as a result of the MiX Combination, including as a result of some of our stockholders adjusting their
portfolios.
The market value of our common stock at the time of consummation of the MiX Combination varied significantly from the prices of our common stock on the date the
Implementation Agreement was executed, the date of our special meeting of stockholders relating to the MiX Combination and the closing date of the MiX Combination. The
market price of our common stock may decline if, among other things, the operational cost savings estimates in connection with the integration of ours and MiX Telematics’
businesses are not realized, or if the costs related to the MiX Combination are greater than expected. The market price also may decline if we do not achieve the perceived
benefits of the MiX Combination as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the MiX Combination on our financial position,
results of operations or cash flows is not consistent with the expectations of financial or industry analysts.
In addition, sales of our common stock by our stockholders after the completion of the MiX Combination may cause the market price of our common stock to decrease.
Shareholders of MiX Telematics may decide not to hold the shares of our common stock that they received in the MiX Combination. Certain of our other stockholders, such as
funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell the shares of our common stock that they received in the MiX
Combination. Such sales of our common stock could have the effect of depressing the market price for our common stock and may take place promptly following the MiX
Combination.
Any of these events may make it more difficult for us to sell equity or equity-related securities and have an adverse impact on the price of our common stock.
The MiX Combination may not be accretive, and may be dilutive, to the combined company’s earnings per share, which may negatively affect the market price of shares of
our common stock.
We currently believe the MiX Combination will result in a number of benefits, including cost savings, operating efficiencies, and stronger demand for our products and
services, and that the MiX Combination will be accretive to our earnings. This belief is based, in part, on preliminary current estimates that may materially change. In addition,
future events and conditions, including adverse changes in market conditions, additional transaction and integration-related costs and other factors such as the failure to realize
some or all of the anticipated benefits of the MiX Combination, could decrease or delay the accretion that is currently anticipated or could result in dilution. Any dilution of, or
decrease in or delay of any accretion to, the combined company’s earnings per share could cause the price of shares of our common stock to decline or grow at a reduced rate.
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We have incurred significant losses and have a substantial accumulated deficit. If we cannot achieve profitability, the market price of our common stock could decline
significantly.
As of December 31, 2023, we had cash (including restricted cash) and cash equivalents of $19.3 million and working capital of $23.5 million. Our primary sources of cash are
cash flows from the sales of products and services, our holdings of cash, cash equivalents and investments from the sale of our capital stock and borrowings under our credit
facility. To date, we have not generated sufficient cash flow solely from operating activities to fund our operations.
We incurred net losses of approximately $22.1 million (as restated), $16.9 million (as restated) and $17.3 million for the years ended December 31, 2021, 2022 and 2023,
respectively, and have incurred additional net losses since inception. At December 31, 2023, we had an accumulated deficit of approximately $146.3 million. Our ability to
increase our revenues from the sale of our solutions will depend on our ability to successfully implement our growth strategy and the continued expansion of our markets. If our
revenues do not grow or if our operating expenses continue to increase, we may not be able to become profitable and the market price of our common stock could decline.
The inability of our supply chain to deliver certain key components, such as semiconductors, could materially adversely affect our business, financial condition and results
of operations.
Our products contain a significant number of components that we source globally. If our supply chain fails to deliver products to us in sufficient quality and quantity on a timely
basis, we will be challenged to meet our customer order delivery timelines and could incur significant additional expenses for expedited freight and other related costs.
Similarly, many of our customers are dependent on an ever-greater number of global suppliers to manufacture their products. These global supply chains have continued to be
adversely impacted by events outside of our control, including macroeconomic events, trade restrictions, economic recessions and ongoing geopolitical conflicts. Over the past
two years, we have experienced delays in supply chain deliveries, extended lead times and shortages of key components, some raw material cost increases and slowdowns at
certain production facilities. These disruptions have delayed and may continue to delay the timing of some orders and expected deliveries of our products, which has impacted
our business and results of operations.
Many of the products we supply are reliant on semiconductors. Globally, there is an ongoing significant shortage of semiconductors. The semiconductor supply chain is
complex, with capacity constraints occurring throughout. We have and will continue to work closely with our suppliers and customers to minimize any potential adverse
impacts of the global semiconductor chip shortage and monitor the availability of semiconductor chips and other key components, customer production schedules and any other
supply chain inefficiencies that may arise. However, if we are not able to mitigate the impact of the semiconductor chip shortage semiconductor shortage impact, any direct or
indirect supply chain disruptions may have a material adverse impact on our business, financial condition and results of operations.
Our expansion into new products, services, and technologies subjects us to additional risks.
We may have limited or no experience in our newer market segments, and our customers may not adopt our product or service offerings. These offerings, which can present
new and difficult technology challenges, may subject us to claims if customers of these offerings experience service disruptions or failures or other quality issues. In addition,
profitability, if any, in our newer activities may not meet our expectations, and we may not be successful enough in these newer activities to recoup our investments in them.
Failure to realize the benefits of amounts we invest in new technologies, products, or services could result in the value of those investments being written down or written off.
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If we are unable to keep up with rapid technological change, we may be unable to meet the needs of our customers, which could materially and adversely affect our
financial condition and results of operations and reduce our ability to grow our market share.
Our market is characterized by rapid technological change and frequent new product announcements. Significant technological changes could render our existing technology
obsolete. We are active in the research and development of new products and technologies and in enhancing our current products. However, research and development in our
industry is complex and filled with uncertainty. For example, it is common for research and development projects to encounter delays due to unforeseen problems, resulting in
low initial volume production, fewer product features than originally considered desirable and higher production costs than initially budgeted, any of which may result in lost
market opportunities. In addition, these new products may not adequately meet the requirements of the marketplace and may not achieve any significant degree of market
acceptance. If our efforts do not lead to the successful development, marketing and release of new products that respond to technological developments or changing customer
needs and preferences, our revenues and market share could be materially and adversely affected. We may expend a significant amount of resources in unsuccessful research
and development efforts. In addition, new products or enhancements by our competitors may cause customers to defer or forego purchases of our products. Any of the
foregoing could materially and adversely affect our financial condition and results of operations and reduce our ability to grow our market share.
Inaccurate output from artificial intelligence could result in brand and reputation damage.
Artificial intelligence (“AI”) is being integrated into a number of our solutions and/or products and could be a significant factor in future service offerings. While AI can present
significant benefits, it also presents risks and challenges to our business. Data sourcing, technology, integration and process issues, program bias into decision-making
algorithms, security challenges and the protection of personal privacy could impair the adoption and acceptance of AI solutions. If the output from AI solutions are deemed to
be inaccurate or questionable, our brand and reputation may be harmed and we may potentially be subject to legal liability claims.
We are subject to breaches of our information technology systems, which could damage our reputation, vendor, and customer relationships, and our customers’ access to
our services.
Our business operations require that we use and store sensitive data, including intellectual property and proprietary business information in our secure data centers and on our
networks. We face a number of threats to our data centers and networks in the form of unauthorized access, security breaches and other system disruptions. It is critical to our
business strategy that our infrastructure remains secure and is perceived by customers and partners to be secure. We require usernames and passwords in order to access our
information technology systems. We also use encryption and authentication technologies to secure the transmission and storage of data. Despite our security measures, our
information technology systems have been, and may continue to be, subject to cybersecurity threats and incidents. Any such security breach may compromise information used
or stored on our networks and may result in significant data losses or theft of our, our customers’, or our business partners’ intellectual property or proprietary business
information. A cybersecurity breach could negatively affect our reputation by adversely affecting the market’s perception of the security or reliability of our products or
services. In addition, a cyber-attack could result in other negative consequences, including remediation costs, disruption of internal operations, increased cybersecurity
protection costs, lost revenues or litigation, which could have a material adverse effect on our business, results of operations and financial condition.
The industry in which we operate is highly competitive, and competitive pressures from existing and new companies could have a material adverse effect on our financial
condition and results of operations.
The industry in which we operate is highly competitive and influenced by the following:
● advances in technology;
● new product introductions;
● evolving industry standards;
● product improvements;
● rapidly changing customer needs;
● intellectual property invention and protection;
● marketing and distribution capabilities;
● ability to attract and retain highly skilled professionals;
● competition from highly capitalized companies;
● entrance of new competitors;
● ability of customers to invest in information technology; and
● price competition.
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The products marketed by us and our competitors are becoming more complex. As the technological and functional capabilities of future products increase, these products may
begin to compete with products being offered by traditional computer, network and communications industry participants that have substantially greater financial, technical,
marketing and manufacturing resources than we do.
Although we are not aware of any current competitors that provide the precise capabilities of our systems, we are aware of competitors that offer similar approaches to address
the customer needs that our products address. Those companies include both emerging companies with limited operating histories and companies with longer operating
histories, greater name recognition and/or significantly greater financial, technical and marketing resources than ours.
We attempt to differentiate our solutions by continuing to innovate and by offering a choice of communication mode, patented battery management technology, sensor options,
and installation configurations.
If we do not keep pace with product and technology advances, including the development of superior products by our competitors, or if we are unable to otherwise compete
successfully against our competitors, there could be a material adverse effect on our competitive position, revenues and prospects for growth. As a result, our financial condition
and results of operations could be materially and adversely affected.
We may not be able to successfully execute our strategic initiatives or meet our long-term financial goals.
We have been engaged in strategic initiatives to focus on our core business to maximize long-term stockholder value, to improve our cost structure and efficiency and to
increase our selling efforts and developing new business. We cannot provide any assurance that we will be able to successfully execute these or other strategic initiatives or that
we will be able to execute these initiatives on our expected timetable. We may not be successful in focusing our core business and obtaining operational efficiencies or
replacing revenues lost as a result of these strategic initiatives.
We are an international company and may be susceptible to a number of political, economic and geographic risks that could harm our business.
We are dependent on sales to customers outside the United States. Our international sales are likely to account for a significant percentage of our products and services revenue
for the foreseeable future. As a result, the occurrence of any international, political, economic or geographic event (for example, continued global supply chain disruptions,
inflation and other cost increases, and the conflict between Russia and Ukraine and between Israel and Hamas) could result in a significant decline in our revenue. In addition,
compliance with complex foreign and U.S. laws and regulations that apply to our international operations will increase our cost of doing business in international jurisdictions.
These numerous and sometimes conflicting laws and regulations include internal control and disclosure rules, data privacy and filtering requirements, anti-corruption laws, such
as the Foreign Corrupt Practices Act, and other local laws prohibiting corrupt payments to governmental officials, and anti-competition regulations, among others. Violations of
these laws and regulations could result in fines and penalties, criminal sanctions against us, our officers, or employees, prohibitions on the conduct of our business and on our
ability to offer our products and services in one or more countries, and could also materially affect our brand, international expansion efforts, ability to attract and retain
employees, business, and operating results. Although we plan to implement policies and procedures designed to ensure compliance with these laws and regulations, there can be
no assurance that our employees, contractors, or agents will not violate our policies.
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Some of the risks and challenges of doing business internationally include:
● unexpected changes in regulatory requirements;
● fluctuations in international currency exchange rates including its impact on unhedgeable currencies and our forecast variations for hedgeable currencies;
● imposition of tariffs and other barriers and restrictions;
● management and operation of an enterprise spread over various countries;
● the burden of complying with a variety of laws and regulations in various countries;
● application of the income tax laws and regulations of multiple jurisdictions, including relatively low-rate and relatively high-rate jurisdictions, to our sales and
other transactions, which results in additional complexity and uncertainty;
● the conduct of unethical business practices in certain developing countries;
● general economic and geopolitical conditions, including inflation and trade relationships;
● war and acts of terrorism;
● kidnapping and high crime rate;
● natural disasters or pandemics (for example, the COVID-19 pandemic);
● availability of U.S. dollars especially in countries with economies highly dependent on resource exports, particularly oil; and
● changes in export regulations.
While these factors and the impacts of these factors are difficult to predict, any one or more of them could adversely affect our business, financial condition and results of
operations in the future.
Conditions and changes in the global economic environment may adversely affect our business and financial results.
The global economy continues to be adversely affected by stock market volatility, tightening of credit markets, concerns of inflation, adverse business conditions and liquidity
concerns, as well as recent bank failures. These events and the related uncertainty about future economic conditions could negatively impact our customers and, among other
things, postpone their decision-making, decrease their spending and jeopardize or delay their ability or willingness to make payment obligations, any of which could adversely
affect our business and results of operations. Uncertainty about current global economic conditions, in particular as a result of the continued global supply chain disruptions,
inflation and other cost increases, and the conflicts between Russia and Ukraine and between Israel and Hamas, and recent bank failures, could also cause volatility of our stock
price. During periods of economic downturns, our customers may decrease their demand for wireless technology solutions, as well as the maintenance, support and consulting
services we provide. This slowdown may have an adverse effect on the wireless solutions industry in general and on demand for our products and services, but the magnitude of
that impact is uncertain. Our future growth is dependent, in part, upon the demand for our products and services. Prolonged weakness in the economy may cause business
enterprises to delay or cancel wireless solutions projects, reduce their overall wireless solutions budgets and/or reduce or cancel orders for our services. This, in turn, may lead
to longer sales cycles, delays in purchase decisions, and payment and collection issues, and may also result in price pressures, causing us to realize lower revenues and
operating margins. Additionally, if our customers cancel or delay their wireless solutions initiatives, our business, financial condition and results of operations could be
materially and adversely affected. If the current uncertainty in the general economy does not change or continue to improve, our business, financial condition and results of
operations could be harmed.
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The international scope of our business exposes us to risks associated with foreign exchange rates.
We report our financial results in U.S. dollars. However, a significant portion of our net sales, assets, indebtedness and other liabilities, and costs are denominated in foreign
currencies. These currencies include, among others, the Euro, Israeli shekel, British pound sterling, Mexican peso, Argentine peso, Brazilian real and South African rand.
In addition, several emerging market economies are particularly vulnerable to the impact of rising interest rates, inflationary pressures, and large external deficits. Risks in one
country can limit our opportunities for growth and negatively affect our operations in another country or countries. As a result, any such unfavorable conditions or
developments could have an adverse impact on our operations. Our results of operations and, in some cases, cash flows, have in the past been, and may in the future be,
adversely affected by movements in exchange rates. In addition, we may also be exposed to credit risks in some of those markets. We may implement currency hedges or take
other actions intended to reduce our exposure to changes in foreign currency exchange rates. If we are not successful in mitigating the effects of changes in exchange rates on
our business, any such changes could materially impact our results.
We may need to obtain additional capital to fund our operations that could have negative consequences on our business.
We may require additional capital in the future to develop and commercialize additional products and technologies or take advantage of other opportunities that may arise,
including potential acquisitions. We may seek to raise the necessary funds through public or private equity offerings, debt financings, additional operating improvements, asset
sales or strategic alliances and licensing arrangements.
To the extent we raise additional capital by issuing equity securities, our existing stockholders may experience substantial dilution. In addition, we may be required to relinquish
rights to our technologies or systems, or grant licenses on terms that are not favorable to us in order to raise additional funds through strategic alliance, joint venture and
licensing arrangements. We cannot provide assurance that the additional sources of funds will be available, or if available, would have reasonable terms. If adequate funds are
not available, we may be required to delay, reduce the scope of or eliminate one or more of our development programs, and our business, financial condition, results of
operations and stock price could be materially and adversely affected.
If the market for our technology does not develop or become sustainable, expands more slowly than we expect or becomes saturated, our revenues will decline and our
financial condition and results of operations could be materially and adversely affected.
Our success is highly dependent on the continued market acceptance of our solutions. The market for our products and services is new and rapidly evolving. If the market for
our products and services does not become sustainable, or becomes saturated with competing products or services, our revenues will decline and our financial condition and
results of operations could be materially and adversely affected.
We rely significantly on channel partners to sell our products, and disruptions to, or our failure to develop and manage our channel partners would harm our business.
Recruiting and retaining qualified channel partners and training them in our technology and product offerings requires significant time and resources. In order to develop and
expand our distribution channel, we must continue to scale and improve our processes and procedures that support our channel, including investment in systems and training.
Those processes and procedures may become increasingly complex and difficult to manage as we grow our organization. We have no minimum purchase commitments from
any of our channel partners, and our contracts with these channel partners do not prohibit them from offering products or services that compete with ours. Our competitors may
provide incentives to existing and potential channel partners to favor their products or to prevent or reduce sales of our products. Our channel partners may choose not to offer
our products exclusively or at all. Establishing relationships with channel partners who have a history of selling our competitors’ products may also prove to be difficult. Our
failure to establish and maintain successful relationships with channel partners would harm our business and operating results.
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If we are unable to protect our intellectual property rights, our financial condition and results of operations could be materially and adversely affected.
We rely on a combination of patents, copyrights, trademarks, trade secrets and contractual measures to protect our intellectual property rights. Third parties may seek to
challenge, invalidate, circumvent or render unenforceable any patents or proprietary rights owned by us. If such challenges are successful, our business will be materially and
adversely affected.
Our employees, consultants and advisors enter into confidentiality agreements with us that prohibit the disclosure or use of our confidential information. We also have entered
into confidentiality agreements to protect our confidential information delivered to third parties for research and other purposes. Despite these efforts, we cannot assure you that
we will be able to effectively enforce these agreements or our confidential information will not be disclosed, that others will not independently develop substantially equivalent
confidential information and techniques or otherwise gain access to our confidential information or that we can meaningfully protect our confidential information.
Disputes may arise in the future with respect to the ownership of rights to any technology developed with advisors or collaborators. These and other possible disagreements
could lead to delays in the collaborative research, development or commercialization of our systems, or could require or result in costly and time-consuming litigation that may
not be decided in our favor. Any such event could materially and adversely affect our financial condition and results of operations.
Policing the unauthorized use of our intellectual property is difficult, and we cannot assure you that the steps we have taken will prevent unauthorized use of our technology or
other intellectual property, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. Accordingly, we may not be
able to protect our proprietary rights against unauthorized third party copying or use. If we are unsuccessful in protecting our intellectual property, we may lose any
technological advantages we have over competitors and our financial condition and results of operations could be materially and adversely affected.
We have been, and may continue to become, involved in intellectual property disputes that could subject us to significant liability, divert the time and attention of our
management and prevent us from selling our products, any of which could materially and adversely affect our financial condition and results of operations.
In recent years, there has been significant litigation in the United States and internationally involving claims of alleged infringement of patents and other intellectual property
rights. Litigation has been, and may continue to be, necessary to enforce our intellectual property rights, defend ourselves against alleged infringement and determine the scope
and validity of our intellectual property rights.
Any such litigation, whether or not successful, could result in substantial costs, divert the time and attention of our management and prevent us from selling our products. If a
claim of patent infringement was decided against us, we could be required to, among other things:
● pay substantial damages to the party making such claim;
● stop selling, making, having made or using products or services that incorporate the challenged intellectual property;
● obtain from the holder of the infringed intellectual property right a license to sell, make or use the relevant technology, which license may not be available on
commercially reasonable terms, or at all; or
● redesign those products or services that incorporate such intellectual property.
The failure to obtain the necessary licenses or other rights could preclude the sale, manufacture or distribution of our products and could materially and adversely affect our
financial condition and results of operations.
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Our Israeli subsidiaries have incurred significant indebtedness.
On March 18, 2024, Powerfleet Israel Ltd. (“Powerfleet Israel”) and Pointer entered into an amended and restated credit agreement (the “A&R Credit Agreement”), with Bank
Hapoalim B.M. (“Hapoalim”), which refinanced the facilities under, and amended and restated, the prior credit agreement, dated August 19, 2019 (as amended, the “Prior
Credit Agreement”). The A&R Credit Agreement provides Powerfleet Israel with two senior secured term loan facilities denominated in New Israeli Shekel (“NIS”) in an
aggregate principal amount of $30 million (comprised of two facilities in the aggregate principal amounts of $20 million and $10 million, respectively (“Facility A” and
“Facility B,” respectively, and collectively, the “Term Facilities”)), and two revolving credit facilities to Pointer in an aggregate principal amount of $20 million (comprised of
two revolvers in the aggregate principal amounts of $10 million and $10 million, respectively (“Facility C” and “Facility D,” respectively, and, collectively, the “Revolving
Facilities” and, together with the Term Facilities, the “Credit Facilities”)). The outstanding amount under the facilities made available pursuant to the Prior Credit Agreement
was approximately NIS 40.1 million, or $11.1 million, as of December 31, 2023. On March 18, 2024, Powerfleet Israel drew down $30 million in cash under the Term Facilities
and used the proceeds to prepay approximately $11.2 million, representing the remaining outstanding balance, of the term loans extended to Powerfleet Israel under the Prior
Credit Agreement and distributed the remaining proceeds to Powerfleet. Such indebtedness will have the effect, among other things, of reducing Powerfleet Israel’s and
Pointer’s flexibility to respond to changing business and economic conditions, will increase our borrowing costs and, because such indebtedness is subject to floating interest
rates and exposed to foreign currency fluctuations, may increase Powerfleet Israel’s and Pointer’s vulnerability to fluctuations in market interest and foreign exchange rates.
The A&R Credit Agreement continues to require Powerfleet Israel and Pointer to satisfy various covenants, including negative covenants that directly or indirectly restrict our
ability to engage in certain transactions without the consent of the lender. The indebtedness continues to be secured by first ranking and exclusive fixed and floating charges,
including by Powerfleet Israel over the entire share capital of Pointer and by Pointer over all of its assets, as well as cross guarantees between Powerfleet Israel and Pointer.
This may also make it more difficult for us to engage in future transactions without the consent of the lender. The increased levels of indebtedness could also reduce funds
available to engage in investments in product development, capital expenditures and other activities and may create competitive disadvantages for us relative to other
companies with lower debt levels. We may be required to raise additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes.
Our ability to arrange additional financing will depend on, among other factors, our financial position and performance, as well as prevailing market conditions and other
factors beyond its control. We cannot assure you that we will be able to obtain additional financing on terms acceptable to us or at all.
The terms of the A&R Credit Agreement restrict Powerfleet Israel’s and Pointer’s current and future operations, particularly their ability to respond to changes or to take
certain actions.
The A&R Credit Agreement contains a number of restrictive covenants that impose significant operating and financial restrictions on Powerfleet Israel and Pointer and limits
their ability to engage in acts that may be in their long-term best interest, including restrictions on their ability to:
● incur or guarantee additional indebtedness;
● incur liens;
● sell or otherwise dispose of assets;
● enter into transactions with affiliates; and
● enter into new lines of business.
The A&R Credit Agreement also limits the ability of Powerfleet Israel and Pointer to consolidate or merge with or into another person.
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In addition, the covenants in the A&R Credit Agreement require Powerfleet Israel and Pointer to maintain specified financial ratios, tested quarterly. Their ability to meet those
financial ratios can be affected by events beyond their control, and they may be unable to meet them.
A breach of the covenants or restrictions under the A&R Credit Agreement could result in an event of default, which may allow the lender to accelerate the indebtedness
thereunder. In addition, an event of default under the A&R Credit Agreement would permit the lender to terminate all commitments to extend further credit pursuant to the
Revolving Facilities. Furthermore, if Powerfleet Israel and Pointer are unable to repay the amounts due and payable under the A&R Credit Agreement, the lender could proceed
against the collateral granted to it to secure the indebtedness under the A&R Credit Agreement. In the event the lender accelerates the repayment of borrowings, Powerfleet
Israel and Pointer may not have sufficient assets to repay that indebtedness.
As a result of these restrictions, we may be:
● limited in our flexibility in planning for, or reacting to, changes in our business and the markets we serve;
● unable to raise additional debt or equity financing to fund working capital, capital expenditures, new product development expenses and other general corporate
requirements; or
● unable to compete effectively or to take advantage of new business or strategic acquisition opportunities.
These restrictions may affect our ability to grow in accordance with our strategy.
In connection with the MiX Combination, we have incurred significant additional indebtedness to finance the redemption of our Series A preferred stock.
The closing of debt and/or equity financing in an amount sufficient to provide for the redemption in full in cash of all outstanding shares of our Series A Preferred Stock was a
condition to closing the MiX Combination. On March 7, 2024, we, together with certain of our wholly owned subsidiaries, entered into a facilities agreement (the “Facilities
Agreement”) with FirstRand Bank Limited (acting through its Rand Merchant Bank division) (“RMB”), pursuant to which RMB agreed to provide us with two term loan
facilities in an aggregate principal amount of $85 million, the proceeds of which may be used to redeem all the outstanding shares of the Series A Preferred Stock and for
general corporate purposes. On March 13, 2024, we drew down all $85 million available under such facilities. On April 2, 2024, concurrently with the closing of the MiX
Combination, we used the net proceeds received from RMB and from incremental borrowing capacity as a result of the refinancing of Credit Facilities to redeem in full all of
the outstanding shares of the Series A Preferred Stock. Such indebtedness will have the effect of, among other things, reducing our flexibility to respond to changing business
and economic conditions, will increase our borrowing costs and, to the extent that such indebtedness is subject to floating interest rates, may increase our vulnerability to
fluctuations in market interest rates. The increased levels of indebtedness could also reduce funds available to fund efforts to combine our and MiX Telematics’ businesses and
realize expected benefits of the MiX Combination and/or engage in investments in product development, capital expenditures and other activities and may create competitive
disadvantages for the combined company relative to other companies with lower debt levels.
The restatement of our previously issued consolidated financial statements and the related analysis and ongoing remedial measures have been time consuming and
expensive and could expose us to additional risks that could materially adversely affect our financial position, results of operations and cash flows.
As discussed in the Explanatory Note to this Form 10-K and in Note 2 to our consolidated financial statements included in this Form 10-K, we have restated our previously
issued audited consolidated financial statements for the fiscal years ended December 31, 2021 and 2022 and our unaudited consolidated financial statements covering each of
the interim periods during the 2022 and 2023 fiscal years. These restatements have been, and the remediation efforts we have begun to undertake are and will be, time-
consuming and expensive and could expose us to a number of additional risks that could materially adversely affect our financial position, results of operations and cash flows.
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In particular, we have incurred significant expenses, including audit, legal, consulting and other professional fees, in connection with the restatement of our previously issued
financial statements and the ongoing remediation of material weaknesses in our internal control over financial reporting. We are implementing and will continue to implement
additional processes to address such material weaknesses utilizing existing resources and adding new resources as needed. To the extent these steps are not successful, we could
be forced to incur additional time and expense. Our management’s attention has also been diverted from the operation of our business in connection with the restatements and
ongoing remediation of material weaknesses in our internal controls. In addition, the restatements and related matters could impair our reputation and could cause our
stakeholders to lose confidence in us, which could have an adverse effect on our business, results of operations, financial condition and stock price.
In connection with the preparation of our annual financial statements for the fiscal year ended December 31, 2023, we identified material weaknesses in our internal
control over financial reporting. Any failure to maintain effective internal control over financial reporting could harm us.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted
accounting principles. We identified material weaknesses in our internal control over financial reporting as of December 31, 2023, which have not been remediated (see Item
9A of this Form 10-K for more information). A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is
a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. Our management has
concluded that material weaknesses in our internal control over financial reporting existed as of December 31, 2023 due to the lack of controls related to accounting for the
redemption premium on convertible redeemable preferred stock, the determination of standalone selling price, capitalized software costs and the financial statement close
process.
We are still considering the full extent of the procedures to implement in order to remediate the material weaknesses described above. As part of the business combination with
MiX Telematics, we expect to migrate our central corporate accounting function to MiX Telematics’ central corporate accounting function and team. Benefits from this
migration will include:
● Implementation of a new enterprise resource planning (“ERP”) system;
● Access to a larger and highly qualified team; and
● Mature internal risk team who are responsible for ensuring systems, process and controls are clearly documented and widely understood and followed throughout the
organization.
The material weakness for the measurement and valuation of the convertible redeemable preferred stock that necessitated the need to restate prior period financial statements
will not require remediation in 2024 as all of the outstanding shares of the Series A Preferred Stock were redeemed in full in April 2024.
Additionally, the current remediation plan includes: (i) utilizing external resources to support our efforts to rework certain control gaps across the various processes in Israel and
the United States with identified deficiencies; (ii) implementing enhanced documentation associated with management review controls and validation of the completeness and
accuracy of key reports in Israel and the United States; and (iii) training relevant personnel to reinforce existing policies and enhancing policies with regard to appropriate steps
and procedures required to be performed related to the execution and documentation of internal controls. We cannot assure you that any of our remedial measures will be
effective in resolving this material weakness or that we will not suffer from other material weaknesses in the future.
If our management is unable to conclude that we have effective internal control over financial reporting, or to certify the effectiveness of such controls, or if additional material
weaknesses in our internal controls are identified in the future, we could be subject to regulatory scrutiny and a loss of public confidence, which could have a material adverse
effect on our business and our stock price. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to
manage our business effectively or accurately report our financial performance on a timely basis, which could cause a decline in our common stock price and adversely affect
our results of operations and financial condition.
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We rely on subcontractors to manufacture and deliver our products. Any quality or performance failures by our subcontractors or changes in their financial condition
could disrupt our ability to supply quality products to our customers in a timely manner, resulting in business interruptions, increased costs, claims for damages, reputation
damage and reduced revenue.
In order to meet the requirements under our customer contracts, we rely on subcontractors to manufacture and deliver our products to our customers. Any quality or
performance failures by our subcontractors or changes in their financial or business condition could disrupt our ability to supply quality products to our customers in a timely
manner. If we are unable to fulfill orders from our customers in a timely manner, we could experience business interruptions, increased costs, damage to our reputation and loss
of our customers. In addition, we may be subject to claims from our customers for failing to meet our contractual obligations. Although we have several sources for production,
the inability to provide our products to our customers in a timely manner could result in the loss of customers and our revenues could be materially reduced. In addition, there is
great competition for the most qualified and competent subcontractors. If we are unable to hire qualified subcontractors, the quality of our services and products could decline.
Furthermore, third-party manufacturers in the electronic component industry are consolidating. The consolidation of third-party manufacturers may give remaining
manufacturers greater leverage to increase the prices that they charge, thereby increasing our manufacturing costs. If this were to occur and we are unable to pass the increased
costs onto our customers, our profitability could be materially and adversely affected.
Our manufacturers rely on a limited number of suppliers for several significant components and raw materials used in our products. If we or our manufacturers are
unable to obtain these components or raw materials on a timely basis, we will be unable to meet our customers’ orders, which could reduce our revenues, subject us to
claims for damages and adversely affect our relationships with our customers.
We rely on a limited number of suppliers for the components and raw materials used in our products. Although there are many suppliers for most of our component parts and
raw materials, we are dependent on a limited number of suppliers for many of our significant components and raw materials. This reliance involves a number of significant
risks, including:
● unavailability of materials and interruptions in delivery of components and raw materials from our suppliers, which could result in manufacturing delays; and
● fluctuations in the quality and price of components and raw materials.
We currently do not have any long-term or exclusive purchase commitments with any of our suppliers. In addition, our suppliers may enter into exclusive arrangements with
our competitors, be acquired by our competitors, or stop selling their products or components to us on commercially reasonable terms or at all. We may not be able to develop
alternative sources for the components and raw materials. Even if alternate suppliers are available to us or our manufacturers, identifying them is often difficult and time
consuming. If we or our manufacturers are unable to obtain an ample supply of product or raw materials from our existing suppliers or alternative sources of supply, we may be
unable to satisfy our customers’ orders, which could reduce our revenues, subject us to claims for damages and adversely affect our relationships with our customers.
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Because our products are complex, they may have undetected errors or failures when they are introduced, which could seriously harm our business, and our product
liability insurance may not adequately protect us.
Technical products like ours often contain undetected errors or failures when first introduced. Despite our efforts to eliminate these flaws, there still may be errors or failures in
our products, even after the commencement of commercial shipments. We provide a reserve at the time of shipment, which may not be sufficient to cover actual repair costs.
Because our products are used in business-critical applications, we could be subject to product liability claims if our systems fail to perform as intended. Even unsuccessful
claims against us could result in costly litigation and the diversion of management’s time and resources and could damage our reputation and impair the marketability of our
systems. Although we maintain insurance, there are no assurances that:
● our insurance will provide adequate coverage against potential liabilities if our products cause harm or fail to perform as promised; or
● adequate product liability insurance will continue to be available to us in the future on commercially reasonable terms or at all.
If our insurance is insufficient to pay any product liability claims, our financial condition and results of operations could be materially and adversely affected. In addition, any
such claims could permanently injure our reputation and customer relationships.
Changes in practices of insurance companies in the markets in which we provide and sell our SVR services and products could adversely affect our revenues and growth
potential.
We depend on the practices of insurance companies in the markets in which we provide our SVR services and sell our SVR products. In Israel, which is our main SVR market,
most of the insurance companies either mandate the use of SVR services and products for certain cars, or their equivalent, as a prerequisite for providing insurance coverage to
owners of certain medium and high-end vehicles, or provide insurance premium discounts to encourage vehicle owners to subscribe to services and purchase products such as
ours. Therefore, we rely on insurance companies’ continued practice of accepting vehicle location and recovery technology as a preferred security product.
If any of these policies or practices changes, for regulatory or commercial reasons, or if market prices for these services fall, revenues from sales of our SVR services and
products, primarily in Israel, could decline, which could adversely affect our revenues and growth potential.
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A decline in sales of consumer or commercial vehicles in the markets in which we operate could result in reduced demand for our products and services.
Our products are primarily installed before or immediately after the initial sale of private or commercial vehicles. Consequently, a reduction in sales of new vehicles could
reduce our market for services and products. New vehicle sales may decline for various reasons, including inflation, an increase in new vehicle tariffs, taxes or gas prices, an
increased difficulty in obtaining credit or financing in the applicable local or global economy, or the occurrence of natural disasters or public health crises, such as the COVID-
19 pandemic. A decline in sales of new vehicles in the markets in which we operate could result in reduced demand for our services and products.
A reduction in vehicle theft rates may adversely impact demand for our SVR services and products.
Demand for our SVR services and products, depends primarily on prevailing or expected vehicle theft rates. Vehicle theft rates may decline as a result of various factors such as
the availability of improved security systems, implementation of improved or more effective law enforcement measures, or improved economic or political conditions in
markets that have high theft rates. If vehicle theft rates in some of, or entire of, our existing markets decline, or if insurance companies or our other customers believe that
vehicle theft rates have declined or are expected to decline, demand for our SVR services and products may decline.
The increasing availability of handheld GPRS devices may reduce the demand for our products for small fleet management.
The increasing availability of low-cost handheld GPRS devices and smartphones may result in a decrease in the demand for our products by managers of small auto fleets or
providers of low-level services. The availability of such devices has expanded considerably in recent years. Any such decline in demand for our products could cause a decline
in our revenues and profitability.
The use of our products is subject to international regulations.
The use of our products is subject to regulatory approvals of government agencies in each of the countries in which our systems are operated, including Israel. Our operators
typically must obtain authorization from each country in which our systems and products are installed. While in general, operators have not experienced problems in obtaining
regulatory approvals to date, the regulatory schemes in each country are different and may change from time to time. We cannot guarantee that approvals, which our operators
have obtained, will remain sufficient in the view of regulatory authorities. In addition, we cannot assure you that third party operators of our systems and products will obtain
licenses and approvals in a timely manner in all jurisdictions in which we wish to sell our systems or that restrictions on the use of our systems will not be unduly burdensome.
The adoption of industry standards that do not incorporate the technology we use may decrease or eliminate the demand for our services or products and could harm our
results of operations.
There are no established industry standards in all of the businesses in which we sell our products. For example, vehicle location devices may operate by employing various
technologies, including network triangulation, GPS, satellite-based or network-based cellular or direction-finding homing systems. The development of industry standards that
do not incorporate the technology we use may decrease or eliminate the demand for our services or products and we may not be able to develop new services and products that
are in compliance with such new industry standards on a cost-effective basis. If industry standards develop and such standards do not incorporate our products and we are
unable to effectively adapt to such new standards, such development could harm our results of operations.
Our financial statements may not reflect certain payments we may be required to make to employees.
In certain countries, we are not required to reflect future severance fees in our liabilities. In countries such as Argentina, Brazil and Mexico, companies do not generally
dedicate amounts to potential future severance payments. Nonetheless, in such cases, companies must pay a severance payment in cash upon termination of employment. We
also do not have a provision in our financial statements for potential future severance payments in the above countries and instead such expenses are recorded when such
payments are actually made upon termination of employment. As a result, our financial statements may not adequately reflect possible future severance payments.
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Some of our employees in our subsidiaries are members of labor unions and a dispute between us and any such labor union could result in a labor strike that could delay
or preclude altogether our ability to generate revenues in the markets where such employees are located.
Some of our employees in our subsidiaries are members of labor unions. If a labor dispute were to develop between us and our unionized employees, such employees could go
on strike and we could suffer work stoppage for a significant period of time. A labor dispute can be difficult to resolve and may require us to seek arbitration for resolution,
which can be time-consuming, distracting to management, expensive and difficult to predict. The occurrence of a labor dispute with our unionized employees could delay or
preclude altogether our ability to generate revenues in the markets where such employees are located. In addition, labor disputes with unionized employees may involve
substantial demands on behalf of the unionized employees, including substantial wage increases, which may not be correlated with our performance, thus impairing our
financial results. Furthermore, labor laws applicable to our subsidiaries may vary and there is no assurance that any labor disputes will be resolved in our favor.
Under the current laws in jurisdictions in which we operate, we may not be able to enforce non-compete covenants and therefore may be unable to prevent our competitors
from benefiting from the expertise of some of our former employees.
We currently have non-competition agreements with many of our employees. However, due to the difficulty of enforcing non-competition agreements globally, not all of our
employees in foreign jurisdictions have such agreements. These agreements generally prohibit our employees, if they cease working for the Company, from directly competing
with us or working for our competitors for a certain period of time following termination of their employment agreements. Israeli courts have required employers seeking to
enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material
interests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or its intellectual property. If we
cannot demonstrate that harm would be caused to us, we may be unable to prevent our competitors from benefiting from the expertise of our former employees.
In January 2023, the U.S. Federal Trade Commission (“FTC”) announced a Notice of Proposed Rulemaking for a broad ban on non-compete clauses between employers and
workers and is currently seeking public comment on the proposed rule. Specifically, the proposed rule would make it illegal for an employer to, among other things, enter into
or attempt to enter into a non-compete with a worker; maintain a non-compete with a worker; or represent to a worker, under certain circumstances, that the worker is subject to
a non-compete. While we cannot predict whether or when the FTC’s proposed ban on non-compete arrangements will be implemented, or the impact that such ban will have on
our operations if implemented, there is now increased uncertainty regarding the long-term enforceability of our non-competition agreements with employees in the United
States. If the enforceability of non-competition agreements is affected by future lawmaking or regulatory action, it may impede our ability to ensure that former employees,
who received training and experience through their employment with us, refrain from using their knowledge of our business and operations to compete with us.
Manufacturing of many of our products is highly complex, and an interruption by suppliers, subcontractors or vendors could adversely affect our business, financial
condition or results of operations.
Many of our products are the result of complex manufacturing processes and are sometimes dependent on components with a limited source of supply. As a result, we can
provide no assurances that supply sources will not be interrupted from time to time. Furthermore, our subcontractors or vendors may fail to obtain supply components and fail
to deliver our products. As a result, a failure to deliver by our subcontractors or vendors can result in decreased revenues. Such interruption or delay of our suppliers to deliver
components or interruption or delay of our vendors or subcontractors to deliver our products could affect our business, financial condition or results of operations.
If we lose our executive officers, or are unable to recruit additional personnel, our ability to manage our business could be materially and adversely affected.
We are dependent on the continued employment and performance of our executive officers. We currently do not have employment agreements with any of our executive
officers. Like other companies in our industry, we face intense competition for qualified personnel. Many of our competitors have greater resources than we have to hire
qualified personnel. Accordingly, if we are not successful in attracting or retaining qualified personnel in the future, our ability to manage our business could be materially and
adversely affected.
We provide financing to our customers for the purchase of our products, which may increase our credit risks in the event of a deterioration in a customer’s financial
condition or in global credit conditions.
We sell our products to a wide range of customers in the commercial and governmental sectors. We provide financing to customers for a portion of such sales which could be in
the form of notes or leases receivable over two to five years. Although these customers are extended credit terms which are approved by us internally, our business could be
materially and adversely affected in the event of a deterioration of the financial condition of one or more of our customers that results in such customers’ inability to repay us.
This risk may increase during a general economic downturn affecting a large number of our customers or a widespread deterioration in global credit conditions, and in the event
our customers do not adequately manage their businesses or properly disclose their financial condition.
Our cash and cash equivalents could be adversely affected by a downturn in the financial and credit markets.
We maintain our cash and cash equivalents with major financial institutions; however, our cash and cash equivalent balances with these institutions exceed the Federal Deposit
Insurance Corporation insurance limits. While we monitor on a systematic basis the cash and cash equivalent balances in our operating accounts and adjust the balances as
appropriate, these balances could be impacted if one or more of the financial institutions with which we deposit our cash and cash equivalents fails or is subject to other adverse
conditions in the financial or credit markets. To date, we have experienced no loss of principal or lack of access to our invested cash or cash equivalents; however, we can
provide no assurance that access to our invested cash and cash equivalents will not be affected if the financial institutions in which we hold our cash and cash equivalents fail or
the financial and credit markets deteriorate.
27
Goodwill impairment or intangible impairment charges may affect our results of operations in the future.
We test goodwill for impairment on an annual basis and more often if events occur or circumstances change that would likely reduce the fair value of a reporting unit to an
amount below its carrying value. We also test for other possible intangible impairments if events occur or circumstances change that would indicate that the carrying amount of
such intangible may not be recoverable. Any resulting impairment loss would be a non-cash charge and may have a material adverse impact on our results of operations in any
future period in which we record a charge.
Long-lived assets with determinable useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Such charges could have a material adverse effect on our results of operations in the period in which they are recorded.
We have operations located in Israel, and therefore our results may be adversely affected by political, military and economic conditions in Israel.
Our subsidiaries Powerfleet Israel and Pointer operate in Israel, and therefore our business and operations may be directly influenced by the political, economic and military
conditions affecting Israel at any given time. A change in the security and political situation in Israel could have a material adverse effect on our business, operating results and
financial condition. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors, including
Hezbollah in Lebanon and Hamas in the Gaza Strip. In the last several years, these conflicts have involved missile strikes against civilian targets in various parts of Israel,
particularly in southern Israel where Pointer’s main offices and manufacturing facility are located and have negatively affected business conditions in Israel. Most recently, on
October 7, 2023, Hamas terrorists invaded southern Israel and launched missile strikes in a widespread terrorist attack on Israel. On the same day, the Israeli government
declared that the country was at war and the Israeli military began to call up reservists for active duty, including a number of our Israeli employees, including members of the
management team in Israel. As of the date of this report, the Israel-Hamas war remains ongoing and the conflict has had an adverse impact on, and may continue to adversely
impact, our supply chain, our ability to manufacture and deliver products in Israel to customers and the stability of our Israeli workforce. In addition, political uprisings and
conflicts in various countries in the Middle East, including Syria and Iraq, are affecting the political stability of those countries. It is not clear how this instability will develop
and how it will affect the political and security situation in the Middle East.
Furthermore, several countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on
doing business with Israel and Israeli companies if hostilities or political instability in the region continues or intensifies. These restrictions may limit materially our ability to
obtain raw materials from these countries or sell our products to companies in these countries. Any hostilities involving Israel or the interruption or curtailment of trade between
Israel and its present trading partners could have a material adverse effect on our business, operating results and financial condition.
Any downturn in the Israeli economy may also have a significant impact on our business. Israel’s economy has been subject to numerous destabilizing factors, including a
period of rampant inflation in the early to mid-1980’s, low foreign exchange reserves, fluctuations in world commodity prices, military conflicts and civil unrest. The revenues
of certain of our products and services may be adversely affected if fewer vehicles are used as a result of an economic downturn in Israel, an increase in use of mass
transportation, an increase in vehicle related taxes, an increase in the imputed value of vehicles provided as a part of employee compensation or other macroeconomic changes
affecting the use of vehicles. In addition, our SVR services significantly depend on Israeli insurance companies mandating subscription to a service such as the Company’s. If
Israeli insurance companies cease to require such subscriptions, our business could be significantly adversely affected. We also rely on the renewal and retention of several
operating licenses issued by certain Israeli regulatory authorities. Should such authorities fail to renew any of these licenses, suspend existing licenses, or require additional
licenses, we may be forced to suspend or cease certain services we provide.
Many of our employees in Israel are required to perform military reserve duty.
All non-exempt male adult permanent residents of Israel under the age of 40, including some of Pointer’s employees, are obligated to perform military reserve duty and may be
called to active duty under emergency circumstances. In the past there have been significant call ups of military reservists, and it is possible that there will be additional call-ups
in the future. While Pointer has operated effectively despite these conditions in the past, we cannot assess the impact these conditions may have on it in the future, particularly
if emergency circumstances occur. Our operations could be disrupted by the absence for a significant period of one or more of our key employees or a significant number of our
other employees due to military service. Any disruption in our operations would harm our business.
28
Economic uncertainty and volatility in Mexico may adversely affect our business.
Our subsidiaries Pointer Recuperacion Mexico S.A., de C.V. and Pointer Logistica y Monitoreo, S.A. de C.V. operate in Mexico, which has gradually experienced, since 2013,
substantial decrease in the value of the Mexican peso against the U.S. dollar, together with growing inflation rates. The devaluation of the Mexican peso and rise in inflation
rate has triggered demonstrations and heightened political tension. Severe devaluation may lead to future governmental actions, including actions to adjust the value of the
Mexican peso, policies which may trigger further increases in inflation. There can be no assurance that inflation will not affect our business in Mexico in the future. In addition,
any Mexican government’s actions to maintain economic stability, as well as public speculation about possible future actions, may contribute significantly to economic
uncertainty in Mexico. Economic instability and or government imposition of exchange controls may also result in the disruption of the international foreign exchange markets
and may limit our ability to transfer or convert pesos into U.S. dollars and other currencies. Such policies could destabilize the country and adversely and materially affect the
economy, and thereby our business. Additionally, due to agreements with the Confederation of Workers of Mexico in Mexico and the country’s high inflation rate, we may be
required to increase employee salaries at a rate which could adversely affect our business.
Fluctuations in the value of the South African Rand may have a significant impact on our reported revenue and results of operations, which may make it difficult to
evaluate our business performance between reporting periods.
The majority of subscription agreements and operating expenses of our subsidiary, MiX Telematics, are incurred outside the United States and denominated in foreign
currencies and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the South African Rand. Currency fluctuations, particularly
those in respect of the South African Rand, may positively or negatively impact our reported income and expenses due to the effects of translating the functional currency of our
foreign subsidiaries into our reporting currency of U.S. Dollars.
If we do not achieve applicable Broad-Based Black Economic Empowerment objectives in our South African businesses, we risk not being able to renew certain of our
existing contracts which service South African government and quasi-governmental customers, as well as not being awarded future corporate and governmental contracts,
each of which would result in the loss of revenue.
The South African government established a legislative framework for the promotion of Broad-Based Black Economic Empowerment (“B-BBEE”). Achievement of B-BBEE
objectives is measured by a scorecard which establishes a weighting for the various components of B-BBEE which relates to:
● Ownership – measuring the share of Black ownership and corresponding rights in the business, including voting rights among others.
● Management Control – reflecting the percentage of Black people in managerial positions ranging from junior management upwards.
● Skills Development – measuring the amount of money that was spent on the training and development of Black people including amongst others short courses,
bursaries and learnerships.
● Enterprise and Supplier Development (including Preferential Procurement) – with enterprise development measuring contributions to, and the development of small
Black-owned businesses with the objective of enabling them to supply goods and services to the company in the future; with supplier development measuring
contributions to, and the development of Black-owned suppliers to help grow their businesses; and with preferential procurement measuring the extent to which goods
and services are procured from suppliers that are empowered and have a good B-BBEE rating; and
● Socio-Economic Development – assessing the initiatives that the company supports often to the benefit of groups of individuals and communities with the objective of
promoting income-generating activities and sustainable access to the economy for these beneficiaries.
The B-BBEE Codes have a continuous review process and are updated from time to time. Various amendments and clarifications with more onerous compliance requirements
have been made over the years.
It is important for us to make a meaningful contribution to the country, and we view the applicable B-BBEE objectives as an opportunity for us to ensure a brighter future for
all, moreover in the context of the National Development Plan 2030. In addition, B-BBEE objectives are pursued, by and large, by requiring parties who contract with
corporate, governmental and state-owned enterprises in South Africa to achieve B-BBEE compliance through satisfaction of the applicable scorecard. Parties improve their B-
BBEE contributor level when contracting with businesses that have earned good B-BBEE contributor levels in relation to their scorecards.
29
Our subsidiary, MiX Telematics Enterprise SA (PTY) Ltd. (“MiX Enterprise”), engages with government and state-owned enterprises in tendering for business and is therefore
required to maintain at least a certain B-BBEE contributor level to continue to provide the service. Currently, certain material end-customers require MiX Enterprise to maintain
at least a B-BBEE contributor between levels 1 and 2 as measured under the new B-BBEE Codes.
Additionally, the Employment Equity Act of 1998 (the “Employment Equity Act”) promotes equality in the workplace and ensures that employees are treated fairly and have
equal opportunities within the workplace. In April 2023, the Employment Equity Amendment Bill (the “Amendment Bill”) was signed into law. The main objectives of the
Amendment Bill are to enable the Employment and Labour Minister to impose sector-specific Employment Equity (“EE”) targets and compliance criteria to issue EE
Compliance Certificates in terms of Section 53 of the Employment Equity Act. This has bestowed the South African government with the right to set specific equity targets by
sector and region. Companies that want to do business with the South African government will be required to submit a certificate from the Department of Employment and
Labour confirming that they comply with the Employment Equity Act and its objectives. Accordingly, MiX Telematics will not set its own EE targets, but certain targets will be
imposed by the South African government.
Failing to achieve applicable B-BBEE and EE objectives could jeopardize our ability to maintain existing business or to secure future business from corporate, governmental or
state-owned enterprises that could materially and adversely affect our business, financial condition and results of operations.
Socio-economic inequality in South Africa or regionally may subject us to political and economic risks, which may affect the ownership or operation of our business.
We own significant operations in South Africa. As a result, we are subject to political and economic risks relating to South Africa. South Africa was transformed from a racially
based government into a democracy in 1994, with successful rounds of democratic elections held under a modern constitution during 1994, 1999, 2004, 2009, 2014 and most
recently, in May 2019. The next national elections are scheduled to be held in 2024. We fully support government policies aimed at redressing the disadvantages suffered by the
majority of citizens under the previous non-democratic dispensation and recognize that in order to implement these policies, our operations and profits may be impacted.
However, South Africa faces many challenges in overcoming substantial racial differences in levels of economic and social development among its people. While South Africa
features highly developed and sophisticated business sectors and financial and legal infrastructure at the core of its economy, large parts of the country’s black population,
particularly in rural areas, do not have access to adequate education, health care, housing and other services, including water and electricity. In addition, South Africa also has a
higher level of unemployment than the United States.
The ruling party which has controlled the South African government since democracy has committed itself to creating a stable, democratic, free market economy, which it has
largely achieved. It remains difficult however, to predict the future political, social and economic direction of South Africa or the manner in which any future government will
attempt to address the country’s inequalities. It is also difficult to predict the impact that addressing these inequalities will have on our business. Furthermore, there has been
regional, political and economic instability in countries neighboring South Africa, which could materially and adversely affect our business, results of operations and financial
condition.
Although political conditions in South Africa are generally stable, changes may occur in the composition of its ruling party or in its political, fiscal and legal systems which
might affect the ownership or operation of our business, which may, in turn, materially and adversely affect our business, financial condition and results of operations. These
risks may include changes in legislation, arbitrary interference with private ownership of contract rights, and changes to exchange controls, taxation and other laws or policies
affecting foreign trade or investment and could materially and adversely affect our business, financial condition and results of operations. Any changes in investment ratings,
regulations and policies or a shift in political attitudes both within and towards South Africa are beyond our control and could materially and adversely affect our business,
financial condition and results of operations.
30
Risks Related to our Securities
The concentration of common stock ownership among our executive officers and directors could limit the ability of other stockholders of the Company to influence the
outcome of corporate transactions or other matters submitted for stockholder approval.
As of May 1, 2024, our executive officers and directors beneficially owned, in the aggregate, approximately 6.47% of our outstanding common stock, not including
approximately 1,392,309 shares of common stock that our executive officers and directors may acquire upon the exercise of outstanding options and stock appreciation rights,
or if they otherwise acquire additional shares of common stock in the future. As a result, our officers and directors may have the ability to influence the outcome of all corporate
actions requiring stockholder approval, irrespective of how our other stockholders may vote, including the following actions:
● the election of directors;
● adoption of stock option or other equity incentive compensation plans;
● the amendment of our organizational documents; and
● the approval of certain mergers and other significant corporate transactions, including a sale of substantially all of our assets.
Future sales of our common stock, including sales of our common stock acquired upon the exercise of outstanding options, may cause the market price of our common
stock to decline.
The market price of our common stock could decline as a result of sales by our existing stockholders of shares of common stock in the market, or sales of our common stock
acquired upon the exercise of outstanding options, or the perception that these sales could occur. These sales also may make it more difficult for us to sell equity securities at a
time and price that we deem appropriate.
We have 107,349,987 shares of common stock outstanding as of May 1, 2024, of which 100,400,538 shares are freely transferable without restriction, and 6,949,449 shares are
held by our officers and directors and, as such, are subject to the applicable volume, manner of sale, holding period and other limitations of Rule 144 under the Securities Act.
In addition, as of December 31, 2023, time-based options and market-based stock options subject to performance-based vesting conditions, to purchase 2,192,000 and
5,445,000 shares of our common stock, respectively, were issued and outstanding, of which 1,189,000 and 0, respectively, were vested. The weighted-average exercise price of
the vested non-market-based stock options is $5.54. We also may issue additional shares of stock in connection with our business, including in connection with acquisitions,
and may grant additional stock options to our employees, officers, directors and consultants under our stock option plans or warrants to third parties. If a significant portion of
these shares of common stock were sold in the public market, the market value of our common stock could be adversely affected.
Our Amended and Restated Certificate of Incorporation, as amended, provides that the Court of Chancery of the State of Delaware will be the exclusive forum for certain
legal actions between us and our stockholders, which could limit stockholders’ ability to obtain a judicial forum viewed by the stockholders as more favorable for disputes
with us or our directors, officers or employees, and the enforceability of the exclusive forum provision may be subject to uncertainty.
Article SIXTEENTH of our Amended and Restated Certificate of Incorporation (as amended, the “Charter”) provides, subject to certain exceptions enumerated in Article
SIXTEENTH, that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum
for any stockholder to bring (i) any derivative action brought on behalf of the Company, (ii) any action asserting a claim of breach of fiduciary duty owed by any current or
former director, officer or other employee or stockholder of the Company, (iii) any action asserting a claim arising pursuant to the General Corporation Law of Delaware (the
“DGCL”) or the Charter or our Amended and Restated Bylaws or as to which the DGCL confers jurisdiction on such court, or (iv) any action asserting a claim governed by the
internal affairs doctrine, except for, in each of the aforementioned actions, among other things, any claims which are vested in the exclusive jurisdiction of a court or forum
other than the Court of Chancery of the State of Delaware or for which the Court of Chancery of the State of Delaware does not have subject matter jurisdiction. Accordingly,
the exclusive forum provision will not apply to claims arising under the Securities Act the Exchange Act or other federal securities laws for which there is exclusive federal or
concurrent federal and state jurisdiction. Article SIXTEENTH provides that any person or entity who acquires an interest in our capital stock will be deemed to have notice of
and consented to the provisions of Article SIXTEENTH. Stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and
regulations thereunder. Although we believe this exclusive forum provision benefits us by providing increased consistency in the application of Delaware law in the types of
lawsuits to which it applies, this exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or
any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Further, in the event a court finds the exclusive
forum provision contained in the Charter to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other
jurisdictions, which could harm our business, operating results and financial condition.
31
Provisions of Delaware law or the Charter could delay or prevent an acquisition of the Company, even if the acquisition would be beneficial to our stockholders, and could
make it more difficult for stockholders to change our management.
The Charter contains provisions that may discourage an unsolicited takeover proposal that stockholders may consider to be in their best interests. We are also subject to anti-
takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and
may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include: the absence of
cumulative voting in the election of directors; the ability of our board of directors to issue up to 50,000 shares of currently undesignated and unissued preferred stock without
prior stockholder approval; advance notice requirements for stockholder proposals or nominations of directors; limitations on the ability of stockholders to call special meetings
or act by written consent; the requirement that certain amendments to the Charter be approved by 75% of the voting power of the outstanding shares of our capital stock; and
the ability of our board of directors to amend our bylaws without stockholder approval.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Cybersecurity Governance
Our board of directors has the ultimate oversight responsibility for the risk management process and regularly reviews issues that present particular risk to us, including those
involving cybersecurity. Our board is responsible for ensuring that management has processes in place designed to identify and assess cybersecurity risks to which the
Company is exposed and implement processes and programs designed to manage cybersecurity risks and mitigate and remediate cybersecurity threats and incidents.
Our management is responsible for identifying, considering and assessing material cybersecurity risks on an ongoing basis, establishing processes to ensure that such potential
cybersecurity risk exposures are monitored, putting in place appropriate mitigation measures and maintaining cybersecurity programs. In managing cybersecurity risks, we
adhere to a structured framework that outlines the roles and responsibilities of management positions and committees.
Our Director of Security and Network Management (“SNM”) leads our cybersecurity initiative, holding various information technology (“IT”) and security certificates and
possessing over 20 years of experience in risk assessments, regulatory compliance (across various frameworks such as ISO 27001, NIST, and GDPR), threat intelligence
gathering, and orchestrating coordinated incident response efforts. Our Director of SNM ensures that our cybersecurity team is equipped with up-to-date threat intelligence and
uses industry leading tools for threat monitoring and incident response.
The cybersecurity team, led by our Director of SNM, is a collective of highly qualified individuals with diverse backgrounds in IT, security, cyber risk management, and digital
forensics, and holding various professional certifications (such as CISA, GRCP, IPMP, IDPP, CEH, ISO27001). Under the Director of SNM’s leadership, our cybersecurity
team continuously monitors for threats and implements necessary security controls, conducting regular reviews and updates to the cybersecurity strategy. Any potential or
actual cybersecurity incidents are assessed for their financial impact by our Director of SNM and reported to our Chief Financial Officer for a comprehensive risk analysis.
Additionally, we have an Information Security Steering Committee (the “ISS Committee”), which plays a pivotal role in the governance of our cybersecurity posture. Members
of the ISS Committee are selected for their domain-specific expertise and strategic vision, with representation from our IT, security, finance, legal, operations, and compliance
sectors. The ISS Committee is an assembly of cross-functional senior leaders from various groups within our company. Led by the Director of SNM, the ISS Committee’s
function extends to the formulation of cybersecurity policies, setting risk management priorities and driving the adoption of security best practices across our company. By
leveraging the collective expertise of the ISS Committee, we believe we ensure cybersecurity considerations are integrated into our company’s organizational strategy and
decision-making processes.
Our Director of SNM and Chief Financial Officer report material cybersecurity risks to our board of directors based on their and the ISS Committee’s assessment of risk.
Cybersecurity Risk Management and Strategy
Our processes for assessing, identifying, and managing cybersecurity threats are designed to be thorough and transparent, ensuring that investors have a clear understanding of
our commitment to cybersecurity.
Our cybersecurity team collaborates with leaders from each department to ensure cybersecurity risks are considered alongside operational, financial, and strategic risks. We
conduct regular cybersecurity risk assessments as part of our enterprise risk management program, ensuring that the cybersecurity risks are tracked, rated, and managed with
the same rigor as all other company risks.
We regularly engage with external assessors, consultants, and auditors to ensure our cybersecurity practices are up to date and aligned with industry standards. These third
parties conduct independent audits of our cybersecurity measures and validate the effectiveness of our risk management processes. We also engage specialized cybersecurity
firms to perform penetration testing and vulnerability assessments.
We have processes in place to manage and mitigate risks associated with the use of third-party service providers., including, but not limited to conducting due diligence before
onboarding new service providers and continuously monitoring their compliance with our security standards. We require service providers to undergo regular security
assessments, and we ensure that such providers have robust incident response plans in place during our engagement.
To date, no risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect
our business, our business strategy, our results of operations or our financial condition.
For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do so, see our risk factors under “Item 1A. Risk Factors”.
Item 2. Properties.
Our corporate headquarters are located in Woodcliff Lake, New Jersey. We also have domestic offices in Tampa, Florida and Frisco, Texas. Our New Jersey offices measure
approximately 13,899 square feet and are leased space. Our Florida offices consist of approximately 25,000 square feet of leased administrative and warehouse space, and our
Texas offices consist of approximately 5,514 square feet of leased administrative space.
We also have international offices located in Rosh Ha’ayin, Israel, Buenos Aires, Argentina, São Paulo, Brazil, Dusseldorf, Germany, Mexico City, Mexico, Cape Town,
Midrand, and Durban, South Africa and Oxford, United Kingdom. Our principal offices in Israel consist of approximately 27,000 square feet of leased office space. We also
lease a call center and warehouse space and additional smaller facilities and antenna sites in various locations in Israel.
Additionally, our subsidiary MiX Telematics leases domestic offices in Boca Raton, Florida and international offices in South Africa, the United Kingdom, Uganda, Brazil,
Australia, Romania and the United Arab Emirates.
We believe that our existing facilities are adequate for our existing needs.
Item 3. Legal Proceedings.
The information contained in Note 19 to our consolidated financial statements included in this Form 10-K is incorporated herein by reference.
Item 4. Mine Safety Disclosures.
Not applicable.
32
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
PART II
Our common stock is traded on The Nasdaq Global Market and the Tel Aviv Stock Exchange, in each case under the symbol “PWFL,” and the Johannesburg Stock Exchange
under the symbol “PWR.”
Holders
As of April 29, 2024, there were 65 holders of record of our common stock.
Dividends
We have never paid a cash dividend on our common stock and do not expect to pay a cash dividend in the near future. We currently intend to retain future earnings, if any, to
finance our operations and expand our business.
Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities.
The following table provides information regarding our share repurchase activity for each month of the quarterly period ended December 31, 2023:
Period
October 1, 2023 - October 31, 2023
November 1, 2023 - November 30, 2023
December 1, 2023 - December 31, 2023
Total
Total Number
of Shares
Purchased
Average Price
Paid per Share
Total Number
of Shares
Purchased as
Part of Publicly
Announced Plans
or Programs
Approximate
Dollar Value of
Shares that May Yet
Be Purchased Under
the Plans or
Programs
-
2,000
-
2,000
$
$
$
$
-
1.80(1)
-
1.80
$
$
$
$
-
-
-
-
$
$
$
$
-
-
-
-
(1) Represents shares of common stock withheld to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock.
Item 6. Reserved.
33
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion is intended to assist you in understanding our financial condition and results of operations and should be read in conjunction with the financial
statements and related notes included elsewhere in this Form 10-K. Many of the amounts and percentages in this section have been rounded for convenience of presentation,
but actual recorded amounts have been used in computations. Accordingly, some information may appear not to compute accurately.
Restatement of Previously Issued Consolidated Financial Statements
As described in the Explanatory Note included in this Form 10-K, we have restated our previously issued consolidated financial statements for the Non-Reliance Periods. As a
result, we have also restated certain previously reported financial information for the fiscal years ended December 31, 2022 and 2021 in this “Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations,” including but not limited to financial information under the sections entitled “Results of Operations” and
“Liquidity and Capital Resources—Capital Requirements” to conform the discussion with the restated information. See Note 2 to our consolidated financial statements,
included Item 8 of this Form 10-K, for additional information on the restatement of, and the related effects on, our consolidated financial statements for the Non-Reliance
Periods.
Overview
Powerfleet is a global leader of IOT solutions providing valuable business intelligence for managing high-value enterprise assets that improve operational efficiencies.
We are headquartered in Woodcliff Lake, New Jersey, with offices located around the globe.
On April 2, 2024, we consummated the MiX Combination, pursuant to which MiX Telematics became our indirect, wholly owned subsidiary.
Our Powerfleet for Warehouse solutions are designed to provide on-premise or in-facility asset and operator management, monitoring, and visibility for warehouse trucks such
as forklifts, man-lifts, tuggers and ground support equipment at airports. These solutions utilize a variety of communications capabilities such as Bluetooth®, WiFi, and
proprietary radio frequency.
Our Powerfleet for Logistics solutions are designed to provide bumper-to-bumper asset management, monitoring, and visibility for over-the-road based assets such as heavy
trucks, dry-van trailers, refrigerated trailers and shipping containers and their associated cargo. These systems provide mobile-asset tracking and condition-monitoring solutions
to meet the transportation market’s desire for greater visibility, safety, security, and productivity throughout global supply chains.
Our Powerfleet for Vehicles solutions are designed both to enhance the vehicle fleet management process, whether it’s a rental car, a private fleet, or automotive OEM partners.
We achieve this by providing critical information that can be used to increase revenues, reduce costs and improve customer service.
Our patented technologies address the needs of organizations to monitor and analyze their assets to improve safety, increase efficiency and productivity, reduce costs, and
improve profitability. Our offerings are sold under the global brands Powerfleet, Pointer and Cellocator.
We deliver advanced mobility solutions that connect assets to increase visibility operational efficiency and profitability by leveraging our Unity platform product strategy.
Across our vertical markets we differentiate ourselves by being OEM agnostic and helping mixed fleets view and manage their assets similarly. All of our solutions are paired
with SaaS analytics platforms to provide an even deeper layer of insights. These insights include a full set of operational KPIs to drive operational and strategic decisions.
These KPIs leverage industry comparisons to show how a company is performing versus their peers. The more data the system collects, the more accurate a client’s
understanding becomes.
The analytics platform, which is integrated into our customers’ management systems, is designed to provide a single, integrated view of asset and operator activity across
multiple locations that provides enterprise-wide benchmarks and peer-industry comparisons. We look for analytics, as well as the data contained therein, to differentiate us from
our competitors, make a growing contribution to revenue, add value to our solutions, and help keep us at the forefront of the wireless asset management markets we serve.
We sell our wireless mobility solutions to both corporate-level executives, division heads and site-level management within the enterprise. We also utilize channel partners such
as independent dealers and OEMs who may opt for us to white label our product. Typically, our initial system deployment serves as a basis for potential expansion across the
customer’s organization. We work closely with customers to help maximize the utilization and benefits of our system and demonstrate the value of enterprise-wide
deployments. Post-implementation, we consult with our customers to further extend and customize the benefits to the enterprise by delivering enhanced analytics capabilities.
We market and sell our solutions to a wide range of customers in the commercial and government sectors. Our customers operate in diverse markets, such as automotive
manufacturing, heavy industry, retail food and grocery distribution, logistics, wholesale distribution, transportation, aviation, manufacturing, aerospace and defense, homeland
security and vehicle rental.
We incurred net losses of approximately $22.1 million (as restated), $16.9 million (as restated), and $17.3 million for the years ended December 31, 2021, 2022 and 2023,
respectively, and have incurred additional net losses since inception. As of December 31, 2023, we had cash (including restricted cash) and cash equivalents of $19.3 million,
working capital of $23.5 million, and an accumulated deficit of $146.3 million. Our primary sources of cash are cash flows from sales of products and services, our holdings of
cash, cash equivalents and investments from the sale of our capital stock and borrowings under our credit facilities. To date, we have not generated sufficient cash flow solely
from operating activities to fund our operations.
Critical Accounting Policies and Estimates
We have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States in the preparation of our financial
statements. Our significant accounting policies are described in Note 3 to our consolidated financial statements included in this Form 10-K. Certain accounting policies involve
significant judgments and assumptions by our management that can have a material impact on the carrying value of certain assets and liabilities. We consider such accounting
policies to be our critical accounting policies. The judgments and assumptions used by our management in these critical accounting policies are based on historical experience
and other factors that our management believes to be reasonable under the circumstances. Because of the nature of these judgments and assumptions, actual results could differ
significantly from these judgments and estimates, which could have a material impact on the carrying values of our assets and liabilities and our results of operations. Our
critical accounting policies are described below.
34
Revenue Recognition
We and our subsidiaries generate revenue from sales of systems and products and from customer SaaS and hosting infrastructure fees. Revenue is measured as the amount of
consideration we expect to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes we collect concurrently with revenue-producing
activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The expected costs associated with our base
warranties continue to be recognized as an expense when the products are sold.
Revenue is recognized when performance obligations under the terms of a contract with our customer are satisfied. Product sales are recognized at a point in time when title
transfers, when the products are shipped, or when control of the system is transferred to the customer, which usually is upon delivery of the system and when contractual
performance obligations have been satisfied. For products which are not distinct to the customer separate from the SaaS services provided, we consider both hardware and SaaS
services a bundled performance obligation. Under the applicable accounting guidance, all of our billings for future services are deferred and classified as a current and long-
term liability. The deferred revenue is recognized over the service contract life, ranging from one to five years, beginning at the time that a customer acknowledges acceptance
of the equipment and service. Payment terms are generally 30 days after invoice date.
We recognize revenue for remotely hosted SaaS agreements and post-contract maintenance and support agreements beyond our standard warranties over the life of the contract.
Revenue is recognized ratably over the service periods and the cost of providing these services is expensed as incurred. Amounts invoiced to customers which are not
recognized as revenue are classified as deferred revenue and classified as short-term or long-term based upon the terms of future services to be delivered. Deferred revenue also
includes prepayment of extended maintenance, hosting and support contracts.
We earn other service revenues from installation services, training and technical support services which are short-term in nature and revenue for these services is recognized at
the time of performance when the service is provided.
We also derive revenue from leasing arrangements. Such arrangements provide for monthly payments covering product or system sale, maintenance, support and interest. These
arrangements meet the criteria to be accounted for as operating or sales-type leases. Accordingly, for sales-type leases an asset is established for the “sales-type lease
receivable” at the present value of the expected lease payments and revenue is deferred and recognized over the service contract, as described above. Maintenance revenues and
interest income are recognized monthly over the lease term.
Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on our relative
standalone selling price (“SSP”). Judgment is required to determine the SSP for each distinct performance obligation. We generally determine standalone selling prices based on
observable prices charged to customers. Significant pricing practices taken into consideration include our discounting practices, the size and volume of our transactions, the
customer demographic, price lists, our go-to-market strategy and historical and current sales and contract prices. As our go-to-market strategies evolve, we may modify our
pricing practices in the future, which could result in changes to SSP.
In certain cases, we are able to establish SSP based on observable prices of products or services sold separately in comparable circumstances to similar customers. We use a
single amount to estimate SSP when it has observable prices. If SSP is not directly observable, for example when pricing is highly variable, we use a range of SSP. We
determine the SSP range using information that may include pricing practices or other observable inputs. We typically have more than one SSP for individual products and
services due to the stratification of those products and services by customer size.
We recognize an asset for the incremental costs of obtaining the contract arising from the sales commissions to employees because we expect to recover those costs through
future fees from the customers. We amortize the asset over one to five years because the asset relates to the services transferred to the customer during the contract term of one
to five years.
Goodwill and Intangibles
Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill and intangible assets deemed to have indefinite lives
are not amortized and are tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. Intangible assets other than goodwill are amortized over their useful lives unless the lives are determined to be indefinite. Intangible assets are carried
at cost, less accumulated amortization. Intangible assets consist of trademarks and trade names, patents, customer relationships and other intangible assets. Goodwill is tested at
the reporting unit level, which is defined as an operating segment or one level below the operating segment. We operate in one reportable segment which is our only reporting
unit. We test our goodwill for impairment annually, which is the first day of our fourth quarter or when an indicator of impairment exists, by comparing the fair value of the
reporting unit to its carrying value.
We test for goodwill impairment at the reporting unit level on October 1 of each year and between annual tests if a triggering event indicates the possibility of an impairment.
We performed a quantitative assessment whereby the fair value of the reporting unit is calculated using a market approach and a discounted cash flow method, as a form of the
income approach. The market approach includes the use of comparative revenue multiples to complement discounted cash flow results. The discounted cash flow method is
based on the present value of the projected cash flows and a terminal value. The terminal value represents the expected normalized future cash flows of the reporting unit
beyond the cash flows from the discrete projection period. The fair value of the reporting unit is calculated based on the sum of the present value of the cash flows from the
discrete period and the present value of the terminal value. The discount rate represented our estimate of the WACC, or expected return, that a marketplace participant would
have required as of the valuation date. The application of our goodwill impairment test required key assumptions underlying our valuation model.
The discounted cash flow analysis factored in assumptions on discount rates and terminal growth rates to reflect risk profiles, as well as revenue and cost growth relative to
history and market trends and expectations. The market multiples approach incorporated judgment involved in the selection of comparable public company multiples and
benchmarks. The selection of companies and multiples was influenced by differences in growth and profitability, and volatility in market prices of peer companies. These
valuation inputs are inherently judgmental, and an adverse change in one or a combination of these inputs could trigger a goodwill impairment loss in the future. In connection
with our goodwill impairment testing as of October 1, 2023, the estimated fair value exceeded its carrying value by approximately 6%.
For the years ended December 31, 2021, 2022 and 2023, we did not incur an impairment charge.
Business Combinations
In accordance with ASC 805, Business Combinations (ASC 805), we recognize the tangible and intangible assets acquired and liabilities assumed based on their estimated fair
values. Determining these fair values requires management to make significant estimates and assumptions, especially with respect to intangible assets.
We recognize identifiable assets acquired and liabilities assumed at their acquisition date fair value. During the measurement period, which may be up to one year from the
acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill or bargain purchase to the extent we identify
adjustments to the preliminary fair values. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, any
subsequent adjustments are recorded to the consolidated statements of operations.
Income Taxes
We use the asset and liability method of accounting for deferred income taxes. Deferred income taxes are measured by applying enacted statutory rates to net operating loss
carryforwards and to the differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets are reduced, if necessary, by a valuation
allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized.
We recognize uncertainty in income taxes in the financial statements using a recognition threshold and measurement attribute of a tax position taken or expected to be taken in a
tax return. We apply the “more-likely-than-not” recognition threshold to all tax positions. We have opted to classify interest and penalties that would accrue according to the
provisions of relevant tax law as selling, general, and administrative expenses, in the consolidated statement of operations. For the years ended December 31, 2021, 2022 and
2023, interest and penalties were immaterial.
35
Results of Operations
The following table sets forth certain items related to our statement of operations as a percentage of revenues for the periods indicated and should be read in conjunction with
our consolidated financial statements and the related notes included elsewhere in this Form 10-K. A detailed discussion of the material changes in our operating results is set
forth below.
2021 (As restated)
Year Ended December 31,
2022 (As restated)
2023
Revenues:
Products
Services
Total revenues
Cost of revenues:
Cost of products
Cost of services
Gross profit
Operating expenses:
Selling, general and administrative expenses
Research and development expenses
Total operating expenses
Loss from operations
Interest income
Interest expense, net
Bargain purchase - Movingdots
Other (expense) income, net
Net loss before income taxes
Income tax expense
Net loss before non-controlling interest
Non-controlling interest
Net loss
Accretion of preferred stock
Preferred stock dividend
Net loss attributable to common stockholders
42.0%
58.0%
100.0%
31.5%
21.1%
52.6%
47.4%
44.9%
9.1%
53.9%
-6.5%
0.0%
-2.2%
0.0%
0.0%
-8.6%
-1.5%
-10.1%
0.0%
-10.1%
-4.1%
-3.3%
-17.5%
36
41.9%
58.1%
100.0%
31.3%
20.9%
52.2%
47.8%
46.7%
6.2%
52.9%
-5.1%
0.1%
0.7%
0.0%
0.0%
-4.3%
-0.6%
-5.0%
0.0%
-5.0%
-4.3%
-3.1%
37.2%
62.8%
100.0%
27.2%
22.6%
49.8%
50.2%
53.3%
6.2%
59.5%
-9.4%
0.1%
-1.2%
6.8%
0.0%
-3.8%
-0.4%
-4.2%
0.0%
-4.2%
-5.3%
-3.4%
-12.4%
-12.9%
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
REVENUES. Revenues decreased by approximately $2.2 million, or 1.6%, to $133.7 million in 2023 from $135.9 million (as restated) in 2022.
Revenues from products decreased by approximately $7.2 million, or 12.7%, to $49.7 million in 2023 from $56.9 million (as restated) in 2022. The decrease in product
revenues was due to decreased product sales in Germany, where we are actively shutting down sales from low margin contracts, large logistics companies recalibrating demand
following aggressive builds during the pandemic, and lower product sales in and out of Israel reflecting geopolitical headwinds and a proactive decision to shutter our
hardware-only line of business. These decreases were offset by increases in product revenue in our Powerfleet for Vehicles business in the United States due to new unit
purchases from new and existing customers.
Revenues from services increased by approximately $5.0 million, or 6.4%, to $84.0 million in 2023 from $79.0 million (as restated) in 2022. The increase in services revenues
was principally due to an increase in our install base that generates service revenue, with revenue growth concentrated in North America where a positive market response to
our Unity SaaS product offering has been a significant contributing factor.
COST OF REVENUES. Cost of revenues decreased by approximately $4.3 million, or 6.0%, to $66.7 million in 2023 from $70.9 million in 2022. Gross profit was $67.1
million in 2023 compared to $65.0 million (as restated) in 2022. As a percentage of revenues, gross profit increased to 50.2% in 2023 from 47.8% in 2022.
Cost of products decreased by approximately $6.2 million, or 14.5%, to $36.4 million in 2023 from $42.6 million in 2022. Gross profit for products was $13.3 million in 2023
compared to $14.4 million (as restated) in 2022. As a percentage of product revenues, gross profit increased to 26.8% in 2023 from 25.2% in 2022. The increase in gross profit
as a percentage of product revenues was principally due to decisions to stop fulfilling low margin orders and decreases in raw materials costs related to global supply chain
issues, which were more prevalent in 2022 than 2023.
Cost of services increased by approximately $1.9 million, or 6.7%, to $30.3 million in 2023 from $28.4 million in 2022. Gross profit for services was $53.7 million in 2023
compared to $50.6 million (as restated) in 2022. As a percentage of service revenues, gross profit minimally decreased to 64.0% in 2023 from 64.1% in 2022. The decrease in
gross profit as a percentage of services revenues was principally due to an increase in our install base that generates service revenue, offset by reduction due to the
commencement of amortization for our Unity SaaS platform.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative (“SG&A”) expenses increased by approximately $7.8 million, or 12.2%, to
$71.3 million in 2023 compared to $63.5 million (as restated) in 2022. The increase was principally due to an aggregate of $5.5 million in transaction-related costs in
connection with our acquisition of Movingdots GmbH (“Movingdots”) and business combination with MiX Telematics, $2.1 million in SG&A costs incurred by Movingdots
after the closing of such transaction, and increased salaries, investments in marketing programs and professional services fees. As a percentage of revenues, SG&A expenses
increased to 53.3% in the year ended December 31, 2023, from 46.7% in the same period in 2022.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development (“R&D”) expenses decreased by approximately $0.1 million, or 1.1%, to $8.4 million in 2023
compared to $8.5 million (as restated) in 2022, principally due to the capitalization of software development expenses for new product development and reduction in salaries
and wages offset in part by the acquisition of Movingdots, which added $2.0 million to expenses. As a percentage of revenues, R&D expenses increased to 6.3% in the year
ended December 31, 2023 from 6.2% in the same period in 2022.
INTEREST EXPENSE. Interest expense increased by $2.6 million, or 261.2%, to $1.6 million in 2023 from $(1.0) million in 2022, principally due to foreign currency
translation gains from the term facilities under the Prior Credit Agreement with Hapoalim.
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. Net loss attributable to common stockholders was $17.3 million, or $(0.49) per basic and diluted share, for
2023 as compared to net loss of $16.9 million (as restated), or $(0.48) per basic and diluted share, for the same period in 2022. The increase in net loss was due primarily to
transaction costs of $5.5 million with respect to the Movingdots acquisition and the business combination with MiX Telematics, plus incremental SG&A spend from the
Movingdots acquisition of $2.1 million, plus an increase in accretion of preferred stock of $1.2 million, offset by the bargain gain on the purchase of Movingdots of $9.0
million.
37
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
REVENUES. Revenues increased by approximately $10.0 million, or 7.9%, to $135.9 million (as restated) in 2022 from $126.0 million (as restated) in 2021.
Revenues from products increased by approximately $4.0 million, or 7.6%, to $56.9 million (as restated) in 2022 from $52.9 million (as restated) in 2021. The increase in
product revenues was attributable to an increase in sales by our Powerfleet for Logistics and Powerfleet for Warehouse products.
Revenues from services increased by approximately $5.9 million, or 8.1%, to $79.0 million (as restated) in 2022 from $73.1 million (as restated) in 2021. The increase in
services revenues was principally due to an increase in our install base that generates service revenue.
COST OF REVENUES. Cost of revenues increased by approximately $4.7 million, or 7.1%, to $70.9 million (as restated) in 2022 from $66.2 million (as restated) in 2021.
Gross profit was $65.0 million (as restated) in 2022 compared to $59.8 million (as restated) in 2021. As a percentage of revenues, gross profit increased to 47.8% in 2022 from
47.4% in 2021. The minimal increase in gross profit as a percentage of revenues was principally due to less significant increases in raw material costs as a result of global
supply chain issues in 2022 than in 2021.
Cost of products increased by approximately $2.9 million, or 7.4%, to $42.6 million in 2022 from $39.6 million (as restated) in 2021. Gross profit for products was $14.4
million (as restated) in 2022 compared to $13.3 million (as restated) in 2021. As a percentage of product revenues, gross profit minimally increased to 25.2% in 2022 from
25.1% in 2021. The gross profit as a percentage of product revenues was impacted by product mix, higher costs associated with supply chain issues, electronic component
shortages and inflation.
Cost of services increased by approximately $1.8 million, or 6.7%, to $28.4 million in 2022 from $26.6 million in 2021. Gross profit for services was $50.6 million (as restated)
in 2022 compared to $46.5 million (as restated) in 2021. As a percentage of service revenues, gross profit increased to 64.1% in 2022 from 63.6% in 2021. The increase in gross
profit as a percentage of services revenues was principally due to an increase in our install base that generates service revenue.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased by approximately $7.0 million, or 12.3%, to $63.5 million (as restated) in 2022
compared to $56.5 million (as restated) in 2021, inclusive of higher foreign currency losses of $0.7 million and higher severance costs of $0.7 million. Other drivers of the
increase in expenses include increased salaries and related expenses, professional fees, and marketing and travel expenses. As a percentage of revenues, SG&A expenses
increased to 46.7% in the year ended December 31, 2022, from 44.9% in the same period in 2021.
RESEARCH AND DEVELOPMENT EXPENSES. R&D expenses decreased by approximately $3.0 million, or 25.9%, to $8.5 million (as restated) in 2022 compared to $11.4
million (as restated) in 2021, principally due to the capitalization of software development expenses for new product development, which increased by $1.7 million in 2022. As
a percentage of revenues, R&D expenses decreased to 6.2% in the year ended December 31, 2022 from 9.1% in the same period in 2021.
INTEREST EXPENSE. Interest expense decreased by $3.8 million, or 136.0%, to $(1.0) million in 2022 from $2.8 million in 2021, principally due to foreign currency
translation gains from the term facilities under the Prior Credit Agreement with Hapoalim.
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. Net loss attributable to common stockholders was $16.9 million (as restated), or $(0.48) per basic and diluted
share, for 2022 as compared to net loss of $22.1 million (as restated), or $(0.64) per basic and diluted share, for the same period in 2021. The decrease in the net loss was due
primarily to the reasons described above.
38
Headline Loss Earnings (Loss) per Share
In connection with our secondary listing on the Johannesburg Stock Exchange (“JSE”), we are required to calculate and publicly disclose headline earnings (loss) per share and
diluted headline earnings (loss) per share. Headline loss per share is calculated using net loss which has been determined in accordance with accounting principles generally
accepted in the United States of America (“GAAP”).
Headline loss for the period represents the loss for the period attributable to common stockholders of Powerfleet adjusted for the remeasurements that are more closely aligned
to the operating or trading results as set forth below, and headline loss per share represents headline loss divided by the weighted average number of shares of common stock
outstanding.
The table below presents a reconciliation between net loss attributable to common stockholders to headline loss for the years ended December 31, 2021 (as restated), 2022 (as
restated) and 2023.
(in thousands, except per share data)
Net loss attributable to common stockholders
Adjusted for:
Reversal of Bargain purchase – Movingdots
Headline loss
Weighted average common shares outstanding on which the net loss attributable
to common shareholders per share and headline loss per share has been
calculated - basic and diluted
Net loss per share attributable to common stockholders – basic and diluted
Headline loss per share attributable to common stockholders – basic and diluted
Use of Non-GAAP Measures
2021
(As restated)
Year Ended December 31,
2022
(As restated)
2023
$
$
$
(22,068)
$
(16,891)
$
-
(22,068)
-
(16,891)
34,571
35,393
(0.64)
(0.64)
$
$
(0.48)
(0.48)
$
$
(17,307)
(9,034)
(26,341)
35,628
(0.49)
(0.74)
The above disclosure was prepared for the purpose of complying with the reporting requirements of the JSE and includes certain non-GAAP measures, such as headline
earnings (loss) and headline earnings (loss) per common share, and related reconciliations.
Liquidity and Capital Resources
On October 3, 2019, in connection with the completion of the Pointer Merger, we issued and sold 50,000 shares of the Series A Preferred Stock to ABRY Senior Equity V, L.P.,
ABRY Senior Equity Co-Investment Fund V, L.P and ABRY Investment Partnership, L.P. (the “Investors”) pursuant to the terms of an Investment and Transaction Agreement,
dated as of March 13, 2019 (as amended, the “Investment Agreement”), for an aggregate purchase price of $50.0 million. The proceeds received from such sale were used to
finance a portion of the cash consideration payable in our acquisition of Pointer.
In addition, our wholly owned subsidiaries, Powerfleet Israel and Pointer (collectively, the “Borrowers”) were party to the Prior Credit Agreement with Hapoalim, pursuant to
which Hapoalim agreed to provide Powerfleet Israel with two senior secured term loan facilities denominated in NIS in an initial aggregate principal amount of $30 million
(comprised of two facilities in the aggregate principal amounts of $20 million and $10 million, respectively) and a five-year revolving credit facility to Pointer denominated in
NIS in an initial aggregate principal amount of $10 million. The proceeds of the term loan facilities were used to finance a portion of the cash consideration payable in our
acquisition of Pointer. The outstanding amount under the revolving facility was approximately NIS 4,915, or $1,355, as of December 31, 2023.
On March 18, 2024, the Borrowers entered into the A&R Credit Agreement, which refinanced the facilities under, and amended and restated, the Prior Credit Agreement. The
A&R Credit Agreement provides for (i) two senior secured term loan facilities denominated in NIS to Powerfleet Israel in an aggregate principal amount of $30 million
(comprised of Facility A and Facility B in the aggregate principal amounts of $20 million and $10 million, respectively) and (ii) two revolving credit facilities to Pointer in an
aggregate principal amount of $20 million (comprised of Facility C and Facility D in the aggregate principal amounts of $10 million and $10 million, respectively). The Term
Facilities will mature on March 18, 2029. The Revolving Facilities are available for successive one-month periods until and including March 18, 2025, unless the Borrowers
deliver prior notice to Hapoalim of their request not to renew the Revolving Facilities.
On March 18, 2024, Powerfleet Israel drew down $30 million in cash under the Term Facilities and used the proceeds to prepay approximately $11.2 million, representing the
remaining outstanding balance, of the term loans extended to Powerfleet Israel under the Prior Credit Agreement and distributed the remaining proceeds to Powerfleet. The
proceeds of the Revolving Facilities may be used by Pointer for general corporate purposes, including working capital and capital expenditures.
The Credit Facilities continue to be secured by first ranking and exclusive fixed and floating charges, including by Powerfleet Israel over the entire share capital of Pointer and
by Pointer over all of its assets, as well as cross guarantees between Powerfleet Israel and Pointer, except that the Borrowers’ holdings in Pointer do Brasil Comercial Ltda.,
Pointer Argentina and Pointer South Africa are excluded from such floating charges. No other assets of our company will serve as collateral under the Credit Facilities.
Borrowings under the Term Facilities will bear interest at a variable rate equal to the applicable prime interest rate, plus, in the case of borrowings under Facility A, 2.2% per
annum, and, in the case of borrowings under Facility B, 2.3% per annum. Borrowings under Facility C will bear interest, in the case of borrowings made in NIS, at the
applicable prime interest rate plus 2.5%, or, in the case of borrowings made in U.S. dollars, at SOFR plus 2.15%. Borrowings under Facility D will bear interest at the
applicable interest rate set forth in the standard form documents entered into in connection with each utilization of Facility D. Borrowings under the Term Facilities will be
denominated in NIS, based on the applicable conversion rate at the time of conversion but will be made available to the Borrowers in U.S. dollars if requested by the
Borrowers.
Pointer is required to pay a credit allocation fee in NIS, with respect to Facility C, and a non-utilization fee in U.S. dollars, with respect to Facility D, in each case, equal to
0.5% per annum on undrawn and uncancelled amounts of the Revolving Facilities during the period commencing on March 18, 2024 and ending on the last day of the
applicable availability period of such Revolving Facilities.
As a result of global supply chain disruptions, the conflicts between Russia and Ukraine and between Israel and Hamas, rising interest rates, fluctuations in currency values,
inflation and other cost increases, there remains uncertainty surrounding the potential impact of such events on our results of operations and cash flows. We are proactively
taking steps to increase available cash on hand including, but not limited to, targeted reductions in discretionary operating expenses and capital expenditures and borrowing
under the revolving credit facility.
39
On April 2, 2024, we consummated the MiX Combination, pursuant to which MiX Telematics became our indirect, wholly owned subsidiary. The Implementation Agreement
required, as a condition to closing of the MiX Combination, that we obtain debt and/or equity financing in an amount sufficient to provide for the redemption in full of all
outstanding shares of our Series A Preferred Stock. In order to meet this condition, we entered into the Facilities Agreement on March 7, 2024 and shortly thereafter drew down
$85 million in cash under the facilities provided thereunder. On April 2, 2024, concurrently with the closing of the MiX Combination, we used the net proceeds received from
RMB and from incremental borrowing capacity as a result of the refinancing of Credit Facilities to redeem the full $90.3 million value of the outstanding shares of Series A
Preferred Stock.
We have incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of $146.3 million as of December 31, 2023. We
anticipate incurring additional losses until such time that growth in revenue and gross margin from our strategic plan centered on our Unity SaaS platform and Warehouse safety
product offerings exceed necessary investments in operating expenses, capital expenditures and debt financing costs.
Management believes our cash and cash equivalents of $19.3 million as of December 31, 2023, in conjunction with the debt proceeds from our lenders, plus cash generated
from the execution of our strategic plan over the next 12 months, are sufficient to fund the projected operations for at least the next 12 months from the issuance date of these
financial statements (May 9, 2024) and service our outstanding obligations.
Capital Requirements
As of December 31, 2023, we had cash (including restricted cash), cash equivalents and marketable securities of $19.3 million and working capital of $23.5 million, compared
to cash (including restricted cash) and cash equivalents of $17.9 million and working capital of $36.7 million (as restated) as of December 31, 2022. Our primary sources of
cash are cash flows from sales of products and services, our holdings of cash, cash equivalents and investments from the sale of our capital stock and borrowings under our
credit facilities. The MiX Combination is also expected to be a source of positive cash flow. To date, we have not generated sufficient cash flow solely from operating activities
to fund our operations.
Our capital requirements depend on a variety of factors, including, but not limited to, the length of the sales cycle, the rate of increase or decrease in our existing business base,
the success, timing, and amount of investment required to bring new products to market, revenue growth or decline and potential acquisitions. Failure to generate positive cash
flow from operations will have a material adverse effect on our business, financial condition and results of operations.
40
Operating Activities
Net cash provided by operating activities was $4.4 million for the year ended December 31, 2023, compared to net cash provided by operating activities of $1.2 million (as
restated) for the same period in 2022. The net cash provided by operating activities for the year ended December 31, 2023 reflects a net loss of $5.7 million and includes non-
cash charges of $3.9 million for stock-based compensation, $9.4 million for depreciation and amortization expense, a gain on bargain purchase of $9.0 million, and $2.8 million
for right of use asset amortization. Changes in operating assets and liabilities included:
● an increase in accounts receivable of $1.5 million;
● an increase in inventory of $1.7 million;
● a decrease in lease liabilities of $2.9 million; and
● an increase in accounts payable and accrued expenses of $4.5 million.
Net cash provided by operating activities was $1.2 million (as restated) for the year ended December 31, 2022, compared to net cash used in operating activities of $5.4 million
(as restated) for the same period in 2021. The net cash provided by operating activities for the year ended December 31, 2022 reflects a net loss of $6.8 million (as restated) and
includes non-cash charges of $4.3 million for stock-based compensation, $8.3 million for depreciation and amortization expense and $2.8 million for right of use asset
amortization. Changes in operating assets and liabilities included:
● an increase in accounts receivable of $1.4 million (as restated);
● an increase in inventory of $4.5 million;
● a decrease in lease liabilities of $2.7 million; and
● a decrease in accounts payable and accrued expenses of $0.6 (as restated) million.
Investing Activities
Net cash provided by investing activities was $1.5 million for the year ended December 31, 2023, compared to net cash used in investing activities of $6.3 million (as restated)
for the same period in 2022. The increase in net cash provided by investing activities was primarily due to $8.7 million in net proceeds from the acquisition of Movingdots,
partially offset by $3.6 million for the purchase of fixed assets and $3.5 million (as restated) for capitalized software development costs.
Net cash used in investing activities was $6.3 million (as restated) for the year ended December 31, 2022, compared to net cash used in investing activities of $3.0 million (as
restated) for the same period in 2021. The cash used in investing activities for the years ended December 31, 2022 and 2021 was for the purchase of fixed assets and capitalized
software development.
Financing Activities
Net cash used in financing activities was $3.7 million for the year ended December 31, 2023, compared to net cash used in financing activities of $0.3 million for the same
period in 2022. The increase in net cash used in financing activities was primarily due to the payment in cash of preferred stock dividends totaling $3.4 million compared to $0
in 2022, net of the changes in the repayment of long-term debt and change in short-term debt, net balance.
Net cash used in financing activities was $0.3 million for the year ended December 31, 2022, compared to net cash provided by financing activities of $16.2 million for the
same period in 2021. The 2021 period was represented by net proceeds from our stock offering of $26.9 million offset by the net repayment of long-term debt of $5.6 million
and the payment of preferred stock dividends of $4.1 million. In 2022, dividends were not paid in cash and the net cash used in financing was primarily from the repayment of
long-term debt, net of proceeds from debt.
Inflation
Rising inflation and other macroeconomic conditions in the U.S. have resulted in higher costs of raw materials, freight, and labor, which has impacted our operating costs. In
addition, we operate in several emerging market economies that are particularly vulnerable to the impact of inflationary pressures that could materially and adversely impact
our operations in the foreseeable future.
41
Business Acquisitions
In addition to focusing on our core applications, we adapt our systems to meet our customers’ broader asset management needs and seek opportunities to expand our solution
offerings through strategic acquisitions.
On March 6, 2023, we entered into a definitive share purchase and transfer agreement (the “SPA”) with Swiss Re Reinsurance Holding Company Ltd (“Swiss Re”) to acquire
all of the outstanding shares of Movingdots for consideration consisting of €1 and the issuance by us of a ten-year warrant to purchase 800,000 shares of our common stock at
an exercise price of $7.00 per share. Under the SPA, Swiss Re was required to ensure that Movingdots had available cash and cash equivalents of at least €8,000,000 as of the
closing date. The transaction closed on March 31, 2023.
On April 2, 2024, we consummated the MiX Combination, pursuant to which Powerfleet Sub acquired all the issued ordinary shares of MiX Telematics, including those
represented by MiX Telematics’ American Depositary Shares, through the implementation of the Scheme in accordance with Sections 114 and 115 of the Companies Act, in
exchange for shares of our common stock. As a result, MiX Telematics became our indirect, wholly owned subsidiary.
As a result of the MiX Combination, the combined company remains Powerfleet and our common stock continues to be listed on The Nasdaq Global Market and the Tel Aviv
Stock Exchange under the symbol “PWFL.” Additionally, our common stock has been listed on the JSE by way of a secondary inward listing under the symbol “PWR.”
MiX Telematics is a leading global provider of fleet and mobile asset management solutions delivered as SaaS to over one million global subscribers spanning more than 120
countries. MiX Telematics’ products and services provide enterprise fleets, small fleets, and consumers with efficiency, safety, compliance, and security solutions. The MiX
Combination is expected to provide us with operational synergies and access to a broader base of customers.
The MiX Combination has been accounted for as a business combination, and we have been identified as the accounting acquirer.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures” (“ASU 2023-07”), which requires additional operating segment disclosures in annual and interim consolidated financial statements. ASU
2023-07 is effective for annual periods beginning after December 15, 2023 and for interim periods beginning after December 15, 2024 on a retrospective basis, with early
adoption permitted. We are evaluating the effect of adopting ASU 2023-07.
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”),
which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other
income tax-related disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a retrospective or prospective basis. We are evaluating the
effect of adopting ASU 2023-09.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments,” which amends
the guidance on measuring credit losses on financial assets held at amortized cost. The amendment is intended to address the issue that the previous “incurred loss”
methodology was restrictive for an entity’s ability to record credit losses based on not yet meeting the “probable” threshold. The new language will require these assets to be
valued at amortized cost presented at the net amount expected to be collected with a valuation provision. We adopted ASU No. 2016-13 on January 1, 2023. The adoption of the
standard did not result in a material impact on the consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risks.
Not applicable.
42
Item 8. Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 42)
Consolidated Balance Sheets at December 31, 2022 (As restated) and 2023
Consolidated Statements of Operations for the Years Ended December 31, 2021 (As restated), 2022 (As restated) and 2023
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2021 (As restated), 2022 (As restated) and 2023
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2021 (As restated), 2022 (As restated) and 2023
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 (As restated), 2022 (As restated) and 2023
Notes to the Consolidated Financial Statements
43
Page
44
47
48
49
50
51
52
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Powerfleet, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of PowerFleet, Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated
statements of operations, comprehensive loss, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related
notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December
31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over
financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (2013 framework), and our report dated May 9, 2024 expressed an adverse opinion thereon.
Restatement of 2022 and 2021 Financial Statements
As discussed in Note 2 to the consolidated financial statements, the 2022 and 2021 consolidated financial statements have been restated to correct misstatements.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be
communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which
they relate.
44
Description of the Matter
At December 31, 2023, the Company reported $83.5 million of goodwill. As discussed in Notes 3 and 9 to the
consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level.
Valuation of Goodwill
How We Addressed the
Matter in Our Audit
Description of the Matter
How We Addressed the Matter in Our Audit
Auditing management’s annual goodwill impairment test was complex and highly judgmental due to the significant
estimation required to determine the fair value of the reporting unit. In particular, the fair value estimate was sensitive
to significant assumptions, such as the weighted average cost of capital, revenue growth and cost growth all of which
are affected by expectations about future operations and market conditions. Further, the identified material weakness
relating to management not adequately preparing and maintaining evidence of their review of significant assumptions
relating to the annual goodwill impairment assessment affected our audit procedures in this area.
To test the fair value of the Company’s reporting unit, we performed audit procedures with the assistance of internal
valuation specialists that included, among others, assessing methodologies and testing the significant assumptions
discussed above and the underlying data used by the Company in its analysis. We compared the significant assumptions
used by management to current industry and economic trends, including key performance indicators, and evaluated
whether changes in the Company’s business would affect the significant assumptions. We assessed the historical
accuracy of management’s estimates and performed a sensitivity analysis of significant assumptions to evaluate the
changes in the fair value of the reporting unit that would result from changes in the assumptions. We compared the data
used in the analysis to supporting documentation and analyses. The nature and extent of our audit procedures
considered the inability to rely on controls over management’s goodwill impairment review process as a result of the
material weakness described above.
Uncertain Tax Positions
As discussed in Note 18 of the consolidated financial statements, the Company has recorded a liability of $0.3 million
related to uncertain tax positions as of December 31, 2023. The Company conducts business in the US and various
foreign countries and is therefore subject to US federal and state income taxes, as well as income taxes of multiple
foreign jurisdictions. Due to the multinational operations of the Company and changes in global income tax laws and
regulations, including those in the US, there is complexity in the accounting for and monitoring of the provision for
uncertain tax positions.
Auditing management’s identification and measurement of uncertain tax positions involved complex analysis and
auditor judgment related to the evaluation of the income tax consequences of changes in income tax laws and
regulations in various jurisdictions, which are often subject to interpretation.
Our audit procedures included, among others, evaluating the Company’s assumptions and the underlying data used to
identify its uncertain tax positions and to estimate the amount of the related unrecognized income tax benefits by
jurisdiction. We obtained an understanding of the Company’s legal structure by reviewing its organizational charts. Due
to the complexity of the tax law in various jurisdictions, we involved our income tax professionals to assess the
Company’s interpretation of and compliance with tax laws in these jurisdictions, as well as to identify relevant tax law
changes. In certain circumstances, we involved our income tax professionals to evaluate the technical merits of the
Company’s tax positions and to evaluate income tax opinions or other third-party advice obtained by the Company.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2019.
Iselin, New Jersey
May 9, 2024
45
To the Stockholders and the Board of Directors of Powerfleet, Inc.
Opinion on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
We have audited PowerFleet, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, because of
the effect of the material weaknesses described below on the achievement of the objectives of the control criteria, PowerFleet, Inc. and subsidiaries (the Company) has not
maintained effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been
identified and included in management’s assessment. Management has identified material weaknesses in the design and operation of controls related to the determination of
standalone selling price, capitalized software, the Movingdots GmbH business combination, valuation of goodwill, measurement and valuation of the convertible redeemable
preferred stock and the financial statement close process, which includes the information technology general controls in the areas of user access and change management over
key information technology systems that support the Company’s financial reporting processes, the related process-level information technology dependent manual controls and
application controls.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the
Company as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity and cash flows for each of
the three years in the period ended December 31, 2023, and the related notes. These material weaknesses were considered in determining the nature, timing and extent of audit
tests applied in our audit of the 2023 consolidated financial statements, and this report does not affect our report dated May 9, 2024, which expressed an unqualified opinion
thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material
effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
/s/ Ernst & Young LLP
Iselin, New Jersey
May 9, 2024
46
POWERFLEET, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share data)
December 31, 2022
(As restated)
December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowance for credit losses of $2,567 and $2,797 in 2022 and 2023,
respectively
Inventory, net
Deferred costs – current
Prepaid expenses and other current assets
Total current assets
Fixed assets, net
Goodwill
Intangible assets, net
Right of use asset
Severance payable fund
Deferred tax asset
Other assets
Total assets
LIABILITIES
Current liabilities:
Short-term bank debt and current maturities of long-term debt
Accounts payable and accrued expenses
Deferred revenue – current
Lease liability – current
Total current liabilities
Long-term debt – less current maturities
Deferred revenue – less current portion
Lease liability – less current portion
Accrued severance payable
Deferred tax liability
Other long-term liabilities
Total liabilities
Commitments and Contingencies (note 19)
Convertible redeemable preferred stock: Series A – 100 shares authorized, $0.01 par value; 59 and 60
shares issued and outstanding at December 31, 2022 and December 31, 2023, respectively, at redemption
value of $90,273 at December 31, 2023
STOCKHOLDERS’ EQUITY
Preferred stock; authorized 50,000 shares, $0.01 par value;
Common stock; authorized 75,000 shares, $0.01 par value; 37,605 and 38,716 shares issued at December
31, 2022 and December 31, 2023, respectively; shares outstanding, 36,170 and 37,229 at December 31,
2022 and December 31, 2023, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Treasury stock; 1,435 and 1,487 common shares at cost at December 31, 2022 and December 31, 2023,
respectively
Total Powerfleet, Inc. stockholders’ equity
Non-controlling interest
Total equity
Total liabilities, convertible redeemable preferred stock, and stockholders’ equity
$
$
$
$
17,680
309
$
32,647
22,272
762
7,536
81,206
9,249
83,487
22,908
7,820
3,760
3,308
6,318
218,056
10,312
25,397
6,376
2,441
44,526
11,403
4,431
5,628
4,365
4,901
1,788
77,042
72,031
-
376
219,055
(140,806)
(1,210)
(8,510)
68,905
78
68,983
218,056
$
$
$
19,022
310
32,440
22,602
83
7,568
82,025
12,383
83,487
20,075
6,195
3,802
2,863
6,916
217,746
21,091
30,296
5,666
1,503
58,556
-
4,956
4,908
4,533
4,450
2,422
79,825
80,277
-
387
212,703
(146,281)
(616)
(8,651)
57,542
102
57,644
217,746
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
47
POWERFLEET, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
Revenues:
Products
Services
Total revenues
Cost of revenues:
Cost of products
Cost of services
Gross profit
Operating expenses:
Selling, general and administrative expenses
Research and development expenses
Total operating expenses
Loss from operations
Interest income
Interest expense, net
Bargain purchase – Movingdots
Other (expense) income, net
Net loss before income taxes
Income tax expense
Net loss before non-controlling interest
Non-controlling interest
Net loss
Accretion of preferred stock
Preferred stock dividends
Net loss attributable to common stockholders
Net loss per share attributable to common stockholders – basic and diluted
Weighted average common shares outstanding – basic and diluted
2021 (As
restated)
Year Ended December 31,
2022 (As
restated)
2023
$
52,902
73,058
125,960
$
56,945
78,967
135,912
39,627
26,580
66,207
59,753
56,496
11,429
67,925
(8,172)
45
(2,764)
-
8
(10,883)
(1,888)
(12,771)
5
(12,766)
(5,190)
(4,112)
(22,068)
(0.64)
34,571
42,569
28,350
70,919
64,993
63,492
8,472
71,964
(6,971)
71
994
-
24
(5,882)
(870)
(6,752)
(2)
(6,754)
(5,906)
(4,231)
$
$
$
$
(16,891)
(0.48)
35,393
49,741
83,995
133,736
36,404
30,256
66,660
67,076
71,253
8,380
79,633
(12,557)
103
(1,602)
9,034
(29)
(5,051)
(589)
(5,640)
(35)
(5,675)
(7,139)
(4,493)
(17,307)
(0.49)
35,628
$
$
$
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
48
POWERFLEET, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Loss
(In thousands, except per share data)
2021 (As
restated)
December 31,
2022 (As
restated)
2023
$
$
(22,068)
$
(16,891)
$
(17,307)
(8)
(8)
(1,601)
(1,601)
594
594
(22,076)
$
(18,492)
$
(16,713)
Net loss attributable to common stockholders
Foreign currency translation adjustment
Total other comprehensive income (loss)
Comprehensive loss
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
49
POWERFLEET, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
(In thousands, except per share data)
Common Stock
Additional
Accumulated
Other
Number of
Shares
Amount
Paid-in
Capital
Accumulated
Deficit
Comprehensive
Income (Loss)
Treasury
Stock
Non-
controlling
Interest
Stockholders’
Equity
32,280 $
323 $ 206,499 $
-
32,280
-
323
(4,713)
201,786
(121,150) $
(137)
(121,287)
399 $ (6,858) $
-
399
-
(6,858)
75 $
-
75
-
-
-
449
(89)
39
156
-
-
4,428
-
-
(9,303)
(12,765)
-
-
5
(1)
-
2
-
-
44
-
-
-
(4)
-
-
875
-
-
26,822
4,676
-
-
-
-
-
-
-
-
-
-
-
-
(8)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(647)
(794)
-
-
-
(5)
16
-
-
-
-
-
-
-
-
79,288
(4,850)
74,438
(22,068)
(5)
8
1
(1)
-
877
(647)
(794)
26,866
4,676
37,263 $
373 $ 224,852 $
(134,052)
$
391 $ (8,299) $
86 $
83,351
-
-
(10,137)
(6,754)
-
-
-
492
(186)
36
-
-
-
-
5
(2)
-
-
-
-
-
(5)
2
-
-
4,343
-
-
-
-
-
-
-
-
(1,601)
-
-
-
-
-
-
-
-
-
-
-
(211)
-
-
(16,891)
2
(10)
-
-
-
-
-
2
(1,611)
-
-
-
(211)
4,343
37,605 $
376 $ 219,055 $
(140,806) $ (1,210) $ (8,510) $ 78 $
68,983
-
-
-
-
-
1,247
(152)
16
-
-
38,716 $
-
-
-
-
-
13
(2)
-
-
-
-
200
(11,632)
(5,675)
-
1,347
-
(13)
2
36
-
3,908
-
-
-
-
-
-
-
-
-
-
-
-
594
-
-
-
-
-
-
-
-
-
-
-
-
(141)
-
387 $ 212,703 $
(146,281) $
(616) $ (8,651) $
-
-
35
-
(11)
-
-
-
200
(17,307)
35
1,347
583
-
-
36
-
-
102 $
(141)
3,908
57,644
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
50
Balance at January 1, 2021 (As issued)
Restatement adjustments
Balance at January 1, 2021 (As restated)
Net loss attributable to common
stockholders (As restated)
Net loss attributable to non-controlling
interest
Foreign currency translation adjustment
Issuance of restricted shares
Forfeiture of restricted shares
Vesting of restricted stock units
Shares issued pursuant to exercise of
stock options
Shares withheld pursuant to exercise of
stock options
Shares withheld pursuant to vesting of
restricted stock
Common shares issued, net of issuance
costs
Stock based compensation
Balance at December 31, 2021 (As
restated)
Net loss attributable to common
stockholders (As restated)
Net income attributable to non-
controlling interest
Foreign currency translation adjustment
Issuance of restricted shares
Forfeiture of restricted shares
Vesting of restricted stock units
Shares withheld pursuant to vesting of
restricted stock
Stock based compensation
Balance at December 31, 2022 (As
restated)
Retained earnings adjustment for
adoption of ASU 2016-13
Net loss attributable to common
stockholders (As restated)
Net income attributable to non-
controlling interest
Warrant issued in connection with
acquisition
Foreign currency translation adjustment
Issuance of restricted shares
Forfeiture of restricted shares
Exercise of stock options
Shares withheld pursuant to vesting of
restricted stock
Stock based compensation
Balance at December 31, 2023
POWERFLEET, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
In thousands (except per share data)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to cash (used in) provided by operating
activities:
2021 (As restated)
Year Ended December 31,
2022 (As restated)
2023
$
(12,766)
$
(6,754)
$
(5,675)
Non-controlling interest
Gain on bargain purchase
Inventory reserve
Stock based compensation expense
Depreciation and amortization
Right-of-use assets, non-cash lease expense
Bad debt expense
Deferred income taxes
Other non-cash items
Changes in:
Accounts receivable
Inventory
Prepaid expenses and other assets
Deferred costs
Deferred revenue
Accounts payable and accrued expenses
Lease liabilities
Accrued severance payable, net
Net cash (used in) provided by operating activities
Cash flows from investing activities:
Acquisitions, net of cash assumed
Purchase of investments
Capitalized software development costs
Capital expenditures
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Net proceeds from stock offering
Repayment of long-term debt
Short-term bank debt, net
Purchase of treasury stock upon vesting of restricted stock
Repayment of financing lease
Payment of preferred stock dividend
Proceeds from exercise of stock options, net
Net cash (used in) provided by financing activities
Effect of foreign exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash - beginning of year
Cash, cash equivalents and restricted cash - end of year
Reconciliation of cash, cash equivalents, and restricted cash, beginning of year
Cash and cash equivalents
Restricted cash
Cash, cash equivalents, and restricted cash, beginning of year
Reconciliation of cash, cash equivalents, and restricted cash, end of year
Cash and cash equivalents
Restricted cash
Cash, cash equivalents, and restricted cash, end of year
Supplemental disclosure of cash flow information:
Cash paid for:
Taxes
Interest
Noncash investing and financing activities:
$
$
$
$
$
(5)
-
(22)
4,676
8,553
2,908
997
1,888
305
(9,549)
(5,943)
(2,860)
2,990
(1,767)
8,140
(2,790)
(145)
(5,390)
-
-
(627)
(2,400)
(3,027)
26,867
(5,571)
(270)
(794)
(138)
(4,112)
229
16,211
531
8,325
18,435
2
-
149
4,343
8,262
2,756
66
708
707
(1,368)
(4,473)
(816)
1,608
(627)
(533)
(2,739)
(42)
1,249
-
(100)
(2,219)
(4,011)
(6,330)
-
(5,659)
5,709
(211)
(121)
-
-
(282)
(3,408)
(8,771)
26,760
26,760
$
17,989
$
18,127
308
18,435
26,452
308
26,760
58
1,474
$
$
$
$
26,452
308
26,760
17,680
309
17,989
63
1,308
$
$
$
$
35
(9,034)
1,500
3,908
9,445
2,814
1,767
(6)
103
(1,460)
(1,743)
791
679
(295)
4,440
(2,851)
(21)
4,397
8,722
(100)
(3,629)
(3,464)
1,529
-
(4,408)
4,321
(141)
(129)
(3,385)
36
(3,706)
(877)
1,343
17,989
19,332
17,680
309
17,989
19,022
310
19,332
175
1,656
Value of shares withheld pursuant to exercise of stock options
Value of warrant issued in connection with Movingdots acquisition
Value of licensed intellectual property acquired in connection with
Movingdots acquisition
Preferred stock dividends paid in shares
$
$
$
$
647
-
-
-
$
$
$
$
-
-
-
4,231
$
$
$
$
-
1,347
1,517
1,108
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
51
POWERFLEET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2023
In thousands (except per share data)
NOTE 1 - DESCRIPTION OF BUSINESS AND LIQUIDITY
The Company is a global leader of Internet-of-Things (“IoT”) solutions providing valuable business intelligence for managing high-value enterprise assets that improve
operational efficiencies.
I.D. Systems, Inc. was incorporated in the State of Delaware in 1993. Powerfleet, Inc. was incorporated in the State of Delaware in February 2019 for the purpose of
effectuating the transactions pursuant to which the Company acquired Pointer Telocation Ltd. (the “Pointer Merger”) and commenced operations on October 3, 2019, upon the
closing of the Pointer Merger.
Impact of Macroeconomic Conditions and Supply Chain Disruptions
Higher interest rates and inflation, fluctuations in currency values, and the conflicts between Russia and Ukraine and between Israel and Hamas have resulted in significant
economic disruption and adversely impacted the broader global economy, including our customers and suppliers. The extent of the impact of such conditions on our business
and financial results will depend largely on future developments that cannot be accurately predicted at this time, including the duration of higher interest rates and inflation, the
resilience of currency values, and the resolution or escalation of geopolitical conflicts, particularly those between Russia and Ukraine and between Israel and Hamas, and the
impact of these and other factors on capital and financial markets and the related impact on the financial circumstances of our employees, customers and suppliers.
In addition, the Company has experienced a significant impact to its supply chain given the challenges stemming from ongoing macroeconomic conditions, including delays in
supply chain deliveries, extended lead times and shortages of certain key components, some raw material cost increases and slowdowns at certain production facilities. As a
result of these supply chain issues, the Company has had to increase its volume of inventory beginning in 2022 to ensure supply. The Company incurred supply chain constraint
expenses which lowered its gross margins and decreased its profitability primarily during the last six months of 2021 and first nine months of 2022. The supply chain
disruptions have delayed and may continue to delay the timing of some orders and expected deliveries of the Company’s products. If the impact of the supply chain disruptions
is more severe than the Company expects, it could result in longer lead times, inventory supply challenges and further increased costs, all of which could result in the
deterioration of the Company’s results, potentially for a longer period than currently anticipated.
As of the date of these audited consolidated financial statements, the full extent to which global economic conditions and geopolitical conflicts may materially impact the
Company’s business, results of operations and financial condition is uncertain.
Liquidity
As of December 31, 2023, the Company had cash (including restricted cash) and cash equivalents of $19,300 and working capital of $23,500. The Company’s primary sources
of cash are cash flows from sales of products and services, its holdings of cash, cash equivalents and investments from the sale of its capital stock and borrowings under its
credit facilities. To date, the Company has not generated sufficient cash flows solely from operating activities to fund its operations.
In addition, the Company’s subsidiaries, Powerfleet Israel Ltd. (“Powerfleet Israel”) and Pointer Telocation Ltd. (“Pointer” and, together with Powerfleet Israel, the
“Borrowers”) were party to a Credit Agreement (the “Prior Credit Agreement”) with Bank Hapoalim B.M. (“Hapoalim”), pursuant to which Hapoalim provided Powerfleet
Israel with two senior secured term loan facilities denominated in New Israeli Shekels (“NIS”) in an initial aggregate principal amount of $30,000 (comprised of two facilities
in the aggregate principal amounts of $20,000 and $10,000) and a five-year revolving credit facility to Pointer in an initial aggregate principal amount of $10,000. The proceeds
of the term loan facilities were used to finance a portion of the cash consideration payable in the Company’s acquisition of Pointer. The Company borrowed net NIS 4,915, or
$1,355, under the revolving credit facility as of December 31, 2023. See Note 12 for additional information.
On March 18, 2024, the Borrowers entered into an amended and restated credit agreement (the “A&R Credit Agreement”), which refinanced the facilities under, and amended
and restated, the Prior Credit Agreement. The A&R Credit Agreement provides for (i) two senior secured term loan facilities denominated in NIS to Powerfleet Israel in an
aggregate principal amount of $30,000 (comprised of two facilities in the aggregate principal amounts of $20,000 and $10,000, respectively) and (ii) two revolving credit
facilities to Pointer in an aggregate principal amount of $20,000 (comprised of two revolvers in the aggregate principal amounts of $10,000 and $10,000, respectively). On
March 18, 2024, Powerfleet Israel drew down $30,000 in cash under the term loan facilities and used the proceeds to prepay approximately $11,200, representing the remaining
outstanding balance, of the term loans extended to Powerfleet Israel under the Prior Credit Agreement and distributed the remaining proceeds to Powerfleet. The proceeds of the
revolving facilities may be used by Pointer for general corporate purposes, including working capital and capital expenditures.
On April 2, 2024, the Company consummated the transactions contemplated by the Implementation Agreement, dated as of October 10, 2023 (the “Implementation
Agreement”), that the Company entered into with Main Street 2000 Proprietary Limited, a private company incorporated in the Republic of South Africa and a wholly owned
subsidiary of the Company, and MiX Telematics Limited, a public company incorporated under the laws of the Republic of South Africa (“MiX Telematics”), pursuant to which
MiX Telematics became an indirect, wholly owned subsidiary of the Company (the “MiX Combination”). The Implementation Agreement required, as a condition to closing of
the MiX Combination, that the Company obtain a debt and/or equity financing in an amount sufficient to provide for the redemption in full of all outstanding shares of the
Company’s Series A Convertible Preferred Stock (“Series A Preferred Stock”). In order to meet this condition, the Company entered into a facilities agreement (the “Facilities
Agreement”) with FirstRand Bank Limited (acting through its Rand Merchant Bank division) (“RMB”) on March 7, 2024 and shortly thereafter drew down $85,000 in cash
under the Facilities Agreement. On April 2, 2024, concurrently with the closing of the MiX Combination, the Company used the net proceeds received from RMB and from
incremental borrowing capacity as a result of the refinancing of credit facilities with Hapoalim to redeem in full $90,300 for the outstanding shares of the Series A Preferred
Stock.
52
See Note 20 for additional information on the financings that occurred after the year ended December 31, 2023.
Management believes the Company’s cash and cash equivalents of $19.3 million as of December 31, 2023 in conjunction with cash generated from the execution of its strategic
plan over the next 12 months, and proceeds from the debt agreements are sufficient to fund the projected operations for at least the next 12 months from the issuance date of
these financial statements (May 9, 2024) and service the Company’s outstanding obligations. Such expectation is based, in part, on the achievement of a certain volume of
assumed revenue and gross margin; however, there is no guarantee the Company will achieve this amount of revenue and gross margin during the assumed time period.
Management assessed various additional operating cost reduction options that are available to the Company and would be implemented, if assumed levels of revenue and gross
margin are not achieved and additional funding is not obtained.
NOTE 2 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
Description of Restatement Adjustments
In connection with the preparation of the Company’s audited consolidated financial statements for the year ended December 31, 2023, the Company determined that the
accounting for the redemption premium associated with the Series A Preferred Stock was understated resulting in an understatement of “net loss attributable to common
stockholders” and “net loss per share attributable to common stockholders” for each period, an understatement of the value of the convertible redeemable preferred stock as of
each balance sheet date, and an overstatement of the additional paid-in capital as of each balance sheet date. The required adjustments to correct the redemption value of the
calculation of the Series A Preferred Stock and the related accretion of the value of the preferred stock in the consolidated statement of operations include the recording of a
non-cash accretion resulting in an increase in the net loss attributable to common stockholders, an increase in the “convertible redeemable preferred stock”, and a decrease of
“additional paid-in capital” for all annual and interim periods in fiscal years 2021, 2022, and through September 30, 2023.
The correction of the error results in reporting the value of the convertible preferred stock including the accretion to the redemption value from the date of original issuance
through each balance sheet date applying the interest method. The Company determined that it is appropriate to restate the financial statements for the fiscal years ended
December 31, 2021 and 2022 and each of the interim periods during the 2022 and 2023 fiscal years included in this Annual Report on Form 10-K in addition to correcting other
unrelated immaterial errors that were previously either unrecorded or recorded as out-of-period adjustments.
The following tables present the impact of all of these adjustments on the Company’s previously reported consolidated financial statements. The “As Reported” amounts in the
following tables are amounts derived from the Company’s previously filed Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. The amounts in the columns
labeled “Redemption Premium Adjustment” represent the effect of adjustments resulting from the correction of the understatement of the Company’s net loss attributable to
common stockholders and net loss per share attributable to common stockholders for each period for each period, as well as the impact of the cumulative amount on the value
of the convertible redeemable preferred stock and additional paid-in capital as of each balance sheet date. The amounts in the columns labeled “Other Adjustments” represent
the effect of other adjustments that relate to other unrelated errors in previously filed financial statements that were not material, individually or in the aggregate, to such filed
financial statements. The effects of the restatement have been corrected in all impacted tables and footnotes throughout these consolidated financial statements.
53
Consolidation Financial Statements – Restatement Reconciliation Tables
Audited Financial Statements
The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Balance Sheet as of December 31, 2022:
December 31, 2022 (As restated)
Redemption
Premium
Adjustment
Other Adjustments
As
Restated
As Reported
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable
Inventory, net
Deferred costs - current
Prepaid expenses and other current assets
Total current assets
Deferred costs less current portion
Fixed assets, net
Goodwill
Intangible assets, net
Right of use asset
Severance payable fund
Deferred tax asset
Other assets
Total assets
LIABILITIES
Current liabilities:
Short-term bank debt and current maturities of long-term debt
Convertible note payable
Accounts payable and accrued expenses
Deferred revenue - current
Lease liability - current
Total current liabilities
Long-term debt - less current maturities
Deferred revenue - less current portion
Lease liability - less current portion
Accrued severance payable
Deferred tax liability
Other long-term liabilities
Total liabilities
Commitments and Contingencies (note 19)
Convertible redeemable preferred stock
Preferred stock
Common stock
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Treasury stock
STOCKHOLDERS’ EQUITY
Total Powerfleet, Inc. stockholders’ equity
Non-controlling interest
Total equity
Total liabilities, convertible redeemable preferred stock, and
stockholders’ equity
$
$
$
$
$
$
17,680
309
32,493
22,272
762
7,709
81,225
-
9,249
83,487
22,908
7,820
3,760
3,225
5,761
217,435
10,312
-
26,598
6,363
2,441
45,714
11,403
4,390
5,628
4,365
4,919
636
77,055
57,565
-
376
233,521
(141,440)
(1,210)
(8,510)
82,737
78
82,815
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,466
-
-
(14,466)
-
-
-
(14,466)
-
(14,466)
$
$
$
-
-
154
-
-
(173)
(19)
-
-
-
-
-
-
83
557
621
-
-
(1,201)
13
-
(1,188)
-
41
-
-
(18)
1,152
(13)
-
-
-
-
634
-
-
634
-
634
17,680
309
32,647
22,272
762
7,536
81,206
-
9,249
83,487
22,908
7,820
3,760
3,308
6,318
218,056
10,312
-
25,397
6,376
2,441
44,526
11,403
4,431
5,628
4,365
4,901
1,788
77,042
72,031
-
376
219,055
(140,806)
(1,210)
(8,510)
68,905
78
68,983
$
217,435
$
-
$
621
$
218,056
54
The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Operations for the year ended
December 31, 2021:
Year Ended December 31, 2021 (As restated)
As Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
Revenues:
Products
Services
Total revenues
Cost of revenues:
Cost of products
Cost of services
Gross profit
Operating expenses:
Selling, general and administrative expenses
Research and development expenses
Total operating expenses
Loss from operations
Interest income
Interest expense, net
Bargain purchase – Movingdots
Other (expense) income, net
Net loss before income taxes
Income tax (expense) benefit
Net loss before non-controlling interest
Non-controlling interest
Net loss
Accretion of preferred stock
Preferred stock dividends
Net loss attributable to common stockholders
Net loss per share attributable to common
stockholders – basic and diluted
$
$
52,981
73,227
126,208
39,445
26,580
66,025
60,183
57,100
11,058
68,158
(7,975)
45
(2,764)
-
8
(10,686)
(2,607)
(13,293)
5
(13,288)
(672)
(4,112)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,518)
-
$
$
(79)
(169)
(248)
52,902
73,058
125,960
182
-
182
(430)
(604)
371
(233)
(197)
-
-
-
-
(197)
719
522
-
522
-
-
39,627
26,580
66,207
59,753
56,496
11,429
67,925
(8,172)
45
(2,764)
-
8
(10,883)
(1,888)
(12,771)
5
(12,766)
(5,190)
(4,112)
(22,068)
(0.64)
34,571
$
$
(18,072)
$
(4,518)
$
522
$
(0.52)
$
(0.13)
$
0.02
$
Weighted average common shares outstanding – basic and diluted
34,571
34,571
34,571
55
The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Operations for the year ended
December 31, 2022:
Year Ended December 31, 2022 (As restated)
As Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
Revenues:
Products
Services
Total revenues
Cost of revenues:
Cost of products
Cost of services
Gross profit
Operating expenses:
Selling, general and administrative expenses
Research and development expenses
Total operating expenses
Loss from operations
Interest income
Interest expense, net
Bargain purchase – Movingdots
Other (expense) income, net
Net loss before income taxes
Income tax (expense) benefit
Net loss before non-controlling interest
Non-controlling interest
Net loss
Accretion of preferred stock
Preferred stock dividends
Net loss attributable to common stockholders
Net loss per share attributable to common stockholders – basic and
diluted
$
$
56,313
78,844
135,157
42,636
28,350
70,986
64,171
63,001
8,964
71,965
(7,794)
71
994
-
24
(6,705)
(296)
(7,001)
(2)
(7,003)
(671)
(4,231)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,235)
-
$
$
632
123
755
56,945
78,967
135,912
(67)
-
(67)
822
491
(492)
(1)
823
-
-
-
-
823
(574)
249
-
249
-
-
42,569
28,350
70,919
64,993
63,492
8,472
71,964
(6,971)
71
994
-
24
(5,882)
(870)
(6,752)
(2)
(6,754)
(5,906)
(4,231)
(11,905)
$
(5,235)
$
249
$
(16,891)
$
$
Weighted average common shares outstanding – basic and diluted
35,393
35,393
35,393
56
(0.34)
$
(0.15)
$
0.01
$
(0.48)
35,393
The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statements of Changes in Stockholders’
Equity for the years ended December 31, 2021 and 2022, respectively:
Additional Paid-In Capital
Accumulated Deficit
CORRECTED CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’
EQUITY
Balance at December 31, 2020
Net loss attributable to common stockholders
Issuance of restricted shares
Shares issued pursuant to exercise of stock
options
Common shares issued, net of issuance costs
Stock based compensation
Balance at December 31, 2021
Net loss attributable to common stockholders
Issuance of restricted shares
Forfeiture of restricted shares
Stock based compensation
Balance at December 31, 2022
As
Reported
$ 206,499 $
(4,785)
(4)
875
26,822
4,676
$ 234,083 $
(4,902)
(5)
2
4,343
Redemption
premium
adjustment
Other
Adjustments
As
Restated
As
Reported
Redemption
premium
adjustment
(4,713) $
(4,518)
-
-
-
-
(9,231) $
(5,235)
-
-
-
- $ 201,786 $ (121,150) $
- $
-
-
(9,303)
(4)
(13,287)
-
-
-
-
875
26,822
4,676
-
-
-
- $ 224,852 $ (134,437) $
-
-
-
-
- $ 219,055 $ (141,440) $
(10,137)
(5)
2
4,343
(7,003)
-
-
-
-
-
-
-
-
- $
-
-
-
-
- $
Other
Adjustments
As
Restated
(137) $ (121,287)
(12,765)
522
-
-
-
-
-
-
-
-
385 $ (134,052)
(6,754)
249
-
-
-
-
-
-
634 $ (140,806)
$ 233,521 $
(14,466) $
57
The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Comprehensive Loss for the
years ended December 31, 2021 and 2022, respectively:
2021 (As restated)
2022 (As restated)
Year Ended December 31,
Net loss attributable to common
stockholders
Foreign currency translation adjustment
Total other comprehensive loss
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
$ (18,072) $
(4,518) $
522 $ (22,068) $ (11,905) $
(5,235) $
249 $ (16,891)
(8)
(8)
-
-
-
-
(8)
(8)
(1,601)
(1,601)
-
-
-
-
(1,601)
(1,601)
Comprehensive loss
$ (18,080) $
(4,518) $
522 $ (22,076) $ (13,506) $
(5,235) $
249 $ (18,492)
58
The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Cash Flows for the year ended
December 31, 2021:
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to cash (used in) provided by operating activities:
Year Ended December 31,
2021 (As restated)
Other
Adjustments
As
Restated
As Reported
$
(13,288)
$
522
$
(12,766)
Non-controlling interest
Gain on bargain purchase
Inventory reserve
Stock based compensation expense
Depreciation and amortization
Right-of-use assets, non-cash lease expense
Bad debt expense
Deferred income taxes
Other non-cash items
Changes in:
Accounts receivable
Inventory
Prepaid expenses and other assets
Deferred costs
Deferred revenue
Accounts payable and accrued expenses
Lease liabilities
Accrued severance payable, net
Net cash used in operating activities
Cash flows from investing activities:
Acquisitions, net of cash assumed
Purchase of investments
Capitalized software development costs
Capital expenditures
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Net proceeds from stock offering
Repayment of long-term debt
Repayment of financing lease
Short-term bank debt, net
Purchase of treasury stock upon vesting of restricted stock
Payment of preferred stock dividend
Proceeds from exercise of stock options, net
Net cash used in financing activities
Effect of foreign exchange rate changes on cash and cash equivalents
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 period
Reconciliation of cash, cash equivalents, and restricted cash, beginning of period
Cash and cash equivalents
Restricted cash
Cash, cash equivalents, and restricted cash, beginning of period
Reconciliation of cash, cash equivalents, and restricted cash, end of period
Cash and cash equivalents
Restricted cash
Cash, cash equivalents, and restricted cash, end of period
Supplemental disclosure of cash flow information:
Cash paid for:
Taxes
Interest
Noncash investing and financing activities:
Value of shares withheld pursuant to exercise of stock options
(5)
-
(22)
4,676
8,553
2,859
1,442
2,607
305
(9,643)
(6,058)
(2,918)
3,349
(2,290)
8,300
(2,741)
(145)
(5,019)
-
-
(627)
(2,771)
(3,398)
26,867
(5,571)
(138)
(270)
(794)
(4,112)
229
16,211
531
8,325
18,435
-
-
-
-
-
49
(445)
(719)
-
94
115
58
(359)
523
(160)
(49)
-
(371)
-
-
-
371
371
-
-
-
-
-
-
-
-
-
-
-
$
$
$
$
26,760
$
-
$
18,127
308
18,435
26,452
308
26,760
$
$
58
1,474
$
$
-
-
-
-
-
-
-
-
647
$
-
$
(5)
-
(22)
4,676
8,553
2,908
997
1,888
305
(9,549)
(5,943)
(2,860)
2,990
(1,767)
8,140
(2,790)
(145)
(5,390)
-
-
(627)
(2,400)
(3,027)
26,867
(5,571)
(138)
(270)
(794)
(4,112)
229
16,211
531
8,325
18,435
26,760
18,127
308
18,435
26,452
308
26,760
58
1,474
647
59
The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Cash Flows for the year ended
December 31, 2022:
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to cash (used in) provided by operating activities:
Year Ended December 31,
2022 (As restated)
Other
Adjustments
As
Restated
As Reported
$
(7,003)
$
249
$
(6,754)
Non-controlling interest
Gain on bargain purchase
Inventory reserve
Stock based compensation expense
Depreciation and amortization
Right-of-use assets, non-cash lease expense
Bad debt expense
Deferred income taxes
Other non-cash items
Changes in:
Accounts receivable
Inventory
Prepaid expenses and other assets
Deferred costs
Deferred revenue
Accounts payable and accrued expenses
Lease liabilities
Accrued severance payable, net
Net cash provided by operating activities
Cash flows from investing activities:
Acquisitions, net of cash assumed
Purchase of investments
Capitalized software development costs
Capital expenditures
Net cash used in investing activities
Cash flows from financing activities:
Net proceeds from stock offering
Repayment of long-term debt
Repayment of financing lease
Short-term bank debt, net
Purchase of treasury stock upon vesting of restricted stock
Payment of preferred stock dividend
Proceeds from exercise of stock options, net
Net cash used in financing activities
Effect of foreign exchange rate changes on cash and cash equivalents
Net decrease 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
Reconciliation of cash, cash equivalents, and restricted cash, beginning of period
Cash and cash equivalents
Restricted cash
Cash, cash equivalents, and restricted cash, beginning of period
Reconciliation of cash, cash equivalents, and restricted cash, end of period
Cash and cash equivalents
Restricted cash
Cash, cash equivalents, and restricted cash, end of period
Supplemental disclosure of cash flow information:
Cash paid for:
Taxes
Interest
Noncash investing and financing activities:
Preferred stock dividends paid in shares
$
$
$
$
2
-
149
4,343
8,262
2,756
66
134
707
(1,638)
(4,473)
(374)
1,249
(158)
(484)
(2,739)
(42)
757
-
(100)
(2,219)
(3,519)
(5,838)
-
(5,659)
(121)
5,709
(211)
-
-
(282)
(3,408)
(8,771)
26,760
-
-
-
-
-
-
-
574
-
270
-
(442)
359
(469)
(49)
-
-
492
-
-
-
(492)
(492)
-
-
-
-
-
-
-
-
-
-
-
17,989
$
-
$
26,452
308
26,760
17,680
309
17,989
$
$
63
1,308
$
$
-
-
-
-
-
-
-
-
2
-
149
4,343
8,262
2,756
66
708
707
(1,368)
(4,473)
(816)
1,608
(627)
(533)
(2,739)
(42)
1,249
-
(100)
(2,219)
(4,011)
(6,330)
-
(5,659)
(121)
5,709
(211)
-
-
(282)
(3,408)
(8,771)
26,760
17,989
26,452
308
26,760
17,680
309
17,989
63
1,308
4,231
$
--
$
4,231
60
Unaudited Financial Statements
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Balance Sheet as of March 31,
2022:
March 31, 2022 (As restated)
As Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable
Inventory, net
Deferred costs – current
Prepaid expenses and other current assets
Total current assets
Deferred costs less current portion
Fixed assets, net
Goodwill
Intangible assets, net
Right of use asset
Severance payable fund
Deferred tax asset
Other assets
Total assets
LIABILITIES
Current liabilities:
Short-term bank debt and current maturities of long-term debt
Convertible note payable
Accounts payable and accrued expenses
Deferred revenue current
Lease liability – current
Total current liabilities
Long-term debt – less current maturities
Deferred revenue – less current portion
Lease liability – less current portion
Accrued severance payable
Deferred tax liability
Other long-term liabilities
Total liabilities
Commitments and Contingencies (note 19)
$
$
$
$
$
$
20,559
308
31,861
20,313
1,416
10,716
85,173
224
8,532
83,487
24,848
9,597
4,282
4,977
4,778
225,898
6,006
-
28,777
7,168
2,718
44,669
16,258
4,466
7,128
4,857
5,305
738
83,421
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
$
$
-
-
55
-
-
-
55
-
-
-
-
-
-
-
91
146
-
-
(814)
97
-
(717)
-
-
-
-
(14)
814
83
20,559
308
31,916
20,313
1,416
10,716
85,228
224
8,532
83,487
24,848
9,597
4,282
4,977
4,869
226,044
6,006
-
27,963
7,265
2,718
43,952
16,258
4,466
7,128
4,857
5,291
1,552
83,504
Convertible redeemable preferred stock
53,859
10,414
-
64,273
STOCKHOLDERS’ EQUITY
Preferred stock
Common stock
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Treasury stock
Total Powerfleet, Inc. stockholders’ equity
Non-controlling interest
Total equity
Total liabilities, convertible redeemable preferred stock, and
stockholders’ equity
-
376
233,342
(137,366)
644
(8,480)
88,516
102
88,618
-
-
(10,414)
-
-
-
(10,414)
-
(10,414)
-
-
317
(159)
(95)
-
63
-
63
-
376
223,245
(137,525)
549
(8,480)
78,165
102
78,267
$
225,898
$
-
$
146
$
226,044
61
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Balance Sheet as of June 30,
2022:
June 30, 2022 (As restated)
As Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable
Inventory, net
Deferred costs – current
Prepaid expenses and other current assets
Total current assets
Deferred costs less current portion
Fixed assets, net
Goodwill
Intangible assets, net
Right of use asset
Severance payable fund
Deferred tax asset
Other assets
Total assets
LIABILITIES
Current liabilities:
Short-term bank debt and current maturities of long-term debt
Convertible note payable
Accounts payable and accrued expenses
Deferred revenue – current
Lease liability – current
Total current liabilities
Long-term debt – less current maturities
Deferred revenue – less current portion
Lease liability – less current portion
Accrued severance payable
Deferred tax liability
Other long-term liabilities
Total liabilities
Commitments and Contingencies (note 19)
$
$
$
$
$
$
17,703
309
33,491
23,540
1,315
9,020
85,378
-
8,333
83,487
24,022
8,463
3,610
4,395
5,063
222,751
7,794
-
29,233
7,331
2,494
46,852
13,408
4,139
6,237
4,118
5,091
647
80,492
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
$
$
-
-
(3)
-
-
(78)
(81)
-
-
-
-
-
-
(448)
(41)
(570)
-
-
(997)
-
-
(997)
-
-
-
-
(10)
997
(10)
17,703
309
33,488
23,540
1,315
8,942
85,297
-
8,333
83,487
24,022
8,463
3,610
3,947
5,022
222,181
7,794
-
28,236
7,331
2,494
45,855
13,408
4,139
6,237
4,118
5,081
1,644
80,482
Convertible redeemable preferred stock
55,074
11,678
-
66,752
STOCKHOLDERS’ EQUITY
Preferred stock
Common stock
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Treasury stock
Total Powerfleet, Inc. stockholders’ equity
Non-controlling interest
Total equity
Total liabilities, convertible redeemable preferred stock, and
stockholders’ equity
-
375
233,756
(137,484)
(1,062)
(8,485)
87,100
85
87,185
-
-
(11,678)
-
-
-
(11,678)
-
(11,678)
-
-
-
(448)
(112)
-
(560)
-
(560)
-
375
222,078
(137,932)
(1,174)
(8,485)
74,862
85
74,947
$
222,751
$
-
$
(570)
$
222,181
62
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Balance Sheet as of September
30, 2022:
September 30, 2022 (As restated)
As Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable
Inventory, net
Deferred costs - current
Prepaid expenses and other current assets
Total current assets
Deferred costs less current portion
Fixed assets, net
Goodwill
Intangible assets, net
Right of use asset
Severance payable fund
Deferred tax asset
Other assets
Total assets
LIABILITIES
Current liabilities:
Short-term bank debt and current maturities of long-term debt
Convertible note payable
Accounts payable and accrued expenses
Deferred revenue - current
Lease liability - current
Total current liabilities
Long-term debt - less current maturities
Deferred revenue - less current portion
Lease liability - less current portion
Accrued severance payable
Deferred tax liability
Other long-term liabilities
Total liabilities
Commitments and Contingencies (note 19)
$
$
$
$
$
$
16,703
309
33,352
23,572
1,025
8,868
83,829
-
8,994
83,487
23,312
7,999
3,614
3,740
5,086
220,061
9,366
-
28,818
6,523
2,464
47,171
11,914
4,208
5,793
4,148
5,182
628
79,044
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Convertible redeemable preferred stock
56,309
13,032
STOCKHOLDERS’ EQUITY
Preferred stock
Common stock
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Treasury stock
Total Powerfleet, Inc. stockholders’ equity
Non-controlling interest
Total equity
Total liabilities, convertible redeemable preferred stock, and
stockholders’ equity
-
376
233,590
(139,784)
(1,050)
(8,492)
84,640
68
84,708
-
-
(13,032)
-
-
-
(13,032)
-
(13,032)
$
$
$
-
-
39
-
-
(78)
(39)
-
-
-
-
-
-
-
184
145
-
-
(1,114)
-
-
(1,114)
-
-
-
-
(9)
1,126
3
-
-
-
-
250
(108)
-
142
-
142
16,703
309
33,391
23,572
1,025
8,790
83,790
-
8,994
83,487
23,312
7,999
3,614
3,740
5,270
220,206
9,366
-
27,704
6,523
2,464
46,057
11,914
4,208
5,793
4,148
5,173
1,754
79,047
69,341
-
376
220,558
(139,534)
(1,158)
(8,492)
71,750
68
71,818
$
220,061
$
-
$
145
$
220,206
63
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Balance Sheet as of March 31,
2023:
March 31, 2023 (As restated)
As Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable
Inventory, net
Deferred costs – current
Prepaid expenses and other current assets
Total current assets
Deferred costs less current portion
Fixed assets, net
Goodwill
Intangible assets, net
Right of use asset
Severance payable fund
Deferred tax asset
Other assets
Total assets
LIABILITIES
Current liabilities:
Short-term bank debt and current maturities of long-term debt
Convertible note payable
Accounts payable and accrued expenses
Deferred revenue – current
Lease liability – current
Total current liabilities
Long-term debt – less current maturities
Deferred revenue – less current portion
Lease liability – less current portion
Accrued severance payable
Deferred tax liability
Other long-term liabilities
Total liabilities
Commitments and Contingencies (note 19)
$
$
$
$
$
$
24,780
309
31,442
22,649
523
7,959
87,662
-
9,953
83,487
22,328
7,332
3,684
2,496
5,984
222,926
9,359
-
27,682
6,327
2,481
45,849
10,638
4,378
5,065
4,396
4,593
623
75,542
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
$
$
-
-
145
-
-
-
145
-
(12)
-
(45)
-
-
97
658
843
-
-
(1,446)
33
-
(1,413)
-
109
-
-
(9)
1,446
133
24,780
309
31,587
22,649
523
7,959
87,807
-
9,941
83,487
22,283
7,332
3,684
2,593
6,642
223,769
9,359
-
26,236
6,360
2,481
44,436
10,638
4,487
5,065
4,396
4,584
2,069
75,675
Convertible redeemable preferred stock
58,840
15,952
-
74,792
STOCKHOLDERS’ EQUITY
Preferred stock
Common stock
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Treasury stock
Total Powerfleet, Inc. stockholders’ equity
Non-controlling interest
Total equity
Total liabilities, convertible redeemable preferred stock, and
stockholders’ equity
-
376
234,425
(136,671)
(1,098)
(8,554)
88,478
66
88,544
-
-
(15,952)
-
-
-
(15,952)
-
(15,952)
-
-
-
710
-
-
710
-
710
-
376
218,473
(135,961)
(1,098)
(8,554)
73,236
66
73,302
$
222,926
$
-
$
843
$
223,769
64
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Balance Sheet as of June 30,
2023:
June 30, 2023 (As restated)
As Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable
Inventory, net
Deferred costs – current
Prepaid expenses and other current assets
Total current assets
Deferred costs less current portion
Fixed assets, net
Goodwill
Intangible assets, net
Right of use asset
Severance payable fund
Deferred tax asset
Other assets
Total assets
LIABILITIES
Current liabilities:
Short-term bank debt and current maturities of long-term debt
Convertible note payable
Accounts payable and accrued expenses
Deferred revenue – current
Lease liability – current
Total current liabilities
Long-term debt – less current maturities
Deferred revenue – less current portion
Lease liability – less current portion
Accrued severance payable
Deferred tax liability
Other long-term liabilities
Total liabilities
Commitments and Contingencies (note 19)
$
$
$
$
$
$
21,729
309
31,318
22,125
338
7,298
83,117
-
10,226
83,487
21,871
6,936
3,566
1,942
6,131
217,276
11,197
-
24,960
6,193
2,448
44,798
9,940
4,582
4,715
4,284
4,030
668
73,017
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
$
$
-
-
(39)
-
-
-
(39)
-
(65)
-
(91)
-
-
97
625
527
-
-
(1,571)
37
-
(1,534)
-
126
-
-
(54)
1,571
109
21,729
309
31,279
22,125
338
7,298
83,078
-
10,161
83,487
21,780
6,936
3,566
2,039
6,756
217,803
11,197
-
23,389
6,230
2,448
43,264
9,940
4,708
4,715
4,284
3,976
2,239
73,126
Convertible redeemable preferred stock
59,008
17,557
-
76,565
STOCKHOLDERS’ EQUITY
Preferred stock
Common stock
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Treasury stock
Total Powerfleet, Inc. stockholders’ equity
Non-controlling interest
Total equity
Total liabilities, convertible redeemable preferred stock, and
stockholders’ equity
-
377
234,015
(139,648)
(998)
(8,558)
85,188
63
85,251
-
-
(17,557)
-
-
-
(17,557)
-
(17,557)
-
-
-
418
-
-
418
-
418
-
377
216,458
(139,230)
(998)
(8,558)
68,049
63
68,112
$
217,276
$
-
$
527
$
217,803
65
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Balance Sheet as of September
30, 2023:
September 30, 2023 (As restated)
As Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable
Inventory, net
Deferred costs - current
Prepaid expenses and other current assets
Total current assets
Deferred costs less current portion
Fixed assets, net
Goodwill
Intangible assets, net
Right of use asset
Severance payable fund
Deferred tax asset
Other assets
Total assets
LIABILITIES
Current liabilities:
Short-term bank debt and current maturities of long-term debt
Convertible note payable
Accounts payable and accrued expenses
Deferred revenue – current
Lease liability – current
Total current liabilities
Long-term debt – less current maturities
Deferred revenue – less current portion
Lease liability – less current portion
Accrued severance payable
Deferred tax liability
Other long-term liabilities
Total liabilities
Commitments and Contingencies (note 19)
$
$
$
$
$
$
19,297
310
33,606
21,055
191
8,721
83,180
-
10,222
83,487
21,157
6,490
3,427
1,915
6,228
216,106
12,137
-
28,109
6,101
2,286
48,633
9,617
4,804
4,415
4,142
4,283
649
76,543
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
$
$
-
-
188
-
-
-
188
-
(119)
-
(136)
-
-
97
653
683
-
-
(1,656)
37
-
(1,619)
-
123
-
-
(21)
1,656
139
19,297
310
33,794
21,055
191
8,721
83,368
-
10,103
83,487
21,021
6,490
3,427
2,012
6,881
216,789
12,137
-
26,453
6,138
2,286
47,014
9,617
4,927
4,415
4,142
4,262
2,305
76,682
Convertible redeemable preferred stock
59,176
19,224
-
78,400
STOCKHOLDERS’ EQUITY
Preferred stock
Common stock
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Treasury stock
Total Powerfleet, Inc. stockholders’ equity
Non-controlling interest
Total equity
Total liabilities, convertible redeemable preferred stock, and
stockholders’ equity
387
233,811
(143,322)
(1,904)
(8,648)
80,324
63
80,387
-
-
(19,224)
-
-
-
(19,224)
-
(19,224)
-
-
544
-
-
544
-
544
387
214,587
(142,778)
(1,904)
(8,648)
61,644
63
61,707
$
216,106
$
-
$
683
$
216,789
66
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Operations for the
three months ended March 31, 2022 and 2023:
Revenues:
Products
Services
Total revenues
Cost of revenues:
Cost of products
Cost of services
Gross profit
Operating expenses:
Selling, general and administrative
expenses
Research and development expenses
Total operating expenses
Loss from operations
Interest income
Interest expense, net
Bargain purchase – Movingdots
Other (expense) income, net
Net loss before income taxes
Income tax (expense) benefit
Net loss before non-controlling interest
Non-controlling interest
Net loss
Accretion of preferred stock
Preferred stock dividends
Net loss attributable to common
stockholders
Net loss per share attributable to common
stockholders - basic and diluted
Weighted average common shares
outstanding - basic
Weighted average common shares
outstanding - diluted
Three Months Ended March 31, 2022
(As restated)
Three Months Ended March 31, 2023
(As restated)
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
$ 14,392 $
18,769
33,161
11,978
6,784
18,762
14,399
14,912
3,229
18,141
(3,742)
13
100
-
(1)
(3,630)
703
(2,927)
(1)
(2,928)
(168)
(1,028)
- $
-
-
127 $ 14,519 $ 12,404 $
-
127
18,769
33,288
20,435
32,839
- $
-
-
104 $ 12,508
20,344
(91)
32,852
13
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,183)
-
(67)
(67)
11,911
6,784
18,695
9,002
7,219
16,221
194
14,593
16,618
665
(492)
173
21
-
-
-
95
15,577
2,737
18,314
(3,721)
13
100
-
94
16,787
1,723
18,510
(1,892)
24
(137)
7,234
(66)
116
(3,514)
5,163
(661)
(545)
-
(545)
-
-
42
(397)
(3,472)
(1)
(3,473)
(1,351)
(1,028)
4,766
3
4,769
(168)
(1,107)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,487)
-
-
57
57
9,002
7,276
16,278
(44)
16,574
154
-
154
(198)
-
-
-
69
16,941
1,723
18,664
(2,090)
24
(137)
7,234
3
(129)
5,034
5
(392)
(124)
-
(124)
-
-
4,642
3
4,645
(1,655)
(1,107)
$
(4,124) $
(1,183) $
(545) $
(5,852) $
3,494 $
(1,487) $
(124) $
1,883
$
(0.12) $
(0.03) $
(0.02) $
(0.17) $
0.11 $
(0.06) $
(0.01) $
0.04
35,332
35,332
35,332
35,332
35,548
35,548
35,548
35,548
35,332
35,332
35,332
35,332
35,628
35,628
35,628
35,628
67
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Operations for the
three months ended June 30, 2022 and 2023:
Three Months Ended June 30, 2022
(As restated)
Three Months Ended June 30, 2023
(As restated)
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
Revenues:
Products
Services
Total revenues
Cost of revenues:
Cost of products
Cost of services
Gross profit
Operating expenses:
Selling, general and administrative
expenses
Research and development expenses
Total operating expenses
Loss from operations
Interest income
Interest expense, net
Bargain purchase – Movingdots
Other (expense) income, net
Net loss before income taxes
Income tax (expense) benefit
Net loss before non-controlling interest
Non-controlling interest
Net loss
Accretion of preferred stock
Preferred stock dividends
Net loss attributable to common
stockholders
Net loss per share attributable to common
stockholders – basic and diluted
Weighted average common shares
outstanding – basic
Weighted average common shares
outstanding – diluted
$ 14,818 $
19,776
34,594
11,336
7,028
18,364
16,230
15,817
2,001
17,818
(1,588)
15
1,493
-
3
(77)
(40)
(117)
(1)
(118)
(168)
(1,048)
- $
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,264)
-
(229) $ 14,589 $ 11,012 $
155
(74)
19,931
34,520
21,038
32,050
- $
-
-
72 $ 11,084
21,008
(30)
32,092
42
-
-
-
11,336
7,028
18,364
8,550
7,467
16,017
(74)
16,156
16,033
(220)
-
(220)
146
-
-
-
17
163
15,597
2,001
17,598
(1,442)
15
1,493
-
20
16,987
2,179
19,166
(3,133)
22
(173)
283
69
86
(2,932)
(452)
(492)
(39)
(289)
-
(289)
-
-
(406)
(1)
(407)
(1,432)
(1,048)
(2,971)
(6)
(2,977)
(168)
(1,129)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,604)
-
-
57
57
8,550
7,524
16,074
(15)
16,018
211
42
253
(268)
-
-
-
(69)
17,198
2,221
19,419
(3,401)
22
(173)
283
-
(337)
(3,269)
45
6
(292)
-
(292)
-
-
(3,263)
(6)
(3,269)
(1,772)
(1,129)
$
(1,334) $
(1,264) $
(289) $
(2,887) $
(4,274) $
(1,604) $
(292) $
(6,170)
$
(0.04) $
(0.04) $
(0.01) $
(0.08) $
(0.12) $
(0.05) $
(0.01) $
(0.17)
35,386
35,386
35,386
35,386
35,605
35,605
35,605
35,605
35,386
35,386
35,386
35,386
35,605
35,605
35,605
35,605
68
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Operations for the
six months ended June 30, 2022 and 2023:
Six Months Ended June 30, 2022
(As restated)
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
As
Reported
Six Months Ended June 30, 2023
(As restated)
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
Revenues:
Products
Services
Total revenues
Cost of revenues:
Cost of products
Cost of services
Gross profit
Operating expenses:
Selling, general and administrative
expenses
Research and development expenses
Total operating expenses
Loss from operations
Interest income
Interest expense, net
Bargain purchase – Movingdots
Other (expense) income, net
Net loss before income taxes
Income tax (expense) benefit
Net loss before non-controlling interest
Non-controlling interest
Net loss
Accretion of preferred stock
Preferred stock dividends
Net loss attributable to common
stockholders
Net loss per share attributable to common
stockholders – basic and diluted
Weighted average common shares
outstanding – basic
Weighted average common shares
outstanding – diluted
$ 29,210 $
38,545
67,755
23,314
13,812
37,126
30,629
30,729
5,230
35,959
(5,330)
28
1,593
-
2
(3,707)
663
(3,044)
(2)
(3,046)
(336)
(2,076)
- $
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,447)
-
(102) $ 29,108 $ 23,416 $
155
53
38,700
67,808
41,473
64,889
- $
-
-
177 $ 23,593
41,352
(121)
64,945
56
(67)
-
(67)
23,247
13,812
37,059
17,552
14,686
32,238
120
30,749
32,651
445
(492)
(47)
167
-
-
112
31,174
4,738
35,912
(5,163)
28
1,593
-
114
33,774
3,902
37,676
(5,025)
46
(310)
7,517
3
279
(3,428)
2,231
(1,113)
(450)
(436)
(834)
-
(834)
-
-
(3,878)
(2)
(3,880)
(2,783)
(2,076)
1,795
(3)
1,792
(336)
(2,236)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,091)
-
-
114
114
17,552
14,800
32,352
(58)
32,593
365
42
407
(465)
-
-
-
34,139
3,944
38,083
(5,490)
46
(310)
7,517
3
(465)
1,766
50
(386)
(415)
-
(415)
-
-
1,380
(3)
1,377
(3,427)
(2,236)
$
(5,458) $
(2,447) $
(834) $
(8,739) $
(780) $
(3,091) $
(415) $
(4,286)
$
(0.15) $
(0.07) $
(0.02) $
(0.25) $
0.01 $
(0.12) $
(0.01) $
(0.12)
35,359
35,359
35,359
35,359
35,577
35,577
35,577
35,577
35,359
35,359
35,359
35,359
35,670
35,577
35,577
35,577
69
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Operations for the
three months ended September 30, 2022 and 2023:
Three Months Ended September 30, 2022
(As restated)
Three Months Ended September 30, 2023
(As restated)
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
Revenues:
Products
Services
Total revenues
Cost of revenues:
Cost of products
Cost of services
Gross profit
Operating expenses:
Selling, general and administrative
expenses
Research and development expenses
Total operating expenses
Loss from operations
Interest income
Interest expense, net
Bargain purchase – Movingdots
Other (expense) income, net
Net loss before income taxes
Income tax (expense) benefit
Net loss before non-controlling interest
Non-controlling interest
Net loss
Accretion of preferred stock
Preferred stock dividends
Net loss attributable to common
stockholders
Net loss per share attributable to common
stockholders – basic and diluted
Weighted average common shares
outstanding – basic
Weighted average common shares
outstanding – diluted
$
$
14,021
20,267
34,288
9,839
7,268
17,107
17,181
16,664
1,735
18,399
(1,218)
20
(331)
-
-
(1,529)
(770)
(2,299)
(1)
(2,300)
(168)
(1,067)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,353)
-
$
419
(152)
267
$ 14,440
20,115
34,555
$ 13,147
21,048
34,195
$
(59)
59
-
9,780
7,327
17,107
8,843
8,237
17,080
267
17,448
17,115
(119)
130
11
256
-
-
-
(4)
16,545
1,865
18,410
(962)
20
(331)
-
(4)
17,988
2,384
20,372
(3,257)
23
(154)
-
(24)
252
(1,277)
(3,412)
447
(323)
(262)
699
-
699
-
-
(1,600)
(1)
(1,601)
(1,521)
(1,067)
(3,674)
-
(3,674)
(167)
(1,128)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,667)
-
$
85
(38)
47
$ 13,232
21,010
34,242
-
57
57
8,843
8,294
17,137
(10)
17,105
(211)
42
(169)
159
-
-
-
-
17,777
2,426
20,203
(3,098)
23
(154)
-
(24)
159
(3,253)
(33)
(295)
126
-
126
-
-
(3,548)
-
(3,548)
(1,834)
(1,128)
$
(3,535)
$
(1,353) $
699 $
(4,189)
$ (4,969)
$
(1,667)
$
126
$ (6,510)
$
(0.10)
$
(0.04)
$
0.02
$
(0.12)
$
(0.14)
$
(0.05)
$
0.00
$
(0.18)
35,406
35,406
35,406
35,406
35,653
35,653
35,653
35,653
35,406
35,406
35,406
35,406
35,653
35,653
35,653
35,653
70
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Operations for the
nine months ended September 30, 2022 and 2023:
Nine Months Ended September 30, 2022
(As restated)
Nine Months Ended September 30, 2023
(As restated)
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
Revenues:
Products
Services
Total revenues
Cost of revenues:
Cost of products
Cost of services
Gross profit
Operating expenses:
Selling, general and administrative
expenses
Research and development expenses
Total operating expenses
Loss from operations
Interest income
Interest expense, net
Bargain purchase - Movingdots
Other (expense) income, net
Net loss before income taxes
Income tax (expense) benefit
Net loss before non-controlling interest
Non-controlling interest
Net loss
Accretion of preferred stock
Preferred stock dividends
Net loss attributable to common
stockholders
Net loss per share attributable to common
stockholders – basic and diluted
Weighted average common shares
outstanding – basic
Weighted average common shares
outstanding – diluted
$ 43,231 $
58,812
102,043
33,152
21,081
54,233
47,810
47,393
6,965
54,358
(6,548)
48
1,262
-
1
(5,237)
(107)
(5,344)
(3)
(5,347)
(504)
(3,143)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,801)
-
$
318
3
321
$ 43,549
58,815
102,364
$ 36,563
62,521
99,084
$
(126)
59
(67)
33,026
21,140
54,166
26,394
22,923
49,317
388
48,198
49,767
327
(362)
(35)
423
-
-
108
47,720
6,603
54,323
(6,125)
48
1,262
-
109
51,763
6,285
58,048
(8,281)
69
(464)
7,517
(22)
531
(4,706)
(1,181)
(666)
(773)
(698)
(135)
-
(135)
-
-
(5,479)
(3)
(5,482)
(4,305)
(3,143)
(1,879)
(3)
(1,882)
(503)
(3,364)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,758)
-
$
262
(159)
103
$ 36,825
62,362
99,187
-
171
171
26,394
23,094
49,488
(68)
49,699
154
84
238
(306)
-
-
51,917
6,369
58,286
(8,587)
69
(464)
7,517
(22)
(306)
(1,487)
17
(681)
(289)
-
(289)
-
-
(2,168)
(3)
(2,171)
(5,261)
(3,364)
$
(8,994) $
(3,801) $
(135) $ (12,930) $
(5,749) $
(4,758) $
(289) $ (10,796)
$
(0.25) $
(0.11) $
(0.00) $
(0.37) $
(0.16) $
(0.13) $
(0.01) $
(0.30)
35,375
35,375
35,375
35,375
35,602
35,602
35,602
35,602
35,375
35,375
35,375
35,375
35,602
35,602
35,602
35,602
71
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Comprehensive Loss
for the three months ended March 31, 2022 and 2023, respectively:
2022 (As restated)
2023 (As restated)
Three Months Ended March 31,
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
$
(4,124) $
(1,183) $
(545) $
(5,852) $
3,494 $
(1,487) $
(124) $
1,883
158
158
-
-
-
-
158
158
112
112
-
-
-
-
112
112
Net loss attributable to common
stockholders
Foreign currency translation adjustment
(As Restated)
Total other comprehensive income (loss)
Comprehensive loss
$
(3,966) $
(1,183) $
(545) $
(5,694) $
3,606 $
(1,487) $
(124) $
1,995
72
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Comprehensive Loss
for the three months ended June 30, 2022 and 2023, respectively:
2022 (As restated)
2023 (As restated)
Three Months Ended June 30,
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
$
(1,334) $
(1,264) $
(289) $
(2,887) $
(4,274) $
(1,604) $
(292) $
(6,170)
(1,723)
(1,723)
-
-
-
-
(1,723)
(1,723)
100
100
-
-
-
-
100
100
Net loss attributable to common
stockholders
Foreign currency translation adjustment
(As restated)
Total other comprehensive income (loss)
Comprehensive loss
$
(3,057) $
(1,264) $
(289) $
(4,610) $
(4,174) $
(1,604) $
(292) $
(6,070)
73
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Comprehensive Loss
for the six months ended June 30, 2022 and 2023, respectively:
2022 (As restated)
2023 (As restated)
Six Months Ended June 30,
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
$
(5,458) $
(2,447) $
(834) $
(8,739) $
(780) $
(3,091) $
(415) $
(4,286)
(1,565)
(1,565)
-
-
-
-
(1,565)
(1,565)
212
212
-
-
-
-
212
212
Net loss attributable to common
stockholders
Foreign currency translation adjustment
(As restated)
Total other comprehensive income (loss)
Comprehensive loss
$
(7,023) $
(2,447) $
(834) $ (10,304) $
(568) $
(3,091) $
(415) $
(4,074)
74
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Comprehensive Loss
for the three months ended September 30, 2022 and 2023, respectively:
2022 (As restated)
2023 (As restated)
Three Months Ended September 30,
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
$
(3,535) $
(1,353) $
699 $
(4,189) $
(4,969) $
(1,667) $
126 $
(6,510)
16
16
-
-
-
-
16
16
(906)
(906)
-
-
-
-
(906)
(906)
Net loss attributable to common
stockholders
Foreign currency translation adjustment
(As restated)
Total other comprehensive income (loss)
Comprehensive loss
$
(3,519) $
(1,353) $
699 $
(4,173) $
(5,875) $
(1,667) $
126 $
(7,416)
75
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Comprehensive Loss
for the nine months ended September 30, 2022 and 2023, respectively:
2022 (As restated)
2023 (As restated)
Nine Months Ended September 30,
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
As
Reported
Redemption
Premium
Adjustment
Other
Adjustments
As
Restated
$
(8,994) $
(3,801) $
(135) $ (12,930) $
(5,749) $
(4,758) $
(289) $ (10,796)
(1,549)
(1,549)
-
-
-
-
(1,549)
(694)
(1,549)
(694)
-
-
-
-
(694)
(694)
Net loss attributable to common
stockholders
Foreign currency translation adjustment
(As restated)
Total other comprehensive loss
Comprehensive loss
$ (10,543) $
(3,801) $
(135) $ (14,479) $
(6,443) $
(4,758) $
(289) $ (11,490)
76
The following table presents the as restated balances in the unaudited Consolidated Statements of Changes in Stockholders’ Equity for the three-month periods ended March 31,
2022, June 30, 2022, and September 30, 2022:
Common Stock
Number of
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Non-
controlling
Interest
Stockholders’
Equity
Balance at December 31, 2021 (As
Reported)
Effect of Restatement
Balance at January 1, 2022 (As Restated)
Net loss attributable to common
stockholders (As restated)
Net loss attributable to non-controlling
interest
Foreign currency translation adjustment
(As restated)
Issuance of restricted shares
Forfeiture of restricted shares
Vesting of restricted stock units
Shares withheld pursuant to vesting of
restricted stock
Stock based compensation (As restated)
Balance at March 31, 2022 (As Restated)
Net loss attributable to common
stockholders (As restated)
Net loss attributable to non-controlling
interest
Foreign currency translation adjustment
(As restated)
Forfeiture of restricted shares
Shares withheld pursuant to vesting of
restricted stock
Stock based compensation (As restated)
Balance at June 30, 2022 (As Restated)
Net loss attributable to common
stockholders (As restated)
Net loss attributable to non-controlling
interest
Foreign currency translation adjustment
Issuance of restricted shares
Forfeiture of restricted shares
Shares withheld pursuant to vesting of
restricted stock
Stock based compensation
Balance at September 30, 2022 (As
Restated)
37,263 $
-
37,263 $
373 $ 234,083 $
-
(9,231)
373 $ 224,852 $
(134,437) $
385
(134,052) $
391 $
-
391 $
(8,299) $
-
(8,299) $
86 $
-
86 $
-
-
-
398
(121)
30
-
-
37,570 $
-
-
-
(24)
-
-
37,546 $
-
-
-
78
(40)
-
-
-
-
-
4
(1)
-
-
-
(2,379)
(3,473)
-
-
(4)
1
-
-
775
-
-
-
-
-
-
-
376 $ 223,245 $
(137,525) $
-
-
-
(1)
-
-
(2,480)
(407)
-
-
1
-
1,312
-
-
-
-
-
375 $ 222,078 $
(137,932) $
-
-
-
1
-
-
-
(2,589)
(1,602)
-
-
(1)
-
-
1,070
-
-
-
-
-
-
-
-
158
-
-
-
-
-
-
-
-
-
-
1
15
-
-
-
-
-
549 $
(181)
-
(8,480) $
-
-
102 $
-
-
(1,723)
-
-
-
-
-
-
1
(18)
-
-
-
(1,174) $
(5)
-
(8,485) $
-
-
85 $
92,197
(8,846)
83,351
(5,852)
1
173
-
-
-
(181)
775
78,267
(2,887)
1
(1,741)
-
(5)
1,312
74,947
-
-
16
-
-
-
-
-
-
-
-
-
(7)
-
-
(4,191)
1
(18)
-
-
-
-
1
(2)
-
-
(7)
1,070
37,584 $
376 $ 220,558 $
(139,534) $
(1,158) $
(8,492) $
68 $
71,818
77
The following table presents the total quarterly net impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statements of
Changes in Stockholders’ Equity for the three-month periods ended March 31, 2023, June 30, 2023, and September 30, 2023:
Balance at January 1, 2023 (As Restated)
Retained earnings adjustment for adoption
of ASU 2016-13
Net (loss) income attributable to common
stockholders (As restated)
Net loss attributable to non-controlling
interest
Foreign currency translation adjustment
Issuance of restricted shares
Forfeiture of restricted shares
Shares withheld pursuant to vesting of
restricted stock
Stock based compensation
Warrant issuance in connection with
acquisition
Balance at March 31, 2023 (As Restated)
Net loss attributable to common
stockholders (As restated)
Net income attributable to non-controlling
interest
Foreign currency translation adjustment
Issuance of restricted shares
Forfeiture of restricted shares
Exercise of stock options
Shares withheld pursuant to vesting of
restricted stock
Stock based compensation
Balance at June 30, 2023 (As Restated)
Net loss attributable to common
stockholders (As restated)
Net loss attributable to non-controlling
interest
Foreign currency translation adjustment
Issuance of restricted shares
Forfeiture of restricted shares
Exercise of stock options
Shares withheld pursuant to vesting of
restricted stock
Stock based compensation
Balance at September 30, 2023 (As
Restated)
Common Stock
Number of
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Non-
controlling
Interest
Stockholders’
Equity
37,605 $
376 $ 219,055 $
(140,806) $
(1,210) $
(8,510) $
78 $
68,983
-
-
-
-
75
(59)
-
-
-
37,621 $
-
-
-
162
(82)
16
-
-
37,717 $
-
-
-
982
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200
(2,761)
4,645
-
-
-
-
-
832
1,347
-
-
-
-
-
-
-
376 $ 218,473 $
(135,961) $
-
-
-
1
-
-
-
-
(2,902)
(3,269)
-
-
(1)
-
36
-
852
-
-
-
-
-
-
-
377 $ 216,458 $
(139,230) $
-
(2,962)
(3,548)
-
-
10
-
-
-
-
-
-
(10)
-
-
-
1,101
-
-
-
-
-
-
-
-
-
-
112
-
-
-
-
-
-
-
-
-
-
(44)
-
-
-
(3)
(9)
-
-
-
-
-
(1,098) $
-
(8,554) $
-
66 $
-
-
100
-
-
-
-
-
-
-
-
-
-
6
(9)
-
-
-
-
-
(998) $
(4)
-
(8,558) $
-
-
63 $
-
-
(906)
-
-
-
-
-
-
-
-
-
-
-
(90)
-
-
-
-
-
-
-
-
-
200
1,884
(3)
103
-
-
(44)
832
1,347
73,302
(6,171)
6
91
-
-
36
(4)
852
68,112
(6,510)
-
(906)
-
-
-
(90)
1,101
38,699 $
387 $ 214,587 $
(142,778) $
(1,904) $
(8,648) $
63 $
61,707
78
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Cash Flows for the
three months ended March 31, 2022 and 2023:
Three Months Ended March 31,
As
Reported
2022 (As restated)
Other
Adjustments
As
Restated
As
Reported
2023 (As restated)
Other
Adjustments
As
Restated
$
(2,928)
$
(545)
$
(3,473)
$
4,769
$
(124)
$
4,645
Cash flows from operating activities
Net (loss) income
Adjustments to reconcile net income (loss) to cash (used in)
provided by operating activities:
Non-controlling interest
Gain on bargain purchase
Inventory reserve
Stock based compensation expense
Depreciation and amortization
Right-of-use assets, non-cash lease expense
Bad debt expense
Deferred income taxes
Other non-cash items
Changes in:
Accounts receivable
Inventory
Prepaid expenses and other assets
Deferred costs
Deferred revenue
Accounts payable and accrued expenses
Lease liabilities
1
-
53
457
2,089
658
252
(703)
556
(533)
(1,929)
(1,337)
372
689
809
(631)
-
-
-
317
-
-
-
662
-
-
369
-
(149)
359
(426)
-
-
1
-
53
774
2,089
658
252
(41)
556
(164)
(1,929)
(1,486)
731
263
809
(631)
(3)
(7,234)
2
832
2,233
658
228
377
46
815
(237)
189
239
(91)
(374)
(694)
Net cash (used in) provided by operating activities
(2,125)
587
(1,538)
1,755
Cash flows from investing activities:
Acquisitions, net of cash assumed
Purchase of investments
Capitalized software development costs
Capital expenditures
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Repayment of long-term debt
Short-term bank debt, net
Purchase of treasury stock upon vesting of restricted stock
Net cash used in by financing activities
Effect of foreign exchange rate changes on cash and cash
equivalents
Net (decrease) increase in cash, cash equivalents and restricted
cash
Cash, cash equivalents and restricted cash - beginning of period
-
-
-
(610)
(610)
(1,497)
-
(181)
(1,678)
(1,480)
(5,893)
26,760
-
-
-
(492)
-
-
-
(1,102)
8,722
(100)
(680)
(1,100)
(492)
(1,102)
6,842
-
-
-
-
(1,497)
-
(181)
(1,329)
(1)
(44)
(1,678)
(1,374)
(95)
(1,575)
(123)
-
-
(5,893)
26,760
7,100
17,989
-
-
-
-
57
-
200
(5)
-
-
9
-
(274)
88
49
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3)
(7,234)
2
832
2,290
658
428
372
46
824
(237)
(85)
239
(3)
(325)
(694)
1,755
8,722
(100)
(680)
(1,100)
6,842
(1,329)
(1)
(44)
(1,374)
(123)
7,100
17,989
Cash, cash equivalents and restricted cash - end of period
$
20,867
$
-
$
20,867
$
25,089
$
-
$
25,089
Reconciliation of cash, cash equivalents, and restricted cash,
beginning of period
Cash and cash equivalents
Restricted cash
Cash, cash equivalents, and restricted cash, beginning of period
Reconciliation of cash, cash equivalents, and restricted cash, end of
period
Cash and cash equivalents
Restricted cash
Cash, cash equivalents, and restricted cash, end of period
Supplemental disclosure of cash flow information:
Cash paid for:
Taxes
Interest
Noncash investing and financing activities:
26,452
308
26,760
20,559
308
20,867
$
$
$
$
3
326
-
-
-
-
-
-
-
-
26,452
308
26,760
20,559
308
20,867
$
$
17,680
309
17,989
24,780
309
25,089
$
$
$
$
3
326
5
383
$
$
-
-
-
-
-
-
-
-
17,680
309
17,989
24,780
309
25,089
5
383
Value of warrant issued in connection with Movingdots
acquisition
$
-
$
-
$
-
$
1,347
$
-
$
1,347
79
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Cash Flows for the
six months ended June 30, 2022 and 2023:
Cash flows from operating activities
Net loss (income)
Adjustments to reconcile net (loss) income to cash (used in)
provided by operating activities:
Non-controlling interest
Gain on bargain purchase
Inventory reserve
Stock based compensation expense
Depreciation and amortization
Right-of-use assets, non-cash lease expense
Bad debt expense
Deferred income taxes
Other non-cash items
Changes in:
Accounts receivable
Inventory
Prepaid expenses and other assets
Deferred costs
Deferred revenue
Accounts payable and accrued expenses
Lease liabilities
Accrued severance payable, net
Six Months Ended June 30,
As
Reported
(3,046)
$
2022 (As restated)
Other
Adjustments
(834)
$
As
Restated
(3,880)
$
As
Reported
1,792
$
2023 (As restated)
Other
Adjustments
(415)
$
As
Restated
1,377
$
2
-
119
2,086
4,133
1,382
(364)
(663)
604
(2,911)
(5,410)
(412)
696
533
1,856
(1,335)
30
-
-
-
-
-
-
1,113
-
428
-
61
359
(523)
-
-
-
2
-
119
2,086
4,133
1,382
(364)
450
604
(2,483)
(5,410)
(351)
1,055
10
1,856
(1,335)
30
3
(7,517)
375
1,684
4,498
1,318
826
398
73
(37)
152
500
424
(53)
(1,840)
(1,344)
88
-
-
-
-
114
-
200
(50)
-
193
-
(241)
-
108
49
-
-
3
(7,517)
375
1,684
4,612
1,318
1,026
348
73
156
152
259
424
55
(1,791)
(1,344)
88
Net cash (used in) provided by operating activities
(2,700)
604
(2,096)
1,340
(42)
1,298
Cash flows from investing activities:
Acquisitions, net of cash assumed
Purchase of investments
Capitalized software development costs
Capital expenditures
-
-
-
(2,013)
-
-
-
(492)
-
-
-
(2,505)
8,722
(100)
(1,677)
(2,108)
Net cash (used in) provided by investing activities
(2,013)
(492)
(2,505)
4,837
Cash flows from financing activities:
Repayment of long-term debt
Short-term bank debt, net
Purchase of treasury stock upon vesting of restricted stock
Payment of preferred stock dividend
Proceeds from exercise of stock options
Net cash used in financing activities
(2,897)
2,330
(186)
-
-
(753)
-
-
-
-
-
-
(2,897)
2,330
(186)
-
-
(2,658)
2,736
(48)
(1,128)
36
(753)
(1,062)
Effect of foreign exchange rate changes on cash and cash
equivalents
Net (decrease) increase in cash, cash equivalents and restricted
cash
Cash, cash equivalents and restricted cash - beginning of period
(3,282)
(112)
(3,394)
(1,066)
(8,748)
26,760
-
-
(8,748)
26,760
4,049
17,989
-
-
-
42
42
-
-
-
-
-
-
-
-
-
8,722
(100)
(1,677)
(2,066)
4,879
(2,658)
2,736
(48)
(1,128)
36
(1,062)
(1,066)
4,049
17,989
Cash, cash equivalents and restricted cash - end of period
$
18,012
$
-
$
18,012
$
22,038
$
-
$
22,038
Reconciliation of cash, cash equivalents, and restricted cash,
beginning of period
Cash and cash equivalents
Restricted cash
Cash, cash equivalents, and restricted cash, beginning of period
Reconciliation of cash, cash equivalents, and restricted cash, end of
period
Cash and cash equivalents
Restricted cash
Cash, cash equivalents, and restricted cash, end of period
Supplemental disclosure of cash flow information:
Cash paid for:
Taxes
Interest
26,452
308
26,760
17,703
309
18,012
$
$
$
$
48
639
-
-
-
-
-
-
-
-
26,452
308
26,760
17,703
309
18,012
$
$
17,680
309
17,989
21,729
309
22,038
$
$
$
$
48
639
106
621
$
$
-
-
-
-
-
-
-
-
17,680
309
17,989
21,729
309
22,038
106
621
Noncash investing and financing activities:
Value of warrant issued in connection with Movingdots
acquisition
$
-
$
-
$
-
$
1,347
$
-
$
1,347
80
The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Cash Flows for the
nine months ended September 30, 2022 and 2023:
Nine Months Ended September 30,
As
Reported
(5,347)
$
2022 (As Restated)
Other
Adjustments
(135)
$
As
Restated
(5,482)
$
As
Reported
(1,882)
$
2023 (As Restated)
Other
Adjustments
(289)
$
As
Restated
(2,171)
$
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to cash (used in) provided by
operating activities:
Non-controlling interest
Gain on bargain purchase
Inventory reserve
Stock based compensation expense
Depreciation and amortization
Right-of-use assets, non-cash lease expense
Bad debt expense
Deferred income taxes
Other non-cash items
Changes in:
Accounts receivable
Inventory
Prepaid expenses and other assets
Deferred costs
Deferred revenue
Accounts payable and accrued expenses
Lease liabilities
Accrued severance payable, net
3
-
177
3,156
6,152
2,071
102
107
660
(3,025)
(5,544)
(761)
986
(197)
1,717
(2,034)
63
-
-
-
-
-
-
-
666
-
386
-
(164)
359
(523)
12
-
-
3
-
177
3,156
6,152
2,071
102
773
660
(2,639)
(5,544)
(925)
1,345
(720)
1,729
(2,034)
63
3
(7,517)
619
2,785
6,926
1,900
1,161
674
172
(3,006)
(2,260)
235
571
113
1,124
(1,941)
91
Net cash used in operating activities
(1,714)
601
(1,113)
(232)
Cash flows from investing activities:
Acquisitions, net of cash assumed
Purchase of investments
Capitalized software development costs
Capital expenditures
-
-
-
(4,001)
-
-
-
(492)
-
-
-
(4,493)
8,722
(100)
(2,727)
(2,626)
Net cash (used in) provided by investing activities
(4,001)
(492)
(4,493)
3,269
Cash flows from financing activities:
Repayment of long-term debt
Short-term bank debt, net
Purchase of treasury stock upon vesting of restricted stock
Payment of preferred stock dividend
Proceeds from exercise of stock options
Net cash used in financing activities
(4,279)
3,949
(193)
-
-
(523)
-
-
-
-
-
(4,279)
3,949
(193)
-
-
(3,985)
4,995
(138)
(2,257)
36
(523)
(1,349)
Effect of foreign exchange rate changes on cash and cash
equivalents
Net (decrease) increase in cash, cash equivalents and restricted
cash
Cash, cash equivalents and restricted cash - beginning of period
(3,510)
(109)
(3,619)
(70)
(9,748)
26,760
-
-
(9,748)
26,760
1,618
17,989
-
-
-
-
171
-
200
(17)
-
(36)
-
(269)
106
49
-
-
(85)
-
-
-
85
85
-
-
-
-
-
-
-
-
-
3
(7,517)
619
2,785
7,097
1,900
1,361
657
172
(3,042)
(2,260)
(34)
571
219
1,173
(1,941)
91
(317)
8,722
(100)
(2,727)
(2,541)
3,354
(3,985)
4,995
(138)
(2,257)
36
(1,349)
(70)
1,618
17,989
Cash, cash equivalents and restricted cash - end of period
$
17,012
$
-
$
17,012
$
19,607
$
-
$
19,607
Reconciliation of cash, cash equivalents, and restricted cash,
beginning of period
Cash and cash equivalents
Restricted cash
Cash, cash equivalents, and restricted cash, beginning of period
Reconciliation of cash, cash equivalents, and restricted cash, end of
period
Cash and cash equivalents
Restricted cash
Cash, cash equivalents, and restricted cash, end of period
Supplemental disclosure of cash flow information:
Cash paid for:
Taxes
Interest
26,452
308
26,760
16,703
309
17,012
$
$
$
$
52
945
-
-
-
-
-
-
-
-
26,452
308
26,760
16,703
309
17,012
$
$
17,680
309
17,989
19,297
310
19,607
$
$
$
$
52
945
120
921
$
$
-
-
-
-
-
-
-
-
17,680
309
17,989
19,297
310
19,607
120
921
Noncash investing and financing activities:
Value of warrant issued in connection with Movingdots
acquisition
$
-
$
-
$
-
$
1,347
$
-
$
1,347
81
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[A] Principles of consolidation:
The consolidated financial statements include the accounts of Powerfleet, Inc. and its subsidiaries (which, as noted above, are collectively referred to herein as the
“Company”). All material intercompany balances and transactions have been eliminated in consolidation.
[B] Use of estimates:
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. The Company continually evaluates estimates used in the preparation of the financial statements for reasonableness. The
most significant estimates relate to realization of deferred tax assets, accounting for uncertain tax positions, the impairment of intangible assets, including goodwill,
capitalized software development costs, market-based stock-based compensation costs, and assumptions used in business combinations. Actual results could differ
from those estimates.
As of December 31, 2023, the impact of global uncertainties continues to unfold. As a result, many of our estimates and assumptions required increased judgment and
carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change materially in
future periods.
[C] Cash and cash equivalents:
The Company considers all highly liquid debt instruments with an original maturity of three months or less when purchased to be cash equivalents unless they are
legally or contractually restricted. The Company’s cash and cash equivalent balances exceed Federal Deposit Insurance Corporation (“FDIC”) and other local
jurisdictional limits. Restricted cash at December 31, 2022 and 2023 consists of cash held in escrow for purchases from a vendor.
82
[D] Accounts receivable and allowance for credit losses:
Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by
operating activities in the consolidated statements of cash flows. The Company maintains an allowance for credit losses against its accounts receivable for potential
losses.
The Company’s receivables were evaluated to determine an appropriate allowance for credit losses. For trade receivables, the Company’s historical collections were
analyzed by the number of days past due to determine the uncollectible rate in each range of days past due and considerations of any changes expected in the future.
The estimate of the allowance for credit losses is charged to the allowance for credit losses based on the age of receivables multiplied by the historical uncollectible
rate for the range of days past due or earlier if the account is deemed uncollectible for other reasons. Recoveries of amounts previously charged as uncollectible are
credited to the allowance for credit losses.
Accounts receivable is net of an allowance for credit losses in the amount of $2,567 and $2,797 in 2022 and 2023, respectively. The Company does not have any off-
balance sheet credit exposure related to its customers.
An analysis of the allowance for credit losses for the period ended December 31, 2023 is as follows:
Allowance for credit losses, December 31, 2022
Adjustment for adoption of ASU 2016-13
Current period provision for expected credit losses
Write-offs charged against the allowance
Foreign currency translation
Allowance for credit losses, December 31, 2023
$
$
2,567
(200)
1,767
(1,473)
136
2,797
During the year ended December 31, 2023, the change in the allowance for credit losses was due to the change in the age of trade receivables, offset by write-offs of
bad debts.
[E] Revenue recognition:
The Company and its subsidiaries generate revenue from sales of systems and products and from customer SaaS and hosting infrastructure fees. Revenue is measured
as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes the
Company collects concurrently with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are
recognized as expense. The expected costs associated with the Company’s base warranties continue to be recognized as an expense when the products are sold (see
Note 13).
Revenue is recognized when performance obligations under the terms of a contract with the customer are satisfied. Product sales are recognized at a point in time
when title transfers, when the products are shipped, or when control of the system is transferred to the customer, which usually is upon delivery of the system and
when contractual performance obligations have been satisfied. For products which are not distinct to the customer separate from the SaaS services provided, the
Company considers both hardware and SaaS services a bundled performance obligation. Under the applicable accounting guidance, all of the Company’s billings for
future services are deferred and classified as a current and long-term liability. The deferred revenue is recognized over the service contract life, ranging from one to
five years, beginning at the time that a customer acknowledges acceptance of the equipment and service. Payment terms are generally 30 days after invoice date.
The Company recognizes revenue for remotely hosted SaaS agreements and post-contract maintenance and support agreements beyond our standard warranties over
the life of the contract. Revenue is recognized ratably over the service periods and the cost of providing these services is expensed as incurred. Amounts invoiced to
customers which are not recognized as revenue are classified as deferred revenue and classified as short-term or long-term based upon the terms of future services to
be delivered. Deferred revenue also includes prepayment of extended maintenance, hosting and support contracts.
The Company earns other service revenues from installation services, training and technical support services which are short-term in nature and revenue for these
services is recognized at the time of performance when the service is provided.
The Company also derives revenue from leasing arrangements. Such arrangements provide for monthly payments covering product or system sale, maintenance,
support and interest. These arrangements meet the criteria to be accounted for as operating or sales-type leases. Accordingly, for sales-type leases an asset is
established for the “sales-type lease receivable” at the present value of the expected lease payments and revenue is deferred and recognized over the service contract,
as described above. Maintenance revenues and interest income are recognized monthly over the lease term.
83
The Company’s contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance
obligation based on its relative standalone selling price (“SSP”). Judgment is required to determine the SSP for each distinct performance obligation. The Company
generally determines standalone selling prices based on observable prices charged to customers. Significant pricing practices taken into consideration include the
Company’s discounting practices, the size and volume of its transactions, the customer demographic, price lists, its go-to-market strategy and historical and current
sales and contract prices. As the Company’s go-to-market strategies evolve, it may modify its pricing practices in the future, which could result in changes to SSP.
In certain cases, the Company is able to establish SSP based on observable prices of products or services sold separately in comparable circumstances to similar
customers. The Company uses a single amount to estimate SSP when it has observable prices. If SSP is not directly observable, for example when pricing is highly
variable, the Company uses a range of SSP. The Company determines the SSP range using information that may include pricing practices or other observable inputs.
The Company typically has more than one SSP for individual products and services due to the stratification of those products and services by customer size.
The Company recognizes an asset for the incremental costs of obtaining the contract arising from the sales commissions to employees because the Company expects to
recover those costs through future fees from the customers. The Company amortizes the asset over one to five years because the asset relates to the services transferred
to the customer during the contract term of one to five years.
The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts
for which the Company recognizes revenue at the amount to which the Company has the right to invoice for services performed.
[F] Deferred costs:
Deferred product costs consist of Powerfleet for Logistics equipment costs deferred in accordance with our revenue recognition policy. The Company evaluates the
realizability of the carrying amount of the deferred contract costs. To the extent the carrying value of the deferred contract costs exceeds the contract revenue, an
impairment loss will be recognized.
[G] Inventory:
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the “moving average” cost method or the first-in first-out (“FIFO”) method.
Inventory consists of components, work in process and finished products.
Inventory valuation reserves are established in order to report inventories at the lower of cost or net realizable value in the consolidated balance sheet. The
determination of inventory valuation reserves requires management to make estimates and judgments on the future salability of inventories. Valuation reserves for
obsolete and slow-moving inventory are estimated based on assumptions of future sales forecasts, product life cycle expectations, the impact of new product
introductions, production requirements, and specific identification of items, such as product discontinuance or engineering/material changes and by comparing the
inventory levels to historical usage rates.
[H] Fixed assets and depreciation:
Fixed assets are recorded at cost, net of accumulated depreciation. Depreciation and amortization are recognized using the straight-line method over the estimated
useful lives of the assets. The following table provides the range of estimated useful lives used for each asset type:
Computer software
Installed products
Computers and electronic equipment
Furniture and fixtures
Leasehold improvements
Useful Life
(years)
3 - 5
3 - 5
3 - 10
5 - 7
Shorter of useful life or lease term
84
[I] Long-lived assets:
Long-lived assets, which includes definite lived intangible assets and fixed assets, are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is assessed by a comparison of the carrying amount of the
assets to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets and would be charged to earnings. Fair value is determined
through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.
[J] Goodwill and intangibles:
Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill and intangible assets deemed to have
indefinite lives are not amortized and are tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. Intangible assets other than goodwill are amortized over their useful lives unless the lives are determined to be indefinite.
Intangible assets are carried at cost, less accumulated amortization. Intangible assets consist of trademarks and trade name, patents, customer relationships, software to
be sold or leased, and other intangible assets. Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below the operating
segment. The Company operates in one operating segment which is its only reporting unit. The Company tests its goodwill for impairment annually, which is the first
day of the Company’s fourth quarter or when an indicator of impairment exists, by comparing the fair value of the reporting unit to its carrying value.
In the evaluation of goodwill for impairment, the Company has the option to perform a qualitative assessment to determine whether further impairment testing is
necessary or to perform a quantitative assessment by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Under the qualitative
assessment, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less
than its carrying amount. By eliminating “Step 2” from the goodwill impairment test, the quantitative analysis of goodwill will result in an impairment loss for the
amount that the carrying value of the reporting unit exceeds its fair value which is limited to the total amount of goodwill allocated to the reporting unit.
The Company performed a quantitative assessment whereby the fair value of the reporting unit is calculated using a market approach and a discounted cash flow
method, as a form of the income approach. The market approach includes the use of comparative revenue and adjusted EBITDA multiples to complement discounted
cash flow results. The discounted cash flow method is based on the present value of the projected cash flows and a terminal value. The terminal value represents the
expected normalized future cash flows of the reporting unit beyond the cash flows from the discrete projection period. The fair value of the reporting unit is calculated
based on the sum of the present value of the cash flows from the discrete period and the present value of the terminal value. The discount rate represented our estimate
of the WACC, or expected return, that a marketplace participant would have required as of the valuation date. The application of our goodwill impairment test required
key assumptions underlying our valuation model.
The discounted cash flow analysis factored in assumptions on discount rates and terminal growth rates to reflect risk profiles, as well as revenue and cost growth
relative to history and market trends and expectations. The market multiples approach incorporated judgment involved in the selection of comparable public company
multiples and benchmarks. The selection of companies and multiples was influenced by differences in growth and profitability, and volatility in market prices of peer
companies. These valuation inputs are inherently judgmental, and an adverse change in one or a combination of these inputs could trigger a goodwill impairment loss
in the future. In connection with the Company’s goodwill impairment testing as of October 1, 2023, the estimated fair value exceeded its carrying value by
approximately 6%.
For the years ended December 31, 2021, 2022 and 2023, the Company did not incur an impairment charge.
[K] Product warranties:
The Company typically provides a 1 – 5-year warranty on its products. Estimated future warranty costs are accrued in the period that the related revenue is recognized.
These estimates are derived from historical data and trends of product reliability and costs of repairing and replacing defective products.
[L] Research and development:
Research and development costs are charged to expense as incurred and consists primarily of salaries and related expenses, supplies and contractor costs. Research and
development costs were $11,429 (as restated), $8,472 (as restated), and $8,380 in 2021, 2022 and 2023, respectively.
[M] Patent costs:
Costs incurred in connection with acquiring patent rights are charged to expense as incurred.
85
[N] Concentrations of credit risk:
Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash and cash equivalents, trade
receivables and trade payables.
The Company’s cash and cash equivalents are invested primarily in deposits with major banks worldwide. Generally, these deposits may be redeemed upon demand
and, therefore, bear low risk. Management believes that the financial institutions that hold the Company’s investments have a high credit rating.
For the years ended December 31, 2023, 2022, and 2021, there were no customers who generated revenues greater than 10% of the Company’s consolidated total
revenues or generated greater than 10% of the Company’s consolidated accounts receivable.
[O] Benefit plan:
The Company maintains a retirement plan under Section 401(k) of the Internal Revenue Code, which covers all eligible employees. All employees with U.S. source
income are eligible to participate in the plan immediately upon employment. The Company did not make any contributions to the plan during the year ended
December 31, 2021. In 2022 and 2023, the Company contributed $285 and $379, respectively, to the plan.
[P] Severance pay:
The liability of the Company’s subsidiaries in Israel for severance pay is calculated pursuant to Israel’s Severance Pay Law 5273-1963 (the “Severance Law”) based
on the most recent salary of the employees multiplied by the number of years of employment as of balance sheet date and are presented on an undiscounted basis.
Employees are entitled to one month’s salary for each year of employment, or a portion thereof. The liability for the Company and its subsidiaries in Israel is fully
provided by monthly deposits with insurance policies and by accrual. The value of these policies is recorded as an asset in the Company’s balance sheet.
The deposited funds may be withdrawn only upon the fulfillment of the obligation pursuant to the Severance Law or labor agreements. The value of the deposited
funds is based on the cash surrendered value of these policies, and includes profits or losses accumulated to balance sheet date.
Some of the Company’s employees are subject to Section 14 of the Severance Law and the General Approval of the Labor Minister dated June 30, 1998, issued in
accordance to the said Section 14, mandating that upon termination of such employees’ employment, all the amounts accrued in their insurance policies shall be
released to them. The severance pay liabilities and deposits covered by these plans are not reflected in the balance sheet as the severance pay risks have been
irrevocably transferred to the severance funds.
[Q] Stock-based compensation:
The Company accounts for stock-based employee compensation for all share-based payments, including grants of stock options and restricted stock, as an operating
expense based on their fair values on the grant date. The Company recorded stock-based compensation expense of $4,416, $4,343, and $3,908 for the years ended
December 31, 2021, 2022 and 2023, respectively.
The Company estimates the fair value of share-based option awards on the grant date using an option pricing model. The value of the portion of the award that is
ultimately expected to vest is recognized as expense over the requisite service period in the Company’s consolidated statement of operations. The Company estimates
forfeitures at the time of grant in order to estimate the amount of share-based awards that will ultimately vest. The estimate is based on the Company’s historical rates
of forfeitures. Estimated forfeitures are revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
86
[R] Income taxes:
The Company uses the asset and liability method of accounting for deferred income taxes. Deferred income taxes are measured by applying enacted statutory rates to
net operating loss carryforwards and to the differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets are reduced, if
necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company recognizes uncertainty in income taxes in the financial statements using a recognition threshold and measurement attribute of a tax position taken or
expected to be taken in a tax return. The Company applies the “more-likely-than-not” recognition threshold to all tax positions, commencing at the adoption date of the
applicable accounting guidance, which resulted in no unrecognized tax benefits as of such date. Additionally, there have been no unrecognized tax benefits subsequent
to adoption. The Company has opted to classify interest and penalties that would accrue according to the provisions of relevant tax law as selling, general, and
administrative expenses and incomes taxes, respectively, in the consolidated statement of operations. For the years ended December 31, 2021, 2022 and 2023, interest
and penalties were immaterial. The Company elected to account for the U.S. tax on its Global Intangible Low-Taxed Income (“GILTI”) from its foreign subsidiaries as
a period cost and, therefore included GILTI expense in its effective tax rate calculation.
[S] Fair value of financial instruments:
The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a
brief description of those levels:
● Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities
● Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets
or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
● Level 3: Unobservable inputs that reflect the reporting entity’s estimates of market participant assumptions
The Company’s cash and cash equivalents and investments in securities are carried at fair value. The carrying value of financing receivables approximates fair value
due to the interest rate implicit in the instruments approximating current market rates. The carrying value of accounts receivables, accounts payable and accrued
liabilities and short-term bank debt approximates their fair values due to the short period to maturity of these instruments. The fair value of the Company’s debt is
based on observable relevant market information and future cash flows discounted at current rates, which are Level 2 measurements.
Debt
[T] Advertising and marketing expense:
December 31, 2023
Carrying Amount
$
21,091 $
Fair Value
20,919
Advertising and marketing costs are expensed as incurred. Advertising and marketing expense for the years ended December 31, 2021, 2022 and 2023 amounted to
$1,185, $1,130 (as restated), and $2,300, respectively.
[U] Foreign currency:
The Company’s reporting currency is the U.S dollar (“USD”). For businesses where the majority of the revenues are generated in USD or linked to the USD and a
substantial portion of the costs are incurred in USD, the Company’s management believes that the USD is the primary currency of the economic environment and thus
their functional currency. Due to the fact that Argentina has been determined to be highly inflationary, the financial statements of our subsidiary in Argentina have been
remeasured as if its functional currency was the USD. The Company also has foreign operations where the functional currency is the local currency. For these
operations, assets and liabilities are translated using the end-of-period exchange rates and revenues, expenses and cash flows are translated using average rates of
exchange for the period. Equity is translated at the rate of exchange at the date of the equity transaction. Translation adjustments are recognized in stockholders’ equity
as a component of accumulated other comprehensive income (loss). Net translation gains (losses) from the translation of foreign currency are $(8), $(1,601) and $594
at December 31, 2021, 2022 and 2023, respectively, which are included in comprehensive loss in the Consolidated Statement of Changes in Stockholders’ Equity.
87
Foreign currency transaction gains and losses related to operational expenses denominated in a currency other than the functional currency are included in determining
net income or loss. Foreign currency transaction gains (losses) for the years ended December 31, 2021, 2022 and 2023 of $(128), $(847), and $277, respectively, are
included in selling, general and administrative expenses in the Consolidated Statement of Operations. Foreign currency transaction gains (losses) related to long-term
debt of $810, $2,689 and $591, for the years ended December 31, 2021, 2022 and 2023, respectively, are included in interest expense in the Consolidated Statement of
Operations.
[V] Commitments and contingencies:
From time to time, the Company is involved in various litigation matters involving claims incidental to its business and acquisitions, including employment matters,
acquisition related claims, patent infringement and contractual matters, among other issues. While the outcome of any such litigation matters cannot be predicted with
certainty, management currently believes that the outcome of these proceedings, including the matters described below, either individually or in the aggregate, will not
have a material adverse effect on its business, results of operations or financial condition. The Company records reserves related to legal matters when losses related to
such litigation or contingencies are both probable and reasonably estimable.
[W] Recently issued accounting pronouncements:
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280):
Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which requires additional operating segment disclosures in annual and interim consolidated
financial statements. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and for interim periods beginning after December 15, 2024 on a
retrospective basis, with early adoption permitted. The Company is evaluating the effect of adopting ASU 2023-07.
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-
09”), which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and
modifies other income tax-related disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a retrospective or prospective basis.
The Company is evaluating the effect of adopting ASU 2023-09.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments,” which
amends the guidance on measuring credit losses on financial assets held at amortized cost. The amendment is intended to address the issue that the previous “incurred
loss” methodology was restrictive for an entity’s ability to record credit losses based on not yet meeting the “probable” threshold. The new language will require these
assets to be valued at amortized cost presented at the net amount expected to be collected with a valuation provision. This updated standard is effective for fiscal years
beginning after December 15, 2022. The Company adopted ASU No. 2016-13 on January 1, 2023. The adoption of the standard did not result in a material impact on
the consolidated financial statements.
[X] Business Combinations
In accordance with ASC 805, Business Combinations (ASC 805), the Company recognizes the tangible and intangible assets acquired and liabilities assumed based on
their estimated fair values. Determining these fair values requires management to make significant estimates and assumptions, especially with respect to intangible
assets.
The Company recognizes identifiable assets acquired and liabilities assumed at their acquisition date fair value. During the measurement period, which may be up
to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill or
bargain purchase to the extent that it identifies adjustments to the preliminary fair values. Upon the conclusion of the measurement period or final determination of the
values of assets acquired or liabilities assumed, any subsequent adjustments are recorded to the consolidated statements of operations.
[Y] Segment Information:
The Company has a single operating and reportable segment. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial
information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. The Company
derives its revenue from the sale of systems and products and from customer SaaS and hosting infrastructure fees (see Note 17 – Segment Information).
88
NOTE 4 – ACQUISITION
On March 6, 2023, the Company entered into a share purchase and transfer agreement (the “Movingdots Agreement”) with Swiss Re Reinsurance Holding Company Ltd
(“Swiss Re”), pursuant to which the Company would acquire all of the outstanding shares of Movingdots GmbH (“Movingdots”), a wholly owned subsidiary of Swiss Re, for
consideration consisting of €1 and the issuance by the Company of a ten-year warrant to purchase 800,000 shares of the Company’s common stock at an exercise price of $7.00
per share (the “Swiss Re Warrants”) with fair value of approximately $1,347 at March 31, 2023 and noncash consideration in the form of a nonexclusive irrevocable, perpetual,
fully paid-up, royalty free license agreement between Movingdots and Swiss Re for certain of the acquired intellectual property (the “Movingdots Acquisition”). The
Movingdots Acquisition was consummated on March 31, 2023 (the “Movingdots Closing”).
As a result of the Movingdots Acquisition, Movingdots, a German company providing insurance telematics and sustainable mobility solutions, became a direct, wholly owned
subsidiary of Powerfleet. Movingdots’ end-to-end telematics app solution will enhance Powerfleet’s software-as-a-service (“SaaS”)-based fleet intelligence platform, Unity,
with additional customization capabilities and insurance risk insights. Movingdots’ expertise in safety and sustainability aligns with Unity’s focus on data-powered applications.
The Movingdots Acquisition also strengthens Powerfleet’s global reach, particularly in Europe. Revenue and net loss of Movingdots since the Movingdots Closing included in
the consolidated income statement was $523 and $(3,808), respectively.
As part of the Movingdots Agreement Swiss Re was also obligated to (i) transfer certain intellectual property rights from Swiss Re to Movingdots, (ii) enter into a distribution
agreement pursuant to which Swiss Re is allowed to promote the Movingdots solutions, and (iii) grant a license agreement between Swiss Re’s affiliates and Movingdots.
The Swiss Re Warrants were valued using the Black-Scholes Model using the following assumptions at the date of issuance:
Expected volatility
Expected term (in years)
Risk free interest rate
Dividend yield
Fair value per share
Purchase Price Allocation
50%
10
3.50%
0%
1.68
$
The Movingdots Acquisition met the criteria for a business combination to be accounted for using the acquisition method under ASC 805, Business Combinations (“ASC 805”),
with the Company identified as the legal and the accounting acquirer. The Company recognized approximately $500 of acquisition-related costs which were expensed in the
consolidated statement of operations for the year ended December 31, 2023.
The following table details the allocation of the purchase price to the assets acquired and liabilities assumed in connection with the acquisition of Movingdots:
Consideration:
Cash
Fair value of Powerfleet warrants on March 31, 2023
Total consideration
Assets acquired:
Cash
Accounts receivable
Prepaid expenses
Other assets
Inventory
Fixed assets
Total assets acquired
Liabilities assumed:
Accounts payable and accrued expenses
Total liabilities assumed
Total identifiable net assets acquired
Gain on bargain purchase
Purchase price consideration
89
$
$
$
$
-
1,347
1,347
8,722
247
103
270
96
1,889
11,327
946
946
10,381
(9,034)
1,347
The fair value estimates of the assets acquired and liabilities assumed, including fixed assets and accounts payable and accrued expenses, were subject to adjustments through
the initial measurement period. As of December 31, 2023, the measurement period was complete and an adjustment of approximately $1,500 was recorded to increase the fixed
assets above for valuation of intellectual property, internal use software, and adjustments of an approximate $300 increase in net assets acquired related primarily to reductions
in accounts payable and accrued expenses. Adjustments resulted in an increase to the gain on bargain purchase. Determining the fair values of the assets and liabilities of
Movingdots required certain assumptions and judgment.
The intellectual property was valued using the replacement method. Since this asset does not directly generate revenue (i.e., it is intended to support other revenue-generating
assets and its utility is premised on avoided operating costs), the fair value analysis considers the costs that would be incurred to recreate the intellectual property in the event
that the intellectual property did not exist (or the agreement to license the intellectual property did not exist). The replacement cost method utilized assumptions on the length of
time expected to be incurred to recreate the intellectual property, the amount and cost of labor plus a 30% obsolescence factor, and 20% estimated developers profit.
All other assets and liabilities acquired, as detailed in the allocation chart above, were valued at fair value based on their short-term nature.
Consistent with the requirements of ASC 805, the Company assessed whether all assets acquired and liabilities assumed have been appropriately identified, measured and
recognized, and performed re-measurements to verify that the consideration paid, assets acquired and liabilities assumed have been properly valued. After applying the
requirements of ASC 805-30-25-4, the Company recognized a gain on bargain purchase as the estimated fair value of the identifiable net assets acquired exceeded the purchase
consideration transferred by approximately $9,034. Management believes that the recognized gain on bargain purchase represents the best estimates of the economic effect of
the Movingdots Acquisition based on all information that was available and existed as of the dates the financial statements were issued.
The gain on bargain purchase primarily resulted from Swiss Re’s motivation to divest its investment in Movingdots and its telematics business, which was deemed a non-core
business of Swiss Re on a go-forward basis. The sale of Movingdots was not subject to a competitive bidding process. Under the Movingdots Agreement, Swiss Re also agreed
to make a cash injection into Movingdots prior to the Movingdots Closing in a form of additional paid in capital to ensure Movingdots had available cash in the amount of
€8,000 to be used to ensure the liquidity of Movingdots and for broader combined business activities.
If the Company makes an on-sale transfer of any shares of Movingdots that were acquired in connection with the Movingdots Acquisition at any time between the signing date
of the Movingdots Agreement and through 12 months after the Movingdots Closing, to any third-party purchaser (an “on-sale transfer”), for an amount that is in excess of the
purchase price consideration transferred, then the Company shall pay Swiss Re an amount in cash (“on sale compensation”) equal to (i) €8,000, plus (ii) the difference between
such on-sale transfer price less the purchase price net of the net present value of the Swiss Re Warrants. The Company does not currently intend to enter into an on-sale transfer.
Management views that the insurance telematics and sustainability are important spaces for the Company to have propositions to enable future strategic value, supporting the
more evolved, IOT data-rich mass subscription space. The acquisition of Movingdots and its business will, among other things:
● open strategic relationships with some key customers such as Mercedes, BMW and Vodafone;
● provide greater go-to-market opportunity to the Company with the European beachhead for future regional expansion, customer acquisition tool to upsell the
Company’s portfolio into German and European markets, and maintain a distribution channel and partnership with Swiss Re; and
● provide the Company with access to a team with technical skillsets across application development and management, cloud platform development, user
experience/user interface design development and technical product management;
The following table represents the unaudited combined pro forma revenue and earnings for the annual periods ended December 31, 2022 and 2023:
Revenues
Operating loss
Net loss per share – basic and diluted
Revenues
Operating loss
Net loss per share – basic and diluted
Year Ended December 31, 2022
Historical (as restated)
Pro forma combined
(unaudited)
$
$
$
$
$
$
135,912 $
(6,971) $
(0.48) $
143,522
(7,465)
(0.49)
Year Ended December 31, 2023
Historical
Pro forma combined
(unaudited)
133,736 $
(12,557) $
(0.49) $
136,258
(12,547)
(0.48)
The unaudited combined pro forma revenue and earnings for the annual periods ended December 31, 2022 and 2023 were prepared as though the Movingdots Acquisition had
occurred as of January 1, 2022. This summary is not necessarily indicative of what the results of operations would have been had the Movingdots Acquisition occurred as of
such date, nor does it purport to represent results of operations for any future periods.
90
NOTE 5 – REVENUE RECOGNITION
The following table presents the Company’s revenues disaggregated by revenue source for the years ended December 31, 2021, 2022 and 2023.
Products
Services
2021 (as restated)
Year Ended December 31,
2022 (as restated)
2023
$
$
52,902
73,058
125,960
$
$
56,945
78,967
135,912
$
$
49,741
83,995
133,736
The balances of contract assets and contract liabilities from contracts with customers are as follows as of December 31, 2022 and 2023 are as follows:
Assets:
Deferred contract cost
Deferred cost
Liabilities:
Deferred revenue – services (1)
Deferred revenue – products (1)
Less: Deferred revenue – current portion
Deferred revenue – long term
Year Ended December 31,
2022 (as restated)
2023
$
$
$
$
$
$
$
2,740
762
9,869
938
10,807
(6,376)
4,431
$
2,581
83
10,511
111
10,622
(5,666)
4,956
(1) The Company records deferred revenues when cash payments are received or due in advance of the Company’s performance. For the years ended December 31, 2022 and
2023, the Company recognized revenue of $5,929 (as restated) and $6,046, respectively, that was included in the deferred revenue balance at the beginning of each
reporting period. The Company expects to recognize as revenue through year 2028, when it transfers those goods and services and, therefore, satisfies its performance
obligation to the customers.
91
NOTE 6 – PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other current assets consist of the following:
Sales-type lease receivables, current
Prepaid expenses
Contract assets
Other current assets
NOTE 7 – INVENTORY
December 31, 2022 (as
restated)
December 31, 2023
$
$
$
1,083
3,952
1,131
1,370
7,536
$
1,104
3,900
1,164
1,400
7,568
Inventory, which primarily consists of finished goods and components used in the Company’s products, is stated at the lower of cost or net realizable value using the “moving
average” cost method or the first-in first-out (FIFO) method. Inventory is shown net of a valuation reserve of $453 at December 31, 2022 and $524 at December 31, 2023.
Inventories consist of the following:
Components
Work in process
Finished goods, net
NOTE 8 – FIXED ASSETS
December 31, 2022
December 31, 2023
$
$
$
12,443
462
9,367
22,272
$
10,272
31
12,299
22,602
Fixed assets are stated at cost, less accumulated depreciation and amortization, and are summarized as follows:
Installed products
Computer software
Computer and electronic equipment
Furniture and fixtures
Leasehold improvements
Accumulated depreciation and amortization
December 31, 2022
December 31, 2023
$
$
8,586
7,195
5,658
2,041
1,415
24,895
(15,646)
9,249
$
$
10,765
10,650
6,275
2,422
1,417
31,529
(19,146)
12,383
Depreciation and amortization expense for the years ended December 31, 2021, 2022 and 2023 was $3,399, $3,183, and $3,876, respectively. This includes amortization of
costs associated with computer software for the years ended December 31, 2021, 2022 and 2023 of $426, $179, and $605, respectively.
92
NOTE 9 – INTANGIBLE ASSETS AND GOODWILL
Beginning in 2022, the Company began to capitalize software costs for software to be sold, marketed, or leased to customers. Costs incurred internally in researching and
developing software products are charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, software
costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is
established. The amortization of these costs will be included in cost of revenue over the estimated life of the products.
The following table summarizes identifiable intangible assets of the Company as of December 31, 2023 and 2022:
December 31, 2023
Amortized:
Customer relationships
Trademark and tradename
Patents
Technology
Software to be sold or leased
Unamortized:
Customer list
Trademark and tradename
Useful Lives
(In Years)
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
$
9-12
3-15
7-11
7
3-6
$
19,264
7,553
628
10,911
4,602
42,958
104
61
165
$
(7,606)
(3,682)
(441)
(10,784)
(535)
(23,048)
-
-
11,658
3,871
187
127
4,067
19,910
104
61
165
Total
$
43,123
$
(23,048)
$
20,075
December 31, 2022
Amortized:
Customer relationships
Trademark and tradename
Patents
Technology
Software to be sold or leased
Unamortized:
Customer list
Trademark and tradename
Total
Useful Lives
(In Years)
Gross Carrying Amount
Accumulated
Amortization
Net Carrying Amount
9-12
3-15
7-11
7
3-6
$
$
93
$
20,031
7,589
628
10,667
1,865
40,780
104
61
165
$
(6,830)
(2,990)
(351)
(7,866)
-
(18,037)
-
-
-
13,201
4,599
277
2,801
1,865
22,743
104
61
165
40,945
$
(18,037)
$
22,908
At December 31, 2023, the weighted-average amortization period for the intangible assets was 8.6 years. At December 31, 2023, the weighted-average amortization periods for
customer relationships, trademarks and trade names, patents, technology, and capitalized software to be sold or leased were 11.9, 9.6, 7.0, 4.3, and 3.0 years, respectively.
Amortization expense for the years ended December 31, 2021, 2022 and 2023 was $5,154, $5,079, and $5,569, respectively. Estimated future amortization expense for each of
the five succeeding fiscal years for these intangible assets is as follows:
Year Ending December 31,
2024
2025
2026
2027
2028
Thereafter
$
$
4,156
4,029
3,412
2,232
2,023
4,058
19,910
Global uncertainties continue to adversely impact the broader global economy and have caused significant volatility in financial markets. If there is a lack of recovery or further
global softening in certain markets, or a sustained decline in the value of the Company’s common stock, the Company may conclude that indicators of impairment exist and
would then be required to calculate whether or not an impairment exists for its goodwill, other intangibles, and long-lived assets, the results of which could result in material
impairment charges. The Company tests for goodwill impairment at the reporting unit level on October 1 of each year and between annual tests if a triggering event indicates
the possibility of an impairment. The Company monitors changing business conditions as well as industry and economic factors, among others, for events which could trigger
the need for an interim impairment analysis.
The Company performed a quantitative impairment analysis at October 1, 2023 using a market-based and income-based quantitative assessment utilizing a combination of the
(i) the guideline public company method applying revenue multiples of similar companies and, (ii) the discounted cash flow method, respectively. The fair value determination
used in the impairment assessment requires estimates of the fair values based present value or other valuation techniques or a combination thereof, necessitating subjective
judgments and assumptions by management. These estimates and assumptions could result in significant differences to the amounts reported if underlying circumstances were
to change. The Company concluded that no impairment relating to goodwill existed at December 31, 2023.
As of December 31, 2022 and 2023, the Company determined that no impairment existed to the goodwill, customer list and trademark and trade name of its acquired intangible
assets. There have been no changes in the carrying amount of goodwill from January 1, 2023 to December 31, 2023.
94
NOTE 10 – STOCK-BASED COMPENSATION
The Company’s stockholders have approved the Company’s 2018 Incentive Plan (as amended the “2018 Plan”) pursuant to which the Company may grant stock options,
restricted stock and other equity-based awards with respect to up to an aggregate of 7,500 shares of the Company’s common stock with a vesting period of approximately four
to five years. There were 2,158 shares available for future issuance under the 2018 Plan as of December 31, 2023.
The 2018 Plan is administered by the Compensation Committee of the Company’s Board of Directors, which has the authority to determine, among other things, the term
during which an option may be exercised (not more than 10 years), the exercise price of an option and the vesting provisions.
The Company recognizes all employee share-based payments in the statement of operations as an operating expense, based on their fair values on the applicable grant date.
During the first fiscal quarter of 2022, the Company granted options to purchase 5,960 shares of the Company’s common stock to certain senior managers, including the
Company’s executive officers, consisting of options to purchase 895 shares of common stock with time-based vesting conditions and options to purchase 5,065 shares of
common stock with performance-based vesting conditions (which we refer to as “market-based stock options”). The market-based stock options have an exercise price that
range from $2.85 to $21.00. The market-based stock options will vest and become exercisable if the volume weighted average price of the Company’s common stock during a
consecutive 60-day trading period (the “60 Day VWAP”) ranges between $10.50 and $21.00. The Company valued the market-based stock option awards using a Monte Carlo
simulation model using a daily price forecast over ten years until expiration utilizing Geometric Brownian Motion that considers a variety of factors including, but not limited
to, the Company’s common stock price, risk-free rate (1.7%), and expected stock price volatility (51.7%) over the expected life of awards (10 years). The weighted average fair
value of market-based stock options granted during the period was $1.60.
During the year ended December 31, 2023, the Company granted options to purchase 1,335 shares of the Company’s common stock to certain senior managers, including the
Company’s executive officers, consisting of options to purchase 470 shares of common stock with time-based vesting conditions and options to purchase 865 shares of common
stock with performance-based vesting conditions (which we refer to as “market-based stock options”). The market-based stock options will vest and become exercisable if the
volume weighted average price of the Company’s common stock during a consecutive 60-day trading period (the “60 Day VWAP”) reaches $12.00. The Company valued the
market-based stock option awards using a Monte Carlo simulation model using a daily price forecast over ten years until expiration utilizing Geometric Brownian Motion that
considers a variety of factors including, but not limited to, the Company’s common stock price, risk-free rate (3.7%), and expected stock price volatility (50%) over the
expected life of awards (5.1 years). The weighted average fair value of market-based stock options granted during the year was $1.56.
During the year ended December 31, 2023, the Company granted 1,247 shares of restricted stock to certain senior managers, including the Company’s executive officers, which
vest in four equal installments over a four-year period, provided that the executive is employed by the Company on each scheduled vesting date. These grants included (i) a
grant of 900 shares of restricted stock to Steve Towe, the Company’s Chief Executive Officer, which vests over four equal installments over a four-year period, provided that
the Mr. Towe is employed by the Company on each scheduled vesting date, and (ii) grants of 82 shares of restricted stock to certain members of the board of directors, which
vest in full on the first anniversary of the date of grant, provided that the director is a director of the Company on such date.
95
[A] Stock options:
A summary of the status of the Company’s stock options, relating to the Company’s market-based stock options that were granted to certain senior managers, including the
Company’s executive officers, as of December 31, 2021, 2022 and 2023 and changes during the years then ended, is presented below:
2021
Weighted-
Average
Number of
Shares
Outstanding at beginning of year
Granted
Exercised
Forfeited or expired
Outstanding at end of year
Exercisable at end of year
-
-
-
-
-
-
Exercise Price
-
$
-
$
-
$
$
-
$
$
$
$
-
-
2022
2023
Number of
Shares
Weighted-
Average
Exercise Price
Number of
Shares
-
5,065
-
-
5,065
-
$
$
$
$
$
$
$
$
14.14
-
14.14
-
5,065
865
-
(485)
5,445
-
Weighted-
Average
Exercise Price
14.14
$
3.09
$
-
$
$
2.87
$
$
$
$
13.39
-
The following table summarizes information about stock options relating to the market-based stock options that were granted to certain senior managers, including the
Company’s executive officers, at December 31, 2023.
Exercise Prices ($)
$2.98 - $7.48
$7.49 - $11.98
$11.99 - $16.48
$16.49 - $21.00
Options Outstanding
Weighted -
Average
Remaining
Contractual Life
in Years
Options Exercisable
Weighted
Average Exercise
Price
Number
Outstanding
Weighted -
Average Exercise
Price
8.87
8.01
8.01
8.01
8.22
$
$
$
$
$
3.18
10.50
14.00
21.00
13.38
-
-
-
-
-
$
$
$
$
$
-
-
-
-
-
Number
Outstanding
1,320
875
1,250
2,000
5,445
A summary of the status of the Company’s stock options, excluding the market-based stock options that were granted to certain senior managers, including the Company’s
executive officers, as of December 31, 2021, 2022 and 2023 and changes during the years then ended, is presented below:
Outstanding at beginning of year
Granted
Exercised
Forfeited or expired
Outstanding at end of year
Exercisable at end of year
Exercise Prices ($)
$2.98 - $4.23
$4.24 - $5.48
$5.49 - $6.73
$6.74- $7.96
2021
2022
2023
Number of
Shares
3,624
120
(156)
(118)
3,470
1,546
Weighted-
Average
Exercise Price
5.85
$
7.77
$
5.60
$
6.34
$
$
$
5.91
5.67
Number of
Shares
3,470
895
-
(1,638)
Weighted-
Average
Exercise Price
5.91
$
4.08
$
-
$
5.95
$
2,727
1,247
$
$
5.29
5.79
Number of
Shares
2,727
470
(16)
(989)
2,192
1,189
Weighted-
Average
Exercise Price
5.29
$
3.09
$
2.33
$
5.40
$
$
$
4.79
5.54
Options Outstanding
Weighted -
Average
Remaining
Contractual Life
in Years
Number
Outstanding
Options Exercisable
Weighted
Average Exercise
Price
Number
Outstanding
Weighted -
Average Exercise
Price
696
568
895
33
2,192
96
8.82
7.55
5.08
6.58
6.93
$
$
$
$
$
3.18
4.83
5.90
7.80
4.79
104
188
880
17
1,189
$
$
$
$
$
3.26
4.87
5.90
7.80
5.54
Options outstanding
Options exercisable
As of December 31, 2023
Aggregate
Intrinsic Value
$
$
-
-
Weighted - Average
Remaining Contractual
Life in Years
6.92
5.60
The fair value of each option grant on the date of grant is estimated using the Black-Scholes option-pricing model reflecting the following weighted-average assumptions:
Expected volatility
Expected life of options (years)
Risk free interest rate
Dividend yield
Weighted-average fair value of options granted during the year
2021
Year Ended December 31,
2022
2023
50.2%
6.5
0.69%
0%
3.81
$
49.4%
6.5
1.73%
0%
2.04
$
55.6%
6.1
3.87%
0%
1.66
$
Expected volatility is based on historical volatility of the Company’s common stock and the expected life of options is based on historical data with respect to employee
exercise periods.
For the years ended December 31, 2021, 2022 and 2023, the Company recorded $1,684, $2,943, and $2,712, respectively, of stock-based compensation expense in connection
with the stock option grants.
The fair value of options vested during the years ended December 31, 2021, 2022 and 2023 was $1,201, $869, and $931, respectively. The total intrinsic value of options
exercised during the years ended December 31, 2021, 2022 and 2023 was $483, $0, and $9, respectively.
As of December 31, 2023, there was $1,342 of total unrecognized compensation costs related to non-vested options granted under the Company’s stock option plans excluding
the market-based stock options that were granted to certain senior managers, including the Company’s executive officers. That cost is expected to be recognized over a
weighted-average period of 2.41 years.
As of December 31, 2023, there was $4,655 of total unrecognized compensation costs related to non-vested options granted under the Company’s stock option plans for the
market-based stock options that were granted to certain senior managers, including the Company’s executive officers. That cost is expected to be recognized over a weighted-
average period of 3.13 years.
The Company estimates forfeitures at the time of valuation and reduces expense ratably over the vesting period. This estimate is adjusted periodically based on the extent to
which actual forfeitures differ, or are expected to differ, from the previous estimate.
97
[B] Restricted Stock Awards:
The Company grants restricted stock to employees, whereby the employees are contractually restricted from transferring the shares until they are vested. The stock is unvested
at the time of grant and, upon vesting, there are no legal restrictions on the stock. The fair value of each share is based on the Company’s closing stock price on the date of the
grant. A summary of the non-vested shares for the years ended December 31, 2021, 2022 and 2023 is as follows:
Non-vested, January 1, 2021
Granted
Vested
Forfeited or expired
Non-vested, December 31, 2021
Granted
Vested
Forfeited or expired
Non-vested, December 31, 2022
Granted
Vested
Forfeited or expired
Non-vested, December 31, 2023
Number of Non-Vested
Shares
806
450
(537)
(90)
629
492
(229)
(186)
706
1,247
(297)
(152)
1,504
Weighted- Average
Grant Date Fair Value
5.54
7.63
5.35
6.51
7.06
3.72
6.99
7.08
4.75
2.41
4.24
5.32
2.86
For the years ended December 31, 2021, 2022 and 2023, the Company recorded $2,529, $1,347, and $1,196, respectively, of stock-based compensation expense in connection
with the restricted stock grants. As of December 31, 2023, there was $3,349 of total unrecognized compensation cost related to non-vested shares. That cost is expected to be
recognized over a weighted-average period of 3.03 years.
[C] Restricted Stock Units:
The Company also grants restricted stock units (“RSUs”) to employees. The following table summarizes the activity relating to the Company’s RSUs for the years ended
December 31, 2021, 2022 and 2023:
Restricted stock-units, non-vested, January 1, 2021
Vested
Forfeited or expired
Restricted stock-units, non-vested, December 31, 2021
Vested
Forfeited or expired
Restricted stock-units, non-vested, December 31, 2022
Vested
Forfeited or expired
Restricted stock-units, non-vested, December 31, 2023
Number of
Restricted
Stock Units
Weighted-Average
Grant Date
Fair Value
75
(35)
(4)
36
(36)
-
-
-
-
-
5.60
5.60
5.60
5.60
5.60
-
-
-
-
-
For the years ended December 31, 2021, 2022 and 2023 the Company recorded $203, $53, and $0, respectively, of stock-based compensation expense in connection with the
RSUs. As of December 31, 2023, there was $-0- of total unrecognized compensation cost related to non-vested RSUs.
NOTE 11 - NET LOSS PER SHARE
Basic and diluted loss per share
Net loss attributable to common stockholders
Weighted-average common share outstanding - basic and diluted
Net loss attributable to common stockholders - basic and diluted
2021
(As restated)
December 31,
2022
(As restated)
2023
$
$
(22,068)
$
(16,891)
$
(17,307)
34,571
35,393
(0.64)
$
(0.48)
$
35,628
(0.49)
Basic loss per share is calculated by dividing net loss attributable to common shareholders by the weighted-average number of common shares outstanding during the period.
Diluted loss per share reflects the potential dilution assuming common shares were issued upon the exercise of outstanding options and the proceeds thereof were used to
purchase outstanding common shares. Dilutive potential common shares include outstanding stock options, warrants and restricted stock and performance share awards. We
include participating securities (unvested share-based payment awards and equivalents that contain non-forfeitable rights to dividends or dividend equivalents) in the
computation of EPS pursuant to the two-class method. Our participating securities consist solely of preferred stock, which have contractual participation rights equivalent to
those of stockholders of unrestricted common stock. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for
common stock and participating securities. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company.
For the years ended December 31, 2021, 2022 and 2023, the basic and diluted weighted-average shares outstanding are the same, since the effect from the potential exercise of
outstanding stock options, conversion of preferred stock and vesting of restricted stock and restricted stock units totaling 11,628, 16,571 and 18,164, respectively, would have
been anti-dilutive due to the loss.
98
NOTE 12 – SHORT-TERM BANK DEBT AND LONG-TERM DEBT
Short-term bank debt
Current maturities of long-term debt
Long-term debt - less current maturities
Debt
December 31,
2022
December 31,
2023
$
$
$
5,709
4,603
11,403
$
$
$
10,030
11,061
-
In connection with the Pointer Merger, Powerfleet Israel incurred NIS denominated debt in term loan borrowings on the October 3, 2019 under the Prior Credit Agreement,
pursuant to which Hapoalim agreed to provide Powerfleet Israel with two senior secured term loan facilities in an initial aggregate principal amount of $30,000 (comprised of
two facilities in the aggregate principal amount of $20,000 and $10,000, respectively (the “Prior Term A Facility” and “Prior Term B Facility”, respectively, and collectively, the
“Prior Term Facilities”)) and a five-year revolving credit facility (the “Prior Revolving Facility”) to Pointer denominated in NIS in an initial aggregate principal amount of
$10,000 (collectively, the “Prior Credit Facilities”). As of December 31, 2023, the Company borrowed NIS 4,915 or $1,355, under the Prior Revolving Facility. The available
balance at December 31, 2023 was approximately $4,800.
The Prior Credit Facilities were scheduled to mature on October 3, 2024. The indicative interest rate provided for the Prior Term Facilities in the Prior Credit Agreement was
approximately 4.73% for the Prior Term A Facility and 5.89% for the Prior Term B Facility. The interest rate for the Prior Revolving Facility was, with respect to NIS-
denominated loans, Hapoalim’s prime rate + 2.5%, and with respect to US dollar-denominated loans, LIBOR + 4.6% (amended to SOFR + 2.15%). The interest rate at
December 31, 2023 was 7.53%. In addition, the Company agreed to pay a 1% commitment fee on the unutilized and uncancelled availability under the Prior Revolving Facility.
The Prior Credit Facilities were secured by the shares held by Powerfleet Israel in Pointer and by Pointer over all of its assets. The Prior Credit Agreement included customary
representations, warranties, affirmative covenants, negative covenants (including the following financial covenants, tested quarterly: Pointer’s net debt to EBITDA; Pointer’s
net debt to working capital; minimum equity of Powerfleet Israel; Powerfleet Israel equity to total assets; Powerfleet Israel net debt to EBITDA; and Pointer EBITDA to current
payments and events of default.
On August 23, 2021, Powerfleet Israel and Pointer (the “Borrowers”) entered into an amendment (the “Amendment”), effective as of August 1, 2021, to the Prior Credit
Agreement with Hapoalim. The Amendment memorialized the agreements between the Borrowers and Hapoalim regarding a reduction in the interest rates of the two Prior
Term Facilities. Pursuant to the Amendment, commencing as of November 12, 2020, the interest rate with respect to the Prior Term A Facility was reduced to a fixed rate of
3.65% per annum and the interest rate with respect to the Prior Term B Facility was reduced to a fixed rate of 4.5% per annum. The Amendment also provided, among other
things, for (i) a reduction in the credit allocation fee on undrawn and uncancelled amounts of the Prior Revolving Facility from 1% to 0.5% per annum, (ii) removal of the
requirement that Powerfleet Israel maintain $3,000 on deposit in a separate reserve fund, and (iii) modifications to certain of the affirmative and negative covenants, including a
financial covenant regarding the ratio of the Borrowers’ debt levels to Pointer’s EBITDA. The Company was in compliance with the covenants as of December 31, 2023.
In connection with the Prior Credit Facilities, the Company incurred debt issuance costs of $742. For the years ended December 31, 2021, 2022, and 2023, the Company
recorded $290, $215, and $133, respectively, of amortization of the debt issuance costs. The Company recorded charges of $1,078, $824, and $572 to interest expense on its
consolidated statements of operations for the years ended December 31, 2021, 2022 and 2023 related to interest expense associated with the Prior Credit Facilities.
On October 31, 2022, the Borrowers entered into a third amendment to the Prior Credit Agreement (the “Third Amendment”) with Hapoalim. The Third Amendment provided
for, among other things, an additional revolving credit facility to Pointer denominated in NIS in an initial aggregate principal amount of $10 million (the “Second Revolver”).
The Second Revolver was available for a period of one month, commencing on October 31, 2022, and continued to be available for successive one-month periods until the
Company’s entry into the A&R Credit Agreement. As of December 31, 2023, the Company borrowed NIS 31,464, or $8,675, under the Second Revolver. The interest rate at
December 31, 2023 was 7.97%. The available balance at December 31, 2023 was $1,325.
See Note 20 (Subsequent Events) for additional information regarding the debt of the Company, including the A&R Credit Agreement and the Facilities Agreement.
99
NOTE 13 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
Accounts payable
Accrued warranty
Accrued compensation
Government authorities
Other current liabilities
December 31,
2022 (As restated)
December 31,
2023
$
$
$
14,702
745
7,153
1,992
805
25,397
$
19,235
965
6,721
2,796
579
30,296
The Company’s products are warranted against defects in materials and workmanship for a period of 1-8 years from the date of acceptance of the product by the customer. The
customers may purchase an extended warranty providing coverage up to a maximum of 60 months. A provision for estimated future warranty costs is recorded for expected or
historical warranty matters related to equipment shipped and is included in accounts payable and accrued expenses in the Consolidated Balance Sheets as of December 31, 2022
and 2023.
The following table summarizes warranty activity during the years ended December 31, 2022 and 2023:
Accrued warranty reserve, beginning of year
Accrual for product warranties issued
Product replacements and other warranty expenditures
Expiration of warranties
Accrued warranty reserve, end of year (a)
Year Ended December 31,
2022
2023
$
$
$
1,333
1,103
(481)
99
2,054
$
2,054
1,238
(503)
(136)
2,653
(a)
Includes accrued warranty included in other long-term liabilities at December 31, 2022 and 2023 of $1,309 (as restated) and $1,688, respectively.
NOTE 14 - LEASES
The Company determines whether an arrangement is a lease at inception. The Company has operating leases for office space and office equipment. The Company’s leases have
remaining lease terms of one year to 10 years, some of which include options to extend the lease term for up to five years.
Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease
payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the
future lease payments over the lease term. The operating lease ROU asset also includes any lease payments made in advance of lease commencement and excludes lease
incentives. The lease terms used in the calculations of the operating ROU assets and operating lease liabilities include options to extend or terminate the lease when the
Company is reasonably certain that it will exercise those options. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in
determining the present value of lease payments.
The Company has lease agreements with lease and non-lease components, which are generally not accounted for separately.
The Company has lease agreements which are classified as short-term in nature. These leases meet the criteria for operating lease classification. Lease costs associated with the
short-term leases are included in selling, general and administrative expenses on the Company’s consolidated statements of operations.
Components of lease expense are as follows:
Year Ended December 31,
2022
2023
Short term lease cost:
$
443
$
453
Supplemental cash flow information and non-cash activity related to the Company’s operating leases are as follows:
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations
Weighted-average remaining lease term and discount rate for the Company’s operating leases are as follows:
Weighted-average remaining lease term (in years)
Weighted-average discount rate
100
Year Ended December 31,
2022
2023
$
1,450
$
1,198
December 31, 2023
2.73
5.86%
Scheduled maturities of operating lease liabilities outstanding as of December 31, 2023 are as follows:
Year ending December 31,
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less: Imputed interest
Present value of lease liabilities
$
$
2,463
2,170
1,012
377
316
654
6,992
(581)
6,411
NOTE 15 – CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
[A] Public Offering:
On February 1, 2021 the Company closed an underwritten public offering of 4,428 shares of common stock (which included the full exercise of the underwriters’ over-
allotment option) for gross proceeds of approximately $28,800, before deducting the underwriting discounts and commissions and other offering expenses.
[B] Convertible Redeemable Preferred Stock:
The Company is authorized to issue 150 shares of preferred stock, par value $0.01 per share of which 100 shares are designated Series A Preferred Stock and 50 shares
are undesignated.
Series A Preferred Stock
In connection with the completion of the Pointer Merger, on October 3, 2019, the Company issued 50 shares of Series A Preferred Stock to ABRY Senior Equity V,
L.P., ABRY Senior Equity Co-Investment Fund V, L.P and ABRY Investment Partnership, L.P. (the “Investors”). For the years ended December 31, 2022 and
December 31, 2023, the Company issued 4 and 1 additional shares of Series A Preferred Stock.
Balance at January 1, 2021
Dividend paid in kind shares issued
Accretion of preferred stock
Balance at December 31, 2021
Dividend paid in kind shares issued
Accretion of preferred stock
Balance at December 31, 2022
Dividend paid in kind shares issued
Accretion of preferred stock
Balance at December 31, 2023
Liquidation
Number of Shares
Amount
(As Restated)
55
-
-
55
4
-
59
1
-
60
$
$
$
$
56,703
-
5,191
61,894
4,231
5,906
72,031
1,107
7,139
80,277
The Series A Preferred Stock has a liquidation preference equal to the greater of (i) the original issuance price of $1,000.00 per share, subject to certain adjustments
(the “Series A Issue Price”), plus all accrued and unpaid dividends thereon (except in the case of a deemed liquidation event, then 150% of such amount) and (ii) the
amount such holder would have received if the Series A Preferred Stock had converted into common stock immediately prior to such liquidation. As of December 31,
2023, the Series A Preferred Stock had a liquidation preference of $30,091 calculated in accordance with clause (i) above.
Dividends
Holders of Series A Preferred Stock are entitled to receive cumulative dividends at a minimum rate of 7.5% per annum (calculated on the basis of the Series A Issue
Price), quarterly in arrears. The dividends are payable at the Company’s election, in kind, through the issuance of additional shares of Series A Preferred Stock, or in
cash, provided no dividend payment failure has occurred and is continuing and that there has not previously occurred two or more dividend payment failures.
Commencing on the 66-month anniversary of the date on which any shares of Series A Preferred Stock are first issued (the “Original Issuance Date”), and on each
monthly anniversary thereafter, the dividend rate will increase by 100 basis points, until the dividend rate reaches 17.5% per annum, subject to the Company’s right to
defer the increase for up to three consecutive months on terms set forth in the Company’s Amended and Restated Certificate of Incorporation (the “Charter”). The
following table summarizes the dividend paid activity for the years ended December 31, 2021, 2022, and 2023:
Dividends
paid in cash
Dividends
paid in shares
Total
Year Ended December 31, 2021
Year Ended December 31, 2022
Year Ended December 31, 2023
$
$
$
4,112
-
3,385
$
$
$
-
4,231
1,108
$
$
$
4,112
4,231
4,493
As of December 31, 2022 and December 31, 2023, dividends in arrears were $-0- and $-0- respectively.
101
Voting; Consent Rights
The holders of Series A Preferred Stock will be given notice by the Company of any meeting of stockholders or action to be taken by written consent in lieu of a
meeting of stockholders as to which the holders of common stock are given notice at the same time as provided in, and in accordance with, the Company’s Amended
and Restated Bylaws. Except as required by applicable law or as otherwise specifically set forth in the Charter, the holders of Series A Preferred Stock are not entitled
to vote on any matter presented to the Company’s stockholders unless and until any holder of Series A Preferred Stock provides written notification to the Company
that such holder is electing, on behalf of all holders of Series A Preferred Stock, to activate their voting rights and in doing so rendering the Series A Preferred Stock
voting capital stock of the Company (such notice, a “Series A Voting Activation Notice”). From and after the delivery of a Series A Voting Activation Notice, all
holders of the Series A Preferred Stock will be entitled to vote with the holders of common stock as a single class on an as-converted basis (provided, however, that
any holder of Series A Preferred Stock shall not be entitled to cast votes for the number of shares of common stock issuable upon conversion of such shares of Series A
Preferred Stock held by such holder that exceeds the quotient of (1) the aggregate Series A Issue Price for such shares of Series A Preferred Stock divided by (2) $5.57
(subject to adjustment for stock splits, stock dividends, combinations, reclassifications and similar events, as applicable)). So long as shares of Series A Preferred Stock
are outstanding and convertible into shares of common stock that represent at least 10% of the voting power of the common stock, or the Investors or their affiliates
continue to hold at least 33% of the aggregate amount of Series A Preferred Stock issued to the Investors on the Original Issuance Date, the consent of the holders of at
least a majority of the outstanding shares of Series A Preferred Stock will be necessary for the Company to, among other things, (i) liquidate the Company or any
operating subsidiary or effect any deemed liquidation event (as such term is defined in the Charter), except for a deemed liquidation event in which the holders of
Series A Preferred Stock receive an amount in cash not less than the Redemption Price (as defined below), (ii) amend the Company’s organizational documents in a
manner that adversely affects the Series A Preferred Stock, (iii) issue any securities that are senior to, or equal in priority with, the Series A Preferred Stock or issue
additional shares of Series A Preferred Stock to any person other than the Investors or their affiliates, (iv) incur indebtedness above the agreed-upon threshold, (v)
change the size of the Company’s board of directors to a number other than seven, or (vi) enter into certain affiliated arrangements or transactions.
Redemption
At any time, each holder of Series A Preferred Stock may elect to convert each share of such holder’s then-outstanding Series A Preferred Stock into the number of
shares of the Company’s common stock equal to the quotient of (x) the Series A Issue Price, plus any accrued and unpaid dividends, divided by (y) the Series A
Conversion Price in effect at the time of conversion. The Series A Conversion Price is initially equal to $7.319, subject to certain adjustments as set forth in the
Charter.
At any time after the third anniversary of the Original Issuance Date, subject to certain conditions, the Company may redeem the Series A Preferred Stock for an
amount per share, equal to the greater of (i) the product of (x) 1.5 multiplied by (y) the sum of the Series A Issue Price, plus all accrued and unpaid dividends and (ii)
the product of (x) the number of shares of common stock issuable upon conversion of such Series A Preferred Stock multiplied by (y) the volume weighted average
price of the common stock during the 30 consecutive trading day period ending on the trading date immediately prior to the date of such redemption notice or, if
calculated in connection with a deemed liquidation event, the value ascribed to a share of common stock in such deemed liquidation event (the “Redemption Price”).
Further, at any time (i) after the 66-month anniversary of the Original Issuance Date, (ii) following delivery of a mandatory conversion notice by us, or (iii) upon a
deemed liquidation event, subject to Delaware law governing distributions to stockholders, the holders of the Series A Preferred Stock may elect to require us to
redeem all or any portion of the outstanding shares of Series A Preferred Stock for an amount per share equal to the Redemption Price.
The Company classifies its Series A Preferred Stock outside of stockholders’ equity as the redemption of such shares is outside the Company’s control. The Company
adjusts the carrying values of the Series A Preferred Stock to redemption value to the earliest redemption date using the effective interest rate method.
Concurrently with the closing of the MiX Combination on April 2,2024, the Company redeemed in full all of the outstanding shares of the Series A Preferred Stock
(see Note 20, Subsequent Events).
102
NOTE 16 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) includes net loss and unrealized gains or losses on available-for-sale investments and foreign currency translation gains and losses. Cumulative
unrealized gains and losses on available-for-sale investments are reflected as accumulated other comprehensive loss in stockholders’ equity on the Company’s Consolidated
Balance Sheets.
The accumulated balances for each classification of other comprehensive income (loss) are as follows:
Foreign currency translation
adjustment
Unrealized gain (losses) on
investments
Accumulated other
comprehensive income (loss)
Balance at January 1, 2021
Net current period change
Balance at December 31, 2021
Net current period change
Balance at December 31, 2022
Net current period change
Balance at December 31, 2023
NOTE 17 – SEGMENT INFORMATION
$
$
$
$
399
(8)
391
(1,601)
(1,210)
594
(616)
$
$
$
$
-
-
-
-
-
-
-
$
$
$
$
The Company operates in one reportable segment, wireless IoT asset management. The following table summarizes revenues by geographic region.
United States
Israel
Other
Long lived assets by geographic region:
United States
Israel
Other
2021 (as restated)
Year Ended December 31,
2022 (as restated)
$
$
$
$
$
$
$
50,772
44,673
30,515
125,960
1,123
3,675
4,190
8,988
$
2021
103
57,437
44,580
33,895
135,912
Year Ended December 31,
2022
941
3,545
4,763
9,249
2023
2023
$
$
$
399
(8)
391
(1,601)
(1,210)
594
(616)
59,233
41,689
32,814
133,736
1,081
3,923
7,379
12,383
NOTE 18 - INCOME TAXES
Loss before income taxes consists of the following:
2021 (As restated)
Year Ended December 31,
2022 (As restated)
U.S. operations
Foreign operations
$
$
(14,996)
4,113
(10,883)
The provision for income taxes consists of the following for the years ended December 31:
Current:
Federal
State
Foreign
Total current provision
Deferred:
Federal
State
Foreign
Total deferred provision
Total (benefit) provision for income taxes
2021
(As restated)
-
16
127
143
-
-
1,745
1,745
1,888
$
$
$
$
$
$
$
$
$
$
$
$
2022
(As restated)
(10,303)
4,421
(5,882)
-
93
69
162
-
-
708
708
870
$
$
$
$
$
$
$
(16,494)
11,443
(5,051)
2023
2023
-
68
519
587
-
-
2
2
589
The difference between income taxes at the statutory federal income tax rate and income taxes reported in the Consolidated Statements of Operations for the years ended
December 31 is attributable to the following:
2021
(As restated)
2022
(As restated)
2023
Income tax benefit at the federal statutory rate
State and local income taxes, net of federal taxes
(Decrease) increase in valuation allowance
Remeasurement of deferred tax adjustments
Permanent differences and other
Foreign rate differential
GILTI inclusion
Other
Acquisition fees
(2,285)
411
595
1,302
269
1,008
509
79
-
1,888
104
(1,236)
(313)
(1,105)
359
810
(151)
2,425
81
-
870
(1,061)
(298)
1,488
4
678
(1,924)
1,586
57
59
589
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2022 and 2023 are presented
below:
December 31, 2022
(As restated)
December 31, 2023
Deferred tax assets:
Net operating loss carryforwards
Capital loss carryforwards
Deferred revenue
Stock-based compensation
Federal research and development tax credits
Capitalized research
Inventories
Bad debt reserve
Deferred lease liability
Other deductible temporary differences
Acquisition costs
Total gross deferred tax assets
Less: valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Intangible amortization
ROU assets
Total deferred tax liabilities
Net deferred tax liabilities
$
$
$
$
$
$
27,722
10,670
2,035
459
1,058
980
324
594
548
2,610
-
47,000
(43,692)
3,308
(4,403)
(498)
(4,901)
(1,593)
A reconciliation of the beginning and ending amount of unrecognized tax positions is as follows as of December 31:
Balance at the beginning of the year
Additions based on tax provisions taken related to current year
Reductions related to expiration of statute of limitations
Balance at the end of year
2022 (As restated)
384
123
(163)
344
$
$
$
$
$
$
$
$
$
$
27,643
10,465
2,241
302
1,058
1,396
411
724
425
2,055
923
47,643
(44,780)
2,863
(4,068)
(382)
(4,450)
(1,587)
344
139
(189)
294
2023 (revised)
The unrecognized tax benefits, if recognized, would reduce the Company’s annual effective tax rate. The Company does not expect any significant changes to its unrecognized
tax positions during the next twelve months.
At December 31, 2023, the Company had an aggregate net operating loss carryforward of approximately $78,675 for U.S. federal income tax purposes. At December 31, 2023,
the Company had an aggregate net operating loss carryforward of approximately $39,263 for state income tax purposes and a foreign net operating loss carryforwards of
approximately $29,020. Substantially all of the net operating loss carryforwards expire from 2024 through 2037 for pre-2018 federal net operating loss carryforwards and from
2024 through 2042 for state purposes. The net operating loss carryforwards may be limited to use in any particular year based on Internal Revenue Code (“IRC”) Section 382
related to change of ownership restrictions. Section 382 of the IRC imposes an annual limitation on the utilization of NOL carryforwards based on long-term bond rates and the
value of the corporation at the time of a change in ownership as defined by Section 382 of the IRC. In 2019, the Company incurred a change in ownership under Section 382 of
the IRC and this change of ownership is not expected to materially impact the Company’s ability to utilize its net operating loss carryforward amounts in the future. In addition,
future stock issuances may subject the Company to further limitations on the utilization of its net operating loss carryforwards under the same Internal Revenue Code provision.
At December 31, 2023, the Company has New Jersey net operating loss carryforwards (“NJ NOLs”) included above in the approximate amount of $8,567 expiring through
2043, which are available to reduce future earnings which would otherwise be subject to state income tax.
The Company is asserting permanent reinvestment of all accumulated undistributed earnings of its foreign subsidiaries as of December 31, 2023 in excess of annual debt
service costs requirements.
For the year ended December 31, 2023, the Company’s valuation allowance increased to $44,780, compared to $43,692 (as restated) as of December 31, 2022 primarily due to
the increase of net operating losses and other timing differences. The Company has provided a valuation allowance against the full amount of its domestic deferred tax assets
and the majority of the foreign deferred tax assets. The valuation allowance was established because of the uncertainty of realization of the deferred tax assets due to lack of
sufficient history of generating taxable income. Realization is dependent upon generating sufficient taxable income prior to the expiration of the net operating loss
carryforwards in future periods. The valuation decreased in 2022 by $1,333 and increased in 2023 by $1,088.
Audits for federal income tax returns are closed for the years through 2019. However, the Internal Revenue Service (“IRS”) can audit the NOL’s generated during those years in
the years that the NOL’s are utilized. State income tax returns are generally subject to examination for a period of three to six years after the filing of the respective tax return.
The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. Foreign income tax
returns are generally subject to examination based on the tax laws of the respective jurisdictions.
On August 16, 2022, the President of the United States signed into law H.R. 5376, commonly referred to as the Inflation Reduction Act of 2022 (the “IRA”). The IRA is federal
legislation designed to raise revenue from, among other things, the imposition of certain corporate tax measures, while authorizing spending on energy and climate change
initiatives and subsidizing the Affordable Care Act. The IRA also introduced a 1% excise tax on certain corporate stock buybacks, which would impose a nondeductible 1%
excise tax on the fair market value of certain stock that is “repurchased” during the taxable year by a publicly traded U.S. corporation or acquired by certain of its subsidiaries.
The passage of the IRA did not have a material impact to the Company nor its calculated AETR as of December 31, 2023.
On August 9, 2022, the President of the United States signed into law H.R. 4346, “The CHIPS and Science Act of 2022.” CHIPS is a federal statue providing funding for
research and domestic production of semiconductors. Additional funding can be provided through CHIPS to various federal agencies as well as towards climate science
research. Tax measures include a 25% advanced investment tax credit for certain investments in semiconductor manufacturing. The passage of the CHIPS and Science Act did
not have a material impact to the Company nor its calculated AETR as of December 31, 2023.
105
NOTE 19 - COMMITMENTS AND CONTINGENCIES
Except for normal operating leases, the Company is not currently subject to any material commitments.
[A] Contingencies:
From time to time, the Company is involved in various litigation matters involving claims incidental to its business and acquisitions, including employment matters, acquisition
related claims, patent infringement and contractual matters, among other issues. While the outcome of any such litigation matters cannot be predicted with certainty,
management currently believes that the outcome of these proceedings, including the matters described below, either individually or in the aggregate, will not have a material
adverse effect on its business, results of operations or financial condition. The Company records reserves related to legal matters when losses related to such litigation or
contingencies are both probable and reasonably estimable.
In August 2014, Pointer do Brasil Comercial Ltda. (“Pointer Brazil”) received a notification of lack of payment of VAT tax (Brazilian ICMS tax) in the amount of $219 plus
$1,164 of interest and penalty, totaling $1,383 as of December 31, 2023. The Company is vigorously defending this tax assessment before the administrative court in Brazil, but
in light of the administrative and judicial processes in Brazil, it could take up to 14 years before the dispute is finally resolved. In case the administrative court rules against the
Company, the Company could claim before the judicial court, an appellate court in Brazil, a substantial reduction of interest charged, potentially reducing the Company’s total
exposure. The Company’s legal counsel is of the opinion that the chance of loss is not probable and for this reason the Company has not made any provision.
In July 2015, Pointer Brazil received a tax deficiency notice alleging that the services provided by Pointer Brazil should be classified as “telecommunication services” and
therefore Pointer Brazil should be subject to the state value-added tax. The aggregate amount claimed to be owed under the notice was approximately $13,482 as of December
31, 2023. On August 14, 2018, the lower chamber of the State Tax Administrative Court in São Paulo rendered a decision that was favorable to Pointer Brazil in relation to the
ICMS demands, but adverse in regards to the clerical obligation of keeping in good order a set of ICMS books and related tax receipts. The remaining claim after this
administrative decision is $226. The state has appealed to the higher chamber of the State Tax Administrative Court. The Company’s legal counsel is of the opinion that the
chance of loss is not probable and that no material costs will arise in respect to these claims. For this reason, the Company has not made any provision.
On February 24, 2022, Pointer Mexico received a notification for 2015 tax assessment in the amount of $238 regarding the underpayment of VAT and government fees from the
Mexican Tax Service (“MTS”). Under the statute and case law, Pointer Mexico was entitled to appeal before the MTS or file a lawsuit before the Federal Court of
Administrative Justice (Tribunal Federal de Justicia Administrativa). On April 19, 2022, Pointer Mexico filed an appeal for revocation of the assessment. On May 3, 2022,
Pointer Mexico filed additional evidence before the MTS. On January 24, 2023, the MTS resolved the administrative revocation appeal, confirming the tax assessment against
Pointer Mexico. Against this last resolution, Pointer Mexico is entitled to appeal before the Federal Court of Administrative Justice. The term for the filing of this appeal lapses
on March 8, 2023. Based on the current analysis of the facts and case, the Company has recorded a provision of $238.
NOTE 20 – SUBSEQUENT EVENTS
On February 28, 2024, the Company held a special meeting of stockholders during which the stockholders approved, among other things, the issuance of shares of common
stock of the Company to shareholders of MiX Telematics pursuant to the Implementation Agreement and an amendment of the Company’s amended and restated certificate of
incorporation to increase the number of authorized shares of common stock from 75 million to 175 million (the “Charter Amendment”). On March 22, 2024, the Company filed
the Charter Amendment with the Secretary of State of the State of Delaware.
On March 7, 2024, the Company entered into the Facilities Agreement with RMB, pursuant to which RMB agreed to provide the Company with two term loan facilities in an
aggregate principal amount of $85 million, comprised of two facilities in the aggregate principal amount of $42.5 million and $42.5 million, respectively. The proceeds of the
term loan facilities were used by the Company to redeem all the outstanding shares of the Series A Preferred Stock and for general corporate purposes. The Company drew
down $85 million in cash under the term loan facilities on March 13, 2024.
On March 18, 2024, the Borrowers entered into the A&R Credit Agreement, which refinanced the facilities under, and amended and restated, the Prior Credit Agreement. The
A&R Credit Agreement provides for (i) two senior secured term loan facilities denominated in NIS to Powerfleet Israel in an aggregate principal amount of $30 million
(comprised of two facilities in the aggregate principal amounts of $20 million and $10 million, respectively) and (ii) two revolving credit facilities to Pointer in an aggregate
principal amount of $20 million (comprised of two revolvers in the aggregate principal amounts of $10 million and $10 million, respectively). Powerfleet Israel drew down $30
million in cash under the term loan facilities on March 18, 2024 and used the proceeds to prepay approximately $11.2 million, representing the remaining outstanding balance,
of the term loans extended to Powerfleet Israel under the Prior Credit Agreement and distributed the remaining proceeds to Powerfleet. The proceeds of the revolving facilities
may be used by Pointer for general corporate purposes, including working capital and capital expenditures.
On April 2, 2024, the MiX Combination was consummated, and MiX Telematics became an indirect, wholly owned subsidiary of the Company. Concurrently with the closing
of the MiX Combination, the Company used the net proceeds received from RMB and from incremental borrowing capacity as a result of the refinancing of credit facilities
with Hapoalim to redeem in full for $90.3 million for all of the outstanding shares of the Series A Preferred Stock.
106
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are controls and other procedures that are designed to ensure that
information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and
our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures,
management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control
objectives. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision-
making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the control. Controls and procedures can only provide reasonable, not absolute, assurance that the above
objectives have been met.
As of December 31, 2023, we carried out an evaluation, with the participation of our management, including our principal executive officer and our principal financial officer,
of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal
executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of December 31, 2023.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we
conducted an evaluation of the effectiveness, as of December 31, 2023, of our internal control over financial reporting based on the framework in 2013 Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under this framework, our management
concluded that our internal control over financial reporting was not effective as of December 31, 2023 due to material weaknesses in our internal control over financial
reporting described below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has concluded that material weaknesses
existed as of December 31, 2023 with respect to the following:
● Controls were not designed or operating effectively to ensure that the standalone selling prices (SSP), used to determine the appropriate allocation of revenue in
multiple element arrangements, was appropriate. Determining SSP involves management judgment and management did not review timely the analysis of SSP or the
underlying data supporting the analysis.
● Controls were not designed or operating effectively to ensure that the costs capitalized for internal use software were appropriate. Specifically, these controls did not
provide for adequate review or documentation of the amounts capitalized, the related phase of the project and when projects should begin amortization. Furthermore,
controls were not designed or operating effectively to ensure that the costs for software to be sold, leased or marketed were appropriate. Specifically, these controls did
not provide for adequate review or documentation of the amounts capitalized, when projects met technological feasibility and when projects should begin
amortization.
● Controls were not designed or operating effectively to ensure that the completeness, measurement and valuation of acquired assets and liabilities assumed in
connection with the Movingdots acquisition was appropriate. Specifically, these controls did not provide for adequate review or documentation of the amounts
recorded and management did not timely review the subsequent adjustments to the provisional amounts recorded or the underlying data supporting the valuation of the
acquired intangible.
● Controls were not designed or operating effectively to ensure that the annual measurement and valuation of the Company’s reporting unit, prepared in connection with
its annual goodwill impairment analysis, was appropriate. Specifically, these controls did not provide for adequate and timely review or documentation of the projected
financial information and valuation assumptions used in the annual analysis.
● Controls over the financial statement close process were not designed or operating effectively to ensure the appropriate level of management review, including the
appropriate level of precision, adequate evidence of management’s review, and the completeness and accuracy of key reports. Furthermore, the primary ERP had
ineffective information technology general controls in the area of user access and change management over key information technology (“IT”) systems that support the
financial reporting processes. As a result, the related U.S. process-level IT dependent controls and application controls were also ineffective.
● Controls were not designed or operating effectively to ensure that the accounting treatment for the measurement and valuation of the convertible redeemable preferred
stock were appropriately calculated. Specifically, these controls did not provide for adequate review of the amounts recorded and management did not review timely
the subsequent accretion of the preferred shares to the redemption value. This material weakness also existed in prior periods.
As disclosed in the Explanatory Note to this Form 10-K and Note 2 to our consolidated financial statements, we are restating the prior year financial statements for the years
ending December 31, 2021 and 2022 and each of the interim periods during fiscal 2022 and 2023 for the accounting for the redemption premium associated with the Series A
Preferred Stock. As part of the restatement process, we are also correcting other unrelated immaterial errors that were previously either unrecorded or recorded as out-of-period
adjustments.
We are still considering the full extent of the procedures to implement in order to remediate the material weaknesses described above.
As part of the business combination with MiX Telematics, we expect to migrate our central corporate accounting function to MiX Telematics’ central corporate accounting
function and team. Benefits from this migration will include:
● Implementation of a new ERP system
● Access to a larger and highly qualified team
● Mature internal risk team who are responsible for ensuring systems, process and controls are clearly documented and widely understood and followed throughout the
organization
Additionally, our current remediation plan includes:
● Utilizing external resources to support its efforts to rework certain control gaps across the various processes in Israel and the United States with identified deficiencies
● Implementing enhanced documentation associated with management review controls and validation of the completeness and accuracy of key reports in Israel and the
United States
● Training of relevant personnel reinforcing existing policies and enhanced policies with regards to the appropriate steps and procedures required to be performed related
to the execution and documentation of internal controls
Our independent registered public accounting firm that audited the consolidated financial statements included in this Form 10-K, Ernst & Young LLP, has issued an attestation
report on the effectiveness of our internal control over financial reporting which appears in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.
Changes in Internal Control over Financial Reporting
Except for the material weaknesses identified during the fourth quarter of the year ended December 31, 2023 related to measurement and valuation of acquired assets and
liabilities assumed in connection with the Movingdots acquisition, the annual measurement and valuation of the Company’s reporting unit, controls over the financial statement
close process, specifically that the primary ERP had ineffective IT general controls in the area of user access and change management over key IT systems that support the
financial reporting processes, and the measurement and valuation of the convertible redeemable preferred stock, there were no other changes in our system of internal control
over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended December 31, 2023 that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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Item 10. Directors, Executive Officers and Corporate Governance.
Information About Our Directors and Executive Officers
PART III
The table below sets forth the names and ages of our directors and executive officers as of May 1, 2024, as well as the position(s) and office(s) with Powerfleet held by those
individuals. A summary of the background and experience of each of those individuals is set forth after the table.
Name
DIRECTORS:
Steve Towe
Michael Brodsky
Ian Jacobs
Andrew Martin
Michael McConnell
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS:
Jonathan Bates
Melissa Ingram
Offer Lehmann
Catherine Lewis
Charles Tasker
David Wilson
Jim Zeitunian
Directors
Age
52
56
47
51
58
41
38
51
49
60
56
57
Position(s)
Chief Executive Officer and Director
Director and Chairman of the Board of Directors
Director
Director
Director
Chief Product Officer
Chief Corporate Development Officer
Chief Operating Officer
Chief Customer Officer
Chief Revenue Officer
Chief Financial Officer and Corporate Secretary
Chief Technology Officer
Steve Towe. Mr. Towe has served as our Chief Executive Officer and a director of Powerfleet since January 2022. Mr. Towe also serves on the board of directors of I.D.
Systems and Powerfleet Israel, each of which is our wholly owned subsidiary. Mr. Towe has over 20 years of experience in senior leadership positions for global software
companies and previously served as President and Chief Operating Officer of Aptos, Inc., a global leader of unified commerce solutions in the retailer enterprise SaaS market,
from 2016 to December 2021. Mr. Towe has vast knowledge of the IoT industry, having served from 2011 to 2016, as the Chief Commercial Officer of Masternaut, a global
telematics provider. Before his tenure at Masternaut, Mr. Towe served as Managing Director, from 2006 to 2011, and Director of Group Operations, from 2002 to 2006, of
Cybit Ltd, a market consolidating data company, and was a founding member and senior executive of Fleetstar Information Systems, the fleet management subsidiary of the
Trafficmaster Group, from 2001 to 2002. Mr. Towe’s early career was spent in numerous leadership roles for global retailer WH Smith.
Mr. Towe’s qualifications to serve on our board of directors include his years of experience scaling high value, global technology organizations. In addition, Mr. Towe’s role as
our Chief Executive Officer provides our board of directors with invaluable insight into our management and daily operations.
Michael Brodsky. Mr. Brodsky has served as a director of Powerfleet since June 2014, as Chairman of our board of directors since December 2016 and as a director of Pointer
since October 2019. Previously, Mr. Brodsky was the Lead Director of our board of directors from June 2014 until December 2016. Mr. Brodsky is the President of Bosun
Asset Management, LLC, an asset management firm and he co-founded and was the Chief Executive Officer of Options Solutions, LLC, a specialized asset manager, until it
was acquired by Bosun in October 2023. Mr. Brodsky is the Managing Partner of Vajra Asset Management, LLC, an investment firm. Mr. Brodsky also currently serves on the
board of directors of EdgeCortix Inc., a firm specializing in semi-conductor technology, since March 2021. Previously, Mr. Brodsky served on the board of directors of Genesis
Land Development Corporation (OTCMKTS: GNLAF), a residential land developer and homebuilder, from 2012 to May 2019, including as Chairman from September 2012 to
May 2019, on the board of directors of Determine, Inc. (formerly Nasdaq: DTRM), a provider of contract management, procurement and sourcing software, from October 2010
until its sale in April 2019, including as Chairman from August 2013 to April 2019 and as Chief Executive Officer from August 2013 until December 2013, on the board of
directors of Trans World Corporation (formerly OTCQB: TWOC), an owner and operator of hotels and casinos throughout Europe, from September 2013 until its sale in March
2018, including as Chairman from June 2014 to March 2018, and on the board of directors of Spark Networks, Inc. (OTCMKTS: LOVLQ), a collection of niche-oriented
community websites, from November 2015 until its sale in November 2017. Mr. Brodsky holds a B.A. degree from Syracuse University, an M.B.A. from the Kellogg School of
Management at Northwestern University, and a J.D. from Northwestern University Pritzker School of Law.
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Mr. Brodsky possesses extensive business, operating and executive expertise. Among other things, Mr. Brodsky has served as the Chief Executive Officer of several companies
and possesses skills in executive management and leadership. We believe Mr. Brodsky’s management and leadership skills and experience as a member of the board of directors
of various companies enable him to be an effective contributing member of our board of directors.
Ian Jacobs. Mr. Jacobs joined our board of directors upon consummation of the MiX Combination on April 2, 2024. Mr. Jacobs has served as a director of MiX Telematics
(formerly NYSE: MIXT) since 2016, including as Chairperson since November 2022. From 1997 to 2002, Mr. Jacobs worked as a research analyst at Schroders, Sidoti & Co.
(now SIDOTI & Company) and Goldman Sachs & Co. In 2003, he joined Berkshire Hathaway Inc. where he worked on investment research and other projects under Warren
Buffett until 2009. In 2009, Mr. Jacobs left Berkshire Hathaway Inc. to form 402 Capital LLC, a private investment fund, where he has since served as the managing member.
Mr. Jacobs earned his undergraduate degree from Yeshiva University and an M.B.A. from Columbia University.
With his extensive experience with, and knowledge of the business and operations of, MiX Telematics and business experience with various investment firms, Mr. Jacobs
brings a wealth of managerial and financial expertise to our board. We believe Mr. Jacobs’ leadership skills, expertise in finance and investment, and insight into MiX
Telematics’ business enable him to be an effective contributing member of our board of directors.
Andrew Martin. Mr. Martin joined our board of directors in April 2024. Mr. Martin serves as a Partner and member of the investment research team at Private Capital
Management, LLC (“PCM”), an investment firm. Mr. Martin joined PCM in 2013 from the hedge fund unit at H.I.G. Capital, LLC, an alternative investment firm, where he
was a senior research analyst focused primarily on industrials, business services and special situation investments. Mr. Martin previously was the Director of Research at Polen
Capital Management, LLC, a global asset manager, where he helped develop and direct the firm’s research process. Mr. Martin has previously worked at Fine Capital Partners,
Sanford C. Bernstein & Co., LLC, and Credit Suisse First Boston, as well as Arthur Andersen LLP, while earning a CPA license. He earned a B.S. degree in Applied Economics
and Business Management from Cornell University and an M.B.A. from Columbia University.
With his extensive experience in investment research and serving in leadership roles at multiple investment firms, Mr. Martin brings substantial leadership and financial
expertise to our board. We believe Mr. Martin’s experience guiding long-term growth and navigating complex market dynamics enables him to be an effective contributing
member of our board of directors.
Michael McConnell. Mr. McConnell joined our board of directors upon consummation of the MiX Combination on April 2, 2024. Mr. McConnell currently serves as
Chairman of Adacel Technologies Limited, a developer of air traffic management systems and technology, and has served as a member of its board of directors since 2017. He
also serves as a member of the board of directors of OneSpan Inc. (Nasdaq: OSPN), a provider of security, identity, e-signature and digital workflow solutions. Mr. McConnell
has previously served on the boards of Vonage Holdings Corp. (formerly Nasdaq: VG), a cloud communications provider, from 2019 through its sale in July 2022, SPS
Commerce, Inc. (Nasdaq: SPSC), a provider of cloud-based supply chain management services, from 2018 through 2019, Spark Networks, Inc. (OTCMKTS: LOVLQ), a
collection of niche-oriented community websites, where he also served as interim Executive Chairman and Chief Executive Officer during 2014, and QuickFee, a provider of
online payment and lending solutions. He has also served on numerous other public and private company boards in the United States, Australia, New Zealand and Ireland. Prior
to his services as a board member of these public and private companies, Mr. McConnell served as the Managing Director of Shamrock Capital Advisors, a private investment
company, for 14 years. Mr. McConnell holds a B.A. degree from Harvard University and an M.B.A. from the University of Virginia Darden School of Business.
Mr. McConnell possesses extensive management, operating, and financial expertise. We believe his more than two decades of experience serving in executive roles and on
various public and private company boards in multiple industries enables Mr. McConnell to be an effective contributing member of our board of directors.
Executive Officers
Jonathan Bates. Mr. Bates has served as our Chief Product Officer since April 2024. Prior to joining Powerfleet, Mr. Bates served as the Executive Vice President of
Marketing and Managing Director of Europe and Middle East of MiX Telematics from July 2020 until the closing of the MiX Combination in April 2024, and served in various
other roles for MiX Telematics from December 2012 to July 2020. Before joining MiX Telematics, Mr. Bates held several managerial positions from within the PSA Peugeot
Citroen Group (now Stellantis) in the functions of sales, marketing, product management, customer success and project management. Mr. Bates earned a Bachelor of Laws
degree in the United Kingdom.
Melissa Ingram. Ms. Ingram has served as our Chief Corporate Development Officer since April 2024. From March 2022 to April 2024, she served as our Chief
Transformation Officer. Prior to joining Powerfleet, Ms. Ingram worked at Aptos, Inc., serving as the Vice President of Transformation and Growth from October 2017 to
January 2022 and the Vice President of Business Operations (EMEA) from October 2016 to October 2017. While at Aptos, Ms. Ingram led the integration of four acquisitions
to expand portfolio areas and support entrance into new territories, standardized global operations, and spearheaded multi-million-dollar profit improvement programs. Ms.
Ingram earned a Master of Arts (MA Oxon.) degree in Modern History from the University of Oxford.
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Offer Lehmann. Mr. Lehmann has served as our Chief Operating Officer since November 2022. Mr. Lehmann joined Powerfleet from Kornit Digital Ltd. (Nasdaq: KRNT), a
global leader in on-demand sustainable fashion and textile production technologies, where he served as Vice President – Global Strategic Accounts & Business Development
from January 2019 to November 2022 and Vice President – Operations from October 2014 to January 2019. Mr. Lehmann has over 20 years of experience working in
management positions for large-cap, global public companies within the technology industry. Mr. Lehmann earned a B.Sc. degree from the Technion – Israel Institute of
Technology and an MBA from the University of Haifa.
Catherine Lewis. Ms. Lewis has served as our Chief Customer Officer since April 2024. Prior to joining Powerfleet, Ms. Lewis served as the Executive Vice President of
Technology and Managing Director of Central Services Organization of MiX Telematics from May 2001 until the closing of the MiX Combination in April 2024. During her
tenure at MiX Telematics, Ms. Lewis was responsible for a number of business functions, including software and hardware engineering, SaaS operations and support,
manufacturing and supply chain, marketing, product management, business systems, and information technology. Ms. Lewis has more than 20 years of experience in the
information technology and technology services industry. Ms. Lewis earned a Bachelor of Business Science degree with honors in Information Systems from the University of
Cape Town.
Charles Tasker. Mr. Tasker has served as our Chief Revenue Officer since April 2024. Prior to joining Powerfleet, Mr. Tasker served as the Chief Operating Officer of MiX
Telematics from 2014 until the closing of the MiX Combination in April 2024 and as a member of MiX Telematics’ board of directors from 2007 to April 2024. Prior to his
tenure at MiX Telematics, Mr. Tasker founded Datapro, Inc., an internet service provider and software development company, which was acquired by Control Instruments
Group Limited in 1996. Mr. Tasker has more than 25 years of entrepreneurial and management experience working with companies in the technology sector.
David Wilson. Mr. Wilson has served as our Chief Financial Officer and Corporate Secretary since January 2023. Prior to joining Powerfleet, Mr. Wilson served as the Chief
Financial Officer of NSONE, Inc., a leading provider of next generation managed Domain Name System services, from May 2020 to December 2022. Additionally, Mr. Wilson
has held Chief Financial Officer roles at Symphony Communication Services, LLC, an encrypted communication software company, from July 2017 to October 2019 and
Ooyala Inc., a leading provider of online video services, from September 2013 to July 2017. Mr. Wilson earned a Bachelor of Commerce degree in Finance from the University
of Birmingham.
Steve Towe. See narrative description under the caption “Directors” above.
Jim Zeitunian. Mr. Zeitunian has served as our Chief Technology Officer since February 2022. Mr. Zeitunian has extensive experience serving in senior leadership positions
for software companies. Prior to joining Powerfleet, Mr. Zeitunian served as Vice President of Engineering at Coupa Software Incorporated (“Coupa”), a global provider of
business spend management solutions, from November 2020 to January 2022, where he led the engineering and applied research teams focusing on the development of Coupa’s
supply chain design and planning SaaS platform. From July 2017 to November 2020, Mr. Zeitunian served as the Vice President of Engineering at LLamasoft, Inc.
(“LLamasoft”), where he played a critical role in transforming LLamasoft into a provider of SaaS products that led to its approximately $1.5 billion sale to Coupa in November
2020. Mr. Zeitunian also served as the Senior Director of Software Development at Thomson Reuters from June 2016 to July 2017, where he drove the production of SaaS
products and platforms. Mr. Zeitunian earned his B.S. degree in Computer Science from Oakland University.
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Audit Committee
The Audit Committee, which is a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act, is composed of
Messrs. Brodsky, Jacobs and McConnell, each of whom is independent under Nasdaq Rule 5605(c)(2) and Rule 10A-3 under the Exchange Act.
The Board has determined that it has at least one “audit committee financial expert” serving on the Audit Committee. Mr. McConnell serves as the audit committee financial
expert. Mr. McConnell also serves as the Chairman of the Audit Committee.
The Board has adopted a written charter for the Audit Committee, a copy of which is publicly available on our website at https://ir.powerfleet.com/corporate-governance/board-
committees. The Audit Committee’s charter sets forth the responsibilities, authority and specific duties of the Audit Committee and is reviewed and reassessed annually. The
information on our website is not a part of this Form 10-K. The charter specifies, among other things, the structure and membership requirements of the Audit Committee, as
well as the relationship of the Audit Committee to our independent registered public accounting firm and management.
In accordance with its written charter, the Audit Committee assists our board of directors in monitoring (i) the integrity of our financial reporting process including our internal
controls regarding financial reporting, (ii) our compliance with legal and regulatory requirements and (iii) the independence and performance of our internal and external
auditors, and serves as an avenue of communication among the independent registered public accounting firm, management and our board of directors.
Code of Ethics
We have a code of ethics (the “Code of Ethics”) that applies to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Controller and Treasurer. A copy
of our Code of Ethics can be found on our website at https://ir.powerfleet.com/corporate-governance/governance-documents. The Code of Ethics is also available in print, free
of charge, to any stockholder who requests a copy by writing to us at the following address: Powerfleet, Inc., 123 Tice Boulevard, Woodcliff Lake, New Jersey 07677,
Attention: Corporate Secretary. Our Code of Ethics is intended to be a codification of the business and ethical principles that guide us, and to deter wrongdoing, to promote
honest and ethical conduct, to avoid conflicts of interest, and to foster full, fair, accurate, timely and understandable disclosures, compliance with applicable governmental laws,
rules and regulations, the prompt internal reporting of violations and accountability for adherence to this code. We will post any amendment to the Code of Ethics, as well as
any waivers that are required to be disclosed by the rules of the SEC or The Nasdaq Stock Market LLC, on our website.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our executive officers, directors and persons who own more than 10% of a registered class of our equity securities to file with the
SEC statements on Form 3, Form 4 and Form 5 of ownership and changes in ownership. Officers, directors and greater than 10% stockholders are required by regulation to
furnish us with copies of all Section 16(a) reports that they file.
Based solely upon a review of Forms 3, 4 and 5 and any amendments to those forms that have been furnished to us, we believe that all parties subject to the reporting
requirements of Section 16(a) filed all such required reports during and with respect to the fiscal year ended December 31, 2023, except that each of Michael Brodsky, our
Chairman, and Michael Casey and Charles Frumberg, former directors of Powerfleet, filed late a Form 4 with respect to transactions that occurred on July 28, 2023.
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Item 11. Executive Compensation.
Compensation Discussion and Analysis
Introduction
This discussion presents the principles underlying our executive officer compensation program. Our goal in this discussion is to provide the reasons why we award
compensation as we do and to place in perspective the data presented in the tables that follow this discussion. The focus is primarily on compensation of our executive officers
for the fiscal year ended December 31, 2023, but some historical and forward-looking information is also provided to put such year’s compensation information in context. The
information presented herein relates to the following individuals who are considered “named executive officers,” under applicable rules and regulations of the SEC, each of
whom is sometimes referred to in this Form 10-K as a “Named Executive Officer:” (i) Steve Towe, who has served as our Chief Executive Officer since January 5, 2022, (ii)
David Wilson, who has served as our Chief Financial Officer since January 4, 2023, and (iii) Jim Zeitunian, who has served as our Chief Technology Officer since February 14,
2022.
Compensation Philosophy and Objectives
We attempt to apply a consistent philosophy to compensation for all employees, including senior management. This philosophy is based on the premises that our success is
dependent upon the efforts of each employee and that a cooperative, team-oriented environment is an essential part of our culture. We believe in the importance of rewarding
our employees for our successes, which is why we emphasize pay-for-performance incentive compensation. Particular emphasis is placed on broad employee equity
participation through the use of stock options and restricted stock awards, as well as on annual cash bonuses linked to achievement of our corporate performance goals. We
considered the results of the “say-on-pay” proposal with respect to executive compensation presented to the stockholders at our 2023 annual meeting held on July 20, 2023, and
in light of the support the proposal received, we continue to emphasize pay-for-performance incentive compensation, as explained in detail in this Compensation Discussion
and Analysis.
Our compensation programs for our Named Executive Officers are designed to achieve a variety of goals, including:
● attracting and retaining talented and experienced executives;
● motivating and rewarding executives whose knowledge, skills and performance are critical to our success;
● aligning the interests of our executives and stockholders by motivating executives to increase stockholder value in a sustained manner; and
● providing a competitive compensation package which rewards achievement of our goals.
Total compensation paid to our executive officers is influenced significantly by the need to attract and retain management employees with a high level of expertise and to
motivate and retain key executives for our long-term success. Some of the components of compensation, such as base salary, are generally fixed and do not vary based on our
financial and other performance. Some components, such as cash incentive bonuses and certain stock option awards, are dependent upon the achievement of certain goals
approved by the compensation committee of our board of directors (the “Compensation Committee”); and for such purpose, the Compensation Committee considers goals for
executive officers (other than our Chief Executive Officer) recommended by our Chief Executive Officer and includes him in its discussions with respect to such goals.
Furthermore, the value of certain of these components, such as stock options and restricted stock, is dependent upon our future stock price.
We compensate our executive officers in these different ways in order to achieve different goals. Cash compensation, for example, provides executive officers with a minimum
base salary. Cash incentive bonuses are generally linked to the achievement of financial and business goals (as described in greater detail below) and are intended to reward
executive officers for our overall performance. Stock option and restricted stock awards are intended to link our executive officers’ longer-term compensation with the
performance of our stock and to build executive ownership positions in our stock. This encourages our executive officers to remain with us and to act in ways intended to
maximize stockholder value, and serves to penalize them if we and/or our stock fails to perform to expectations.
We view the three components of our executive officer compensation as related but distinct. Although the Compensation Committee does review total compensation, it does not
believe that compensation derived from one component of compensation necessarily should negate or reduce compensation from other components. We determine the
appropriate level for each compensation component based in part, but not exclusively, on its historical practices with the individual and our view of individual performance and
other information we deem relevant. The Compensation Committee has not adopted any formal or informal policies or guidelines for allocating compensation between long-
term and currently paid out compensation, between cash and non-cash compensation, or among different forms of compensation. We have not reviewed wealth and retirement
accumulation as a result of employment with us and have only focused on fair compensation for the year in question.
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The Compensation Committee monitors the results of the annual advisory “say-on-pay” proposal and incorporates such results as one of many factors considered in connection
with the discharge of its responsibilities. At our 2023 annual meeting of stockholders, the stockholders approved, on an advisory basis, the compensation of the Named
Executive Officers, and in light of such approval, the Compensation Committee continued with its performance-based compensation philosophy and its balanced approach to
the components of its compensation program.
Elements of Executive Officer Compensation
Base Salary. We pay our executive officers a base salary, which we review and determine annually. We believe that a competitive base salary is a necessary element of any
compensation program. We believe that attractive base salaries can motivate and reward executives for their overall performance. Base salaries are established in part based on
the particular executive’s position, responsibility, experience, skills and expected contributions during the coming year and such individual’s performance during the prior year.
We also have generally sought to align base compensation levels comparable to our competitors and other companies in similar stages of development. We do not view base
salaries as primarily serving our objective of paying for performance, but in attracting and retaining the most qualified executives necessary to run our business. We continue to
focus on a pay-for-performance structure, which is discussed below.
Cash Incentive Bonus Program. The primary objective of our annual cash incentive bonus program is to motivate and reward our employees, including our Named Executive
Officers, for meeting our short-term objectives using a pay-for-performance program with objectively determinable performance goals. Each of Messrs. Towe, Wilson and
Zeitunian was eligible to receive a cash incentive bonus under our Global Bonus Plan (the “GBP”) for the fiscal year ended December 31, 2023, which is discussed below.
The objectives of the GBP for 2023 are to align the interests of senior management with our performance goals. The GBP focuses on rewarding executives for the achievement
of financial objectives with competitive financial incentives and provides a systemic plan for establishing definitive performance goals. Under the GBP for 2023, our
performance goals are based on (i) revenue growth, (ii) profitability based on adjusted EBITDA and (iii) subscriber renewal.
Awards payable under the GBP for 2023 were calculated as a percentage of the executive’s base salary. The target award under the GBP for 2023 for each of Messrs. Towe,
Wilson and Zeitunian was set at 100%, 75%, and 50% of his base salary, respectively. Under the GBP for 2023, 45% of each executive’s target award could be earned based on
the achievement of (a) a global revenue target of $148.2 million and specified revenue targets for each foreign territory in which we do business for the 2023 fiscal year and (b)
a global adjusted EBITDA target of $12.5 million and specified adjusted EBITDA targets for each foreign territory in which we do business for the 2023 fiscal year, and 10% of
each executive’s target award could be earned based on us having a target subscriber renewal rate of 90% for the 2023 fiscal year. The portion of each executive’s bonus award
that was tied to the revenue target could be pro-rated based on the amount of revenue actually achieved for the 2023 fiscal year starting at 90%, and being capped at 120%, of
the revenue target. The portion of each executive’s bonus award that was tied to the adjusted EBITDA target could be pro-rated based on the amount of adjusted EBITDA
actually achieved for the 2023 fiscal year starting at 100%, and being capped at 120%, of the adjusted EBITDA target. Based on our financial results for the fiscal year ended
December 31, 2023 and our subscriber renewal rate, each of Messrs. Towe, Wilson and Zeitunian received annual bonuses under the GBP for 2023 in the aggregate amounts of
$214,625, 132,563 and $63,125, respectively.
Equity Compensation. We believe that stock option and restricted stock awards are an important long-term incentive for our executive officers and employees and that our stock
option and restricted stock award program has been effective in aligning officer and employee interests with those of our stockholders. We review our equity compensation
plans annually. Employees are eligible for annual stock option and restricted stock award grants. These options and grants are intended to produce value for each executive
officer if (i) our stockholders derive significant sustained value and (ii) the executive officer remains employed with us.
Historically, other than in connection with an incentive bonus program, we did not have any program, plan or obligation under which we were required to grant equity
compensation to any executive officer on specified dates or upon the achievement of certain performance goals. The authority to make equity grants to executive officers rests
with the Compensation Committee and our board of directors, although, as noted, the Compensation Committee and our board of directors do consider the recommendations of
our Chief Executive Officer in setting the compensation of our other executive officers.
113
Severance and Change-in-Control Benefits. We describe certain severance and change-in-control benefits applicable to Mr. Towe, our current Chief Executive Officer, under
the captions “Severance Arrangements” and “Potential Payments Upon Termination or Change in Control” below.
Benefits. The executive officers participate in all of our employee benefit plans, such as medical and 401(k) plans, on the same basis as our other employees.
Perquisites. Our use of perquisites as an element of compensation is very limited. We do not view perquisites as a significant element of our comprehensive compensation
structure.
Regulatory Considerations
We account for the equity compensation expense for our employees under the rules of Financial Accounting Standards Board Accounting Standards Codification Topic 718
(“ASC 718”), which requires us to estimate and record an expense for each award of equity compensation over the service period of the award. Accounting rules also require us
to record cash compensation as an expense at the time the obligation is accrued.
Employment Agreements
We have not entered into employments agreements with any of our Named Executive Officers.
Severance Arrangements
We are a party to a severance agreement with Mr. Towe, which provides Mr. Towe with certain severance and change in control benefits upon the occurrence of certain events.
The severance agreement with Mr. Towe provides Mr. Towe with certain severance and change in control benefits upon the occurrence of one of the following events: (i) the
termination of Mr. Towe’s employment by us without cause (a “Trigger Event”) or (ii) the termination of Mr. Towe’s employment by us without cause or Mr. Towe’s
resignation for good reason within six months following a change in control event (a “Change in Control Trigger Event”).
Under the terms of the severance agreement with Mr. Towe, subject to Mr. Towe’s delivery of a general release to us, Mr. Towe will be entitled to the following upon a Trigger
Event or Change in Control Trigger Event: (i) cash payments at twice the rate of his annual base salary as in effect immediately prior to the Trigger Event or Change in Control
Trigger Event, as the case may be, for a period of 12 months, made as a series of separate payments that are payable in accordance with our standard payroll practices; (ii) a
waiver of any remaining portion of Mr. Towe’s healthcare continuation payments under COBRA for the 12-month severance period, provided that he timely elects COBRA
coverage and continues to make contributions for such coverage equal to his contribution amount in effect immediately preceding the date of his termination of employment;
(iii) partial accelerated vesting of his previously granted stock options and restricted stock awards, such that (to the extent not already then vested) a portion of these awards
shall vest and/or become exercisable, in each case on a pro-rated basis that takes into account the number of months elapsed since the date of grant as compared to the
scheduled vesting date (provided that the terms of our equity compensation plans shall continue to govern acceleration of vesting in the event of a change of control as defined
in such plan); and (iv) any bonus that would have otherwise been payable to Mr. Towe for the calendar year prior to termination.
As a condition to our obligations under the severance agreement with Mr. Towe, Mr. Towe also executed and delivered to us a restrictive covenants agreement containing
covenants regarding confidentiality, assignment of inventions, non-competition and non-solicitation.
We are also party to an employee covenants agreement with Mr. Wilson, which provides him with certain severance benefits if Mr. Wilson is terminated by us involuntarily
without cause and/or for reasons not related to Mr. Wilson’s performance.
The employee covenants agreement with Mr. Wilson provides that if we terminate Mr. Wilson without cause and/or for reasons not related to Mr. Wilson’s performance, subject
to Mr. Wilson’s delivery of a general release to us, Mr. Wilson will be entitled to the following: (i) cash payment equal to six months of Mr. Wilson’s annual base salary; (ii) a
pro rata portion of any target annual bonus that would have been payable to Mr. Wilson with respect to the year of termination; and (iii) partial accelerated vesting of previously
granted stock options and restricted stock awards, such that (to the extent not already then vested) the portion of these awards that would have vested in the calendar year Mr.
Wilson is terminated will be deemed to have vested and/or became exercisable.
In addition, under the terms of the employee covenants agreement, Mr. Wilson agreed to covenants regarding, among other things, confidentiality, assignment of inventions,
non-competition and non-solicitation.
114
Compensation Tables
The following table, which should be read in conjunction with the explanations provided above, sets forth summary compensation information for the years ended December
31, 2023 and 2022 for our Named Executive Officers.
Name and Principal Position
Steve Towe
Chief Executive Officer
David Wilson
Chief Financial Officer
Jim Zeitunian
Chief Technology Officer
Summary Compensation Table
Year
2023
2022
2023
Salary
($)
425,000
425,000
350,000
Bonus ($)
(1)
216,667
216,667
—
Stock
Awards
($)(2)
2,016,000
962,000
196,500
Option
Awards
($)(2)
—
1,191,387
560,897
Non-Equity
Incentive Plan
Compensation
($)(3)
214,625
228,013
132,563
Total ($)
2,872,292
3,023,067
1,239,960
2023
2022
250,000
220,673
—
—
—
145,600
—
146,971
63,125
67,063
313,125
580,307
(1) The dollar amounts shown under the heading “Bonus” with respect to Steve Towe for 2022 and 2023 represent the first and second installments, respectively, of a retention
bonus of $650,000.
(2) The dollar amounts shown under the headings “Stock Awards” and “Option Awards” with respect to each of the Named Executive Officers for the fiscal years ended
December 31, 2023 and 2022 reflect the aggregate grant date fair value of restricted stock and option awards granted in the fiscal year indicated, computed in accordance
with ASC 718, disregarding service-based vesting conditions. For a discussion of the assumptions we made in valuing the stock and option awards, see “Note 3[Q] —
Summary of Significant Accounting Policies — Stock-based compensation” and “Note 10 — Stock-Based Compensation” in the notes to our consolidated financial
statements contained in this Form 10-K.
(3) The dollar amounts shown under the heading “Non-Equity Incentive Plan Compensation” (i) for each of Messrs. Towe, Wilson and Zeitunian for 2023 represent bonus
earned for such fiscal year pursuant to the GBP for 2023 and (ii) for each of Messrs. Towe and Zeitunian for 2022 represent bonus earned for such fiscal year pursuant to
the GBP for 2022.
115
The following table provides certain information concerning outstanding equity awards held by each of our Named Executive Officers at December 31, 2023.
Option Awards
Stock Awards
Outstanding Equity Awards at Fiscal Year End
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
125,000
—
—
—
—
—
20,000
—
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
375,000
875,000
1,250,000
2,000,000
130,000
275,000
60,000
160,000
Option
Exercise
Price ($)
4.81
10.50
14.00
21.00
3.00
3.00
3.64
3.64
Option
Expiration
Date
1/5/2032(3)
1/5/2032(4)
1/5/2032(5)
1/5/2032(6)
1/4/2033(3)
1/4/2033(7)
2/14/2032(3)
2/14/2032(7)
Number of
Shares or
Units of
Stock
That Have
Not Vested
(#)(1)
1,050,000
—
—
—
75,000
—
30,000
—
Market
Value of
Shares or
Units of
Stock
That Have
Not Vested
($)(2)
3,591,000
—
—
—
256,500
—
102,600
—
Name
Steve Towe
David Wilson
Jim Zeitunian
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested (#)
—
—
—
—
—
—
—
—
Equity
Incentive
Plan
Awards:
Market
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested ($)
—
—
—
—
—
—
—
—
(1) Represents restricted shares issued under the 2018 Plan.
(2) Calculated based on $3.42 per share, the closing price per share of our common stock, as reported on The Nasdaq Global Market, on December 29, 2023.
(3) These option awards were scheduled to vest over a four-year period, such that twenty-five percent (25%) of the options vests on each of the first, second, third and fourth
anniversaries of the date of grant, provided that the holder was an employee of Powerfleet on each such anniversary. In connection with consummation of the MiX
Combination, these awards vested in full on April 2, 2024.
(4) These option awards will vest and become exercisable in full immediately upon the volume weighted average price of our common stock during a consecutive 60 trading
day period (the “60 Day VWAP”) reaching $10.50, provided that the holder is an employee of Powerfleet on such date.
(5) These option awards will vest and become exercisable in full immediately upon the 60 Day VWAP reaching $14.00, provided that the holder is an employee of Powerfleet
on such date.
(6) These option awards will vest and become exercisable in full immediately upon the 60 Day VWAP reaching $21.00, provided that the holder is an employee of Powerfleet
on such date.
(7) These option awards will vest and become exercisable in full immediately upon the 60 Day VWAP reaching $12.00, provided that the holder is an employee of Powerfleet
on such date.
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control under Severance Arrangements
As described above under the caption “Severance Arrangements,” we have entered into a severance agreement with Mr. Towe, which provides for severance payments or other
compensation upon the termination of such executive’s employment or a change in control with respect to Powerfleet. We have also entered into an employee covenants
agreement with Mr. Wilson, which provides for severance payments or other compensation upon the termination of such executive’s employment.
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Potential Payments Upon Termination or Change in Control under Equity Compensation Plans
Our 2018 Plan provides that, unless the Compensation Committee provides otherwise in advance of the grant, in the event of a “change in control,” if the employee or service
provider is terminated other than for “cause” (as defined in the 2018 Plan) within one year of such change in control or leaves for “good reason” (as defined in the 2018 Plan),
options and restricted stock (including restricted stock units) shall vest. In addition, unless otherwise determined by the Compensation Committee, the payout of performance
stock units and performance shares shall be determined exclusively by the attainment of the performance goals established by the Compensation Committee, which may not be
modified after the change in control, and we will not have the right to reduce the awards for any other reason.
For purposes of the 2018 Plan, a “change in control” means the occurrence of any of the following events: (i) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of Powerfleet or a corporation owned directly or indirectly by our stockholders in substantially the same proportions as their
ownership of our stock, becomes the beneficial owner (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of our securities representing fifty
percent (50%) or more of the total voting power represented by our then outstanding voting securities; (ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute our board of directors and any new director whose election by the board of directors or nomination for election by our stockholders was
approved by a vote of a majority of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof; (iii) the consummation of a merger or consolidation of Powerfleet with any other corporation,
other than a merger or consolidation which would result in our voting securities outstanding immediately prior thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving entity) at least 50% of the total voting power represented by our voting securities or such surviving entity
outstanding immediately after such merger or consolidation; or (iv) our stockholders approve a plan of complete liquidation of Powerfleet or an agreement for the sale or
disposition by us of all or substantially all our assets.
Risk Considerations
We do not believe that our compensation practices and policies for our employees, including our executive officers, create risks or are likely to create risks that are reasonably
likely to have a material adverse effect on us or our results of operations or financial condition.
Compensation of Directors
General
All directors are entitled to reimbursement for travel and lodging and other reasonable out-of-pocket expenses incurred by them in connection with their attendance at board of
directors and/or board committee meetings or other activities on our behalf.
Employee Directors
Directors who are our current officers or employees or any subsidiary of Powerfleet do not receive any additional compensation for their service as members of either our board
of directors or any committees of our board of directors.
Non-Employee Directors
On August 1, 2017, our board of directors adopted a non-employee director compensation program pursuant to which non-employee directors are entitled to receive annual
compensation having economic value of approximately $119,000, which includes a cash retainer of $59,000 and restricted stock grants with an economic value of
approximately $60,000. The cash retainer may be paid, at each director’s election, in cash or in restricted shares of our common stock. Each of Anders Bjork and Medhini
Srinivasan, as former directors elected to our board by the holders of our previously outstanding Series A Preferred Stock (the “former Series A Directors”), agreed to waive
participation in our non-employee director compensation program. Each of the non-employee directors, other than the former Series A Directors, was paid his retainer for 2023
in cash. With respect to restricted stock awards, the number of shares issuable in 2023 was calculated based on the average of the reported closing price per share of our
common stock on The Nasdaq Global Market over a 20 consecutive trading day period ending on and including the 2023 annual meeting of stockholders.
The Chairman of our board of directors and the chairperson of each of the committees of our board of directors are also entitled to a supplemental retainer, which may be paid,
at each director’s election, in cash or in restricted shares of our common stock. Specifically, the Chairman of our board of directors receives an additional $36,000 per year of
service; the chairperson of the Audit Committee receives an additional $18,000 per year of service; the chairperson of the Compensation Committee receives an additional
$12,000 per year of service; and the chairperson of the Nominating Committee receives an additional $10,000 per year of service. Each of the non-employee directors, other
than the former Series A Directors, was paid his supplemental retainer in 2023 in cash.
117
During the fiscal year ended December 31, 2023, Michael Brodsky, Michael Casey, Charles Frumberg and Nani Maoz were paid cash retainers in the aggregate amounts of
$105,000, $77,000, $59,000 and $59,000, respectively. In addition, each of Messrs. Brodsky, Casey, Frumberg and Maoz received an award of 20,562 in restricted shares of
common stock in consideration for his services as a director of Powerfleet, which were granted on July 26, 2023 pursuant to the 2018 Plan. All such restricted stock awards
were scheduled to vest as to 100% of such shares on the first anniversary of the date of grant, provided that the non-employee director was then serving as a director of
Powerfleet. In connection with consummation of the MiX Combination, these awards vested in full on April 2, 2024. Each of Mr. Bjork and Ms. Srinivasan, as the former
Series A Directors, did not receive any compensation for their service as directors during the fiscal year ended December 31, 2023.
Our non-employee directors are not entitled to retirement, benefit or other perquisite programs.
The following table provides certain information with respect to the compensation paid to our non-employee directors during the fiscal year ended December 31, 2023.
Name
Anders Bjork(5)
Michael Brodsky
Michael Casey
Charles Frumberg
Nani Maoz
Medhini Srinivasan(5)
Fees Earned or
Paid in Cash ($)
(1)
Stock Awards ($)
(2)(3)
Option Awards
($)(4)
Total ($)
$
$
$
$
—
105,000
77,000
59,000
59,000
—
$
$
$
$
—
57,574
57,574
57,574
57,574
—
—
—
—
—
—
—
$
$
$
$
—
162,574
134,574
116,574
116,574
—
(1) The amount under this column reflects the aggregate amount of cash retainers paid to each non-employee director.
(2) The amounts under this column reflect the aggregate grant date fair value of 20,562 restricted shares of our common stock granted to each of Michael Brodsky, Michael
Casey and Charles Frumberg, and Nani Maoz, under the 2018 Plan on July 26, 2023, each computed in accordance with ASC 718, disregarding any service-based vesting
conditions. For a discussion of the assumptions we made in valuing the stock awards, see “Note 3[Q] – Summary of Significant Accounting Policies – Stock-based
compensation” and “Note 10 – Stock-Based Compensation” in the notes to our consolidated financial statements contained in this Form 10-K. The amounts set forth under
this column do not include the restricted shares of common stock granted in lieu of cash for fees set forth under the column “Fees Earned or Paid in Cash.” Each of the
restricted stock awards granted to Messrs. Brodsky, Casey, Frumberg and Maoz vested in full upon consummation of the MiX Combination.
(3) At December 31, 2023, each of Messrs. Brodsky, Casey and Frumberg held 20,562 shares of unvested restricted stock and neither Anders Bjork nor Medhini Srinivasan
held any shares of unvested restricted stock.
(4) At December 31, 2023, Mr. Brodsky held options to purchase 95,000 shares of our common stock and each of Messrs. Casey and Frumberg held options to purchase
45,000 shares of our common stock. Mr. Bjork, Mr. Maoz and Ms. Srinivasan did not hold any options to purchase shares of our common stock at December 31, 2023.
(5) Mr. Bjork and Ms. Srinivasan did not receive any compensation for their service as directors during the fiscal year ended December 31, 2023.
As of the closing date of the MiX Combination, each of Mr. Bjork, Mr. Casey, Mr. Frumberg, Mr. Maoz and Ms. Srinivasan resigned as a director of Powerfleet.
118
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information regarding ownership of shares of our common stock as of May 1, 2024 by:
● each stockholder known by us to own beneficially more than 5% of our outstanding common stock;
● each of our Named Executive Officers;
● each of our current directors; and
● all of our current directors and executive officers as a group.
To our knowledge, except as set forth in the footnotes to the table and subject to applicable community property laws, each person or entity named in the table has sole voting
and disposition power with respect to the shares set forth opposite such person’s or entity’s name. The number of shares beneficially owned by each entity, person, director or
executive officer is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under
such rules, beneficial ownership includes any shares over which the individual has the sole or shared voting power or investment power and any shares that the individual has
the right to acquire within 60 days of May 1, 2024, through the exercise of stock options, warrants or other convertible securities or any other right. Shares of our common
stock that a person has the right to acquire within 60 days of May 1, 2024 are deemed outstanding for purposes of computing the percentage ownership of the person holding
such rights but are not deemed outstanding for purposes of computing the percentage ownership of any other person (except with respect to the percentage ownership of all
directors and executive officers as a group). As used in this Form 10-K, “voting power” is the power to vote or direct the voting of shares and “investment power” includes the
power to dispose or direct the disposition of shares.
The number and percentage of shares beneficially owned is computed on the basis of 107,349,987 shares of our common stock outstanding as of May 1, 2024. The information
in the following table regarding the beneficial owners of more than 5% of our common stock is based upon information supplied by our principal stockholders or set forth in
Schedules 13D and 13G filed with the SEC. The determination that there were no other persons, entities or groups known to us to beneficially own more than 5% of our
outstanding common stock was based on a review of all statements filed with the SEC with respect to Powerfleet pursuant to Section 13(d) or 13(g) of the Exchange Act.
The address for those persons for which an address is not otherwise provided is c/o Powerfleet, Inc., 123 Tice Boulevard, Woodcliff Lake, New Jersey 07677.
Name and Address of Beneficial Owner
5% Stockholders:
Private Capital Management, LLC
8889 Pelican Bay Boulevard
Suite 500
Naples, FL 34108
Current Executive Officers:
Steve Towe
David Wilson
Jim Zeitunian
Offer Lehmann
Melissa Ingram
Charles Tasker
Catherine Lewis
Jonathan Bates
Current Non-Employee Directors:
Michael Brodsky
Ian Jacobs
Andrew Martin
Michael McConnell
All current directors and executive officers as a group (eleven individuals)
* Represents less than 1% of the outstanding shares of our common stock.
(1) Ownership percentages are based on 107,349,987 shares of our common stock outstanding as of May 1, 2024.
119
Number of Shares
of Common Stock
Beneficially Owned
Percentage of
Shares of Common
Stock
Outstanding(1)
5,923,830(2)
1,161,754(3)
180,603(4)
113,220(5)
97,000(6)
133,566(7)
1,275,128(8)
484,091(9)
63,808(10)
428,178(11)
4,382,068(12)
22,342(13)
—
8,341,758
5.52%
1.08%
*
*
*
*
1.19%
*
*
*
4.08%
*
*
7.67%
(2) Based on information contained in Amendment No. 4 to Schedule 13G filed with the SEC on February 5, 2024, Private Capital Management, LLC, a Delaware limited
liability company, beneficially owns an aggregate of 5,923,830 shares of our common stock, with shared voting and dispositive power over 2,932,602 shares, and sole
voting and dispositive power over 2,991,228 shares.
(3) This number includes 500,000 shares of our common stock issuable upon exercise of options which are currently exercisable or which will become exercisable within 60
days of May 1, 2024.
(4) This number includes 130,000 shares of our common stock issuable upon exercise of options which are currently exercisable or which will become exercisable within 60
days of May 1, 2024.
(5) This number includes 80,000 shares of our common stock issuable upon exercise of options which are currently exercisable or which will become exercisable within 60
days of May 1, 2024.
(6) This number includes 65,000 shares of our common stock issuable upon exercise of options which are currently exercisable or which will become exercisable within 60
days of May 1, 2024.
(7) This number includes 90,000 shares of our common stock issuable upon exercise of options which are currently exercisable or which will become exercisable within 60
days of May 1, 2024.
(8) This number includes (i) 309,880 shares of our common stock held by Mr. Tasker’s wife and (ii) 207,382 shares of our common stock underlying stock appreciation rights
which are currently exercisable or which will become exercisable within 60 days of May 1, 2024.
(9) This number includes 161,119 shares of our common stock underlying stock appreciation rights which are currently exercisable or which will become exercisable within
60 days of May 1, 2024.
(10) This number consists of shares of our common stock underlying stock appreciation rights which are currently exercisable or which will become exercisable within 60 days
of May 1, 2024.
(11) This number includes (i) 76,000 shares of our common stock held by Vajra Fund I, L.P., of which Mr. Brodsky is the general partner, and (ii) 95,000 shares of our common
stock issuable upon exercise of options which are currently exercisable or will become exercisable within 60 days of May 1, 2024.
(12) This number includes 4,351,350 shares of our common stock held by 786 Partners LP and 402 Fund LP, over which Mr. Jacobs has voting and investment power.
(13) This number includes 2,152 shares of our common stock held by Mr. Martin’s children.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Certain Relationships and Related Transactions
Our policy prohibits conflicts between the interests of our employees, officers and directors and our company. A conflict of interest exists when an employee, officer, or
director’s personal interest interferes or may interfere with our interests. When it is deemed to be in the best interests of our company and our stockholders, the Audit
Committee may grant waivers to employees, officers and directors who have disclosed an actual or potential conflict of interest, which waivers are subject to approval by our
Board. This policy is included in our Code of Business Conduct and Ethics for Employees, Officers and Directors.
120
In accordance with its charter, the Audit Committee is responsible for annually reviewing any transactions or series of similar transactions to which we are or were a party and
in which any director, executive officer or beneficial holder of more than 5% of any class of our voting securities, or members of any such person’s immediate family, have had
or will have a direct or indirect material interest. Our Audit Committee’s procedures for reviewing related party transactions are not in writing. Since January 1, 2021, there has
not been, nor is there currently proposed, any transaction or series of similar transactions to which we are or were a party in which the amount involved exceeds $120,000 and
in which any director, executive officer or beneficial holder of more than 5% of any class of our voting securities, or members of any such person’s immediate family, have had
or will have a direct or indirect material interest. As of May 1, 2024, our common stock is Powerfleet’s only class of voting securities.
Director Independence
Our Board has determined that, with the exception of Mr. Towe, each of our current directors satisfies the current “independent director” standards established by the Nasdaq
rules and, as to the members of the Audit Committee, the additional independence requirements under applicable rules and regulations of the SEC. Thus, a majority of our
board of directors is comprised of independent directors as required by the Nasdaq rules. The Audit Committee is composed of Messrs. Brodsky, Jacobs and McConnell, each
of whom is an independent director in accordance with Nasdaq Rule 5605(c). The Compensation Committee is composed of Messrs. Brodsky, Jacobs and McConnell, each of
whom is an independent director in accordance with Nasdaq Rule 5605(d). The Nominating Committee of our board of directors is composed of Messrs. Brodsky, Jacobs and
McConnell, each of whom is independent in accordance with Nasdaq Rule 5605(e).
Item 14. Principal Accounting Fees and Services.
Audit Fees
The aggregate fees billed by Ernst & Young LLP (“EY”), our independent registered public accounting firm, for professional services rendered for the audit of our annual
financial statements, comfort letters, statutory and subsidiary audits, consents and assistance with review of documents filed with the SEC for the fiscal years ended December
31, 2022 and December 31, 2023 were $1,550,000 and $2,586,000, respectively. For the fiscal years ended December 31, 2022 and 2023, aggregate audit fees included fees for
the audit of the effectiveness of our internal control over financial reporting required by the Sarbanes-Oxley Act.
Audit-Related Fees
The aggregate fees billed by EY for audit-related services reasonably related to the performance of the audit or review of our financial statements during the fiscal years ended
December 31, 2022 and December 31, 2023 were $0 and $66,950, respectively.
Tax Fees
The aggregate fees billed by EY for professional services rendered for tax compliance, tax advice or tax planning during the fiscal years ended December 31, 2022 and
December 31, 2023 were $222,000 and $235,000, respectively.
All Other Fees
The aggregate fees billed by EY for products or professional services rendered during the fiscal years ended December 31, 2022 and December 31, 2023 were $2,500 and $0,
respectively, in addition to the services described under the captions “Audit Fees” and “Tax Fees” above, which primarily consisted of fees related to a subscription for EY
thought leadership and accounting guidance in 2022.
Audit Committee’s Pre-Approval Policies and Procedures
The Audit Committee pre-approves all services, including both audit and non-audit services, provided by our independent registered public accounting firm. For audit services,
each year the independent registered public accounting firm provides the Audit Committee with an engagement letter outlining the scope of the audit services proposed to be
performed during the year, which must be formally accepted by the Audit Committee before the audit commences. The independent registered public accounting firm also
submits an audit services fee proposal, which also must be approved by the Audit Committee before the audit commences. None of the fees for services described above under
the captions “Tax Fees” or “All Other Fees” approved by the Audit Committee were approved pursuant to the exception provided by paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X.
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Item 15. Exhibits, Financial Statement Schedules.
(a) List of Financial Statements, Financial Statement Schedules, and Exhibits.
PART IV.
(1) Financial Statements. The following financial statements of Powerfleet, Inc. are included in Item 8 of Part II of this Form 10-K:
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 42)
Consolidated Balance Sheets at December 31, 2022 (As restated) and 2023
Consolidated Statements of Operations for the Years Ended December 31, 2021 (As restated), 2022 (As restated) and 2023
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2021 (As restated), 2022 (As restated) and 2023
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2021 (As restated), 2022 (As restated) and 2023
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 (As restated), 2022 (As restated) and 2023
Notes to the Consolidated Financial Statements
(2) Financial Statement Schedule.
None.
122
Page
44
47
48
49
50
51
52
(3) Exhibits. The following exhibits are filed with this Form 10-K or are incorporated herein by reference, as indicated.
2.1
2.2.1
2.2.2
2.2.3
2.2.4
2.2.5
2.4
3.1.1
Agreement and Plan of Merger, dated as of March 13, 2019, by and among Powerfleet, Inc., Powerfleet Israel Holding Company Ltd., Powerfleet Israel
Acquisition Company Ltd., I.D. Systems, Inc. and Pointer Telocation Ltd. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of I.D.
Systems, Inc., filed with the SEC on March 15, 2019).†
Investment and Transaction Agreement, dated as of March 13, 2019, by and among I.D. Systems, Inc., Powerfleet, Inc., Powerfleet US Acquisition Inc., ABRY
Senior Equity V, L.P. and ABRY Senior Equity Co-Investment Fund V, L.P. (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K of I.D.
Systems, Inc., filed with the SEC on March 15, 2019).†
Amendment No. 1 to the Investment and Transaction Agreement, dated as of May 16, 2019, by and among I.D. Systems, Inc., Powerfleet, Inc., Powerfleet US
Acquisition Inc., ABRY Senior Equity V, L.P. and ABRY Senior Equity Co-Investment Fund V, L.P. (incorporated by reference to Exhibit 2.1 to the Current
Report on Form 8-K of I.D. Systems, Inc., filed with the SEC on May 20, 2019).†
Amendment No. 2 to the Investment and Transaction Agreement, dated as of June 27, 2019, by and among I.D. Systems, Inc., Powerfleet, Inc., Powerfleet US
Acquisition Inc., ABRY Senior Equity V, L.P. and ABRY Senior Equity Co-Investment Fund V, L.P. (incorporated by reference to Exhibit 2.1 to the Current
Report on Form 8-K of I.D. Systems, Inc., filed with the SEC on June 27, 2019).†
Amendment No. 3 to the Investment and Transaction Agreement, dated as of October 3, 2019, by and among I.D. Systems, Inc., Powerfleet, Inc., Powerfleet US
Acquisition Inc., ABRY Senior Equity V, L.P., ABRY Senior Equity Co-Investment Fund V, L.P. and ABRY Investment Partnership, L.P. (incorporated by
reference to Exhibit 2.5 to the Current Report on Form 8-K12B of Powerfleet, Inc., filed with the SEC on October 3, 2019).†
Amendment No. 4 to the Investment and Transaction Agreement, dated as of May 13, 2020, by and among Powerfleet, Inc., I.D. Systems Inc., ABRY Senior
Equity V, L.P., ABRY Senior Equity Co-Investment Fund V, L.P. and ARBY Investment Partnership, L.P. (incorporated by reference to Exhibit 2.1 to the Current
Report on Form 8-K of I.D. Systems, Inc., filed with the SEC on May 14, 2020).
Implementation Agreement, dated October 10, 2023, by and among Powerfleet, Inc., Main Street 2000 Proprietary Limited and MiX Telematics Limited
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Powerfleet, Inc., filed with the SEC on October 10, 2023).†
Amended and Restated Certificate of Incorporation of Powerfleet, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K12B of
Powerfleet, Inc., filed with the SEC on October 3, 2019).
3.1.2
Amendment to the Amended and Restated Certificate of Incorporation of Powerfleet, Inc. (filed herewith).
3.2
4.1
4.2
Amended and Restated Bylaws of Powerfleet, Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K12B of Powerfleet, Inc., filed with
the SEC on October 3, 2019).
Specimen Powerfleet, Inc. Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 2 to the Registration Statement on Form S-4 of
Powerfleet, Inc., filed with the SEC on July 23, 2019).
Description of Securities (filed herewith).
10.1.1
2009 Non-Employee Director Equity Compensation Plan (incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q of I.D. Systems, Inc.
for the fiscal quarter ended September 30, 2009, filed with the SEC on November 6, 2009).*
123
10.1.2
Amendment, dated March 16, 2012, to 2009 Non-Employee Director Equity Compensation Plan (incorporated by reference to Exhibit 10.2 to the Quarterly
Report on Form 10-Q of I.D. Systems, Inc. for the fiscal quarter ended March 31, 2012, filed with the SEC on May 14, 2012).*
10.2
10.3
10.4.1
10.4.2
10.4.3
10.4.4
10.5.1
I.D. Systems, Inc. 2015 Equity Compensation Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of I.D. Systems, Inc. filed with
the SEC on June 25, 2015).*
Powerfleet, Inc. 2018 Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Powerfleet, Inc., filed with the
SEC on July 26, 2023).*
Employment Offer Letter, dated January 5, 2022, between Powerfleet, Inc. and Steve Towe (incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K of Powerfleet, Inc., filed with the SEC on January 5, 2022).*
Severance Agreement, dated January 5, 2022, between Powerfleet, Inc. and Steve Towe (incorporated by reference to Exhibit 10.2 to the Current Report on Form
8-K of Powerfleet, Inc., filed with the SEC on January 5, 2022).*
Amendment to Severance Agreement, dated September 11, 2023, between Powerfleet, Inc. and Steve Towe (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K of Powerfleet, Inc. filed with the SEC on September 15, 2023).*
Form of Stock Option Inducement Award Agreement (incorporated by reference to Exhibit 99.1 to the Registration Statement on Form S-8 of Powerfleet, Inc.,
filed with the SEC on March 16, 2022).*
Offer Letter, dated December 31, 2022, between Powerfleet, Inc. and David Wilson (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K
of Powerfleet, Inc., filed with the SEC on January 4, 2023).*
10.5.2
Employee Covenants Agreement, dated November 11, 2022, between Powerfleet, Inc. and David Wilson (filed herewith).*
10.6
10.7
Offer Letter, dated February 8, 2022, between Powerfleet, Inc. and James Zeitunian (incorporated by reference to Exhibit 10.7 to the Annual Report on Form 10-K
of Powerfleet, Inc., filed with the SEC on March 31, 2023).*
Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.5 to Amendment No. 2 to the Registration Statement on Form
S-4 of Powerfleet, Inc., filed with the SEC on July 23, 2019).*
124
10.8
10.9
21.1
23.1
31.1
31.2
32.1
32.2
Amended and Restated Credit Agreement, dated March 18, 2024, by and among Powerfleet Israel Ltd., Pointer Telocation Ltd. and Bank Hapoalim B.M.
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Powerfleet, Inc., filed with the SEC on March 22, 2024).
Facilities Agreement, dated March 7, 2024, by and among Powerfleet, Inc., I.D. Systems, Inc., Movingdots GmbH and FirstRand Bank Limited (acting through its
Rand Merchant Bank division) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Powerfleet, Inc., filed with the SEC on March 12,
2024).
List of Subsidiaries (filed herewith).
Consent of Ernst & Young LLP (filed herewith).
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
97.1
Powerfleet, Inc. Clawback Policy (filed herewith).
101.INS
Inline XBRL Instance Document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
†
*
We have omitted certain schedules and exhibits to this agreement in accordance with Item 601(b)(2) of Regulation S-K, and we will supplementally furnish a copy of
any omitted schedule and/or exhibit to the Securities and Exchange Commission upon request.
Management contract or compensatory plan or arrangement.
(b) Exhibits. The exhibits required by Item 601 of Regulation S-K are filed herewith or incorporated herein by reference. Please see the Index to Exhibits to this Form 10-K,
which is incorporated into this Item 15(b) by reference.
Item 16. Form 10-K Summary
None.
125
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: May 9, 2024
SIGNATURES
POWERFLEET, INC.
By:
By:
/s/ Steve Towe
Steve Towe
Chief Executive Officer
(Principal Executive Officer)
/s/ David Wilson
David Wilson
Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report is signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
/s/ Steve Towe
Steve Towe
/s/ David Wilson
David Wilson
/s/ Michael Brodsky
Michael Brodsky
/s/ Ian Jacobs
Ian Jacobs
/s/ Andrew Martin
Andrew Martin
/s/ Michael McConnell
Michael McConnell
Signature
Title
Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
126
Date
May 9, 2024
May 9, 2024
May 9, 2024
May 9, 2024
May 9, 2024
May 9, 2024
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
POWERFLEET, INC.
Pursuant to Section 242 of the General Corporation Law of the State of Delaware
Exhibit 3.1.2
POWERFLEET, INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the “DGCL”), does hereby certify:
1. The name of the corporation is: Powerfleet, Inc. (the “Corporation”). The original Certificate of Incorporation of the Corporation was filed with the Secretary of
State of the State of Delaware on February 21, 2019.
2. The amendments to the Corporation’s Amended and Restated Certificate of Incorporation set forth below were duly adopted in accordance with the provisions of
Section 242 of the DGCL and have been consented to by the requisite vote of the stockholders of the Corporation at a meeting called in accordance with Section 222 of the
DGCL.
3. The first paragraph of ARTICLE FIFTH of the Corporation’s Amended and Restated Certificate of Incorporation is hereby amended and restated in its entirety to
read as follows:
“The total number of shares of all classes of stock that the Corporation shall have the authority to issue is 175,150,000 shares, consisting of:
(a) 175,000,000 shares of Common Stock, $0.01 par value per share (“Common Stock”); and
(b) 150,000 shares of Preferred Stock, $0.01 par value per share (“Preferred Stock”), of which 100,000 shares of Preferred Stock shall be designated Series A
Convertible Preferred Stock (“Series A Preferred Stock”) and 50,000 shares of Preferred Stock shall initially be undesignated.”
4. The foregoing amendment shall be effective upon the filing of this Certificate of Amendment to the Certificate of Incorporation of the Corporation with the
Secretary of State of the State of Delaware.
[Signature Page Follows]
IN WITNESS WHEREOF, Powerfleet, Inc. has caused this Certificate of Amendment to be signed by its duly authorized officer on this 22nd day of March 2024.
POWERFLEET, INC.
/s/ Steve Towe
By:
Name: Steve Towe
Title:
Chief Executive Officer
Exhibit 4.2
DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12
OF THE SECURITIES EXCHANGE ACT OF 1934
Powerfleet, Inc. (“Powerfleet” or the “Company”) has authority to issue 175,150,000 shares of capital stock, consisting of 175,000,000 shares of common stock, $0.01 par
value per share (the “Common Stock”), and 150,000 shares of preferred stock, $0.01 par value per share, of which 100,000 shares of preferred stock are currently designated as
Series A Convertible Preferred Stock (“Series A Preferred Stock”). The following is a summary of the material terms of the Common Stock. This summary is qualified in its
entirety by reference to Powerfleet’s Amended and Restated Certificate of Incorporation (as amended, the “Charter”) and Powerfleet’s Amended and Restated Bylaws (the
“Bylaws”), which are incorporated herein by reference as Exhibits 3.1.1 and 3.1.2, with respect to the Charter, and Exhibit 3.2.1, with respect to the Bylaws, to Powerfleet’s
Annual Report on Form 10-K of which this exhibit is a part. Please read the Charter, the Bylaws and applicable provisions of the Delaware General Corporation Law (the
“DGCL”) for additional information.
Common Stock
Voting. The holders of Common Stock are entitled to one vote for each share held of record on all matters on which the holders of Common Stock are entitled to vote. Holders
of Common Stock do not have cumulative voting rights in the election of directors.
Dividends. Subject to the rights of holders of all classes of stock (including the Series A Preferred Stock) at the time outstanding that have prior rights as to dividends, the
holders of Common Stock are entitled to receive, when, as and if declared by our board of directors (“Board”), out of assets of the Company legally available therefor, such
dividends as may be declared from time to time by our Board.
Liquidation Rights. Upon any voluntary or involuntary liquidation, dissolution or winding-up, or Deemed Liquidation Event (as defined in our Charter), the holders of
Common Stock will be entitled to receive all assets of the Company available for distribution to its stockholders, subject to any preferential or pari passu rights of any then
outstanding preferred stock (including the Series A Preferred Stock).
Other Rights. Holders of Common Stock have no preemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions applicable to the
Common Stock. The rights, preferences, and privileges of the holders of Common Stock are subject to and may be adversely affected by, the rights of the holders of shares of
any series of preferred stock that we may designate in the future (including the Series A Preferred Stock).
Anti-Takeover Provisions
Our Charter contains provisions that could have an anti-takeover effect and may delay, defer or discourage potential acquisition proposals or tender offers or delaying or
preventing attempts to influence or replace our incumbent directors and officers. These provisions are summarized below.
No Cumulative Voting
Our Charter does not provide for cumulative voting in the election of directors. Under cumulative voting, a minority stockholder holding a sufficient number of shares may be
able to ensure the election of one or more directors. The absence of cumulative voting may have the effect of limiting the ability of minority stockholders to effect changes in
our Board.
Undesignated Preferred Stock
Our Charter provides our Board with the authority, without further action by the holders of Common Stock, to provide for the issuance of up to 50,000 shares of currently
undesignated and unissued preferred stock in one or more series and to establish from time to time the number of shares to be included in each series, and to fix the
designations, powers, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. Our Charter has designated 100,000
shares as Series A Preferred Stock. The existence of authorized but unissued shares of preferred stock would enable our Board to render more difficult or to discourage an
attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or other means.
Section 203 of the Delaware General Corporation Law (the “DGCL”)
We are subject to Section 203 of the DGCL. Section 203 of the DGCL generally prohibits “business combinations”, including mergers, sales and leases of assets, issuances of
securities and similar transactions, by a corporation or a subsidiary with an interested stockholder who beneficially owns 15% or more of a corporation’s voting stock, within
three years after the person or entity becomes an interested stockholder, unless: (i) the board of directors approved the acquisition of stock pursuant to which the person became
an interested stockholder or the transaction that resulted in the person becoming an interested stockholder prior to the time that the person became an interested stockholder, (ii)
upon consummation of the transaction that resulted in the person becoming an interested stockholder, such person owned at least 85% of the corporation’s outstanding voting
stock (excluding shares owned by directors who are officers and shares owned by employee stock plans in which participants do not have the right to determine confidentially
whether shares will be tendered in a tender or exchange offer) or (iii) after the person or entity becomes an interested stockholder, the transaction is approved by the board of
directors and by the affirmative vote of at least 66 2/3% of the outstanding voting stock not owned by the interested stockholder. These provisions may have the effect of
delaying, deferring or preventing changes in control of the Company.
Requirements for Advance Notification of Stockholder Nominations and Proposals
Our Bylaws provide advance notice procedures for stockholders to nominate candidates for election as directors at our annual and special meetings of stockholders and for
stockholders seeking to bring business before its annual meeting of stockholders. Generally, such notice must be provided no later than the 90th day, nor earlier than 120th day,
prior to the first anniversary of the previous year’s annual meeting of stockholders. Our Bylaws also specify certain requirements regarding the form and content of a
stockholder’s notice as to each person the stockholder proposes to nominate for election as a director.
Special Meetings of Stockholders
Our Charter provides that special meetings of the stockholders may be called only by (i) our Board pursuant to a resolution adopted by a majority of the entire Board, either
upon motion of a director or upon written request by holders of at least fifty percent (50%) of the voting power of all the shares of our capital stock then entitled to vote
generally in the election of directors, voting together as a single class or (ii) the chairman of the Board or our chief executive officer.
Amendments of Certain Provisions of Our Charter
Our Charter requires the affirmative vote of at least 75% of the voting power of the outstanding shares of our capital stock entitled to vote in the election of directors, voting
together as a single class, to amend, alter, change, or repeal Articles FOURTEENTH and FIFTEENTH, which relate to the ability of stockholders to call a special meeting or act
by written consent, and the threshold for amending such provisions. In all other matters (other than those relating to the rights of the holders of the Series A Preferred Stock),
amendment of our Charter requires a majority of the voting power of the outstanding shares of our capital stock.
Authority to Amend Bylaws
Our Charter provides that the Board has the power to alter, amend or repeal any provision of the Bylaws or to make new Bylaws, without the consent or vote of our
stockholders.
Listing
Our Common Stock is currently quoted on The Nasdaq Global Market and the Tel Aviv Stock Exchange, in each case under the symbol “PWFL,” and the Johannesburg Stock
Exchange under the symbol “PWR.”
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is Computershare Inc.
Powerfleet, Inc.
EMPLOYEE COVENANTS AGREEMENT
Exhibit 10.5.2
THIS AGREEMENT is made and entered into this 11th day of November 2022 by and between POWERFLEET, INC. (“Powerfleet, Inc.”) and David Wilson (“Employee”).
WITNESSETH:
WHEREAS, Powerfleet, Inc. is engaged in a highly competitive business involving the development, design, manufacture and/or sale of tracking and monitoring
products; and
WHEREAS, Powerfleet, Inc. develops and uses various valuable trade secrets as well as other technical and non-technical confidential information which it wishes to
protect either by patents or by keeping same secret and confidential, and which trade secrets and confidential information are commercially valuable and afford Powerfleet, Inc.
a competitive advantage in the marketplace; and
WHEREAS, Employee is or desires to be employed by Powerfleet, Inc. in a capacity in which Employee may receive or contribute to confidential information,
NOW, THEREFORE, in consideration of Employee’s employment and/or continued employment with Powerfleet, Inc. and the salary and benefits of employment
received by Employee from time to time, it is AGREED as follows:
1. DEFINITIONS OF TERMS IN THIS AGREEMENT
collectively referred to as “Powerfleet, Inc.”).
a. “Powerfleet, Inc.” is defined to include any parent, subsidiary, affiliate or related entity which presently exists or which may exist in the future (hereafter,
b. “Trade Secret” is defined as any technology, design, pattern, device, or compilation of information which is used in Powerfleet, Inc.’s business and which
gives it an opportunity to obtain an advantage over competitors who do not know or use it.
c. “Confidential Information” is defined as information not generally or publicly known and is proprietary to Powerfleet, Inc., including, but not limited to,
information relating to products; research materials; sources; new materials; batch numbers; lot numbers; applications; new products; sales; plans; formulations; techniques;
processes; production methods and systems; stabilizations; purchasing; designs; pricing; costs; packaging; accounting; engineering; marketing; merchandising; servicing;
selling; finance and business systems; Trade Secrets; customer and supplier lists; requirements of customers; sources of supply; all other customer and supplier data; research
and development data; contracts and negotiations; personnel and employee data; business plans; and sales and servicing data to the extent such information is not generally or
publicly known. Confidential Information also includes confidential or proprietary information received by Powerfleet, Inc. from third parties subject to a duty on Powerfleet,
Inc.’s part to maintain the confidentiality of such information and to use it only for certain limited purposes.
All information disclosed to the Employee or to which the Employee obtains access, whether originated by him or by others during the period of his
employment, which he has reasonable basis to believe to be Confidential Information, or which is treated by Powerfleet, Inc. as being Confidential Information, shall be
presumed to be Confidential Information, regardless of whether said information is specifically included in this paragraph.
whether or not patentable or copyrightable:
d. “Inventions” is defined as discoveries, improvements or ideas, whether or not shown or described in writing or reduced to practice, or works of authorship,
(i) which result from any work performed by the Employee for Powerfleet, Inc., either alone or with others; or
(ii) for which equipment, supplies, facilities, Trade Secrets or Confidential Information of Powerfleet, Inc. are used; or
(iii) which are developed on Powerfleet, Inc.’s time or within the scope of the Employee’s duties with I. D. Systems.
e. “Conflicting Product or Device” is defined as a technology, product or device which is the same or substantially similar to products, proposed products,
samples and prototype products of Powerfleet, Inc. or to devices (including machinery) used by Powerfleet, Inc. in the research, development, production or manufacture of
said products with which the Employee was involved during the last twelve (12) months of his employment and which are sold, distributed, manufactured or used (or are
intended to be sold, distributed, manufactured or used) in the geographic areas and territories in which Powerfleet, Inc. does business and can reasonably be expected to do
business.
f. “Conflicting Entity” is defined as any person or organization, including any firm, partnership, corporation, entity or enterprise, which is engaged in or about
to become engaged in research, development, production, manufacture, marketing, leasing, selling, installation, servicing or other furnishing of a Conflicting Product or Device.
2. NON-DISCLOSURE OF TRADE SECRETS, CONFIDENTIAL INFORMATION AND OTHER PROPERTY
a. Employee acknowledges and agrees that Powerfleet, Inc. will be irreparably injured and the value of its business and its goodwill will be irreparably
damaged if the Employee discloses any Trade Secrets or Confidential Information acquired during his employment with Powerfleet, Inc. or uses said Trade Secrets or
Confidential Information for his own purposes or those of any entity or enterprise other than Powerfleet, Inc.
b. Employee therefore agrees not to disclose or utilize, either during the course of his employment or at any time thereafter, any such Trade Secrets or
Confidential Information without first obtaining Powerfleet, Inc.’s written consent thereto, except as required by his duties to Powerfleet, Inc. or as required by law.
c. All such information received, developed or conceived by the Employee as a result of his employment with Powerfleet, Inc. shall be deemed the property of
Powerfleet, Inc. and shall be held by the Employee in trust for the sole benefit of Powerfleet, Inc.
provided such information has not become publicly accessible as a result of Employee’s direct or indirect act or omission.
d. These provisions are not intended, and shall not be intended, to restrict Employee’s ability to utilize data recognized to be within the public domain,
e. Employee agrees that all Trade Secrets, Confidential Information, products, memoranda, notes, records, supplies, samples, prototypes, lists, devices,
technology, equipment, sales and service data, pricing data, blueprints, specifications, research and development data, items or other documents or tangible things, whether
handwritten, typed, taped, transcribed or otherwise recorded, which are or were made, received, or compiled by the Employee, or made available to the Employee during his
employment with Powerfleet, Inc. (including, but not limited to, such items which disclose or embody Confidential Information), shall be delivered to Powerfleet, Inc.
immediately upon termination of the Employee’s employment, or at such other time as Powerfleet, Inc. may request.
proprietorship, corporation, enterprise or other entity.
f. Employee shall neither retain copies of said documents or items, nor give, sell, transfer, transmit or otherwise provide them to any person, firm,
g. Notwithstanding the foregoing or anything else contained herein to the contrary, this Agreement shall not preclude Employee from disclosing Confidential
Information to a governmental body or agency or to a court if and to the extent that a restriction on such disclosure would limit the Employee from exercising any protected
right afforded the Employee under applicable law, including the ability to receive an award for information provided to a governmental body.
h. Employee acknowledges receipt of the following notice under the Defend Trade Secrets Act: An individual will not be held criminally or civilly liable
under any federal or state trade secret law for the disclosure of a trade secret if he/she (i) makes such disclosure in confidence to a Federal, State, or local government official,
either directly or indirectly, or to an attorney and such disclosure is made solely for the purpose of reporting or investigating a suspected violation of law; or (ii) such disclosure
was made in a complaint or other document filed in a lawsuit or other proceeding if such filing is made under seal.
3. COVENANTS AGAINST COMPETITION AND SOLICITATION
a. Employee acknowledges that Powerfleet, Inc. has expended and is expending substantial time, money and effort in developing and solidifying its
relationships with customers and clients; and that Employee’s employment, continuation of employment and compensation represents consideration, among other things, for the
development and preservation of business information, customer and client good will, customer and client loyalty and customer and client contacts for and on behalf of
Powerfleet, Inc..
b. During the period of employment with Powerfleet, Inc., the Employee will not, without the express written consent of Powerfleet, Inc., engage at any time
in any business or activity which competes directly or indirectly with the present or future business of Powerfleet, Inc., or which is in any other way destructive of or harmful to
any business interests of Powerfleet, Inc. In addition, Employee agrees that, during the term of his employment with Powerfleet, Inc. he will devote his best efforts to
Powerfleet, Inc.’s business and will work solely for it and will not consult, work or perform services for any other person, firm, company, entity or enterprise without the
written consent of Powerfleet, Inc., which consent will not be unreasonably withheld.
c. During employment with Powerfleet, Inc., and for a period of one (1) year immediately following the termination of employment with Powerfleet, Inc. for
any reason, whether with or without cause, Employee shall not, without the express written consent of Powerfleet, Inc., directly or indirectly, by himself or through any other
person, firm, partnership, corporation, entity or enterprise:
(i) contact, communicate, solicit, transact business with or perform services for (or assist any third party in contacting, communicating, soliciting,
transacting business with or performing any services for) any individual or entity who or which either is, or at any time within eighteen (18) months prior to
the contact, communication, solicitation, transaction of business or performance of services was, a customer or prospective customer of Powerfleet, Inc., for
the purpose of inducing such customer or potential customer to be connected to or benefit from any business competitive with that of Powerfleet, Inc. (as
defined by the Powerfleet, Inc. annual report and 10-K filings), or otherwise induce or influence any such customer or client, known customer or client
prospect to reduce its volume of business, or terminate or divert its relationship or in any way adversely affect its relationship with Powerfleet, Inc.; or
(ii) recruit, solicit, employ, engage or retain, any person who or which either is, or at any time within the prior twelve (12) months, was a director,
officer, employee, consultant, representative or agent of Powerfleet, Inc., or induce or encourage any such person to terminate his or her employment or other
relationship with Powerfleet, Inc.; or
(iii) engage in the research, development, production or manufacture of Conflicting Products or Devices; or
(iv) engage in, be employed by or participate in any way in any Conflicting Entity (which engagement, employment or participation includes, but is
not limited to, acting as a director, officer, employee, agent, member, manager, managing member, independent contractor, partner, general partner, limited
partner, consultant, representative, salesman, licensor or licensee, franchisor or franchisee, proprietor, syndicate member, shareholder or creditor).
Notwithstanding the foregoing, Employee may own or hold equity securities (or securities convertible into, or exchangeable or exercisable for, equity
securities) of Conflicting Entities; provided, however, that (A) such equity securities are publicly traded on a securities exchange and (B) Employee’s
aggregate holdings of such securities do not exceed at any time one (1%) percent of the total issued and outstanding equity securities of such company or
entity.
d. If the Employee is terminated involuntarily without cause and/or for reasons not related to performance, Powerfleet, Inc. will:
(i) pay the Employee severance equivalent to 6 months’ base salary plus the proration of target annual bonus amount based on days employed (less
customary taxes and withholdings);
(ii) accelerate the vesting of the current annual tranche of stock options based on number of full months employed; and
(iii) Employee must execute a Separation and General Release Agreement in order to be eligible for above.
4. FUTURE EMPLOYERS
If at any time during his employment with Powerfleet, Inc. or following termination of his employment with Powerfleet, Inc., Employee seeks employment
with a new employer, Employee shall, prior to accepting or immediately upon accepting such employment, inform such new employer of the terms and conditions herein and
furnish such new employer with a copy of this Agreement. Prior to or immediately upon accepting employment with a new employer, Employee will advise Powerfleet, Inc. of
his new employment and duties, and Powerfleet, Inc. shall have the right to notify Employee’s new employer of Employee’s rights and obligations under this Agreement.
5. INVENTIONS
a. With respect to inventions or designs made, authored, conceived, developed or perfected by the Employee, either (i) solely or jointly with others during his
employment, whether or not during normal working hours, and whether or not at Powerfleet, Inc.’s premises, or (ii) within one year after termination of his employment if such
invention (1) relates to a product or process upon which the Employee worked during his employment with Powerfleet, Inc., or (2) is based upon Trade Secrets or Confidential
Information, or (3) is the result of or attributed to work done during such employment and relates to a method, technology, machine, device, design, article of manufacture or
improvements thereto, that is, or can reasonably be expected to be within the scope of Powerfleet, Inc.’s business, the Employee agrees to:
(i) Promptly and fully disclose and describe such inventions or designs in writing to Powerfleet, Inc.;
(ii) Keep accurate, complete and timely records of such inventions or designs, which records shall be Powerfleet, Inc.’s property and shall be
retained on Powerfleet, Inc.’s premises;
(iii) Promptly assign and transfer to Powerfleet, Inc. (and Employee does hereby assign and transfer to Powerfleet, Inc.) full and exclusive rights to
such inventions or designs, and to any applications for patents and/or copyrights, as well as any patents and/or copyrights granted upon such inventions or
designs; and
(iv) Execute, acknowledge and deliver to Powerfleet, Inc., without charge but at Powerfleet, Inc.’s expense, all such further documents and papers
(including, but not limited to, applications for patents anywhere in the world) that in Powerfleet, Inc.’s judgment may be necessary or desirable to preserve
Powerfleet, Inc.’s property rights against forfeiture, abandonment or loss, or to obtain and maintain patents and/or copyrights and to vest complete and
unencumbered title thereto in Powerfleet, Inc.
b. Powerfleet, Inc. shall retain all rights, title and interest in and to any such inventions, patents or designs, which shall be held by the Employee in trust
solely for the benefit of Powerfleet, Inc. and shall not be disclosed to any others without Powerfleet, Inc.’s written consent. Said inventions shall be the sole and exclusive
property of Powerfleet, Inc. and may, without limitation or consent of Employee, be assigned, licensed or sold by Powerfleet, Inc. to any other person.
c. This Agreement shall not apply to any inventions made by the Employee whether patented or unpatented, which were conceived or made by the Employee
prior to his employment with Powerfleet, Inc. and which are found on the attached Exhibit A with a brief description thereof or with titles and dates of documents describing
them.
other person, corporation, entity, partnership or enterprise, unless so indicated on a signed and dated attachment to this Agreement.
d. Employee hereby acknowledges that to the best of his knowledge, there is no other agreement to assign inventions now in existence between him and any
6. REPRESENTATIONS
a. Employee agrees to execute any proper oath or verify any proper document required to carry out the terms of this Agreement. Employee represents that his
performance of all of the terms of this Agreement will not breach any prior agreement to keep in confidence proprietary information acquired by Employee in confidence or in
trust prior to his employment with Powerfleet, Inc. Employee further represents that he owns all right, title and interest in and to the Inventions assigned hereunder and that
such Inventions will not infringe the patent, trademark or copyright owned by any third party. Employee represents that he has not entered into, and will not enter into, any oral
or written agreements in conflict with this Agreement.
b. Employee represents that Employee does not have any non-disclosure, non-solicitation, non-compete or other obligations to any previous employer or other
person or entity that would conflict with Employee’s obligations under this Agreement or the performance of Employee’s duties for Powerfleet, Inc. Employee will not disclose
to Powerfleet, Inc. or its customers or induce or cause Powerfleet, Inc. or its customers to use any secret or confidential information or material belonging to others, including
Employee’s former employers, if any.
7. INTERPRETATION AND SCOPE OF THIS AGREEMENT
a. If any of the provisions of this Agreement relating to time, geographical area, products, devices and/or information are deemed by a court of competent
jurisdiction to be overly broad or for any other reason unenforceable, the parties agree that such restrictions herein as to time, geographical area, products, devices and/or
information shall be reduced to such time, geographical area, products, devices and/or information as such court shall hold to be reasonable and legally enforceable. Each
provision of this Agreement will be interpreted on its own. If any provision is held to be unenforceable by a court of competent jurisdiction as written, then such provision shall
be deemed limited and restricted to the extent that the court shall deem the provision to be enforceable. The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision hereof.
b. Waiver of any breach or failure to enforce any term or condition of this Agreement on any particular occasion shall not be construed as a waiver of any
breach upon any subsequent occasion. Furthermore, Powerfleet, Inc.’s failure to enter into a written confidentiality and non-competition agreement with any of its other
employees or waiver of any breach or failure to enforce any term or condition of any such agreements between Powerfleet, Inc. and any of its other employees shall not be
construed as a waiver of any breach of the terms and conditions of this Agreement.
c. Employee understands and agrees that if Employee breaches or threaten to breach any of the provisions of this Agreement, Powerfleet, Inc. would suffer
irreparable harm and damages would be an inadequate remedy. Accordingly, Employee acknowledges that Powerfleet, Inc. shall be entitled to temporary, preliminary and
permanent injunctive or other equitable relief in any court of competent jurisdiction (without being obligated to post a bond or other collateral) and to an equitable accounting
of all earning, profits and other benefits arising, directly or indirectly, from such violation, which rights shall be in addition to any other rights or remedies to which Powerfleet,
Inc. may be entitled at law or in equity. In addition, Employee further covenants that Employee will be responsible for payment of the fees and expenses of Powerfleet, Inc.’s
attorneys and experts, as well as Powerfleet, Inc.’s court costs, pertaining to any suit, arbitration, mediation, action or other proceeding (including the costs of any investigation
related thereto) arising directly or indirectly out of my violation or threatened violation of any of the provisions of this Agreement.
d. The provisions of this Agreement shall constitute the entire agreement of Powerfleet, Inc. and Employee with respect to the matters covered hereby and
shall supersede all previous written, oral or implied understandings with respect to such matters.
e. Any and all actions, claims or controversies arising directly or indirectly out of this Agreement, including, without limitation, tort claims, shall be governed
and construed by the laws of the State of New Jersey, without reference to the choice of laws provisions thereof. Any and all actions arising directly or indirectly out of this
Agreement or my employment by Powerfleet, Inc. shall be brought and heard exclusively in the state and federal courts of the State of New Jersey and Employee hereby
irrevocably submits to the exclusive jurisdiction of any such courts.
and their respective successors and assigns (including, without limitation, a purchaser of all or substantially all of the assets of Powerfleet, Inc. or its affiliates).
f. This Agreement shall be binding upon Employee and Employee’s executors, heirs and assigns and shall inure to the benefit of Powerfleet, Inc., its affiliates
g. Employee acknowledges and agrees that the restrictions on the activities in which Employee may engage that are set forth in this Agreement and the
location and period of time for which such restrictions apply are reasonable and necessary to protect Powerfleet, Inc.’s legitimate business interests and shall survive the
termination of Employee’s employment. Employee understands that Powerfleet, Inc.’s business is national in scope and, accordingly, the restrictions cannot be limited to any
particular geographic area within the United States of America. Employee further acknowledges that the restrictions contained in this Agreement will not prevent Employee
from earning a livelihood.
h. Employee is employed as an employee at-will. Nothing contained in this Agreement shall give Employee any right to continue to be employed by
Powerfleet, Inc. Powerfleet, Inc. shall have the right to terminate Employee’s employment at any time, with or without cause or notice and no one at Powerfleet, Inc. has made
any other representations to Employee with respect thereto.
Employee represents and warrants that: (a) Employee has read this Agreement and understands all the terms and conditions hereof, (b) Employee has entered into
this Agreement of Employee’s own free will and volition, (c) Employee has been advised by Powerfleet, Inc. that this Agreement is a legally binding contract and that
Employee should seek Employee’s own independent attorney to review it, (d) Employee has been afforded ample opportunity to consult with Employee’s own
attorney regarding this Agreement, and (e) the terms of this Agreement are fair, reasonable and are being agreed to voluntarily in exchange for Employee’s continued
employment by Powerfleet, Inc. and other compensation and benefits.
IN WITNESS WHEREOF, the parties have executed this agreement as of the date first set forth above.
POWERFLEET, INC.
/s/ Lindsay Estelle
By:
Name: Lindsay Estelle
EMPLOYEE
/s/ David Wilson
By:
Name: David Wilson
Exhibit 21.1
List of Subsidiaries
Name
Asset Intelligence, LLC
I.D. Systems, Inc.
Keytroller, LLC
Main Street 2000 (PTY) Ltd.
MiX Telematics Limited
MiX Telematics Africa (PTY) Ltd.
MiX Telematics Australasia (PTY) Ltd.
MiX Telematics East Africa Limited(1)
MiX Telematics Enterprise SA (PTY) Ltd.(2)
MiX Telematics Europe Limited
MiX Telematics Fleet Support Services (PTY) Ltd.
MiX Telematics India Private Limited
MiX Telematics International (PTY) Ltd.
MiX Telematics Investments (PTY) Ltd.
MiX Telematics Middle East FZE
MiX Telematics North America Incorporated
MiX Telematics Romania SRL(3)
MiX Telematics Serviços De Telemetria E Rastreamento De Veículos Do Brazil
Limitada
MiX Telematics Sociedad De Responsabilidad Limitada De Capital Variable
MiX Telematics (Thailand) Limited
Movingdots GmbH
PowerFleet GmbH
PowerFleet Systems Ltd
PowerFleet Israel Ltd.
Pointer Telocation Ltd.
Pointer Argentina S.A.(4)
Pointer Recuperación de México, S.A. de C.V.(5)
Pointer Logistica y Monitoreo, S.A. de C.V.(5)
Pointer do Brasil Comercial Ltda.
Pointer Telocation India
Pointer SA (PTY) Ltd.(6)
Jurisdiction of Organization / Incorporation
Delaware
Delaware
Delaware
South Africa
South Africa
South Africa
Australia
Uganda
South Africa
United Kingdom
South Africa
India
South Africa
South Africa
United Arab Emirates
Texas
Romania
Brazil
Mexico
Thailand
Germany
Germany
United Kingdom
Israel
Israel
Argentina
Mexico
Mexico
Brazil
India
South Africa
(1) Powerfleet, Inc. (“Powerfleet”) indirectly holds 99.9% of the issued and outstanding capital stock of MiX Telematics East Africa Limited.
(2) Powerfleet indirectly holds 85.1% of the issued and outstanding capital stock of MiX Telematics Enterprise SA (PTY) Ltd.
(3) Powerfleet indirectly holds 99% of the issued and outstanding capital stock of MiX Telematics Romania SRL.
(4) Powerfleet indirectly holds 99.64% of the issued and outstanding shares of Pointer Argentina S.A.
(5) Powerfleet indirectly holds 99.99% of the issued and outstanding capital stock of Pointer Recuperación de México, S.A. de C.V. and Pointer Logistica y Monitoreo,
S.A. de C.V.
(6) Powerfleet indirectly holds 88% of the issued and outstanding shares of Pointer SA (PTY) Ltd.
We consent to the incorporation by reference in the following Registration Statements:
Consent of Independent Registered Public Accounting Firm
(1) Registration Statement on Form S-8 (No. 333-234079) pertaining to the Powerfleet, Inc. 2018 Incentive Plan, I.D. Systems, Inc. 2015 Equity Compensation Plan, I.D.
Systems, Inc. 2009 Non-Employee Director Equity Compensation Plan and I.D. Systems, Inc. 2007 Equity Compensation Plan
(2) Registration Statement on Form S-8 (No. 333-234081) pertaining to the I.D. Systems, Inc. 401(k) Plan
(3) Registration Statement on Form S-8 (No. 333-258715) pertaining to the Powerfleet, Inc. 2018 Incentive Plan
(4) Registration Statement on Form S-8 (No. 333-263625) pertaining to certain stock option inducement awards
(5) Registration Statement on Form S-8 (No. 333-273885) pertaining to certain stock option inducement awards and
(6) Registration Statement on Form S-4 (No. 333-275648) of Powerfleet, Inc.
of our report dated May 9, 2024 with respect to the consolidated financial statements of Powerfleet, Inc. and the effectiveness of internal control over financial reporting of
Powerfleet, Inc. included in this Annual Report (Form 10-K) of Powerfleet, Inc. for the year ended December 31, 2023.
Exhibit 23.1
/s/ Ernst & Young LLP
Iselin, New Jersey
May 9, 2024
Exhibit 31.1
I, Steve Towe, as Chief Executive Officer (Principal Executive Officer), certify that:
1. I have reviewed this Annual Report on Form 10-K of Powerfleet, Inc.;
CERTIFICATIONS
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over
financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Date: May 9, 2024
/s/ Steve Towe
By:
Name: Steve Towe
Title:
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
I, David Wilson, as Chief Financial Officer (Principal Financial Officer), certify that:
1. I have reviewed this Annual Report on Form 10-K of Powerfleet, Inc.;
CERTIFICATIONS
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over
financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Date: May 9, 2024
/s/ David Wilson
By:
Name: David Wilson
Title:
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report on Form 10-K (the “Report”) of Powerfleet, Inc. (the “Corporation”) for the year ended December 31, 2023, as filed with the Securities
and Exchange Commission on the date hereof, I, Steve Towe, Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of
the Sarbanes-Oxley Act of 2002, to my knowledge, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
Date: May 9, 2024
/s/ Steve Towe
By:
Name: Steve Towe
Title:
Chief Executive Officer
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,
United States Code) and is not being filed as part of the Report or as a separate disclosure document.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed
form within the electronic version of this written statement required by Section 906, has been provided to the Corporation and will be retained by the Corporation and furnished
to the Securities and Exchange Commission or its staff upon request.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report on Form 10-K (the “Report”) of Powerfleet, Inc. (the “Corporation”) for the year ended December 31, 2023, as filed with the Securities
and Exchange Commission on the date hereof, I, David Wilson, Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906
of the Sarbanes-Oxley Act of 2002, to my knowledge, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
Date: May 9, 2024
/s/ David Wilson
By:
Name: David Wilson
Title:
Chief Financial Officer
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,
United States Code) and is not being filed as part of the Report or as a separate disclosure document.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed
form within the electronic version of this written statement required by Section 906, has been provided to the Corporation and will be retained by the Corporation and furnished
to the Securities and Exchange Commission or its staff upon request.
POWERFLEET, INC.
DODD-FRANK CLAWBACK POLICY
Exhibit 97.1
The Board of Directors (the “Board”) of Powerfleet, Inc. (the “Company”) has adopted this clawback policy (this “Policy”) as a supplement to any other clawback
policies in effect now or in the future at the Company to provide for the recovery of erroneously awarded Incentive-Based Compensation from Executive Officers. This Policy
shall be interpreted to comply with the clawback rules found in 17 C.F.R. §240.10D and Listing Rule 5608 of The Nasdaq Stock Market (the “Exchange”), and, to the extent
this Policy is in any manner deemed inconsistent with such rules, this Policy shall be treated as retroactively amended to be compliant with such rules.
1. Definitions. 17 C.F.R. §240.10D-1(d) defines the terms “Executive Officer,” “Financial Reporting Measures,” “Incentive-Based Compensation,” and “Received.” As used
herein, these terms shall have the same meaning as set forth in such regulation.
2. Application of this Policy. This Policy shall only apply in the event that the Company is required to prepare an accounting restatement due to the material noncompliance of
the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial
statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left
uncorrected in the current period. In the event of such an accounting restatement, the Company will recover reasonably promptly the Erroneously Awarded Compensation
Received in accordance with this Policy.
3. Recovery Period. The Incentive-Based Compensation subject to clawback is the Incentive-Based Compensation Received by an Executive Officer (1) after beginning service
as an Executive Officer and (2) during the three completed fiscal years immediately preceding the date that the Company is required to prepare an accounting restatement as
described in Section 2, provided that the person served as an Executive Officer at any time during the performance period applicable to the Incentive-Based Compensation in
question (whether or not such person is serving as an Executive Officer at the time the Erroneously Awarded Compensation is required to be repaid to the Company). The date
that the Company is required to prepare an accounting restatement shall be determined pursuant to 17 C.F.R. §240.10D-1(b)(1)(ii).
(a) Notwithstanding the foregoing, this Policy shall only apply if the Incentive-Based Compensation is Received (1) while the Company has a class of securities listed
on the Exchange and (2) on or after October 2, 2023.
(b) See 17 C.F.R. §240.10D-1(b)(1)(i) for certain circumstances under which this Policy will apply to Incentive-Based Compensation Received during a transition
period arising due to a change in the Company’s fiscal year.
4. Erroneously Awarded Compensation. The amount of Incentive-Based Compensation subject to recovery under this Policy with respect to each Executive Officer in
connection with an accounting restatement described in Section 2 (“Erroneously Awarded Compensation”) is the amount of Incentive-Based Compensation Received that
exceeds the amount of Incentive Based-Compensation that otherwise would have been Received had it been determined based on the restated amounts and shall be computed
without regard to any taxes paid. For Incentive-Based Compensation based on the Company’s stock price or total shareholder return, where the amount of Erroneously Awarded
Compensation is not subject to mathematical recalculation directly from the information in an accounting restatement: (1) the amount shall be based on a reasonable estimate of
the effect of the accounting restatement on the Company’s stock price or total shareholder return upon which the Incentive-Based Compensation was Received; and (2) the
Company must maintain documentation of the determination of that reasonable estimate and provide such documentation to the Exchange.
5. Recovery of Erroneously Awarded Compensation. The Company shall recover reasonably promptly any Erroneously Awarded Compensation except to the extent that the
conditions of paragraphs (a), (b), or (c) below apply. The Board shall determine the amount of Erroneously Awarded Compensation Received by each Executive Officer,
promptly notify each Executive Officer of such amount and demand repayment or return of such compensation based on a repayment schedule determined by the Board in a
manner that complies with this “reasonably promptly” requirement. Such determination shall be consistent with any applicable legal guidance, by the Securities and Exchange
Commission (the “SEC”), judicial opinion, or otherwise. The determination of “reasonably promptly” may vary from case to case and the Board is authorized to adopt
additional rules to further describe what repayment schedules satisfy this requirement.
(a) Erroneously Awarded Compensation need not be recovered if the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to
be recovered and the Board has made a determination that recovery would be impracticable. Before concluding that it would be impracticable to recover any amount
of Erroneously Awarded Compensation based on expense of enforcement, the Company shall make a reasonable attempt to recover such Erroneously Awarded
Compensation, document such reasonable attempt(s) to recover, and provide that documentation to the Exchange.
(b) Erroneously Awarded Compensation need not be recovered if recovery would violate home country law where that law was adopted prior to November 28, 2022.
Before concluding that it would be impracticable to recover any amount of Erroneously Awarded Compensation based on violation of home country law, the Company
shall obtain an opinion of home country counsel, acceptable to the Exchange, that recovery would result in such a violation and shall provide such opinion to the
Exchange.
(c) Erroneously Awarded Compensation need not be recovered if recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are
broadly available to employees of the Company, to fail to meet the requirements of 26 U.S.C. §401(a)(13) or 26 U.S.C. §411(a) and regulations thereunder.
6. Board Decisions. Decisions of the Board with respect to this Policy shall be final, conclusive and binding on all Executive Officers subject to this Policy, unless determined
to be an abuse of discretion.
7. No Indemnification. Notwithstanding anything to the contrary in any other policy of the Company or any agreement between the Company and an Executive Officer, no
Executive Officer shall be indemnified by the Company against the loss of any Erroneously Awarded Compensation or any claims related to the Company’s enforcement of its
rights under this Policy.
8. Agreement to Policy by Executive Officers. The Board shall take reasonable steps to inform Executive Officers of this Policy and obtain their agreement to this Policy, which
steps may constitute the inclusion of this Policy as an attachment to any award that is accepted by the Executive Officer.
9. Other Recovery Rights. Any employment agreement, equity award agreement, compensatory plan or any other agreement or arrangement with an Executive Officer shall be
deemed to include, as a condition to the grant of any benefit thereunder, an agreement by the Executive Officer to abide by the terms of this Policy. Any right of recovery under
this Policy is in addition to, and not in lieu of, any other remedies or rights of recovery that may be available to the Company under applicable law, regulation or rule or
pursuant to the terms of any policy of the Company or any provision in any employment agreement, equity award agreement, compensatory plan, agreement or other
arrangement.
10. Disclosure. The Company shall file all disclosures with respect to this Policy required by applicable SEC filings and rules.
11. Amendments. The Board may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary. Notwithstanding anything in this
Section 11 to the contrary, no amendment or termination of this Policy shall be effective if such amendment or termination would (after taking into account any actions taken by
the Company contemporaneously with such amendment or termination) cause the Company to violate any federal securities laws, SEC rule or Exchange rule.
EXHIBIT A
POWERFLEET, INC. DODD-FRANK CLAWBACK POLICY
ACKNOWLEDGMENT FORM
By signing below, the undersigned acknowledges and confirms that the undersigned has received and reviewed a copy of the Powerfleet, Inc. (the “Company”) Dodd-Frank
Clawback Policy (the “Policy”).
By signing this Acknowledgment Form, the undersigned acknowledges and agrees that the undersigned is and will continue to be subject to the Policy and that the Policy will
apply both during and after the undersigned’s employment with the Company. Further, by signing below, the undersigned agrees to abide by the terms of the Policy, including,
without limitation, by returning any Erroneously Awarded Compensation (as defined in the Policy) to the Company to the extent required by, and in a manner consistent with,
the Policy.
Signature
Print Name
Date