What changed in this filing

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Item 1. Financial Statements

2022-08-09 compared with 2022-05-10 · 373 added, 362 removed, 567 unchanged (56% of the section changed)

3 unchanged sentences

thousands, except per share data)

December 31, 2021 *

March 31, 2022

June 30, 2022

Current assets:

1 unchanged sentence

Restricted cash

Accounts receivable, net of allowance for doubtful accounts of $ 3,176

in 2021 and 2022, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 3,176 and $ 2,641 in 2021 and 2022, respectively

Inventory, net

24 unchanged sentences

Convertible redeemable preferred stock:

Series A – 100

shares authorized, $ 0.01

shares issued and outstanding at December 31, 2021 and March 31, 2022

Series A – 100 shares authorized, $ 0.01 par value;

55 and 57 shares issued and outstanding at December 31, 2021 and June 30, 2022

Preferred stock;

1 unchanged sentence

Common stock;

authorized 75,000 shares,

$ 0.01 par value;

and 37,570 shares issued at December 31,

2021 and March 31, 2022, respectively;

shares outstanding, 35,882 and 36,146

at December 31, 2021 and March 31, 2022, respectively

authorized 75,000 shares, $ 0.01 par value;

37,263 and 37,546 shares issued at December 31, 2021 and June 30, 2022, respectively;

shares outstanding, 35,882 and 36,119 at December 31, 2021 and June 30, 2022, respectively

Additional paid-in capital

2 unchanged sentences

Treasury stock;

1,381 and 1,424 common shares at cost at December 31, 2021

and March 31, 2022, respectively

1,381 and 1,427 common shares at cost at December 31, 2021 and June 30, 2022, respectively

Total PowerFleet, Inc.

2 unchanged sentences

Total liabilities and stockholders’ equity

* Derived from audited

balance sheet as of December 31, 2021.

from audited balance sheet as of December 31, 2021.

accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

thousands, except per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Total revenues

2 unchanged sentences

Cost of services

cost of revenue

Total cost of revenues

Operating expenses:

2 unchanged sentences

Total Operating expenses

Income (loss) from operations

Loss from operations

Interest income

14 unchanged sentences

thousands, except per share data)

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

Net loss attributable to common stockholders

Other comprehensive (loss) income, net:

Foreign currency translation adjustment

7 unchanged sentences

Income (Loss)

Non-controlling

Stockholders’

Comprehensive

Income (Loss)

Stockholders’

at January 1, 2022

6 unchanged sentences

of restricted stock units

issued pursuant to exercise of stock options

withheld pursuant to vesting of restricted stock

withheld pursuant to exercise of stock options

based compensation

shares issued, net of issuance costs

Stock based compensation

at March 31, 2022

$ ( 137,366 )

loss attributable to common stockholders

loss attributable to non-controlling interest

currency translation adjustment

of restricted shares

withheld pursuant to vesting of restricted stock

Stock based compensation

at June 30, 2022

$ ( 137,484 )

Comprehensive

Income (Loss)

Stockholders’

Paid-in Capital

Other Comprehensive

Income (Loss)

Non-controlling

Stockholders’

at January 1, 2021

Balance at January 1, 2021

$ ( 121,150 )

loss attributable to common stockholders

currency translation adjustment

of restricted shares

of restricted stock units

issued pursuant to exercise of stock options

withheld pursuant to vesting of restricted stock

withheld pursuant to exercise of stock options

based compensation

shares issued, net of issuance costs

at March 31, 2021

Net loss attributable to common stockholders

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 vesting of restricted stock

Shares withheld pursuant to exercise of stock options

Stock based compensation

Common shares issued, net of issuance

Balance at March 31, 2021

$ ( 122,937 )

Net loss attributable to common stockholders

Net loss attributable to non-controlling interest

Foreign currency translation adjustment

Forfeiture of restricted shares

Vesting of restricted stock units

Shares issued pursuant to exercise of stock options

Shares withheld pursuant to vesting of restricted stock

Stock based compensation

Balance at June 30, 2021

$ ( 124,375 )

accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

thousands, except per share data)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

14 unchanged sentences

Lease liabilities

Net cash (used in) provided by operating activities

Accrued severance payable, net

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Proceeds from sale of property and equipment

Capital expenditures

Net cash (used in) provided by investing activities

Net cash (used in) investing activities

Cash flows from financing activities:

5 unchanged sentences

Purchase of treasury stock upon vesting of restricted stock

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

Effect of foreign exchange rate changes on cash and cash equivalents

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Systems, Inc.

was incorporated in the State of Delaware in 1993.

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 (the “Transactions”) pursuant to which the Company acquired Pointer Telocation

was incorporated in the

State of Delaware in February 2019 for the purpose of effectuating the transactions (the “Transactions”) pursuant to which

the Company acquired Pointer Telocation Ltd.

(“Pointer”) and commenced operations on October 3, 2019.

Upon the closing of the Transactions, PowerFleet

became the parent entity of I.D.

Upon the closing of

the Transactions, PowerFleet became the parent entity of I.D.

Systems and Pointer.

of COVID-19 and Supply Chain Disruptions

The ongoing COVID-19 pandemic,

and mitigation efforts by governments to attempt to control its spread, has resulted in significant economic disruption and continues

to adversely impact the broader global economy.

The extent of the impact of the pandemic on our business and financial results

will depend largely on the future developments that cannot be accurately predicted at this time, including the duration of the

spread of the outbreak and COVID-19 variants, the extent and effectiveness of containment actions and vaccination campaigns,

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 COVID-19 and the related global semiconductor chip shortage, 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 to ensure supply.

During the three-month period ended March 31, 2022, the Company incurred supply chain constraint expenses which lowered its gross

margins and decreased its profitability.

The supply chain disruptions and the related global semiconductor chip shortage 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 are 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.

ongoing COVID-19 pandemic, and mitigation efforts by governments to attempt to control its spread, has resulted in significant economic

disruption and continues to adversely impact the broader global economy.

The extent of the impact of the pandemic on our business and

financial results will depend largely on the future developments that cannot be accurately predicted at this time, including the duration

of the spread of the outbreak and COVID-19 variants, the extent and effectiveness of containment actions and vaccination campaigns, 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.

addition, the Company has experienced a significant impact to its supply chain given COVID-19 and the related global semiconductor

chip shortage, 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 to ensure supply.

During the three- and six-month periods ended June 30, 2022, the Company

incurred supply chain constraint expenses which lowered its gross margins and decreased its profitability.

The supply chain

disruptions and the related global semiconductor chip shortage 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 are 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.

of the date of these unaudited consolidated financial statements, the full extent to which the COVID-19 pandemic and the related supply

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include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the consolidated

financial position of the Company as of March 31, 2022, the consolidated results of its operations for the three-month periods ended

March 31, 2021 and 2022, the consolidated change in stockholders’ equity for the three-month periods ended March 31, 2021

and 2022, and the consolidated cash flows for the three-month periods ended March 31, 2021 and 2022.

financial position of the Company as of June 30, 2022, the consolidated results of its operations for the three- and six-month periods

ended June 30, 2021 and 2022, the consolidated change in stockholders’ equity for the three-month periods ended March 31 and June

30, 2021 and 2022, and the consolidated cash flows for the six-month periods ended June 30, 2021 and 2022.

The results of operations

for the three-month period ended March 31, 2022 are not necessarily indicative of the operating results for the full year.

These financial

statements should be read in conjunction with the audited consolidated financial statements and related disclosures for the year ended

December 31, 2021 included in the Company’s Annual Report on Form 10-K for the year then ended.

of March 31, 2022, the Company had cash (including restricted cash) and cash equivalents of $ 20,867

and working capital of $ 40,504 .

The Company’s primary sources of cash are cash flows from operating activities, its holdings of cash, cash equivalents and investments

for the three- and six-month periods ended June 30, 2022 are not necessarily indicative of the operating results for the full year.

financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures for the

year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K for the year then ended.

of June 30, 2022, the Company had cash (including restricted cash) and cash equivalents of $ 18,012 and working capital of $ 38,526 .

Company’s primary sources of cash are cash flows from operating activities, its holdings of cash, cash equivalents and investments

from the sale of its capital stock and borrowings under its credit facility.

2 unchanged sentences

addition, the Company’s subsidiaries, PowerFleet Israel Ltd.

(“PowerFleet Israel”) and Pointer, are party to

a Credit Agreement (the “Credit Agreement”) with Bank Hapoalim B.M.

(“Hapoalim”), pursuant to which Hapoalim

provided PowerFleet Israel with two senior secured term loan facilities in an aggregate principal amount of $ 30,000

(comprised of two facilities in the aggregate

principal amount of $ 20,000

and $ 10,000 )

and a five-year

revolving credit facility to Pointer in an 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

(“PowerFleet Israel”) and Pointer, are party to a Credit

Agreement (the “Credit Agreement”) with Bank Hapoalim B.M.

(“Hapoalim”), pursuant to which Hapoalim provided

PowerFleet Israel with two senior secured term loan facilities in an aggregate principal amount of $ 30,000 (comprised of two facilities

in the aggregate principal amount of $ 20,000 and $ 10,000 ) and a five-year revolving credit facility to Pointer in an 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 proceeds of the revolving credit facility may be used by Pointer for general corporate purposes.

The Company has not

borrowed under the revolving credit facility since its inception and does not have any borrowings under the revolving credit facility

as of March 31, 2022.

borrowed $ 2,330 under the revolving credit facility as of June 30, 2022.

See Note 11 for additional information.

In June 2012, Pointer entered into a one-year $ 1,000

revolving credit facility with Discount Bank, which renews annually, subject to the bank’s approval.

The proceeds of the revolving credit facility may be used by Pointer for general

corporate purposes.

The Company did not have any borrowings outstanding under the revolving credit facility as of June 30,

Company has on file a shelf registration statement on Form S-3 that was declared effective by the Securities and Exchange Commission

11 unchanged sentences

in the Underwritten Public Offering were made pursuant to the Company’s shelf registration statement.

of the COVID-19 pandemic, there is significant uncertainty surrounding the potential impact on our results of operations and cash flows.

of the COVID-19 pandemic, there continues to be significant uncertainty surrounding the potential impact on our results of operations and cash flows.

During 2021 and 2022, we proactively took steps to increase available cash on hand including, but not limited to, targeted reductions

2 unchanged sentences

borrowings under its revolving credit facility with Hapoalim will provide sufficient funds to cover capital requirements through at least

May 10, 2023.

August 9, 2023.

2 – USE OF ESTIMATES

6 unchanged sentences

The most significant estimates relate to

realization of deferred tax assets, the impairment of intangible assets, and stock-based compensation costs.

Actual results could

differ from those estimates.

of March 31, 2022, the impact of COVID-19 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.

realization of deferred tax assets, the impairment of intangible assets, and market-based stock compensation costs.

results could differ from those estimates.

of June 30, 2022, the impact of COVID-19 continues to unfold.

In addition, the Company has experienced increased economic

uncertainty due to rising interest rates, higher inflation and supply chain disruptions.

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.

3 – CASH AND CASH EQUIVALENTS

3 unchanged sentences

Corporation (FDIC) and other local jurisdictional limits.

Restricted cash at December 31, 2021 and March 31, 2022 consists of cash held

Restricted cash at December 31, 2021 and June 30, 2022 consists of cash held

in escrow for purchases from a vendor.

50 unchanged sentences

for services performed.

following table presents the Company’s revenues disaggregated by revenue source for the three-months ended March 31, 2021 and 2022:

OF REVENUE DISAGGREGATED BY REVENUE SOURCE

Three Months Ended March 31,

Total revenue

balances of contract assets, and contract liabilities from contracts with customers are as follows as of December 31, 2021 and March

OF DEFERRED REVENUE

contract costs

following table presents the Company’s revenues disaggregated by revenue source for the three- and six-months ended June 30, 2021

SCHEDULE OF REVENUE DISAGGREGATED BY REVENUE SOURCE

Three Months Ended June 30

Six Months Ended June 30,

balances of contract assets, and contract liabilities from contracts with customers are as follows as of December 31, 2021 and June

SCHEDULE OF DEFERRED REVENUE

December 31, 2021

June 30, 2022

Deferred contract costs

Deferred costs

Deferred revenue- services (1)

revenue - products (1)

Deferred revenue - products (1)

Deferred revenue

Deferred revenue and contract liabilities - current portion

revenue and contract liabilities - less current portion

Deferred revenue and contract liabilities - less current portion

Company records deferred revenues when cash payments are received or due in advance of the Company’s performance.

For the three-month

periods ended March 31, 2021 and 2022, the Company recognized revenue of $ 2,718

and $ 2,208, respectively,

that was included in the deferred revenue balance

at the beginning of each reporting period.

The Company expects to recognize as revenue these deferred revenue balances before the

year 2027, when the services are performed and, therefore, satisfies its performance obligation to the customers.

For the three-

and six-month periods ended June 30, 2021 and 2022, the Company recognized revenue of $ 2,502 and $ 5,220 , respectively, and $ 2,659

and $ 4,867 , respectively, that was included in the deferred revenue balance at the beginning of each reporting period.

expects to recognize as revenue these deferred revenue balances before the year 2027, when the services are performed and, therefore,

satisfies its performance obligation to the customers.

5 – PREPAID EXPENSES AND OTHER ASSETS

expenses and other current assets consist of the following:

OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

December 31, 2021

June 30, 2022

Finance receivables, current

2 unchanged sentences

Other current assets

Prepaid expenses and other current assets

Prepaid expenses and

other current assets

6 - INVENTORY

2 unchanged sentences

Inventory is shown net of

a valuation reserve of $ 260

at December 31, 2021, and $ 301

March 31, 2022.

a valuation reserve of $ 260 at December 31, 2021 and $ 346 at June 30, 2022.

consist of the following:

OF INVENTORIES

SCHEDULE OF INVENTORIES

December 31, 2021

June 30, 2022

Work in process

3 unchanged sentences

assets are stated at cost, less accumulated depreciation and amortization, and are summarized as follows:

OF FIXED ASSETS

SCHEDULE OF FIXED ASSETS

December 31, 2021

June 30, 2022

Installed products

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Accumulated depreciation and amortization

Property, plant and equipment, net

and amortization expense of fixed assets for the three-month periods ended March 31, 2021 and March 31, 2022 was $ 845 ,

respectively.

Property, plant and equipment,

and amortization expense of fixed assets for the three- and six-month periods ended June 30, 2021 was $ 788 and $ 1,633 , respectively,

and for the three- and six- month periods ended June 30, 2022 was $ 770 and $ 1,584 , respectively.

This includes amortization of costs

associated with computer software for the three-month periods ended March 31, 2021 and March 31, 2022 of $ 107

respectively.

associated with computer software for the three- and six-month periods ended June 30, 2021 of $ 103 and $ 210 , respectively, and for the

three- and six-month periods ended June 30, 2022 of $ 26 and $ 135 , respectively.

8 - INTANGIBLE ASSETS AND GOODWILL

following table summarizes identifiable intangible assets of the Company as of December 31, 2021 and March 31, 2022:

OF INTANGIBLE ASSETS

March 31, 2022 (Unaudited)

Gross Carrying Amount

following table summarizes identifiable intangible assets of the Company as of December 31, 2021 and June 30, 2022:

SCHEDULE OF INTANGIBLE ASSETS

June 30, 2022

Accumulated Amortization

2 unchanged sentences

Trademark and tradename

Software to be sold or leased

Favorable contract interest

3 unchanged sentences

December 31, 2021

Gross Carrying Amount

Accumulated Amortization

6 unchanged sentences

Trademark and tradename

March 31, 2022, the weighted-average amortization period for the intangible assets was 9.1

At March 31, 2022, the weighted-average

June 30 2022, the weighted-average amortization period for the intangible assets was 9.1 years.

At June 30, 2022, the weighted-average

amortization periods for customer relationships, trademarks and trade names, patents, technology, favorable contract interests and covenant

not to compete were 11.9 ,

years, respectively.

expense for the three-month periods ended March 31, 2021 and March 31, 2022 was $ 1,299

respectively.

Estimated future amortization

expense for each of the five succeeding fiscal years for these intangible assets is as follows:

OF FINITE-LIVED INTANGIBLE ASSETS AMORTIZATION EXPENSE

not to compete were 11.9 , 9.6 , 7.0 , 4.3 , 0.0 and 5.0 years, respectively.

expense for the three- and six-month periods ended June 30, 2021 was $ 1,298 and $ 2,597 , respectively, and for the three- and six-month

periods ended June 30, 2022 was $ 1,275 and $ 2,549 , respectively.

Estimated future amortization expense for each of the five succeeding

fiscal years for these intangible assets is as follows:

SCHEDULE OF FINITE-LIVED INTANGIBLE ASSETS AMORTIZATION EXPENSE

Year ending December 31:

2022 (remaining)

Finite-Lived intangible

have been no changes in the carrying amount of goodwill from January 1, 2021 to March 31, 2022.

the three-month period ended March 31, 2022, the Company did not identify any indicators of impairment.

intangible assets

have been no changes in the carrying amount of goodwill from January 1, 2021 to June 30, 2022.

the six-month period ended June 30, 2022, the Company did not identify any indicators of impairment.

9 - STOCK-BASED COMPENSATION

The Company granted options to purchase

the first fiscal quarter of 2022, the Company granted options to purchase 5,065,000

shares of the Company’s common stock to certain executives.

The options have an exercise price that range from $ 2.85

The 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

The 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 performance 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 ( 1.8 %), and expected stock price volatility ( 53.9 %) over the expected life of

awards ( 10 years ).

The Company valued the market-based performance 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

The weighted average fair value of options granted during the period was $ 1.27 .

Stock options:

following table summarizes the activity relating to the Company’s market based stock options that were granted to

certain executives for the three-month period ended March 31, 2022:

OF STOCK OPTIONS ACTIVITY

Weighted- Average Exercise Price

Weighted-Average Remaining Contractual Terms

Aggregate Intrinsic Value

following table summarizes the activity relating to the Company’s market based stock options that were granted to certain executives

for the six-month period ended June 30, 2022:

SCHEDULE OF STOCK OPTIONS ACTIVITY

Exercise Price

Intrinsic Value

Outstanding at beginning of year

2 unchanged sentences

Exercisable at end of period

The following table summarizes the activity

relating to the Company’s stock options, excluding the market based stock options that were granted to certain executives,

for the three-month period ended March 31, 2022:

Average Exercise Price

Weighted-Average

Remaining Contractual Terms

following table summarizes the activity relating to the Company’s stock options, excluding the market-based stock options that

were granted to certain executives, for the six-month period ended June 30, 2022:

Exercise Price

Intrinsic Value

at beginning of year

Outstanding at beginning of year

Forfeited or expired

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weighted-average assumptions:

OF FAIR VALUE STOCK OPTION ASSUMPTIONS

life of options (in years)

free interest rate

Weighted-average

fair value of options granted during year

SCHEDULE OF FAIR VALUE STOCK OPTION ASSUMPTIONS

Expected volatility

Expected life of options (in years)

Risk free interest rate

Dividend yield

Weighted-average fair value of options granted during year

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.

Company recorded stock-based compensation expense of $ 377

for the three-month periods ended March 31,

2021 and March 31, 2022, respectively, in connection with awards made under the stock option plans.

fair value of options vested during the three-month periods ended March 31, 2021 and 2022 was $ 408

respectively.

The total intrinsic value of options

exercised during the three-month periods ended March 31, 2021 and 2022 was $ 451

and $ - 0 - ,

respectively.

of March 31, 2022, there was approximately $ 6,300

of unrecognized compensation cost related

to non-vested options granted under the Company’s stock option plans for the performance stock options that were granted to

certain executives.

That cost is expected to be recognized over a weighted-average period of 9.81

of March 31, 2022, there was approximately $ 2,982 of unrecognized compensation cost related to non-vested options granted under the Company’s

Company recorded stock-based compensation expense of $ 339 and $ 716 , for the three- and six-month periods ended June 30, 2021, respectively,

and $ 1,267 and $ 1,301 , for the three- and six-month periods ended June 30, 2022, respectively, in connection with awards made under

the stock option plans.

fair value of options vested during the six-month periods ended June 30, 2021 and 2022 was $ 438 and $ 376 , respectively.

The total intrinsic

value of options exercised during the three-month periods ended June 30, 2021 and 2022 was $ 465 and $- 0 -, respectively.

of June 30, 2022, there was approximately $ 7,110 of unrecognized compensation cost related to non-vested options granted under the Company’s

stock option plans for the performance stock options that were granted to certain executives.

That cost is expected to be recognized

over a weighted-average period of 3.44 years.

of June 30, 2022, there was approximately $ 2,595 of unrecognized compensation cost related to non-vested options granted under the Company’s

stock option plans that exclude the performance stock options.

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A summary of all non-vested restricted stock

for the three-month period ended March 31, 2022 is as follows:

OF NON-VESTED RESTRICTED STOCK ACTIVITY

Number of Non-Vested Shares

Weighted-Average Grant Date Fair Value

for the six-month period ended June 30, 2022 is as follows:

SCHEDULE OF NON-VESTED RESTRICTED STOCK ACTIVITY

Number of Non-

Vested Shares

Average Grant

Date Fair Value

Restricted stock, non-vested, beginning of year

Restricted stock, non-vested, end of period

Company recorded stock-based compensation expense of $ 665

respectively, for the three-month periods ended

March 31, 2021 and 2022, in connection with restricted stock grants.

As of March 31, 2022, there was $ 3,330

of total unrecognized compensation cost related

to non-vested shares.

That cost is expected to be recognized over a weighted-average period of 2.97

Company recorded stock-based compensation expense of $ 710 and $ 1,375 , respectively, for the three- and six-month periods ended June 30,

2021 and $ 355 and $ 743 , respectively, for the three-and six-month periods ended June 30, 2022 in connection with restricted stock grants.

As of June 30, 2022, there was $ 2,850 of total unrecognized compensation cost related to non-vested shares.

That cost is expected to

be recognized over a weighted-average period of 2.83 years.

Restricted Stock Units:

Company also has granted restricted stock units (RSUs) to employees.

The following table summarizes the activity relating to the

Company’s restricted stock units for the three-month period ended March 31, 2022:

OF NON-VESTED RESTRICTED STOCK ACTIVITY

Number of Restricted Stock Units

Weighted-Average Grant Date Fair Value

The following table summarizes the activity relating to the Company’s

restricted stock units for the three-month period ended June 30, 2022:

SCHEDULE OF NON-VESTED RESTRICTED STOCK ACTIVITY

Restricted Stock

Average Grant

Date Fair Value

Restricted stock units, non-vested, beginning of year

Restricted stock units, non-vested, end of period

Company recorded stock-based compensation expense of $ 55

respectively, for the three-month periods ended

March 31, 2021 and 2022, in connection with the RSUs.

As of March 31, 2022, there was $ 17

total unrecognized compensation cost related

to non-vested RSUs.

That cost is expected to be recognized over a weighted-average period of 0.6

Company recorded stock-based compensation expense of $ 46 and $ 101 , respectively, for the three- and six-month periods ended June 30,

2021 and $ 7 and $ 42 , respectively, for the three- and six-month periods ended June 30, 2022 in connection with the RSUs.

As of June 30,

2022, there was $ 10 total unrecognized compensation cost related to non-vested RSUs.

That cost is expected to be recognized over a weighted-average

period of 0.38 years.

10 - NET LOSS PER SHARE

loss per share for the three-month periods ended March 31, 2021 and 2022 are as follows:

OF NET LOSS PER SHARE BASIC AND DILUTED

Three Months Ended

loss per share for the three- and six-month periods ended June 30, 2021 and 2022 are as follows:

SCHEDULE OF NET LOSS PER SHARE BASIC AND DILUTED

Three Months Ended June 30,

Six Months Ended June 30,

Basic and diluted loss per share

17 unchanged sentences

loss, no effect is given to the participating securities because they do not share in the losses of the Company.

For the three-month

periods ended March 31, 2021 and 2022, 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 12,243

respectively, would have been anti-dilutive

due to the loss.

For the six-month periods

ended June 30, 2021 and 2022, 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

12,141 and 16,438 , respectively, would have been anti-dilutive due to the loss.

11 - SHORT-TERM BANK DEBT AND LONG-TERM DEBT

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December 31, 2021

March 31, 2022

June 30, 2022

Current maturities of long-term debt

Long term debt - less current maturities

connection with the Transactions, PowerFleet Israel incurred $ 30,000

in term loan borrowings on the closing date

of the Transactions (the “Closing Date”) under the Credit Agreement, pursuant to which Hapoalim agreed to provide PowerFleet

Israel with two senior secured term loan facilities in an aggregate principal amount of $ 30,000

(comprised of two facilities in the aggregate

principal amount of $ 20,000

and $ 10,000 ,

respectively (the “Term A Facility” and “Term B Facility”, respectively, and collectively, the “Term Facilities”))

and a five-year

revolving credit facility (the “Revolving

Facility”) to Pointer in an aggregate principal amount of $ 10,000

(collectively, the “Credit Facilities”).

As of March 31, 2022, no amounts were outstanding under the Revolving Facility.

connection with the Transactions, PowerFleet Israel incurred $ 30,000 in term loan borrowings on the closing date of the Transactions

(the “Closing Date”) under the Credit Agreement, pursuant to which Hapoalim agreed to provide PowerFleet Israel with two

senior secured term loan facilities in an aggregate principal amount of $ 30,000 (comprised of two facilities in the aggregate principal

amount of $ 20,000 and $ 10,000 , respectively (the “Term A Facility” and “Term B Facility”, respectively, and collectively,

the “Term Facilities”)) and a five-year revolving credit facility (the “Revolving Facility”) to Pointer in an

aggregate principal amount of $ 10,000 (collectively, the “Credit Facilities”).

As of June 30, 2022, the Company borrowed $ 2,330

under the Revolving Facility.

Credit Facilities will mature on the date that is five years from the Closing Date.

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levels to Pointer’s EBITDA.

The Company is in compliance with the covenants as of March 31, 2022.

The Company is in compliance with the covenants as of June 30, 2022.

connection with the Credit Facilities, the Company incurred debt issuance costs of $ 742 .

For the three-month periods ended March 31,

2021 and 2022, amortization of the debt issuance costs was $ 83 and $ 64 , respectively.

The Company recorded charges of $ 277 and $ 236 for

the three-month periods ended March 31, 2021 and 2022, respectively, to interest expense on its consolidated statements of operations

related to interest expense and amortization of debt issuance costs associated with the Credit Facilities.

maturities of the long-term debt as of March 31, 2022 are as follows:

For the three- and six-month periods ended June

30, 2021, amortization of the debt issuance costs was $ 72 and $ 155 , respectively.

For the three- and six-month periods ended June 30,

2022, amortization of the debt issuance costs was $ 55 and $ 119 , respectively.

The Company recorded charges of $ 276 and $ 553 for the three-

and six-month periods ended June 30, 2021, respectively, and $ 200 and $ 436 for the three- and six-month periods ended June 30, 2022, respectively,

to interest expense on its consolidated statements of operations related to interest expense and amortization of debt issuance costs

associated with the Credit Facilities.

In June 2012, Pointer entered into a

one-year $ 1,000

revolving credit facility with Discount Bank, which renews annually, subject to the bank’s approval.

The proceeds of the revolving credit facility may be used by Pointer for general

corporate purposes.

The Company did not have any borrowings outstanding under the revolving credit facility as of June 30,

maturities of the long-term debt as of June 30, 2022 are as follows:

SCHEDULE OF MATURITIES OF LONG TERM DEBT

Year ending December 31:

April - December 2022

July - December 2022

Long term debt

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December 31, 2021

June 30, 2022

Accounts payable

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shipped and is included in accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets as of December 31, 2021

and March 31, 2022.

following table summarizes warranty activity for the three-month periods ended March 31, 2021 and 2022:

OF PRODUCT WARRANTY LIABILITY

Three Months Ended March

and June 30, 2022.

following table summarizes warranty activity for the six-month periods ended June 30, 2021 and 2022:

SCHEDULE OF PRODUCT WARRANTY LIABILITY

Six Months Ended June 30,

Accrued warranty reserve, beginning of year

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Accrued warranty reserve, end of period (a)

non-current accrued warranty included in other long-term liabilities at December 31, 2021 and March 31, 2022 of $ 187

respectively.

non-current accrued warranty included in other long-term liabilities at December 31, 2021 and June 30, 2022 of $ 187 and $ 173 , respectively.

13 - STOCKHOLDERS’ EQUITY

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Redeemable preferred stock

Company is authorized to issue 150

shares of preferred stock, par value $ 0.01

per share of which 100

shares are designated Series A Convertible

Preferred Stock (“Series A Preferred Stock”) and 50

shares are undesignated.

Company is authorized to issue 150 shares of preferred stock, par value $ 0.01 per share of which 100 shares are designated Series A Convertible

Preferred Stock (“Series A Preferred Stock”) and 50 shares are undesignated.

A Preferred Stock

connection with the completion of the Transactions, 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.

connection with the completion of the Transactions, 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”).

the three-month periods ended March 31, 2021 and March 31, 2022, the Company issued - 0 -

additional shares of Series A Preferred Stock.

Series A Preferred Stock has a liquidation preference equal to the greater of (i) the original issuance price of $ 1,000.00

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.

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”).

During the three-month period ended March 31, 2022, the Company paid dividends in the

to the holders of the Series A Preferred Stock.

As of March 31, 2022, dividends in arrears were $- 0 -.

For the six-month periods ended June 30, 2021 and June 30, 2022, the Company issued - 0 - and 2 additional shares of Series A Preferred

Stock, respectively.

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.

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”).

During the six-month period ended June 30, 2022, the Company paid dividends in the amounts

of 2 shares to the holders of the Series A Preferred Stock.

As of June 30, 2022, dividends in arrears were $- 0 -.

Consent Rights

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income (loss) includes net loss and foreign currency translation gains and losses.

accumulated balances for each classification of other comprehensive loss for the three-month period ended March 31, 2022 are as follows:

accumulated balances for each classification of other comprehensive loss for the six-month period ended June 30, 2022 are as follows:

SCHEDULE OF ACCUMULATED OTHER COMPREHENSIVE LOSS

Foreign currency translation adjustment

Accumulated other comprehensive income/(loss)

Balance at January 1, 2022

Net current period change

Balance at March 31, 2022

accumulated balances for each classification of other comprehensive loss for the three-month period ended March 31, 2021 are as follows:

Foreign currency translation adjustment

Accumulated other comprehensive income/(loss)

Balance at January 1, 2021

Net current period change

Balance at March 31, 2021

comprehensive

income/(loss)

January 1, 2022

current period change

at June 30, 2022

accumulated balances for each classification of other comprehensive loss for the six-month period ended June 30, 2021 are as follows:

comprehensive

income/(loss)

January 1, 2021

current period change

at June 30, 2021

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.

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

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Net translation gains/(losses)

from the translation of foreign currency financial statements of $ 1,334

at March 31, 2021 and 2022, respectively, are included in comprehensive loss in the Consolidated Statement of Changes in Stockholders’

currency translation 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 translation (losses) gains for the three-month periods ended March 31, 2021

and 2022 of $ 150 and $( 203 ), respectively, are included in selling, general and administrative expenses in the Consolidated Statement

of Operations.

Foreign currency translation gains (losses) related to long-term debt of $ 1,027 and $ 544 , respectively, for the three-month

periods ended March 31, 2021 and 2022 are included in interest expense in the Consolidated Statement of Operations.

from the translation of foreign currency financial statements of $( 331 ) and $( 1,453 ) at June 30, 2021 and 2022, respectively, are included

in comprehensive loss in the Consolidated Statement of Changes in Stockholders’ Equity.

currency translation 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 translation (losses) gains for the three- and six-month periods

ended June 30, 2021 of $ 56 and

respectively, and for the three- and six-month periods ended June 30, 2022 of $( 719 )

and $( 922 ),

respectively, are included in selling, general and administrative expenses in the Consolidated Statement of Operations.

currency translation gains (losses) related to long-term debt of $( 615 )

for the three- and six-month periods ended June 30, 2021, respectively, and $ 2,068 and

$ 2,612 for the three- and six-month periods ended June 30, 2022, respectively, are included in interest expense in the

Consolidated Statement of Operations.

15 – SEGMENT INFORMATION

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SCHEDULE OF REVENUES AND LONG LIVED ASSETS BY GEOGRAPHICAL REGION

Three Months Ended March 31,

Months Ended June 30,

United States

Total revenues

December 31, 2021

March 31, 2022

Long lived assets by geographic region:

Long lived assets by geographic

United States

Long lived assets

16 - INCOME TAXES

Company records its interim tax provision based upon a projection of the Company’s annual effective tax rate (“AETR”).

This AETR is applied to the year-to-date consolidated pre-tax income to determine the interim provision for income taxes before discrete

The Company updates the AETR on a quarterly basis as the pre-tax income projections are revised and tax laws are enacted.

effective tax rate (“ETR”) each period is impacted by a number of factors, including the relative mix of domestic and foreign

earnings and adjustments to recorded valuation allowances.

The currently forecasted ETR may vary from the actual year-end due to the

changes in these factors.

OF INCOME BEFORE INCOME TAX DOMESTIC AND FOREIGN

Months Ended March 31,

pre-tax book income/(loss)

income before income (loss) taxes

tax benefit (expense)

income (loss) after taxes

For the three-month periods ended March

31, 2021 and 2022, the effective tax rate differed from the statutory tax rates primarily due to the mix of domestic and

foreign earnings amongst taxable jurisdictions, recorded valuation allowances to fully reserve against deferred tax assets

in non-Israel jurisdictions and certain discrete items.

March 11, 2021, the President of the United States signed the American Rescue Plan Act (the “ARPA”) into law as a continuing

response to the COVID-19 pandemic.

The ARPA implemented new entity taxation provisions as well as extended unemployment benefits and

related incentives to provide further economic relief to US businesses.

The passage of the ARPA did not have a material impact to the

Company nor its calculated AETR for the year.

The Company records its interim tax provision based

upon a projection of the Company’s annual effective tax rate (“AETR”).

This AETR is applied to the year-to-date consolidated

pre-tax income to determine the interim provision for income taxes before discrete items.

The Company updates the AETR on a quarterly

basis as the pre-tax income projections are revised and tax laws are enacted.

The effective tax rate (“ETR”) each period is

impacted by a number of factors, including the relative mix of domestic and foreign earnings and adjustments to recorded valuation allowances.

The currently forecasted ETR may vary from the actual year-end due to the changes in these factors.

SCHEDULE OF INCOME BEFORE INCOME TAX DOMESTIC AND FOREIGN

Three Months Ended June 30,

Six Months Ended June 30,

Domestic pre-tax book income/(loss)

Foreign pre-tax book income/(loss)

Total income before income (loss) taxes

Income tax benefit (expense)

Total income (loss) after taxes

Effective tax rate

For the three- and six-month periods ended June

30, 2021 and June 30, 2022, the effective tax rate differed from the statutory tax rates primarily due to the mix of domestic and

foreign earnings amongst taxable jurisdictions, recorded valuation allowances to fully reserve against deferred tax assets in

non-Israel foreign jurisdictions and certain discrete items.

On March 11, 2021, the President of the United States

signed the American Rescue Plan Act (the “ARPA”) into law as a continuing response to the COVID-19 pandemic.

The ARPA implemented

new entity taxation provisions as well as extended unemployment benefits and related incentives to provide further economic relief to

US businesses.

The passage of the ARPA did not have a material impact to the Company nor its calculated AETR for the year.

Company has operating leases for office space and office equipment.

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Lease costs associated with the short-term leases are included in selling, general and administrative expenses on the Company’s

condensed consolidated statements of operations during the three-months ended March 31, 2021 and 2022.

condensed consolidated statements of operations during the three- and six-months ended June 30, 2021 and 2022.

of lease expense are as follows:

SCHEDULE OF COMPONENTS OF LEASE EXPENSE

Three Months Ended

Short term lease cost:

Months Ended June 30,

cash flow information and non-cash activity related to our operating leases are as follows:

SCHEDULE OF CASH FLOW INFORMATION AND NON-CASH ACTIVITY OF OPERATING LEASES

Non-cash activity:

Right-of-use assets obtained in exchange for lease obligations

Months Ended June 30,

assets obtained in exchange for lease obligations

Weighted-average

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SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERM AND DISCOUNT RATE

March 31, 2022

Weighted-average remaining lease term (in years)

Weighted-average discount rate

maturities of operating lease liabilities outstanding as of March 31, 2022 are as follows:

Weighted-average

remaining lease term (in years)

Weighted-average discount

maturities of operating lease liabilities outstanding as of June 30, 2022 are as follows:

SCHEDULED MATURITIES OF OPERATING LEASE LIABILITIES

Year ending December 31:

April - December 2022

July - December

Total lease payments

Imputed interest

Present value of lease liabilities

value of lease liabilities

18 - FAIR VALUE OF FINANCIAL INSTRUMENTS

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SCHEDULE OF FAIR VALUE OF FINANCIAL INSTRUMENTS

March 31, 2022

Carrying Amount

Long term debt

19 - CONCENTRATION OF CUSTOMERS

the three-month periods ended March 31, 2021 and 2022, there were no customers who generated revenues greater than 10% of the Company’s

the six-month periods ended June 30, 2021 and 2022, 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.

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(“Pointer Brazil”) received a notification of lack of payment of VAT tax (Brazilian

ICMS tax) in the amount of $ 224 ,

of interest and penalty, totaling $ 1,357

as of March 31, 2022.

ICMS tax) in the amount of $ 224 , plus $ 1,010 of interest and penalty, totaling $ 1,234 as of June 30, 2022.

The Company is vigorously

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and for this reason the Company has not made any provision.

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 $ 12,392

as of March 31, 2022.

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.

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 $ 12,603 as

of June 30, 2022.

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 $ 189 .

The state has the opportunity to appeal 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.

The state has

the opportunity to appeal 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

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effective for fiscal years beginning after December 15, 2022.

The Company is currently evaluating the impact of this ASU on the

consolidated financial statements.

The Company is currently evaluating the impact of this ASU on the consolidated

financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements