What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-09 compared with 2022-08-09 · 206 added, 177 removed, 352 unchanged (52% of the section changed)

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In those instances, the payment amount is recorded as deferred revenue and revenue is recognized over the service

Rising interest rates, higher inflation, supply chain

disruptions, the ongoing COVID-19 pandemic, and the conflict between Russia and Ukraine 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.

interest rates, higher inflation, supply chain disruptions, the ongoing COVID-19 pandemic, and the conflict between Russia and Ukraine

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.

Inflation Reduction Act of 2022 (the “IRA”) was signed into law in August 2022.

The IRA is federal legislation designed to

raise revenue from lowering of prescription drug prices and imposition of certain corporate tax measures, while authorizing spending

on energy and climate change initiatives, subsidizing the Affordable Care Act, and enacting of certain tax reforms.

Management continues

to monitor any potential impact of the IRA on our results.

No immediate or direct effect from the legislation has had a material impact

on our results at this time.

CHIPS and Science Act (“CHIPS”) was signed into law in August 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.

No immediate or direct material effect from the legislation has had a material impact on our results at this

to Our Business

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and commercialize new products and technologies.

of June 30, 2022, we had cash (including restricted cash) and cash equivalents of $18.0 million and working capital of $38.5 million.

of September 30, 2022, we had cash (including restricted cash) and cash equivalents of $17.0 million and working capital of $36.6 million.

Our primary sources of cash are cash flows from operating activities, our holdings of cash, cash equivalents and investments from the

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activities to fund our operations.

believe that our available working capital, anticipated level of future revenues, expected cash flows from operations and available

borrowings under its revolving credit facility with Bank Hapoalim B.M.

will provide sufficient funds to cover

capital requirements through August 9, 2023.

believe that our available working capital, anticipated level of future revenues, expected cash flows from operations and available borrowings

under the revolving credit facility with Bank Hapoalim B.M.

will provide sufficient funds to cover capital requirements through November

risks and uncertainties to which we are subject are described under the heading “Risk Factors” in Part II, Item 1A of this

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Accounting Policies

the three-month period ended June 30, 2022, there were no significant changes to our critical accounting policies as identified in our

Annual Report on Form 10-K for the year ended December 31, 2021.

the three-month period ended September 30, 2022, there were no significant changes to our critical accounting policies as identified

in our Annual Report on Form 10-K for the year ended December 31, 2021.

of Operations

following table sets forth, for the periods indicated, certain operating information expressed as a percentage of revenue:

Months Ended June 30,

Months Ended September 30,

Cost of Revenue:

Cost of products

Operating expenses:

Selling, general and administrative

and development expenses

Cost of services

Operating expenses:

Selling, general and administrative expenses

Research and development

Total operating expenses

Loss from operations

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Interest expense

income (expenses) net,

Net loss before income

tax benefit (expense)

loss before non-controlling interest

Non-controlling

Accretion of preferred

stock dividend

loss attributable to common shareholders

Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Revenues increased by approximately $1.0 million, or 3.1%, to $34.5 million in the three months ended June 30, 2022, from $33.5 million

in the same period in 2021.

from products decreased approximately $0.6 million, or 4.2%, to $14.8 million in the three months ended June 30, 2022, from $15.5 million

in the same period in 2021.

The decrease in product revenue is principally due to decreased product sales in our PowerFleet for Logistics

from services increased approximately $1.7 million, or 9.4%, to $19.8 million in the three months ended June 30, 2022, from $18.1 million

in the same period in 2021.

The increase in services revenue is principally due to an increase in our install base that generates service

revenue and installation revenue.

COST OF REVENUES.

Cost of revenues increased

by approximately $0.9 million, or 4.9%, to $18.4 million in the three months ended June 30, 2022, from $17.5 million for the same period

Gross profit was $16.2 million in the three months ended June 30, 2022, compared to $16.0 million in the same period in 2021.

As a percentage of revenues, gross profit decreased to 46.9% in 2022 from 47.8% in 2021.

The decrease in gross profit as a percentage

of revenue was principally due to higher raw materials costs related to the global supply chain issues.

Cost of products increased by approximately $0.5 million,

or 4.4%, to $11.3 million in the three months ended June 30, 2022, from $10.9 million in the same period in 2021.

Gross profit for products

was $3.5 million in the three months ended June 30, 2022, compared to $4.6 million in the same period in 2021.

As a percentage of product

revenues, gross profit decreased to 23.5% in 2022 from 29.8% in 2021.

The decrease in gross profit as a percentage of revenue was impacted

by product mix, higher costs associated with supply chain issues and electronic component shortages and inflation.

Cost of services increased by approximately $0.4 million,

or 5.8%, to $7.0 million in the three months ended June 30, 2022, from $6.6 million in the same period in 2021.

Gross profit for services

was $12.7 million in the three months ended June 30, 2022, compared to $11.4 million in the same period in 2021.

As a percentage of service

revenues, gross profit increased to 64.5% in 2022 from 63.3% 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 .

Selling, general and administrative (“SG&A”) expenses increased by approximately $2.4 million, or 17.9%, to approximately

$15.8 million in the three months ended June 30, 2022, compared to $13.4 million in the same period in 2021, principally due to increased

salaries and professional services fees and foreign currency translation losses.

As a percentage of revenues, SG&A expenses increased

to 45.7% in the three months ended June 30, 2022, from 40.0% in the same period in 2021, primarily due to the reasons described above.

RESEARCH AND DEVELOPMENT EXPENSES .

and development (“R&D”) expenses decreased by approximately $0.8 million, or 28.0%, to approximately $2.0 million in the

three months ended June 30, 2022, compared to $2.8 million in the same period in 2021 principally due to the capitalization of software

development expenses for new product development.

As a percentage of revenues, R&D expenses decreased to 5.8% in the three months

ended June 30, 2022, from 8.3% in the same period in 2021, primarily due to the reason described above.

INTEREST EXPENSE.

Interest expense decreased

by approximately $2.7 million, or 221.8%, to approximately $(1.5) million in the three months ended June 30, 2022, compared to $1.2 million

in the same period in 2021, principally due to foreign currency translation gains from the Term Facilities.

NET LOSS ATTIBUTABLE TO COMMON STOCKHOLDERS .

Net loss was $1.3 million, or $(0.04) per basic and diluted share, for the three months ended June 30, 2022, as compared to net loss of

$2.6 million, or $(0.08) 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.

Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Revenues increased by approximately $5.2 million, or 8.3%, to $67.8 million in the six months ended June 30, 2022, from $62.5

Other income (expenses)

Net loss before income taxes

Income tax benefit

Net loss before non-controlling

Non-controlling interest

Accretion of preferred stock

Preferred stock dividend

Net loss attributable

to common shareholders

Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

Revenues increased by approximately $5.0 million, or 17.2%, to $34.3 million in the three months ended September 30, 2022, from $29.2

million in the same period in 2021.

from products increased by approximately $2.3 million, or 8.6%, to $29.2 million in the six months ended June 30, 2022, from $26.9 million

in the same period in 2021.

The increase in product revenue is due to increased product sales in our PowerFleet for Logistics business.

from services increased by approximately $2.9 million or 8.1%, to $38.5 million in the six months ended June 30, 2022, from $35.7 million

in the same period in 2021.

The increase in services revenue is principally due to an increase in our install base that generates service

COST OF REVENUES .

Cost of revenues increased

by approximately $5.1 million, or 15.9%, to $37.1 million in the six months ended June 30, 2022, from $32.0 million for the same period

Gross profit was $30.6 million in the six months ended June 30, 2022, compared to $30.5 million for the same period in 2021.

As a percentage of revenues, gross profit decreased to 45.2% in 2022 from 48.8% in 2021.

The decrease in gross profit as a percentage

of revenue was principally due to higher raw materials costs related to the global supply chain issues.

Cost of products increased by approximately $4.3 million,

or 22.6%, to $23.3 million in the six months ended June 30, 2022, from $19.0 million in the same period in 2021.

Gross profit for products

was $5.9 million in the six months ended June 30, 2022, compared to $7.9 million in the same period in 2021.

As a percentage of product

revenues, gross profit decreased to 20.2% in 2022 from 29.3% in 2021.

The decrease in gross profit as a percentage of revenue was impacted

by product mix, higher costs associated with supply chain issues and electronic component shortages and inflation.

Cost of services increased by approximately $0.8 million,

or 6.2%, to $13.8 million in the six months ended June 30, 2022, from $13.0 million in the same period in 2021.

Gross profit for services

was $24.7 million in the six months ended June 30, 2022, compared to $22.6 million in the same period in 2021.

As a percentage of service

revenues, gross profit increased to 64.2% in 2022 from 63.5% 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 $3.7 million, or 13.7%, to approximately $30.7 million in the six months ended June 30, 2022,

compared to $27.0 million in the same period in 2021, principally due to increased salaries, travel and professional fees, and

foreign currency translation losses.

As a percentage of revenues, SG&A expenses increased to 45.4% in the six months ended June 30,

2022, from 43.2% in the same period in 2021, primarily due to the reasons described above.

RESEARCH AND DEVELOPMENT EXPENSES .

expenses decreased by approximately $0.3 million, or 5.3%, to approximately $5.2 million in the six months ended June 30, 2022, compared

to $5.5 million in the same period in 2021, principally due to the capitalization of software development expenses for new product development.

As a percentage of revenues, R&D expenses decreased to 7.7% in the six months ended June 30, 2022, from 8.8% in the same period in

2021, primarily due to the reason described above.

INTEREST EXPENSE.

Interest expense decreased by approximately

$2.2, million or 338.1%, to approximately $(1.6) million in the three months ended June 30, 2022, compared to $0.7 million in the same period

in 2021, principally due to foreign currency translation gains from the Term Facilities.

NET LOSS ATTIBUTABLE TO COMMON STOCKHOLDERS.

Net loss was $5.5 million, or $(0.15) per basic and diluted share, for the six months ended June 30, 2022, as compared to net loss of $5.6

million, or $(0.16) per basic and diluted share, for the same period in 2021.

The increase in the net loss was due primarily to the reasons

described above.

Liquidity and Capital Resources

Historically, our capital requirements have been funded

primarily from the net proceeds from the issuance of our securities, including any issuances of our common stock upon the exercise of

As of June 30, 2022, we had cash (including restricted cash) and cash equivalents of $18.0 million and working capital of $38.5

On October 3, 2019, in connection with our acquisition

of Pointer, we issued and sold 50,000 shares of Series A Convertible Preferred Stock, par value $0.01 per share (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.

“Investors”), pursuant to the terms of an Investment and Transaction Agreement, dated as of March 13, 2019 (as such agreement

has been amended from time to time, the “Investment Agreement”) for an aggregate purchase price of $50.0 million.

received from such sale were used to finance a portion of the cash consideration payable in our acquisition of Pointer.

from products increased approximately $3.2 million, or 30%, to $14.0 million in the three months ended September 30, 2022, from $10.8

million in the same period in 2021.

The increase in product revenue is principally due to increased product sales in our Powerfleet for

Logistics business and Powerfleet for Industrial business.

from services increased approximately $1.8 million, or 9.8%, to $20.3 million in the three months ended September 30, 2022, from $18.5

million in the same period in 2021.

The increase in services revenue is principally due to an increase in our install base that generates

service revenue and installation revenue.

Cost of revenues increased by approximately $2.1 million, or 14.2%, to $17.1 million in the three months ended September

30, 2022, from $14.9 million for the same period in 2021.

Gross profit was $17.2 million in the three months ended September 30, 2022,

compared to $14.3 million in the same period in 2021.

As a percentage of revenues, gross profit increased to 50.1% in 2022 from 48.8%

The increase in gross profit as a percentage of revenue was principally due to improved management of raw materials costs related

to the global supply chain issues and electronic component shortages.

of products increased by approximately $1.6 million, or 20.4%, to $9.8 million in the three months ended September 30, 2022, from

$8.2 million in the same period in 2021.

Gross profit for products was $4.2 million in the three months ended September 30, 2022,

compared to $2.6 million in the same period in 2021.

As a percentage of product revenues, gross profit increased to 29.8% in 2022

from 24.2% in 2021.

The increase in gross profit as a percentage of revenue was principally due to product mix and improved

management of raw materials costs related to the global supply chain issues and electronic component shortages.

of services increased by approximately $0.4 million, or 6.8%, to $7.3 million in the three months ended September 30, 2022, from $6.8

million in the same period in 2021.

Gross profit for services was $12.9 million in the three months ended September 30, 2022, compared

to $11.6 million in the same period in 2021.

As a percentage of service revenues, gross profit increased to 64.1% in 2022 from 63.1%

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.

GENERAL AND ADMINISTRATIVE EXPENSES .

Selling, general and administrative (“SG&A”) expenses increased by approximately

$2.7 million, or 19.3%, to approximately $16.7 million in the three months ended September 30, 2022, compared to $14.0 million in the

same period in 2021, principally due to foreign currency losses, increased salaries and related expenses, and marketing expenses.

As a percentage of revenues, SG&A expenses increased to 48.6% in the three months ended September 30, 2022, from 47.7% in the same

period in 2021, primarily due to the reasons described above.

AND DEVELOPMENT EXPENSES .

Research and development (“R&D”) expenses decreased by approximately $1.0 million, or 36.6%,

to approximately $1.7 million in the three months ended September 30, 2022, compared to $2.7 million in the same period in 2021 principally

due to the capitalization of software development expenses for new product development.

As a percentage of revenues, R&D expenses

decreased to 5.1% in the three months ended September 30, 2022, from 9.4% in the same period in 2021, primarily due to the reason described

Interest expense decreased by approximately $446 thousand, or 57.4%, to approximately $(331) thousand in the three

months ended September 30, 2022, compared to $(777) thousand in the same period in 2021, principally due to foreign currency

translation gains from the Term Facilities.

LOSS ATTIBUTABLE TO COMMON STOCKHOLDERS .

Net loss was $3.5 million, or $(0.10) per basic and diluted share, for the three months

ended September 30, 2022, as compared to net loss of $4.5 million, or $(0.13) 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.

Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Revenues increased by approximately $10.3 million, or 11.2%, to $102.0 million in the nine months ended September 30, 2022, from $91.8

million in the same period in 2021.

from products increased by approximately $5.6 million, or 14.8%, to $43.2 million in the nine months ended September 30, 2022, from $37.6

million in the same period in 2021.

The increase in product revenue is due to increased product sales in our Powerfleet for Logistics

business and Powerfleet for Industrial business.

from services increased by approximately $4.7 million, or 8.7%, to $58.8 million in the nine months ended September 30, 2022, from $54.1

million in the same period in 2021.

The increase in services revenue is principally due to an increase in our install base that generates

service revenue.

OF REVENUES .

Cost of revenues increased by approximately $7.2 million, or 15.4%, to $54.2 million in the nine months ended September

30, 2022, from $47.0 million for the same period in 2021.

Gross profit was $47.8 million in the nine months ended September 30, 2022,

compared to $44.8 million for the same period in 2021.

As a percentage of revenues, gross profit decreased to 46.9% in 2022 from 48.8%

The decrease in gross profit as a percentage of revenue was principally due to higher raw materials costs related to the global

supply chain issues.

of products increased by approximately $6.0 million, or 21.9%, to $33.2 million in the nine months ended September 30, 2022, from $27.2

million in the same period in 2021.

Gross profit for products was $10.1 million in the nine months ended September 30, 2022, compared

to $10.5 million in the same period in 2021.

As a percentage of product revenues, gross profit decreased to 23.3% in 2022 from 27.8%

The decrease in gross profit as a percentage of revenue was impacted by product mix, higher costs associated with supply chain

issues, electronic component shortages and inflation.

of services increased by approximately $1.3 million, or 6.3%, to $21.1 million in the nine months ended September 30, 2022, from $19.8

million in the same period in 2021.

Gross profit for services was $37.7 million in the nine months ended September 30, 2022, compared

to $34.3 million in the same period in 2021.

As a percentage of service revenues, gross profit increased to 64.2% in 2022 from 63.4%

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.

GENERAL AND ADMINISTRATIVE EXPENSES .

SG&A expenses increased by approximately $6.4 million, or 15.6%, to approximately $47.4

million in the nine months ended September 30, 2022, compared to $41.0 million in the same period in 2021, principally due to increased

salaries and related expenses, foreign currency losses, marketing and travel expenses, and professional fees.

As a percentage

of revenues, SG&A expenses increased to 46.4% in the nine months ended September 30, 2022, from 44.7% in the same period in 2021,

primarily due to the reasons described above.

AND DEVELOPMENT EXPENSES .

R&D expenses decreased by approximately $1.3 million, or 15.7%, to approximately $7.0 million in the

nine months ended September 30, 2022, compared to $8.3 million in the same period in 2021, principally due to the capitalization of software

development expenses for new product development.

As a percentage of revenues, R&D expenses decreased to 6.8% in the nine months

ended September 30, 2022, from 9.0% in the same period in 2021, primarily due to the reason described above.

Interest expense decreased by approximately $2.7 million, or 187.3%, to approximately $(1.3) million in the nine months ended

September 30, 2022, compared to $1.4 million in the same period in 2021, principally due to foreign currency translation gains from the

Term Facilities.

LOSS ATTIBUTABLE TO COMMON STOCKHOLDERS.

Net loss was $9.0 million, or $(0.25) per basic and diluted share, for the nine months ended

September 30, 2022, as compared to net loss of $10.2 million, or $(0.30) per basic and diluted share, for the same period in 2021.

decrease in the net loss was due primarily to the reasons described above.

and Capital Resources

Historically,

our capital requirements have been funded primarily from the net proceeds from the issuance of our securities, including any issuances

of our common stock upon the exercise of options.

As of September 30, 2022, we had cash (including restricted cash) and cash equivalents

of $17.0 million and working capital of $36.6 million.

October 3, 2019, in connection with our acquisition of Pointer, we issued and sold 50,000 shares of Series A Convertible Preferred Stock,

par value $0.01 per share (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 such agreement has been amended from time to time, 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.

addition, our wholly-owned subsidiaries, Powerfleet Israel and Pointer (the “Borrowers”) are party to a Credit Agreement

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a five-year revolving credit facility to Pointer in an aggregate principal amount of $10 million (the “Revolving Facility”).

The outstanding amount under the term loan facilities was $21.0 million as of June 30, 2022.

The outstanding amount under the term loan facilities was $21.3 million as of September 30, 2022.

The proceeds of the term loan facilities

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facility may be used by Pointer for general corporate purposes.

As of June 30, 2022, the Company borrowed $2.3 million under the revolving credit facility.

As of September 30, 2022, the Company borrowed $3.9 million under the

revolving credit facility.

August 23, 2021, the Borrowers entered into an amendment (the “Amendment”), effective as of August 1, 2021, to the Credit

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including a financial covenant regarding the ratio of the Borrowers’ debt levels to Pointer’s EBITDA.

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,

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.

did not have any borrowings outstanding under the revolving credit facility with Discount Bank as of September 30, 2022.

October 31, 2022, the Borrowers entered into a third amendment to the Credit Agreement (the “Third Amendment”) with Hapoalim.

The Third Amendment provides for, among other things, a new revolving credit facility to Pointer in the aggregate principal amount of

$10 million (the “New Revolver”).

The New Revolver will be available for a period of one month, commencing on October 31,

2022, and will continue to be available for successive one-month periods until and including October 30, 2023, unless the Borrowers deliver

a notice to Hapoalim of their request not to renew the New Revolver.

New Revolver will initially bear interest at the Secured Overnight Financing Rate plus 2.59%.

Such interest is subject to monthly changes

by Hapoalim, provided that Hapoalim gives Pointer advance notice regarding such change prior to the end of the applicable calendar month.

New Revolver will be secured by a first ranking fixed pledge and assignment by Pointer over its new bank account, which was opened in

connection with the New Revolver, and all of the rights relating thereunder as well as a cross guarantee by Powerfleet Israel.

is required to pay a credit allocation fee equal to 0.5% per annum on undrawn and uncancelled amounts of the New Revolver.

have on file a shelf registration statement on Form S-3 that was declared effective by the SEC on November 27, 2019.

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Public Offering were made pursuant to our shelf registration statement.

a result of rising interest rates, higher inflation, supply chain disruptions the ongoing COVID-19 pandemic and the conflict between Russia and Ukraine, 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.

of June 30, 2022, we had cash (including restricted cash) and cash equivalents of $18.0 million and working capital of $38.5 million.

a result of rising interest rates, higher inflation, supply chain disruptions the ongoing COVID-19 pandemic and the conflict between

Russia and Ukraine, 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.

of September 30, 2022, we had cash (including restricted cash) and cash equivalents of $17.0 million and working capital of $36.6 million.

Our primary sources of cash are cash flows from operating activities, our holdings of cash, cash equivalents and investments from the

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believe our available working capital, anticipated level of future revenues and expected cash flows from operations will provide sufficient

funds to cover capital requirements through at least August 9, 2023.

funds to cover capital requirements through at least November 9, 2023.

capital requirements depend on a variety of factors, including, but not limited to, the length of the sales cycle, the rate of increase

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on our business, financial condition and results of operations.

cash used in operating activities was $2.7 million for the six months ended June 30, 2022, compared to net cash provided by operating

cash used in operating activities was $1.7 million for the nine months ended September 30, 2022, compared to net cash used in operating

activities of $1.2 million for the same period in 2021.

The net cash used in operating activities for the six months ended June 30, 2022,

reflects a net loss of $3.0 million and includes non-cash charges of $2.1 million for stock-based compensation, $4.1 million for depreciation

and amortization expense and $1.4 million for right of use asset amortization.

The net cash used in operating activities for the nine months ended September

30, 2022, reflects a net loss of $5.3 million and includes non-cash charges of $3.2 million for stock-based compensation, $6.2 million

for depreciation and amortization expense and $2.1 million for right of use asset amortization.

Changes in working capital items included:

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decrease in lease liabilities of $2.0 million.

cash used in investing activities was $2.0 million for the six months ended June 30, 2022, compared to net cash used in investing activities

of $1.5 million for the same period in 2021.

The cash used in investing activities for the six months ended June 30, 2022 and 2021 was

related to capital expenditures.

cash used in financing activities was $0.8 million for the six months ended June 30, 2022, compared to net cash provided by financing

cash used in investing activities was $4.0 million for the nine months ended September 30, 2022, compared to net cash used in investing

activities of $2.5 million for the same period in 2021.

The cash used in financing activities for the six months ended June 30, 2022

was primarily due to the repayment of long-term debt of $2.9 million, partially offset by net borrowings under the line of credit of

$2.3 million.

The cash used in investing activities for the nine months ended September 30,

2022 and 2021 was related to capital expenditures.

cash used in financing activities was $0.5 million for the nine months ended September 30, 2022, compared to net cash provided by financing

activities of $19.7 million for the same period in 2021.

The cash used in financing activities for the nine months ended September 30,

2022 was primarily due to the repayment of long-term debt of $4.3 million, partially offset by net borrowings under the line of credit

of $3.9 million.

The change from the same period in 2021 was primarily due to the net proceeds from our stock offering of $26.9 million

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condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

of June 30, 2022, there have been no material charges in contractual obligations as disclosed under the caption “Contractual Obligations

and Commitments” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Rising inflation and other macroeconomic trends in

have resulted in higher costs of raw materials, freight, and labor, which has impacted our operating costs.

We expect the inflationary

environment to continue for the remainder of the year, resulting in corresponding pressure on our operating costs and gross margins.

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.

of September 30, 2022, there have been no material charges in contractual obligations as disclosed under the caption “Contractual

Obligations and Commitments” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

inflation and other macroeconomic trends in the U.S.

have resulted in higher costs of raw materials, freight, and labor, which has impacted

our operating costs.

We expect the inflationary environment to continue for the remainder of the year, resulting in corresponding pressure

on our operating costs and gross margins.

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.

of Recently Issued Accounting Pronouncements

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What changed 10-Q

Item 2. Management’s Discussion and Analysis