What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-03-31 compared with 2022-03-16 · 224 added, 236 removed, 188 unchanged (71% of the section changed)

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are headquartered in Woodcliff Lake, New Jersey, with offices located around the globe.

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.

PowerFleet for Industrial solutions are designed to provide on-premise or in-facility asset and operator management, monitoring, and

visibility for industrial 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.

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.

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

deliver advanced mobility solutions that connect assets to increase visibility operational efficiency and profitability.

Across our vertical

markets we differentiate ourselves by being OEM agnostic and helping mixed fleets view and manage their assets similarly.

solutions are paired with software as a service, or SaaS, analytics platforms to provide an even deeper layer of insights.

These insights

include a full set of operational Key Performance Indicators, or KPI’s, to drive operational and strategic decisions.

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.

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 software as a service (SaaS) analytics platforms to provide an even deeper layer of insights.

These insights include a full set of operational Key Performance Indicators (KPIs) to drive operational and strategic

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.

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.

for analytics, as well as the data contained therein, to differentiate us from our competitors, make a growing contribution to revenue,

and add value to our solutions, and help keep us at the forefront of the wireless asset management markets we serve.

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 original equipment manufacturers, or 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

Post-implementation, we consult with our customers to further extend and customize the benefits to the enterprise by delivering

enhanced analytics capabilities

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.

sell our wireless mobility solutions to both corporate-level executives, division heads and site-level management within the

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.

market and sell our solutions to a wide range of customers in the commercial and government sectors.

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aviation, manufacturing, aerospace and defense, homeland security and vehicle rental.

incurred net losses of approximately, $12 million, $13.6 million, and $18.1 million for the years ended December 31, 2019, 2020

and 2021, respectively, and have incurred additional net losses since inception.

As of December 31, 2021, we had cash (including restricted

cash) and cash equivalents of $26.8 million, working capital of $43.6 million, and an accumulated deficit of $134.4 million.

Our primary sources of cash are cash flows from operating activities, 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.

incurred net losses of approximately $13.6 million, $18.1 million, and $11.9 million for the years ended December 31, 2020, 2021 and

2022, respectively, and have incurred additional net losses since inception.

As of December 31, 2022, we had cash (including

restricted cash) and cash equivalents of $18.0 million, working capital of $35.5 million, and an accumulated deficit of $141.4

Our primary sources of cash are cash flows from operating activities, 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.

Accounting Estimates

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For products which do

not have stand-alone value to the customer separate from the SaaS services provided, the Company considers both hardware and SaaS services

not have standalone value to the customer separate from the SaaS services provided, the Company considers both hardware and SaaS services

a bundled performance obligation.

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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.

The Company operates in one reportable

segment which is its only reporting unit.

The Company operates in one operating segment which is its only reporting unit.

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.

The Company performed a market-based quantitative

assessment utilizing the guideline public company and guideline transaction approaches by comparing revenue and adjusted EBITDA multiples

of similar sized companies and similar sized transactions.

For the years ended December 31, 2019, 2020, and 2021, the Company did not

incur an impairment charge.

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.

is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment.

operates in one reportable segment which is its only reporting unit.

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.

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.

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.

the years ended December 31, 2020, 2021 and 2022, the Company did not incur an impairment charge.

use the asset and liability method of accounting for deferred income taxes.

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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.

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.

have opted to classify interest and penalties that would accrue according to the provisions of relevant tax law as selling, general,

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.

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Report on Form 10-K.

Our results reflect the operations of (i) Pointer Telocation Ltd.

from October 3, 2019, the closing date

of the transactions pursuant to which we acquired Pointer (the “Transactions”), (ii) the assets we acquired from CarrierWeb

Services Ltd.

from July 30, 2019, and (iii) the assets we acquired from CarrierWeb, L.L.C from January 30, 2019.

detailed discussion of the material changes in our operating results is set forth below.

A detailed discussion of the material changes in our operating results is set forth below.

Year Ended December 31,

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Research and development expenses

Acquisition related expenses

Total operating expenses

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The increase in

product revenue is attributable to an increase in sales by our PowerFleet for Logistics business.

product revenues is attributable to an increase in sales by our Powerfleet for Logistics and Powerfleet for Industrial products.

from services increased by approximately $5.6 million, or 7.7%, to $78.8 million in 2022 from $73.2 million in 2021.

The increase in

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

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

Cost of revenues increased by approximately $5.0 million, or 7.5%, to $71.0 million in 2022 from $66.0 million in 2021.

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in 2022 from 47.7% in 2021.

The decrease in gross profit as a percentage of revenue was principally due to changes in product mix

and higher costs for components as a result of the global supply chain issues.

The decrease in gross profit as a percentage of revenues was principally due to increases in raw material costs as a result of global supply chain issues.

of products increased by approximately $3.2 million, or 8.1%, to $42.6 million in 2022 from $39.4 million in 2021.

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24.3% in 2022 from 25.5% in 2021.

The decrease in gross profit as a percentage of product revenues was primarily due to a $400,000 one-time

expense related to an incentive program to expand business with an existing customer that is one of the largest chassis lessors in North

Product gross profit was also impacted by product mix, higher costs associated with supply chain

issues, electronic component shortages and inflation.

The decrease in 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.

of services increased by approximately $1.8 million, or 6.7%, to $28.4 million in 2022 from $26.6 million in 2021.

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was $50.5 million in 2022 compared to $46.6 million in 2021.

As a percentage of service revenues, gross profit decreased to 63.7% in

As a percentage of service revenues, gross profit increased to 64.0% in

2022 from 63.7% 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.

GENERAL AND ADMINISTRATIVE EXPENSES.

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

$5.2 million, or 10.0%, to $57.1 million in 2021 compared to $51.9 million in 2020 principally due to increased salaries due to the reversal

of temporary cost reduction initiatives implemented during the first quarter of 2020 in response to the impact and uncertainty caused

There was an additional $1.0 million increase in severance and recruiting related expenses.

As a percentage of revenues,

SG&A expenses decreased to 45.2% in the year ended December 31, 2021, from 45.7% in the same period in 2020.

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

approximately $5.9 million, or 10.3%, to $63.0 million in 2022 compared to $57.1 million 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 46.6% in the year ended December 31, 2022, from 45.2% in the same period in

AND DEVELOPMENT EXPENSES.

Research and development (“R&D”) expenses increased by approximately $0.5 million,

or 4.4%, to $11.1 million in 2021 compared to $10.6 million in 2020 principally due to increased salaries due to the reversal of temporary

cost reduction initiatives implemented during the first quarter of 2020 in response to the impact and uncertainty caused by COVID-19.

As a percentage of revenues, R&D expenses decreased to 8.8% in the year ended December 31, 2021from 9.3% in the same period in 2020.

Interest expense decreased by $1.7 million, or 38.1%, to $2.8 million in 2021 from $4.5 million in 2020, due to the

continued paydown of principal on our credit facility with Bank Hapoalim and the full paydown in 2020 of the convertible unsecured promissory

notes in the aggregate principal amount of $5,000,000 (the “Notes”) that we issued to ABRY Senior Equity V, L.P., ABRY

Senior Equity Co-Investment Fund V, L.P and ABRY Investment Partnership, L.P.

(the “Investors” and a decrease in the

foreign currency translation losses related to long-term debt included in interest expense.

Research and development (“R&D”) expenses decreased by approximately $2.1 million, or

18.9%, to $9.0 million in 2022 compared to $11.1 million in 2021, principally due to the capitalization of software development

expenses for new product development, which increased by $2.2 million in 2022.

As a percentage of revenues, R&D expenses decreased to 6.7% in the year ended December

31, 2022 from 8.8% in the same period in 2021.

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.

LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS.

Net loss attributable to common stockholders was $18.1 million, or $(0.52)

per basic and diluted share, for 2021 as compared to net loss of $13.6 million, or $(0.46) per basic and diluted share, for the same

period in 2020.

Net loss attributable to common stockholders was $11.9 million, or $(0.34) per basic and

diluted share, for 2022 as compared to net loss of $18.1 million, or $(0.52) 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.

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Revenues increased by approximately $12.6 million, or 11.1%, to $126.2 million in 2021 from $113.6 million in 2020.

The increase in

revenue is attributable to a full year of revenue from the Pointer acquisition, which was completed on October 3, 2019, offset by a decrease

in revenue in PowerFleet due to the impact COVID-19.

from products increased by approximately $7.3 million, or 16.1%, to $53.0 million in 2021 from $45.7 million in 2020.

The increase in

product revenue is attributable to a full year of product revenue from the Pointer acquisition, offset by a decrease in product revenue

in PowerFleet due to the impact of COVID-19.

product revenue is attributable to an increase in sales by our Powerfleet for Logistics products.

from services increased by approximately $5.3 million, or 7.8%, to $73.2 million in 2021 from $67.9 million in 2020.

The increase in

service revenue is attributable to a full year of service revenue resulting from our acquisition of Pointer.

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

Cost of revenues increased by approximately $11.4 million, or 21.0%, to $66.0 million in 2021 from $54.6 million in

Gross profit was $60.2 million in 2021 compared to $59.0 million in 2020.

As a percentage of revenues, gross profit increased to

As a percentage of revenues, gross profit decreased to

47.7% in 2021 from 52.0% in 2020.

of products increased by approximately $0.2 million, or 0.8%, to $30.2 million in 2020 from $30.0 million in in 2019.

The decrease in gross profit as a percentage of revenue was principally due to changes in product mix

and higher costs for components as a result of the global supply chain issues.

of products increased by approximately $9.2 million, or 30.5%, to $39.4 million in 2021 from $30.2 million in 2020.

Gross profit for

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25.5% in 2021 from 33.8% in 2020.

The decrease in gross profit as a percentage of product revenues was primarily due to a $400,000 one-time

expense related to an incentive program to expand business with an existing customer that is one of the largest chassis lessors in North

Product gross profit was also impacted by product mix, higher costs associated with supply chain issues, electronic component

shortages and inflation.

of services increased by approximately $2.2 million, or 9.1%, to $26.6 million in 2021 from $24.4 million in 2020.

Gross profit for

services was $43.6 million in 2020 compared to $22.9 million in 2019.

The increase in the gross profit was attributable to the increase

in service revenue resulting from a full year of operations from our acquisition of Pointer.

As a percentage of service revenues, gross

profit increased to 64.2% in 2020 from 62.8% in 2019.

Gross profit for services

was $46.6 million in 2021 compared to $43.6 million in 2020.

As a percentage of service revenues, gross profit decreased to 63.7% in

2021 from 64.2% in 2020.

GENERAL AND ADMINISTRATIVE EXPENSES.

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

$17.4 million, or 50.6%, to $51.9 million in 2020 compared to $34.5 million in 2019.

The increase was principally due to our acquisition

SG&A expenses increased by approximately

$5.2 million, or 10.0%, to $57.1 million in 2021 compared to $51.9 million in 2020 principally due to increased salaries due to the reversal

of temporary cost reduction initiatives implemented during the first quarter of 2020 in response to the impact and uncertainty caused

There was an additional $1.0 million increase in severance and recruiting related expenses.

As a percentage of revenues,

SG&A expenses decreased to 45.2% in the year ended December 31, 2021, from 45.7% in the same period in 2020.

AND DEVELOPMENT EXPENSES.

Research and development expenses increased by approximately $2.1 million, or 24.1%, to $10.6 million in

2020 compared to $8.5 million in 2019 principally due to our acquisition of Pointer.

ACQUISITION-RELATED

Acquisition related expenses decreased to $-0- in 2020 from approximately $5.1 million in 2019 principally due to the completion

of the Transactions in 2019.

Interest expense increased by $3.1 million, or 225.3%, to $4.5 million in 2020 from $1.4 million in 2019, principally due

to a full year of our credit facility with Bank Hapoalim and the “Notes” that we issued to the Investors, compared to a partial year of such interest expense in 2019

and an increase in the foreign currency translation losses related to long-term debt included in interest expense.

R&D expenses increased by approximately $0.5 million, or 4.4%,

to $11.1 million in 2021 compared to $10.6 million in 2020 principally due to increased salaries due to the reversal of temporary cost

reduction initiatives implemented during the first quarter of 2020 in response to the impact and uncertainty caused by COVID-19.

percentage of revenues, R&D expenses decreased to 8.8% in the year ended December 31, 2021from 9.3% in the same period in 2020.

Interest expense decreased by $1.7 million, or 38.1%, to $2.8 million in 2021 from $4.5 million in 2020, due to the

continued paydown of principal on our credit facility with Hapoalim and the full pay down in 2020 of the convertible unsecured

promissory notes in the aggregate principal amount of $5,000,000 (the “Notes”) that we issued to the Investors and a decrease

in the foreign currency translation losses related to long-term debt included in interest expense.

LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS.

Net loss attributable to common stockholders was $13.6 million, or $(0.46) per basic

and diluted share, for 2020 as compared to net loss of $12.0 million, or $(0.59) per basic and diluted share, for the same period in

Net loss attributable to common stockholders was $18.1 million, or $(0.52) per basic and

diluted share, for 2021 as compared to net loss of $13.6 million, or $(0.46) per basic and diluted share, for the same period in 2020.

The 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

As of December 31, 2021, we had cash (including restricted cash), and cash equivalents of $26.8 million and working

capital of $43.6 million, compared to cash (including restricted cash) and cash equivalents of $18.4 million and working

capital of $28.9 million as of December 31, 2020.

October 3, 2019, in connection with the completion of the Transactions, we issued and sold 50,000 shares of the Series A Convertible

Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), to 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.

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 December 31, 2022, we had cash (including restricted cash) and cash equivalents

of $18.0 million and working capital of $35.5 million, compared to cash (including restricted cash) and cash equivalents of $26.8 million

and working capital of $43.6 million as of December 31, 2021.

October 3, 2019, in connection with the completion of the Transactions, we issued and sold 50,000 shares of the Series A Preferred

Stock to the Investors pursuant to the terms of the Investment Agreement for an aggregate purchase price of $50.0

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

on October 3, 2019, we issued and sold the Notes to the Investors at the closing of the Transactions.

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principal amount of $5.0 million and accrued interest under the Notes on October 1, 2020.

addition, our wholly owned subsidiaries, PowerFleet Israel Ltd.

(“PowerFleet Israel”) and Pointer (the “Borrowers”)

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

(“Hapoalim”), pursuant to which

Hapoalim agreed to provide PowerFleet Israel with two senior secured term loan facilities in an aggregate principal amount of $30 million

(comprised of two facilities in the aggregate principal amount of $20 million (the “Term A Facility”) and $10 million (the

“Term B Facility”)) and 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 $24,400,000 as of December 31, 2021.

The proceeds of the term loan facilities 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 (collectively, the “Borrowers”) are party to the

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 the Term A Facility and the Term

B Facility in the aggregate principal amount 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 “Revolving Facility”).

outstanding amount under the term loan facilities was approximately NIS 55.3 million, or $15.9 million, as of December 31, 2022.

proceeds of the term loan facilities were used to finance a portion of the cash consideration payable in our acquisition of Pointer.

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

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

have on file a shelf registration statement on Form S-3 that was declared effective by the Securities and Exchange Commission (the “SEC”)

on November 27, 2019.

Pursuant to the shelf registration statement, we may offer to the public from time to time, in one or more offerings,

up to $60.0 million of our common stock, preferred stock, warrants, debt securities, and units, or any combination of the foregoing,

at prices and on terms to be determined at the time of any such offering.

The specific terms of any future offering will be determined

at the time of the offering and described in a prospectus supplement that will be filed with the SEC in connection with such offering.

May 14, 2020, we entered into an equity distribution agreement for an “at-the-market offering” program (the “ATM Offering”)

with Canaccord Genuity LLC (“Canaccord”) as sales agent, pursuant to which we issued and sold an aggregate of 809,846 shares

of common stock for approximately $4.2 million in gross proceeds.

We terminated the equity distribution agreement effective as of August

February 1, 2021, we closed an underwritten public offering (the “Underwritten Public Offering”) of 4,427,500 shares of common

stock (which includes the full exercise of the underwriters’ over-allotment option) for gross proceeds of approximately $28.8 million,

before deducting the underwriting discounts and commissions and other estimated offering expenses.

The offer and sale of common stock

in the ATM Offering and the Underwritten Public Offering were made pursuant to our shelf registration statement.

a result of the COVID-19 pandemic the related global supply chain disruptions, 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.

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

The Third Amendment provides for, among other things, 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

As of December 31, 2022, the Company borrowed approximately NIS20.1 million,

or $5.7 million, under the revolving credit facilities.

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 is 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.

also has a one-year $1,000 revolving credit facility available for use with Discount Bank, which renews annually, subject to the bank’s

Pointer did not have any borrowings outstanding under the revolving credit facility with Discount Bank as of December 31, 2022.

a result of global supply chain disruptions, the conflict between Russia and Ukraine, 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.

of December 31, 2022, we had cash (including restricted cash), cash equivalents and marketable securities of $18.0 million and working

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cash flow solely from operating activities to fund our operations.

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 March 16, 2023.

believe that 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 March 31, 2024.

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 $5.0 million for the year ended December 31, 2021, compared to net cash provided by operating

activities of $8.8 million for the same period in 2020.

The net cash used in operating activities for the year ended December 31, 2021,

reflects a net loss of $18.1 million and includes non-cash charges of $4.7 million for stock-based compensation, $8.6 million

for depreciation and amortization expense and $2.9 million for right of use asset amortization.

Changes in working capital items

increase in accounts receivable of $9.7 million;

increase in inventory of $6.1 million;

increase in accounts payable and accrued expenses of $8.3 million.

cash provided by operating activities was $0.8 million for the year ended December 31, 2022, compared to net cash used in operating activities

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The net cash provided by operating activities for the year ended December 31, 2022 reflects

a net loss of $13.6 million and includes non-cash charges of $4.6 million for preferred dividends, $4.3 million for stock-based compensation,

$8.4 million for depreciation and amortization expense and $2.8 million for right of use asset amortization.

Changes in working capital

items included:

decrease in deferred revenue of $4.3 million;

decrease in inventory of $3.1 million;

a net loss of $7.0 million 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 working capital items included:

increase in accounts receivable of $1.6 million;

increase in inventory of $4.5 million;

decrease in lease liabilities of $2.7 million;

cash used in investing activities was $3.4 million for the year ended December 31, 2021, compared to net cash used in investing activities

decrease in accounts payable and accrued expenses of $0.5 million.

cash used in operating activities was $5.0 million for the year ended December 31, 2021, compared to net cash provided by operating activities

of $8.8 million for the same period in 2020.

The cash used in investing activities for the year ended December 31, 2021, was for the

purchase of fixed assets.

The cash used in investing activities in the same period in 2020 was primarily for the purchase of fixed assets.

cash used in investing activities was $3.3 million for the year ended December 31, 2020, compared to net cash used in investing activities

The net cash used in operating activities for the year ended December 31, 2021 reflects

a net loss of $13.3 million and includes non-cash charges of $4.7 million for stock-based compensation, $8.6 million for depreciation

and amortization expense and $2.9 million for right of use asset amortization.

Changes in working capital items included:

increase in accounts receivable of $9.7 million;

increase in inventory of $6.1 million;

increase in accounts payable and accrued expenses of $8.3 million.

cash used in investing activities was $5.8 million for the year ended December 31, 2022, compared to net cash used in investing

activities of $3.4 million for the same period in 2021.

The cash used in investing activities for the years ended December 31, 2022

and 2021 was primarily for the purchase of fixed assets and capitalized software development.

cash used in investing activities was $3.4 million for the year ended December 31, 2021, compared to net cash used in investing

activities of $3.3 million for the same period in 2020.

The cash used in investing activities for the years ended December 31, 2021 and 2020

was for the purchase of fixed assets and capitalized software development.

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 change from the same period in 2019 was primarily due to $-0- used for acquisitions

in 2020 compared to $69.0 million used for our acquisitions of Pointer and CarrierWeb in 2019, $3.4 million used for the purchase of

fixed assets in 2020 compared to $1 million used for the purchase of fixed assets in 2019 and $-0- provided by the proceeds from the

sales and maturities of investments in 2020 compared to $4.6 million in 2019.

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 $5.7 million and the payment of preferred stock dividends of $4.1 million.

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

cash provided by financing activities was $16.2 million for the year ended December 31, 2021, compared to net cash used in financing

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dividends of $4.1 million.

cash used in financing activities was $3.9 million for the year ended December 31, 2020, compared to net cash provided by financing activities

of $78.6 million for the same period in 2019.

The change from the same period in 2019 was primarily due to net proceeds from our ATM

Offering of $4 million in 2020 compared to net proceeds from our sale of Series A Preferred Stock to the Investors of $46.3 million in

2019, offset by the repayment of the Notes of $5 million and the repayment of long-term debt of $2.9 million.

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

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.

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.

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 January 30, 2019, we completed the acquisition

of substantially all of the assets of CarrierWeb, L.L.C., and on July 30, 2019, we complete the acquisition of substantially all of the

assets of CarrierWeb Services Ltd.

(together, the “CarrierWeb Acquisitions”).

The assets we acquired in the CarrierWeb Acquisitions

have been integrated into our products.

The CarrierWeb Acquisitions allow us to offer a full complement of highly integrated logistics

technology solutions to its current customers and prospects and immediately adds more than 70 customers and 9,000 subscriber units.

October 3, 2019, we completed the Transactions, as a result of which I.D.

Systems and PowerFleet Israel each became direct, wholly-owned

subsidiaries of the Company and Pointer became an indirect, wholly-owned subsidiary of the Company.

For further discussion on the Transactions

and related transactions, please see Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K.

March 6, 2023, we entered into the SPA with 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 is required to

ensure that Movingdots has available cash and cash equivalents of at least €8,000,000 as of the closing date.

The transaction closed on March 31, 2023.

Sheet Arrangements

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Issued Accounting Pronouncements

In December 2019, the Financial Accounting Standards

Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2019-12, Simplifying the Accounting for Income

Taxes which removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income

taxes in an interim period, the recognition of deferred tax liabilities for outside basis differences and clarifies the accounting for

transactions that result in a step-up in the tax basis of goodwill.

The guidance is generally effective as of January 1, 2021, with early

adoption permitted.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements..

December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2019-12, Simplifying the Accounting for Income Taxes which removes certain exceptions related to the approach for intraperiod tax allocation,

the methodology for calculating income taxes in an interim period, the recognition of deferred tax liabilities for outside basis differences

and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The guidance is generally effective

as of January 1, 2021, with early adoption permitted.

The adoption of this standard did not have a material impact on the Company’s

consolidated financial statements.

June 2016, the FASB issued ASU No.

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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.

January 2017, the FASB issued ASU No.

2017-04, “Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill

Impairment,” which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill

impairment test.

Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill

with the carrying amount of that goodwill.

Under the amendments in ASU 2017-04, an entity should recognize an impairment charge for the

amount by which the carrying amount of a reporting unit exceeds its fair value;

however, the loss recognized should not exceed the total

amount of goodwill allocated to that reporting unit.

The updated guidance requires a prospective adoption.

The guidance is effective

beginning fiscal year 2020.

Early adoption is permitted.

The adoption of this standard did not have an impact on the Company’s

consolidated financial statements.

The Company is currently evaluating

the impact of this ASU on the consolidated financial statements.

Quantitative and Qualitative Disclosures about Market Risks.

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-K

Item 7. Management’s Discussion and Analysis