What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-10 compared with 2023-05-10 · 228 added, 200 removed, 356 unchanged (55% of the section changed)

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following discussion and analysis of the consolidated financial condition and results of operations of PowerFleet, Inc.

and its subsidiaries

(“Powerfleet”, “we”, “our” or “us”) should be read in conjunction with the consolidated

financial statements and notes thereto appearing in Part I, Item 1 of this report.

In the following discussions, most percentages and

dollar amounts have been rounded to aid presentation, and, accordingly, all amounts are approximations.

subsidiaries (“Powerfleet”, the “Company” “we”, “our” or “us”) should be

read in conjunction with the consolidated financial statements and notes thereto appearing in Part I, Item 1 of this report.

following discussions, most percentages and dollar amounts have been rounded to aid presentation, and, accordingly, all amounts are

approximations.

Note Regarding Forward-Looking Statements

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to be correct.

There are a number of risks and uncertainties that could cause the Company’s

actual results to differ materially from the forward-looking statements contained in this report.

Important factors that could cause the

Company’s actual results to differ materially from those expressed as forward-looking statements herein include, but are not limited,

are a number of risks and uncertainties that could cause the Company’s actual results to differ materially from the forward-looking

statements contained in this report.

Important factors that could cause the Company’s actual results to differ materially from

those expressed as forward-looking statements herein include, but are not limited, to:

future economic and business conditions;

the ability to recognize the anticipated benefit of the acquisition of Movingdots GmbH (“Movingdots”);

the loss of any of the Company’s key customers or reduction in the purchase of the Company’s products by any such customers;

the failure of the markets for the Company’s products to continue to develop;

the possibility that the Company may not be able to

integrate successfully the business, operations and employees of Movingdots;

the Company’s inability to adequately protect its intellectual

the Company’s inability to manage growth;

the effects of competition from a wide variety of local, regional, national

and other providers of wireless solutions;

changes in laws and regulations or changes in generally accepted accounting policies, rules

and practices;

changes in technology or products, which may be more difficult or costly, or less effective, than anticipated;

of outbreaks of pandemics or contagious diseases, including the length and severity of the recent global outbreak of the novel coronavirus,

COVID-19, and its impact on the Company’s business;

and other risks detailed from time to time in the Company’s filings with

the Securities and Exchange Commission (the “SEC”), including the Company’s annual report on Form 10-K for the year

ended December 31, 2022 (the “2022 Annual Report”).

to recognize the anticipated benefit of the acquisition of Movingdots GmbH (“Movingdots”);

the loss of any of the Company’s

key customers or reduction in the purchase of the Company’s products by any such customers;

the failure of the markets for the

Company’s products to continue to develop;

the possibility that the Company may not be able to integrate successfully the business,

operations and employees of Movingdots;

the Company’s inability to adequately protect its intellectual property;

the Company’s

inability to manage growth;

the effects of competition from a wide variety of local, regional, national and other providers of wireless

changes in laws and regulations or changes in generally accepted accounting policies, rules and practices;

changes in technology

or products, which may be more difficult or costly, or less effective, than anticipated;

the effects of outbreaks of pandemics or contagious

diseases, including the length and severity of the recent global outbreak of the novel coronavirus, COVID-19, and its impact on the Company’s

and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission (the

“SEC”), including the Company’s annual report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual

may be other factors of which the Company is currently unaware or which it currently deems immaterial that may cause its actual results

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The information contained in the Company’s website is not incorporated by reference into this report.

(together with its subsidiaries, “Powerfleet,” the “Company,” “we,” “our” or “us”)

is a global leader of Internet-of-Things (“IoT”) solutions providing valuable business intelligence for managing high-value

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Key Performance Indicators (KPIs) to drive operational and strategic decisions.

Our customers typically get a return on their

investment in less than 12 months from deployment.

Our customers typically get a return on their investment

in less than 12 months from deployment.

enterprise software applications have machine learning capabilities and are built to integrate with our customers’ management systems

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Our solutions

also feature open application programming interfaces (APIs) for additional integrations and development to boost other enterprise

management systems and third-party applications.

also feature open application programming interfaces (APIs) for additional integrations and development to boost other enterprise management

systems and third-party applications.

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

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and create safer environments.

In the first quarter of 2023 we began to consolidate and augment many of our existing capabilities on a single customer

software platform branded as “Unity.” We have designed our Unity platform to enable rapid and deep integration with IoT devices

and third-party business systems to a highly scalable data pipeline that powers artificial intelligence-driven insights to help companies

save lives, time, and money.

Unity is an increasingly important initiative to meet our objective of becoming a leading global provider

of IoT SaaS solutions for high-value enterprise assets to drive optimized operations and create safer environments.

To achieve this goal,

we intend to prove value, retain and grow business with existing customers and pursue opportunities with new customers by:

business solutions by vertical markets and go to market strategies to each market;

positioning ourselves as

an innovative thought leader;

maintaining a world class

sales and marketing team;

identifying, seizing, and

managing revenue opportunities;

expanding our customer

base, achieving wider market penetration and educating customers with mixed assets in their organization about our other applications;

implementing improved marketing,

sales and support strategies;

shortening our initial

sales cycles by helping our customers through:

In the first quarter of 2023 we began to consolidate and augment many of our existing capabilities on

a single customer software platform branded as “Unity.” We have designed our Unity platform to enable rapid and deep integration

with IoT devices and third-party business systems to a highly scalable data pipeline that powers artificial intelligence-driven insights

to help companies save lives, time, and money.

Unity is an increasingly important initiative to meet our objective of becoming a leading

global provider of IoT SaaS solutions for high-value enterprise assets to drive optimized operations and create safer environments.

achieve this goal, we intend to prove value, retain and grow business with existing customers and pursue opportunities with new customers

our business solutions by vertical markets and go to market strategies to each market;

ourselves as an innovative thought leader;

a world class sales and marketing team;

seizing, and managing revenue opportunities;

our customer base, achieving wider market penetration and educating customers with mixed assets in their organization about our other

applications;

improved marketing, sales and support strategies;

our initial sales cycles by helping our customers through:

and quantifying benefits expected from our solutions;

accelerating transitions

from implementation to roll-out;

building service revenue

through long-term SaaS contracts;

transitions from implementation to roll-out;

service revenue through long-term SaaS contracts;

differentiating

our product offering through analytics, machine learning, unique sensors, and value-added services;

producing incremental revenue

at a high profit margin;

expanding our partnerships

and integrations.

incremental revenue at a high profit margin;

our partnerships and integrations.

also plan to expand into new applications and markets by:

pursuing opportunities

to integrate our system with computer hardware and software vendors, including:

transportation management

warehouse management systems;

labor and timecard systems;

enterprise resource planning;

yard management systems;

establishing relationships

with global distributors;

evaluating and pursuing

strategically sound acquisitions of companies.

opportunities to integrate our system with computer hardware and software vendors, including:

transportation

management systems;

and timecard systems;

resource planning;

management systems;

relationships with global distributors;

and pursuing strategically sound acquisitions of companies.

Applications of our IoT Solutions

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

interest rates, higher inflation, fluctuations in currency values, supply chain disruptions 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, among other things, the imposition of certain corporate tax measures, while authorizing spending on energy and climate

change initiatives and subsidizing the Affordable Care Act.

The IRA also introduced a 1% excise tax on certain corporate stock buybacks,

which would impose a nondeductible 1% excise tax on the fair market value of certain stock that is “repurchased” during the

taxable year by a publicly traded U.S.

corporation or acquired by certain of its subsidiaries.

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

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

interest rates and inflation, fluctuations in currency values, supply chain disruptions 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.

ultimate extent of the effects of these developments remain highly uncertain, and such effects could exist for an extended period of

to Our Business

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and commercialize new products and technologies.

of March 31, 2023, we had cash (including restricted cash) and cash equivalents of $25.1 million and working capital of $41.8 million.

of June 30, 2023, we had cash (including restricted cash) and cash equivalents of $22.0 million and working capital of $38.3 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 the revolving credit facility with Bank Hapoalim B.M.

will provide sufficient funds to cover capital requirements through May 10,

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 August 10, 2024.

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 March 31, 2023, there were no significant changes to our critical accounting policies as identified in our

the three-and six-month periods ended June 30, 2023, there were no significant changes to our critical accounting policies as identified in our

2022 Annual Report.

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

Three Months Ended March 31,

Cost of revenue:

Three Months Ended June 30,

Six Months Ended June 30,

Total revenues

Cost of revenues:

Cost of products

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Interest income

Interest expense

Interest expense, net

Bargain purchase - Movingdots

Other income (expenses), net

Other income, net

Net income (loss) before income taxes

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Preferred stock dividend

Net income (loss) attributable to common shareholders

Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Revenues decreased by approximately $0.3 million, or 1%, to $32.8 million in the three months ended March 31, 2023, from $33.2

million in the same period in 2022.

from products decreased approximately $2.0 million, or 13.8%, to $12.4 million in the three months ended March 31, 2023, from $14.4

Net income (loss) attributable to common stockholders

Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Revenues decreased by approximately $2.5 million, or 7%, to $32.1 million in the three months ended June 30, 2023, from $34.6 million

in the same period in 2022.

from products decreased approximately $3.8 million, or 25.7%, to $11.0 million in the three months ended June 30, 2023, from $14.8

million in the same period in 2022.

The decrease in product revenue was due to decreased product sales from our Powerfleet GmbH

subsidiary, where we are actively shutting down sales from low margin contracts, and product sales in Israel.

from services increased approximately $1.7 million, or 8.9%, to $20.4 million in the three months ended March 31, 2023, from $18.8 million

The decrease in product revenue was principally due to decreased product sales in Germany, where we are actively shutting down sales from low margin contracts, negatively impacted sales due to large logistics companies recalibrating demand following aggressive builds

during the pandemic, and lower product sales in and out of Israel reflecting geopolitical headwinds and a proactive decision to

shutter our hardware only line of business.

from services increased approximately $1.3 million, or 6.4%, to $21.0 million in the three months ended June 30, 2023, from $19.8 million

in the same period in 2022.

The increase in services revenue was principally due to an increase in our installed base that generates service

Cost of revenues decreased by approximately $2.5 million, or 13.5%, to $16.2 million in the three months ended March

The increase in services revenues was principally due to an increase in our installed base that generates

service revenue offset in part by the impact of negative foreign currency shifts in our international business.

Cost of revenues decreased by approximately $2.3 million, or 12.8%, to $16.0 million in the three months ended June

30, 2023, from $18.4 million for the same period in 2022.

Gross profit was $16.6 million in three months ended March 31, 2023,

Gross profit was $16.0 million in the three months ended June 30, 2023,

compared to $16.2 million for the same period in 2022.

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46.9% in 2022.

The increase in gross profit as a percentage of revenues was principally due to decisions to stop fulfilling low

margin orders and the decrease in raw materials costs related to the global supply chain issues which were more prevalent in the

first quarter of 2022 than the first quarter of 2023.

of products decreased by approximately $3.0 million, or 24.8%, to 9.0 million in the three months ended March 31, 2023, from $12.0 million

in the same period in 2022.

Gross profit for products was $3.4 million in the three months ended March 31, 2023, compared to $2.4 million

in the same period in 2022.

As a percentage of product revenues, gross profit increased to 27.4% in 2023 from 16.8% in 2022.

in gross profit as a percentage of revenues is the result of ceasing to fulfill certain low margin orders, and relief from supply chain issues and electronic

component shortages that drove up the cost of materials in the first quarter of 2022.

of services increased by approximately $0.4 million, or 6.4%, to $7.2 million in the three months ended March 31, 2023, from $6.8 million

The increase in gross profit as a percentage of revenues was principally due to high margin service revenue

increasing to 67% of total revenue in 2023 from 57% in 2022.

of products decreased by approximately $2.8 million, or 24.6%, to $8.5 million in the three months ended June 30, 2023, from $11.3

million in the same period in 2022.

Gross profit for products was $2.5 million in the three months ended June 30, 2023, compared to

$3.5 million in the same period in 2022.

As a percentage of product revenues, gross profit decreased to 22.4% in 2023 from 23.5% in

The decrease in gross profit as a percentage of revenue was impacted by product mix and inflation.

of services increased by approximately $0.4 million, or 6.3%, to $7.5 million in the three months ended June 30, 2023, from $7.0 million

in the same period in 2022.

Gross profit for services was $13.2 million in the three months ended March 31, 2023, compared to $12.0 million

Gross profit for services was $13.6 million in the three months ended June 30, 2023, compared to $12.7 million

in the same period in 2022.

As a percentage of service revenues, gross profit increased to 64.7% in 2023 from 63.9% in 2022.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.

Selling, general and administrative (“SG&A”) expenses increased by approximately $1.9 million, or 12.6%, to

approximately $16.8 million in the three months ended March 31, 2023, compared to $14.9 million in the same period in 2022,

principally due to increased salaries, investments in marketing programs and increased professional services fees, including costs associated with our acquisition of Movingdots.

As a percentage

of revenues, SG&A expenses increased to 51.1% in the three months ended March 31, 2023, from 45.0% in the same period in

AND DEVELOPMENT EXPENSES .

Research and development (“R&D”) expenses decreased by approximately $1.5 million, or 46.6%,

to approximately $1.7 million in the three months ended March 31, 2023, compared to $3.2 million in the same period in 2022, principally

due to higher levels of capitalized software associated with the build out of our Unity platform and new device firmware.

As a percentage of revenues, R&D expenses decreased to 5.2% in the three months ended March

As a percentage of service revenues, gross profit remained at 64.5% for both periods.

GENERAL AND ADMINISTRATIVE EXPENSES .

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

$1.1 million, or 7.4%, to approximately $16.9 million in the three months ended June 30, 2023, compared to $15.8 million in the same

period in 2022, principally due to the acquisition of Movingdots, which added $0.7 million to expense, and $0.5 million in transaction, severance, and

restructuring costs in the quarter.

As a percentage of revenues, SG&A expenses increased to 53.0% in the three months ended June

30, 2023, from 45.7% in the same period in 2022.

INCOME (LOSS) ATTIBUTABLE TO COMMON STOCKHOLDERS.

Net income was $3.5 million, or $0.11 per basic and diluted share, for

the three months ended March 31, 2023, as compared to net loss of $4.1 million, or $(0.12) per basic and $(0.12) per diluted share,

for the same period in 2022.

The increase in net income was primarily the result of the $7.2 million gain on bargain purchase associated with our acquisition of Movingdots.

AND DEVELOPMENT EXPENSES .

Research and development (“R&D”) expenses increased by approximately $0.2 million, or

8.9%, to approximately $2.2 million in the three months ended June 30, 2023, compared to $2.0 million in the same period in 2022,

principally due to higher levels of capitalized software associated with the build out of our Unity platform and new device firmware

and the acquisition of Movingdots, which added $0.7 million to expense.

As a percentage of revenues, R&D expenses increased to 5.8% in the three months ended June 30, 2023, from 5.8% in the same

period in 2022.

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS .

Net loss was $4.3 million, or $(0.12) per basic and diluted share, for the three

months ended June 30, 2023, as compared to net loss of $1.3 million, or $(0.04) per basic and diluted share, for the same period in 2022.

The increase in net loss was primarily the result of the decreased product revenues and increased SG&A

Six Months Ended June

30, 2023 Compared to Six Months Ended June 30, 2022

decreased by approximately $2.9 million, or 4.2%, to $64.9 million in the six months ended June 30, 2023, from $67.8 million in the same

period in 2022.

Revenues from products

decreased by approximately $5.8 million, or 19.8%, to $23.4 million in the six months ended June 30, 2023, from $29.2 million in the

same period in 2022.

The decrease in product revenues was due to decreased product sales in Germany, where

we are actively shutting down sales from low margin contracts, negatively

impacted sales due to large logistics companies recalibrating demand following aggressive builds during the pandemic, and lower product sales

in and out of Israel reflecting geopolitical headwinds and a proactive decision to shutter our hardware only line of business.

Revenues from services increased

by approximately $0.9 million, or 6.3%, to $41.5 million in the six months ended June 30, 2023, from $38.5 million in the same period in

The increase in services revenues is principally due to an increase in our install base that generates service revenue offset in part by the impact of negative foreign currency shifts in our international business.

COST OF REVENUES .

Cost of revenues decreased

by approximately $4.9 million, or 13.1%, to $32.2 million in the six months ended June 30, 2023, from $37.1 million for the same period

Gross profit was $32.6 million in the six months ended June 30, 2023, compared to $30.6 million for the same period in 2022.

As a percentage of revenues, gross profit increased to 50.3% in 2023 from 45.2% in 2022.

The increase in gross profit as a percentage

of revenues was principally due to decisions to stop fulfilling low margin orders and the decrease in raw materials costs related to the

global supply chain issues, which were more prevalent in 2022 than 2023.

Cost of products decreased

by approximately $5.8 million, or 24.7%, to $17.6 million in the six months ended June 30, 2023, from $23.3 million in the same period

Gross profit for products was $5.9 million in the six months ended June 30, 2023, compared to $5.9 million in the same period

As a percentage of product revenues, gross profit increased to 25.0% in 2023 from 20.2% in 2022.

The increase in gross profit

as a percentage of revenues was principally due to high margin service revenue increasing to 64% of total

revenue in 2023 from 57% in 2022.

Cost of services increased

by approximately $0.9 million, or 6.3%, to $14.7 million in the six months ended June 30, 2023, from $13.8 million in the same period

Gross profit for services was $13.6 million in the six months ended June 30, 2023, compared to $12.7 million in the same period

As a percentage of service revenues, gross profit was 64.5% for both periods.

SELLING, GENERAL AND

ADMINISTRATIVE EXPENSES .

SG&A expenses increased by approximately $3.0 million, or 9.9%, to approximately $33.8 million in

the six months ended June 30, 2023, compared to $30.7 million in the same period in 2022, principally due to

the acquisition of Movingdots which added $0.7 million to expense and $0.7 million in transaction, severance, and restructuring

costs in the six months, and increased salaries, investments in marketing programs and increased professional services fees,

including costs associated with our acquisition of Movingdots.

As a percentage of revenues, SG&A expenses increased to 52.0% in

the six months ended June 30, 2023, from 45.4% in the same period in 2022, primarily due to the reasons described above.

DEVELOPMENT EXPENSES .

R&D expenses decreased by approximately $1.3 million, or 25.3%, to approximately $3.9 million in the

six months ended June 30, 2023, compared to $5.2 million in the same period in 2022, principally due to the capitalization of

software development expenses for new product development and reduction in salaries and wages offset in part by the acquisition of Movingdots which added $0.7 million to expense.

As a percentage of revenues, R&D

expenses decreased to 6.0% in the six months ended June 30, 2023, from 7.7% in the same period in 2022, primarily due to the reason

described above.

INTEREST EXPENSE .

Interest expense decreased by approximately $1.9 million, or 119.4%, to approximately $(0.3) million in the three months ended June 30,

2023, compared to $1.6 million in the same period in 2022, principally due to foreign currency translation gains from our two senior secured term loan facilities with Bank Hapoalim B.M.

(“Hapoalim”).

NET LOSS ATTRIBUTABLE TO COMMON

STOCKHOLDERS.

Net loss was $5.5 million, or $(0.15) per basic and diluted share, for the six months ended June 30, 2023, as

compared to net loss of $0.8 million, or $(0.02) per basic and diluted share, for the same period in 2022.

The decrease in net

loss was due primarily to the bargain purchase for Movingdots.

and Capital Resources

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of our common stock upon the exercise of options.

As of March 31, 2023, we had cash (including restricted cash) and cash equivalents

As of June 30, 2023, we had cash (including restricted cash) and cash equivalents

of $22.0 million and working capital of $38.3 million.

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payable in our acquisition of Pointer.

addition, our wholly owned subsidiaries, Powerfleet Israel and Pointer (collectively, 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 denominated in NIS in an initial aggregate principal amount of

$30 million (comprised of the 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 denominated in NIS in an initial

aggregate principal amount of $10 million (the “Revolving Facility”).

The outstanding amount under the term loan facilities

was approximately NIS51.7 million, or $14.3 million, as of March 31, 2023.

The 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.

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

Credit Agreement (the “Credit Agreement”) with Hapoalim, effective as of October 3, 2019, 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 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

denominated in NIS in an initial aggregate principal amount of $10 million (the “Revolving Facility”) all of which

matures on October 3, 2024.

The outstanding amount under the term loan facilities was approximately NIS46,500, or $12,600, as of June

The 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

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.

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 denominated in NIS in an initial aggregate

principal amount of $10 million (the “New Revolver”).

The New Revolver is available for a period of one month that commenced

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.

As of March 31, 2023, the Company borrowed

approximately NIS20.6 million, or $5.7 million, under the revolving credit facilities.

As of June 30, 2023, the we borrowed approximately NIS11,800, or $3,200, under the revolving credit

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, a new revolving credit facility to Pointer denominated in NIS in an

initial aggregate principal amount of $10 million (the “New Revolver”).

The New Revolver is available for a period of

one month that commenced 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.

As of June 30,

2023, we borrowed approximately NIS19,200, or $5,200, under the New Revolver.

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

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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 March 31, 2023.

a result of global supply chain disruptions, the conflict between Russia and Ukraine, rising interest rates, fluctuations in currency

a result of global supply chain disruptions, the conflict between Russia and Ukraine, higher interest rates, fluctuations in currency

values, inflation and other cost increases, there remains uncertainty surrounding the potential impact of such events on our results

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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.

On March 31, 2023, we completed our acquisition of Movingdots.

this acquisition will provide significant additional liquidity, with net cash proceeds of $8.7 million expected to exceed the associated

transaction, integration, and rationalization costs.

See “Business Acquisitions” below for more information regarding the

acquisition of Movingdots.

of March 31, 2023, we had cash (including restricted cash) and cash equivalents of $25.1 million and working capital of $41.8 million.

reductions in discretionary operating expenses and capital expenditures and borrowing under our revolving credit facilities.

March 31, 2023, we completed our acquisition of Movingdots.

We believe this acquisition will provide significant additional liquidity,

with net cash proceeds of $8.7 million expected to exceed the associated transaction, integration, and rationalization costs.

See “Business

Acquisitions” below for more information regarding the acquisition of Movingdots.

of June 30, 2023, we had cash (including restricted cash) and cash equivalents of $22.0 million and working capital of $38.3 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 May 10, 2024.

funds to cover capital requirements through at least August 10, 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.

During the three months ended March 31, 2023,

net cash provided by operating activities was $1.8 million, compared to net cash used in operating activities of $2.1 million for

the same period in 2022.

The net cash provided by operating activities for the first quarter of 2023 primarily included a

non-operating cash benefit of $7.2 million for gain on bargain purchase, non-cash charges of $0.8 million for stock-based

compensation, $2.2 million for depreciation and amortization expense, and $0.7 million for right-of-use asset amortization.

in working capital items included a decrease in accounts receivable of $0.8 million, an increase in inventory of $0.2 million, a

decrease in prepaid expenses and other assets of $0.2 million, a decrease in accounts payable of $0.7 million, and a decrease in

lease liabilities of $0.7 million.

For the same period in the prior year, net cash used

in operating activities was $2.1 million.

Net cash provided by investing activities for the three months ended March 31, 2023 was $6.8 million, compared to

net cash used in investing activities of $0.6 million for the same period in 2022.

The increase in net cash provided by investing activities

was primarily due to $8.7 million in net proceeds from the acquisition of Movingdots, partly offset by $1.1 million for the purchase of

the six months ended June 30, 2023, net cash provided by operating activities was $1.3 million, compared to net cash used in

operating activities of $2.7 million for the same period in 2022.

The net cash provided by operating activities for the six-months

of 2023 primarily included a non-operating cash benefit of $7.5 million for gain on bargain purchase relating to the acquisition of Movingdots, non-cash charges of $1.7

million for stock-based compensation, $4.5 million for depreciation and amortization expense, and $1.3 million for right-of-use

asset amortization.

Changes in working capital items included a decrease in inventory of $0.7 million, an increase in prepaid

expenses and other assets of $0.5 million, a decrease in accounts payable of $1.8 million, and a decrease in lease liabilities of

$1.3 million.

cash provided by investing activities for the six months ended June 30, 2023 was $4.8 million, compared to net cash used in

investing activities of $2.0 million for the same period in 2022.

The increase in net cash provided by investing activities was

primarily due to $8.7 million in net proceeds from the acquisition of Movingdots, partially offset by $2.1 million for the purchase of

fixed assets and $1.7 million for capitalized software development costs.

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$2.0 million in the same period in 2022 was primarily for the purchase of fixed assets.

During the three months ended March 31, 2023, net cash used in financing activities was $1.4 million, compared to

$1.7 million for the same period in 2022.

The decrease in net cash used in financing activities was primarily due to the repayment of

long-term debt totaling $1.3 million in the first quarter of 2023, as opposed to $1.5 million in the first quarter of 2022.

the six months ended June 30, 2023, net cash used in financing activities was $1.1 million, compared to $0.8 million for the same

period in 2022.

The increase in net cash used in financing activities was primarily due to the repayment of preferred stock dividends in cash for the quarter ended June 30, 2023.

Sheet Arrangements

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

of March 31, 2023, there have been no material charges in contractual obligations as disclosed under the caption “Contractual Obligations

of June 30, 2023, there have been no material charges in contractual obligations as disclosed under the caption “Contractual Obligations

and Commitments” in Item 7 of our 2022 Annual Report.

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opportunities to expand our solution offerings through strategic acquisitions.

March 6, 2023, we entered into a definitive share purchase and transfer agreement (the “SPA”)

with Swiss Re Reinsurance Holding Company Ltd (“Swiss Re”) to acquire all of the outstanding shares of Movingdots for consideration consisting

of €1 and the issuance by us of a ten-year warrant to purchase 800,000 shares of our common stock at an exercise price of $7.00

Under the SPA, Swiss Re was required to ensure that Movingdots had available cash and cash equivalents of at least €8,000,000

as of the closing date.

March 6, 2023, we entered into a definitive share purchase and transfer agreement (the “SPA”) with Swiss Re Reinsurance Holding

Company Ltd (“Swiss Re”) to acquire all of the outstanding shares of Movingdots for consideration consisting of €1 and

the issuance by us of a ten-year warrant to purchase 800,000 shares of our common stock at an exercise price of $7.00 per share.

the SPA, Swiss Re was required to ensure that Movingdots had available cash and cash equivalents of at least €8,000,000 as of the

closing date.

The transaction closed on March 31, 2023.

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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 2. Management’s Discussion and Analysis