What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-13 compared with 2023-08-10 · 300 added, 210 removed, 374 unchanged (58% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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.

following discussion and analysis of the consolidated financial condition

and results of operations of PowerFleet, Inc.

and its 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.

In the 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.

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;

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

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, including the conflict in Israel and the Gaza Strip;

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

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 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;

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 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”).

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

October 10, 2023, we entered into an Implementation Agreement (the “Implementation Agreement”), by and among us, Main Street

2000 Proprietary Limited, a private company incorporated in the Republic of South Africa and our wholly owned subsidiary (“Powerfleet

Sub”), and MiX Telematics Limited, a public company incorporated under the laws of the Republic of South Africa (“MiX Telematics”),

pursuant to which, subject to the terms and conditions thereof, Powerfleet Sub will acquire all of the issued ordinary shares of MiX

Telematics (including those represented by MiX Telematics’ American Depositary Shares) through the implementation of a scheme of

arrangement (the “Scheme”) in accordance with Sections 114 and 115 of the South African Companies Act, No.

71 of 2008, as

amended (the “Companies Act”), in exchange for shares of our common stock.

As a result of the transactions, including the

Scheme, contemplated by the Implementation Agreement (the “Scheme Transactions”), MiX Telematics will become our indirect,

wholly owned subsidiary.

The Scheme Transactions have been approved by the boards of directors of both companies, are subject to customary

closing conditions, including approval by our stockholders and MiX Telematics’ shareholders, and are expected to close in the first

quarter of 2024.

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

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

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

Higher interest rates and inflation, fluctuations in currency values, supply

chain disruptions and the conflicts between Russia and Ukraine, primarily in Ukraine, and between Israel and Hamas, primarily in the Gaza

Strip, 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.

to Our Business

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and commercialize new products and technologies.

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

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.

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.

Implementation Agreement requires, as a condition to closing of the transactions contemplated therein, that we obtain a debt and/or

equity financing (the “Financing”) in an amount sufficient to provide for the redemption in full of all outstanding

shares of our Series A Convertible Preferred Stock (“Series A Preferred Stock”).

We are in the process of securing the

Financing (including, without limitation, a refinancing of our credit facility with Bank Hapoalim B.M.

(“Hapoalim”)).

have incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of $143.3

million as of September 30, 2023.

We anticipate incurring additional losses until such time that growth in revenue and gross margin

from our strategic plan centered on our Unity SaaS platform and Industrial safety product offerings exceed necessary

investments in operating expenses, capital expenditures and debt financing costs.

We have received credit committee approval

from our existing lender, Hapoalim, to enter into a new 5-year term debt facility with an approximate value of $30 million.

believe it is highly probable that we will enter into a binding credit agreement by year end, there can be no assurance that we will

enter into such a credit agreement.

If we do not enter into a binding credit agreement with Hapoalim by year end, we may be required to delay key strategic product initiatives and market expansion

activities, which could adversely affect our business prospects.

believes our cash and cash equivalents of $19.6 million as of September 30, 2023 in conjunction with cash generated from the

execution of our strategic plan over the next 12 months, are sufficient to fund the projected operations for at least the next

12 months from the issuance date of these financial statements (November 13, 2024) and service our outstanding obligations.

Such expectation is based, in part, on the achievement of a

certain volume of assumed revenue and gross margin;

however, there is no guarantee we will achieve this amount of revenue

and gross margin during the assumed time period.

Management assessed various additional operating cost reduction options that are

available to us and would be implemented, if assumed levels of revenue and gross margin are not achieved and additional

funding is not obtained.

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-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.

the three- and nine-month periods ended September 30, 2023, there were no significant changes to our critical accounting policies as

identified in our 2022 Annual Report.

of Operations

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Total revenues

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Bargain purchase - Movingdots

Other income, net

Net income (loss) before income taxes

Income tax benefit (expense)

Net income (loss) before non-controlling interest

Other (expense) income, net

Net loss before income taxes

Income tax expense

Net loss before non-controlling interest

Non-controlling interest

Net income (loss)

Accretion of preferred stock

Preferred stock dividend

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

Net loss attributable to common stockholders

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

Revenues decreased by approximately $0.1 million, or 0.3%, to $34.2 million in the three months ended September 30, 2023, from $34.3

million in the same period in 2022.

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

from products decreased approximately $0.9 million, or 6.2%, to $13.1 million in the three months ended September 30, 2023, from $14.0

million in the same period in 2022.

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, and lower product sales in and out of Israel reflecting geopolitical

headwinds and a proactive decision to shutter our hardware-only line of business.

These decreases were offset by increases in

product revenue in our Powerfleet US business due to new unit purchases from new and existing customers.

from services increased approximately $0.8 million, or 3.8%, to $21.0 million in the three months ended September 30, 2023, from $20.3 million

in the same period in 2022.

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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

Cost of revenues decreased by approximately $0.03 million, or 0.2%, to $17.1 million in the three months ended September

30, 2023, from $17.1 million for the same period in 2022.

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

Gross profit was $17.1 million in the three months ended September 30, 2023,

compared to $17.2 million for the same period in 2022.

As a percentage of revenues, gross profit increased to 50.0% in 2023 from

46.9% in 2022.

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

As a percentage of revenues, gross profit was 50.1% for both periods.

of products decreased by approximately $1.0 million, or 10.1%, to $8.8 million in the three months ended September 30, 2023, from

$9.8 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 $13.6 million in the three months ended June 30, 2023, compared to $12.7 million

Gross profit for products was $4.3 million in the three months ended September 30, 2023,

compared to $4.2 million in the same period in 2022.

As a percentage of product revenues, gross profit increased to 32.7% in 2023

from 29.8% in 2022.

The increase in gross profit as a percentage of revenues was impacted by product mix, improvement in management

of raw material costs, and lower inflationary costs in the 2023 period versus the 2022 period.

of services increased by approximately $1.0 million, or 13.3%, to $8.2 million in the three months ended September 30, 2023, from $7.3 million

in the same period in 2022.

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

Gross profit for services was $12.8 million in the three months ended September 30, 2023, compared to $12.9

million in the same period in 2022.

As a percentage of service revenues, gross profit decreased to 60.9% in 2023 from 64.1% in 2022.

decrease in gross profit as a percentage of revenues was impacted by product mix, inflation and the commencement of depreciation for our Unity SaaS platform.

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.

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

approximately $1.3 million, or 7.9%, to approximately $17.9 million in the three months ended September 30, 2023, compared to $16.7

million in the same period in 2022, principally due to the acquisition of Movingdots, which added $0.7 million to expenses, severance

costs of $0.1 million, and an additional $1.2 million in transaction costs in the quarter related to the Scheme Transactions.

As a percentage of revenues, SG&A

expenses increased to 52.6% in the three months ended September 30, 2023, from 48.6% in the same period in

AND DEVELOPMENT EXPENSES .

Research and development (“R&D”) expenses increased by approximately $0.6 million, or 37.4%,

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.

to approximately $2.4 million in the three months ended September 30, 2023, compared to $1.7 million in the same period in 2022, principally

due to higher employee costs following the acquisition

of Movingdots, which added $0.6 million to expense.

As a percentage of revenues, R&D expenses increased to 7.0% in the three months

ended September 30, 2023, from 5.1% in the same period in 2022.

LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS .

Net loss attributable to common stockholders was $4.9 million, or $(0.14) per basic and

diluted share, for the three months ended September 30, 2023, as compared to net loss of $3.5 million, or $(0.10) per basic and diluted

share, for the same period in 2022.

The increase in net loss was primarily the result of the increased SG&A, including transaction

costs associated with our proposed business combination with Mix Telematics and higher R&D expenses following our acquisition of

Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Revenues decreased by approximately $3.0 million, or 2.9%, to $99.1 million in the nine months ended September 30, 2023, from $102.0 million

in the same period in 2022.

from products decreased by approximately $6.7 million, or 15.4%, to $36.5 million in the nine months ended September 30, 2023, from $43.2

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, 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 by approximately $3.7 million, or 6.3%, to $62.5 million in the nine months ended September 30, 2023, from $58.8

million in the same period in 2022.

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.

OF REVENUES .

Cost of revenues decreased by approximately $4.9 million, or 9.1%, to $49.3 million in the nine months ended September 30,

2023, from $54.2 million for the same period in 2022.

Gross profit was $49.8 million in the nine months ended September 30, 2023, compared

to $47.8 million for the same period in 2022.

As a percentage of revenues, gross profit increased to 50.2% in 2023 from 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 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.

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

decrease in raw materials costs related to the global supply chain issues, which were more prevalent in 2022 than 2023, and increases in high margin service revenues.

of products decreased by approximately $6.8 million, or 20.4%, to $26.4 million in the nine months ended September 30, 2023, from

$33.2 million in the same period in 2022.

Gross profit for products was $10.2 million in the nine months ended September 30, 2023,

compared to $10.1 million in the same period in 2022.

As a percentage of product revenues, gross profit increased to 27.8% in 2023

from 23.3% in 2022 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.

of services increased by approximately $1.8 million, or 8.7%, to $22.9 million in the nine months ended September 30, 2023, from

$21.1 million in the same period in 2022.

Gross profit for services was $39.6 million in the nine months ended September 30, 2023,

compared to $37.7 million in the same period in 2022.

As a percentage of service revenues, gross profit decreased to 63.3% in 2023

from 64.2% in 2022 due in part to the commencement of depreciation for our Unity SaaS platform.

GENERAL AND ADMINISTRATIVE EXPENSES .

SG&A expenses increased by approximately $4.3 million, or 9.2%, to approximately $51.8

million in the nine months ended September 30, 2023, compared to $47.4 million in the same period in 2022.

The increase was

principally due to an aggregate of $1.7 million in transaction-related costs in connection with our acquisition of Movingdots and our

proposed business combination with MiX Telematics, the acquisition of Movingdots which added $1.3 million in SG&A costs, $0.4 million

of restructuring expenses, and increased salaries, investments in marketing programs and professional services fees.

As a percentage of

revenues, SG&A expenses increased to 52.2% in the nine months ended September 30, 2023, from 46.4% in the same period in 2022, primarily

due to the reasons described above.

AND DEVELOPMENT EXPENSES .

R&D expenses decreased by approximately $0.7 million, or 9.8%, to approximately $6.3 million in the nine

months ended September 30, 2023, compared to $7.0 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 $1.3 million to expenses.

As a percentage of revenues, R&D expenses decreased to 6.3% in the nine months ended September

30, 2023, from 6.8% in the same period in 2022, primarily due to the reason described above.

Interest expense decreased by approximately $1.7 million, or 136.8%, to approximately $(0.4) million in the nine months ended September

30, 2023, compared to $1.3 million in the same period in 2022, principally due to foreign currency translation gains from our two senior

secured term loan facilities with Hapoalim.

LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS.

Net loss attributable to common stockholders was $5.7 million, or $(0.16) per

basic and diluted share, for the nine months ended September 30, 2023, as compared to net loss of $9.0 million, or $(0.25) 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 a reduction in interest expenses.

and Capital Resources

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of our common stock upon the exercise of options.

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

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

of $19.6 million and working capital of $34.5 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

October 3, 2019, in connection with our acquisition of Pointer, we issued and sold 50,000 shares of Series A Preferred Stock, to ABRY Senior Equity V, L.P., ABRY Senior Equity Co-Investment

Fund V, L.P and ABRY Investment Partnership, L.P.

4 unchanged sentences

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 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

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 NIS41,800, or $10,900, as of September 30, 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.

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.

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.

As of September 30,

2023, we borrowed approximately NIS8,420, or $ 2,200 , under the revolving credit facilities.

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 September 30, 2023, we borrowed approximately

NIS 32,500 , or $ 8,500 , 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.

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

connection with the Implementation Agreement, we are in the process of securing the Financing (including, without limitation, a refinancing

of our credit facility with Hapoalim) in an amount sufficient to provide for the redemption in full of our Series A Preferred Stock.

As a result of global supply chain disruptions, the conflicts between Russia

and Ukraine and between Israel and Hamas, 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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March 31, 2023, we completed our acquisition of Movingdots.

We believe this acquisition will provide significant additional liquidity,

We believe this acquisition has provided, and will continue to provide, significant additional liquidity,

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

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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

of September 30, 2023, we had cash (including restricted cash) and cash equivalents of $19.6 million and working capital of $34.5 million.

Our primary sources of cash are cash flows from the sale of our products and services, our holdings of cash, cash equivalents and investments from the

sale of our capital stock and borrowings under our credit facility.

To date, we have not generated sufficient cash flow solely from operating

activities to fund our operations.

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 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

or decrease in our existing business base, the success, timing, and amount of investment required to bring new products to market, revenue

growth or decline and potential acquisitions.

Failure to generate positive cash flow from operations will have a material adverse effect

on our business, financial condition and results of operations.

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

Our capital requirements depend on a variety of factors, including, but not limited to, the length of the sales cycle, the rate of increase or decrease in our existing business base, the success, timing, and amount of investment required to bring new products to market, revenue growth or decline and potential acquisitions.

Failure to generate positive cash flow from operations will have a material adverse effect on our business, financial condition and results of operations.

In connection with the Implementation Agreement, we are in the process

of securing the Financing (including, without limitation, a refinancing of our credit facility with Hapoalim) in an amount sufficient

to provide for the redemption in full of our Series A Preferred Stock.

We have incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of $143.3

million as of September 30, 2023.

We anticipate incurring additional losses until such time that growth in revenue and gross

margin from our strategic plan centered on our Unity SaaS platform and Industrial safety product offerings exceed necessary investments

in operating expenses, capital expenditures and debt financing costs.

We have received credit committee approval

from our existing lender, Hapoalim, to enter into a new 5-year term debt facility with an approximate value of $30 million.

believe it is highly probable that we will enter into a binding credit agreement by year end, there can be no assurance that we will

enter into such a credit agreement.

If we do not enter into a binding credit agreement with Hapoalim by year end, we may be required to delay key strategic product initiatives and market expansion

activities, which could adversely affect our business prospects.

believes our cash and cash equivalents of $19.6 million as of September 30, 2023 in conjunction with cash generated from the

execution of our strategic plan over the next 12 months, are sufficient to fund the projected operations for at least the next

12 months from the issuance date of these financial statements (November 13, 2024) and service our outstanding obligations.

Such expectation is based, in part, on the achievement of a

certain volume of assumed revenue and gross margin;

however, there is no guarantee we will achieve this amount of revenue

and gross margin during the assumed time period.

Management assessed various additional operating cost reduction options that are

available to us and would be implemented, if assumed levels of revenue and gross margin are not achieved and additional

funding is not obtained.

the nine months ended September 30, 2023, net cash used in operating activities was $0.2 million, compared to net cash used in

operating activities of $1.7 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.

In contrast, the net cash used in investing activities of

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

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.

The net cash used in operating activities for the nine-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 $2.8 million for stock-based compensation, $6.9 million for depreciation and amortization expense,

and $1.9 million for right-of-use asset amortization.

Changes in operating assets and liabilities included a decrease in inventory, net of

reserve of $1.6 million, an increase in accounts payable of $1.1 million, and a decrease in lease liabilities of $1.9

cash provided by investing activities for the nine months ended September 30, 2023 was $3.3 million, compared to net cash used in investing

activities of $4.0 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 $2.6 million for the purchase of fixed assets and

$2.7 million for capitalized software development costs.

In contrast, the net cash used in investing activities of $4.0 million in the

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

the nine months ended September 30, 2023, net cash used in financing activities was $1.3 million, compared to $0.5 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 quarters ended June 30, 2023 and September 30, 2023 totaling $2.2 million, net of the changes

in the repayment of long-term debt and change in short-term debt, net balance.

Sheet Arrangements

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

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.

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.

of September 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.

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

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The transaction closed on March 31, 2023.

On October 10, 2023,

we entered into the Implementation Agreement with Powerfleet Sub and MiX Telematics, pursuant to which, subject to the terms and

conditions thereof, Powerfleet Sub will acquire all of the issued ordinary shares of MiX Telematics, including those represented by

MiX Telematics’ American Depositary Shares, through the implementation of the Scheme in accordance with Sections 114 and 115

of the Companies Act, in exchange for shares of our common stock.

As a result of the Scheme Transactions, MiX Telematics will become our indirect, wholly

owned subsidiary.

The Scheme Transactions have been approved by the boards of directors of both companies, are

subject to customary closing conditions, including approval by our stockholders and MiX Telematics’

shareholders.

The Scheme Transactions are expected to close in the first quarter of 2024.

At the closing of the Scheme Transactions, the

combined company will remain Powerfleet and our common stock will continue to be listed on The Nasdaq Global Market and

the Tel Aviv Stock Exchange under the symbol “PWFL.” Additionally, our common stock will be listed on the

Johannesburg Stock Exchange by way of a secondary inward listing.

MiX Telematics is a leading global provider of

fleet and mobile asset management solutions delivered as SaaS to over one million global subscribers spanning more than 120 countries.

MiX Telematics’ products and services provide enterprise fleets, small fleets, and consumers with efficiency, safety, compliance,

and security solutions.

The pending Scheme Transactions are expected to provide us with operational synergies and access to a

broader base of customers.

The pending Scheme Transactions will be accounted for as a business

combination and we have been identified as the accounting acquirer.

of Recently Issued Accounting Pronouncements

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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