Powerfleet, Inc. 10-Q

Item 1. Financial Statements POWERFLEET, INC. AND SUBSIDIARIES Condensed Balance Sheets (In thousands, except per share data) December 31, 2022 * September 30, 2023 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 17,680 $ 19,297 Restricted cash 309 310 Accounts receivable, net of allowance for credit losses of $ 2,567 and $ 2,677 in 2022 and 2023, respectively 32,493 33,606 Inventory, net 22,272 21,055 Deferred costs - current 762 191 Prepaid expenses and other current assets 7,709 8,721 Total current assets 81,225 83,180 Fixed assets, net 9,249 10,222 Goodwill 83,487 83,487 Intangible assets, net 22,908 21,157 Right of use asset 7,820 6,490 Severance payable fund 3,760 3,427 Deferred tax asset 3,225 1,915 Other assets 5,761 6,228 Total assets $ 217,435 $ 216,106 LIABILITIES Current liabilities: Short-term bank debt and current maturities of long-term debt 10,312 12,137 Accounts payable and accrued expenses 26,598 28,109 Deferred revenue - current 6,363 6,101 Lease liability - current 2,441 2,286 Total current liabilities 45,714 48,633 Long-term debt, less current maturities 11,403 9,617 Deferred revenue - less current portion 4,390 4,804 Lease liability - less current portion 5,628 4,415 Accrued severance payable 4,365 4,142 Deferred tax liability 4,919 4,283 Other long-term liabilities 636 649 Total liabilities 77,055 76,543 Commitments and Contingencies (note 22) - - MEZZANINE EQUITY Convertible redeemable preferred stock: Series A – 100 shares authorized, $ 0.01 par value; 59 and 60 shares issued and outstanding at December 31, 2022 and September 30, 2023 57,565 59,176 Preferred stock; authorized 50,000 shares, $ 0.01 par value; - - Common stock; authorized 75,000 shares, $ 0.01 par value; 37,605 and 38,699 shares issued at December 31, 2022 and September 30, 2023, respectively; shares outstanding, 36,170 and 37,214 at December 31, 2022 and September 30, 2023, respectively 376 387 Additional paid-in capital 233,521 233,811 Accumulated deficit ( 141,440 ) ( 143,322 ) Accumulated other comprehensive loss ( 1,210 ) ( 1,904 ) Treasury stock; 1,435 and 1,485 common shares at cost at December 31, 2022 and September 30, 2023, respectively ( 8,510 ) ( 8,648 ) Total PowerFleet, Inc. stockholders’ equity 82,737 80,324 Non-controlling interest 78 63 Total equity 82,815 80,387 Total liabilities and stockholders’ equity $ 217,435 $ 216,106 * Derived from audited balance sheet as of December 31, 2022. See accompanying notes to unaudited condensed consolidated financial statements. 3 POWERFLEET, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) 2022 2023 2022 2023 Three Months Ended September 30, Nine Months Ended September 30, 2022 2023 2022 2023 Revenues: Products $ 14,021 $ 13,147 $ 43,231 $ 36,563 Services 20,267 21,048 58,812 62,521 Total revenues 34,288 34,195 102,043 99,084 Cost of revenues: Cost of products 9,839 8,843 33,152 26,394 Cost of services 7,268 8,237 21,081 22,923 Total cost of revenues 17,107 17,080 54,233 49,317 Gross profit 17,181 17,115 47,810 49,767 Operating expenses: Selling, general and administrative expenses 16,664 17,988 47,393 51,763 Research and development expenses 1,735 2,384 6,965 6,285 Total operating expenses 18,399 20,372 54,358 58,048 Loss from operations ( 1,218 ) ( 3,257 ) ( 6,548 ) ( 8,281 ) Interest income 20 23 48 69 Interest expense, net ( 331 ) ( 154 ) 1,262 ( 464 ) Bargain purchase - Movingdots - - - 7,517 Other (expense) income, net - ( 24 ) 1 ( 22 ) Net loss before income taxes ( 1,529 ) ( 3,412 ) ( 5,237 ) ( 1,181 ) Income tax expense ( 770 ) ( 262 ) ( 107 ) ( 698 ) Net loss before non-controlling interest ( 2,299 ) ( 3,674 ) ( 5,344 ) ( 1,879 ) Non-controlling interest ( 1 ) - ( 3 ) ( 3 ) Net loss ( 2,300 ) ( 3,674 ) ( 5,347 ) ( 1,882 ) Accretion of preferred stock ( 168 ) ( 167 ) ( 504 ) ( 503 ) Preferred stock dividend ( 1,067 ) ( 1,128 ) ( 3,143 ) ( 3,364 ) Net loss attributable to common stockholders $ ( 3,535 ) $ ( 4,969 ) $ ( 8,994 ) $ ( 5,749 ) Net loss per share attributable to common stockholders - basic $ ( 0.10 ) $ ( 0.14 ) $ ( 0.25 ) $ ( 0.16 ) Net loss per share attributable to common stockholders - diluted $ ( 0.10 ) $ ( 0.14 ) $ ( 0.25 ) $ ( 0.16 ) Weighted average common shares outstanding - basic 35,406 35,653 35,375 35,602 Weighted average common shares outstanding - diluted 35,406 35,653 35,375 35,602 See accompanying notes to unaudited condensed consolidated financial statements. 4 POWERFLEET, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Loss (In thousands, except per share data) (Unaudited) 2022 2023 2022 2023 Three Months Ended Nine Months Ended September 30, September 30, 2022 2023 2022 2023 Net loss attributable to common stockholders $ ( 3,535 ) $ ( 4,969 ) $ ( 8,994 ) $ ( 5,749 ) Other comprehensive income (loss), net: Foreign currency translation adjustment 12 ( 906 ) ( 1,441 ) ( 694 ) Total other comprehensive income (loss) 12 ( 906 ) ( 1,441 ) ( 694 ) Comprehensive loss $ ( 3,523 ) $ ( 5,875 ) $ ( 10,435 ) $ ( 6,443 ) See accompanying notes to unaudited condensed consolidated financial statements. 5 POWERFLEET, INC. AND SUBSIDIARIES Condensed Consolidated Statement of Changes in Stockholders’ Equity (In thousands, except per share data) (Unaudited) Common Stock Accumulated Number of Shares Amount Additional Paid-in Capital Accumulated Deficit Other Comprehensive Income (Loss) Treasury Stock Non-controlling Interest Stockholders’ Equity Balance at January 1, 2023 37,605 $ 376 $ 233,521 $ ( 141,440 ) $ ( 1,210 ) $ ( 8,510 ) $ 78 $ 82,815 Net income (loss) attributable to common stockholders - - ( 1,275 ) 4,769 - - - 3,494 Net loss attributable to non-controlling interest - - - - - - ( 3 ) ( 3 ) Foreign currency translation adjustment - - - - 112 - ( 9 ) 103 Issuance of restricted shares 75 - - - - - - - Forfeiture of restricted shares ( 59 ) - - - - - - - Shares withheld pursuant to vesting of restricted stock - - - - - ( 44 ) - ( 44 ) Stock based compensation - - 832 - - - - 832 Warrant issuance in connection with acquisition - - 1,347 - - - - 1,347 Balance at March 31, 2023 37,621 $ 376 $ 234,425 $ ( 136,671 ) $ ( 1,098 ) $ ( 8,554 ) $ 66 $ 88,544 Net loss attributable to common stockholders - - ( 1,297 ) ( 2,977 ) - - - ( 4,274 ) Net income attributable to non-controlling interest - - - - - - 6 6 Foreign currency translation adjustment - - - - 100 - ( 9 ) 91 Issuance of restricted shares 162 1 ( 1 ) - - - - - Forfeiture of restricted shares ( 82 ) - - - - - - - Exercise of stock options 16 - 36 - - - - 36 Shares withheld pursuant to vesting of restricted stock - - - - - ( 4 ) - ( 4 ) Stock based compensation - - 852 - - - - 852 Balance at June 30, 2023 37,717 $ 377 $ 234,015 $ ( 139,648 ) $ ( 998 ) $ ( 8,558 ) $ 63 $ 85,251 Net loss attributable to common stockholders - - ( 1,295 ) ( 3,674 ) - - - ( 4,969 ) Foreign currency translation adjustment - - - - ( 906 ) - - ( 906 ) Issuance of restricted shares 982 10 ( 10 ) - - - - - Shares withheld pursuant to vesting of restricted stock - - - - - ( 90 ) - ( 90 ) Stock based compensation - - 1,101 - - - - 1,101 Balance at September 30, 2023 38,699 $ 387 $ 233,811 $ ( 143,322 ) $ ( 1,904 ) $ ( 8,648 ) $ 63 $ 80,387 Common Stock Accumulated Number of Shares Amount Additional Paid-in Capital Accumulated Deficit Other Comprehensive Income (Loss) Treasury Stock Non-controlling Interest Stockholders’ Equity Balance at January 1, 2022 37,263 $ 373 $ 234,083 $ ( 134,437 ) $ 391 $ ( 8,299 ) $ 86 $ 92,197 Net loss attributable to common stockholders - - ( 1,195 ) ( 2,929 ) - - - ( 4,124 ) Net income attributable to non-controlling interest - - - - - - 1 1 Foreign currency translation adjustment - - - - 253 - 15 268 Issuance of restricted shares 398 4 ( 4 ) - - - - - Forfeiture of restricted shares ( 121 ) ( 1 ) 1 - - - - - Vesting of restricted stock units 30 - - - - - - - Shares withheld pursuant to vesting of restricted stock - - - - - ( 181 ) - ( 181 ) Stock based compensation - - 457 - - - - 457 Balance at March 31, 2022 37,570 $ 376 $ 233,342 $ ( 137,366 ) $ 644 $ ( 8,480 ) $ 102 $ 88,618 Net loss attributable to common stockholders - - ( 1,216 ) ( 118 ) ( 1,334 ) Net income attributable to non-controlling interest - - - - - - 1 1 Foreign currency translation adjustment - - - - ( 1,706 ) - ( 18 ) ( 1,724 ) Forfeiture of restricted shares ( 24 ) ( 1 ) 1 - - - - - Shares withheld pursuant to vesting of restricted stock - - - - - ( 5 ) - ( 5 ) Stock based compensation - - 1,629 - - - - 1,629 Balance at June 30, 2022 37,546 $ 375 $ 233,756 $ ( 137,484 ) $ ( 1,062 ) $ ( 8,485 ) $ 85 $ 87,185 Net loss attributable to common stockholders - ( 1,235 ) ( 2,300 ) ( 3,535 ) Net income (loss) attributable to common stockholders - ( 1,235 ) ( 2,300 ) ( 3,535 ) Net income attributable to non-controlling interest - - - - - - 1 1 Net income (loss) attributable to non-controlling interest - - - - - - 1 1 Foreign currency translation adjustment - - - - 12 ( 18 ) ( 6 ) Issuance of restricted shares 78 1 ( 1 ) - - - - - Forfeiture of restricted shares ( 40 ) - - - - - - - Shares withheld pursuant to vesting of restricted stock - - - - - ( 7 ) - ( 7 ) Stock based compensation - - 1,070 - - - - 1,070 Balance at September 30, 2022 37,584 $ 376 $ 233,590 $ ( 139,784 ) $ ( 1,050 ) $ ( 8,492 ) $ 68 $ 84,708 See accompanying notes to unaudited condensed consolidated financial statements. 6 POWERFLEET, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands, except per share data) (Unaudited) 2022 2023 Nine Months Ended September 30, 2022 2023 Cash flows from operating activities Net loss $ ( 5,347 ) $ ( 1,882 ) Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities: Non-controlling interest 3 3 Gain on bargain purchase - ( 7,517 ) Inventory reserve 177 619 Stock based compensation expense 3,156 2,785 Depreciation and amortization 6,152 6,926 Right-of-use assets, non-cash lease expense 2,071 1,900 Bad debt expense 102 1,161 Deferred income taxes 107 674 Other non-cash items 660 172 Changes in: Accounts receivable ( 3,025 ) ( 3,006 ) Inventory ( 5,544 ) ( 2,260 ) Prepaid expenses and other assets ( 761 ) 235 Deferred costs 986 571 Deferred revenue ( 197 ) 113 Accounts payable and accrued expenses 1,717 1,124 Lease liabilities ( 2,034 ) ( 1,941 ) Accrued severance payable, net 63 91 Net cash used in operating activities ( 1,714 ) ( 232 ) Cash flows from investing activities: Acquisitions, net of cash assumed - 8,722 Purchase of investments - ( 100 ) Capitalized software development costs - ( 2,727 ) Capital expenditures ( 4,001 ) ( 2,626 ) Net cash (used in) provided by investing activities ( 4,001 ) 3,269 Cash flows from financing activities: Repayment of long-term debt ( 4,279 ) ( 3,985 ) Short-term bank debt, net 3,949 4,995 Purchase of treasury stock upon vesting of restricted stock ( 193 ) ( 138 ) Payment of preferred stock dividend - ( 2,257 ) Proceeds from exercise of stock options - 36 Net cash used in financing activities ( 523 ) ( 1,349 ) Effect of foreign exchange rate changes on cash and cash equivalents ( 3,510 ) ( 70 ) Net (decrease) increase in cash, cash equivalents and restricted cash ( 9,748 ) 1,618 Cash, cash equivalents and restricted cash - beginning of period 26,760 17,989 Cash, cash equivalents and restricted cash - end of period $ 17,012 $ 19,607 Reconciliation of cash, cash equivalents, and restricted cash, beginning of period Cash and cash equivalents 26,452 17,680 Restricted cash 308 309 Cash, cash equivalents, and restricted cash, beginning of period $ 26,760 $ 17,989 Reconciliation of cash, cash equivalents, and restricted cash, end of period Cash and cash equivalents 16,703 19,297 Restricted cash 309 310 Cash, cash equivalents, and restricted cash, end of period $ 17,012 $ 19,607 Supplemental disclosure of cash flow information: Cash paid for: Taxes 52 120 Interest 945 921 Noncash investing and financing activities: Value of warrant issued in connection with Movingdots acquisition $ - $ 1,347 See accompanying notes to unaudited condensed consolidated financial statements. 7 POWERFLEET, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2023 In thousands (except per share data) NOTE 1 - DESCRIPTION OF THE COMPANY AND BASIS OF PRESENTATION Description of the Company PowerFleet, Inc. (the “Company” or “Powerfleet”) is a global leader of Internet-of-Things (“IoT”) solutions providing valuable business intelligence for managing high-value enterprise assets that improve operational efficiencies. I.D. Systems, Inc. (“I.D. Systems”) was incorporated in the State of Delaware in 1993. Powerfleet was incorporated in the State of Delaware in February 2019 for the purpose of effectuating the transactions (the “Transactions”) pursuant to which the Company acquired Pointer Telocation Ltd. (“Pointer”) and commenced operations on October 3, 2019. Upon the closing of the Transactions, Powerfleet became the parent entity of I.D. Systems and Pointer. Basis of Presentation The unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the consolidated financial position of the Company as of September 30, 2023, the consolidated results of its operations for the three- and nine-month periods ended September 30, 2022 and 2023, the consolidated change in stockholders’ equity for the three-month periods ended March 31, June 30 and September 30, 2022 and 2023, and the consolidated cash flows for the nine-month periods ended September 30, 2022 and 2023. The results of operations for the three- and nine-month periods ended September 30, 2023 are not necessarily indicative of the operating results for the full year. These financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K for the year then ended. 8 Liquidity As of September 30, 2023, the Company had cash (including restricted cash) and cash equivalents of $ 19,600 and working capital approximately $ 34,500 . The Company’s primary sources of cash are cash flows from the sales of its products and services, its holdings of cash, cash equivalents and investments from the sale of its capital stock and borrowings under its credit facility. To date, the Company has not generated sufficient cash flows solely from operating activities to fund its operations. In addition, the Company’s subsidiaries, PowerFleet Israel Ltd. (“Powerfleet Israel”) and Pointer Telocation Ltd. (“Pointer” and, together with Powerfleet Israel, the “Borrowers”) are party to a Credit Agreement (the “Credit Agreement”) with Bank Hapoalim B.M. (“Hapoalim”), pursuant to which Hapoalim provided Powerfleet Israel with two senior secured term loan facilities denominated in New Israeli Shekels (NIS) in an initial aggregate principal amount of $ 30,000 (comprised of two facilities in the aggregate principal amount of $ 20,000 and $ 10,000 ) and a five-year revolving credit facility to Pointer in an initial aggregate principal amount of $ 10,000 . The proceeds of the term loan facilities were used to finance a portion of the cash consideration payable in the Company’s acquisition of Pointer. The proceeds of the revolving credit facility may be used by Pointer for general corporate purposes. The Company borrowed net NIS 8,420 , or $ 2,200 , under the revolving credit facility as of September 30, 2023. See Note 13 for additional information. On 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 $ 10,000 (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. The Company borrowed net NIS 32,500 , or $ 8,500 , under the New Revolver facility as of September 30, 2023. See Note 13 for additional information. The New Revolver initially bears interest at the Secured Overnight Financing Rate (“SOFR”) 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. The 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. Pointer is required to pay a credit allocation fee equal to 0.5 % per annum on undrawn and uncancelled amounts of the New Revolver. On October 10, 2023, the Company entered into an Implementation Agreement (the “Implementation Agreement”), by and among the Company, Main Street 2000 Proprietary Limited, a private company incorporated in the Republic of South Africa and a wholly owned subsidiary of the Company (“Powerfleet Sub”), and MiX Telematics Limited, a public company incorporated under the laws of the Republic of South Africa (“MiX Telematics”), pursuant to which MiX Telematics will become an indirect, wholly owned subsidiary of the Company. The Implementation Agreement requires, as a condition to closing of the transactions contemplated therein, that the Company 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 the Company’s Series A Convertible Preferred Stock (“Series A Preferred Stock”). The Company has 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. The Company anticipates incurring additional losses until such time that growth in revenue and gross margin from its strategic plan centered on its Unity SaaS platform and Industrial safety product offerings exceed necessary investments in operating expenses, capital expenditures and debt financing costs. The Company has received credit committee approval from its existing lender, Hapoalim, to enter into a new 5-year term debt facility with an approximate value of $ 30 million. While the Company believes it is highly probable that it will enter into a binding credit agreement by year end, there can be no assurance that the Company will enter into such a credit agreement. If the Company does not enter into a binding credit agreement with Hapoalim by year end, the Company may be required to delay key strategic product initiatives and market expansion activities, which could adversely affect its business prospects. Management believes the Company’s cash and cash equivalents of $ 19.6 million as of September 30, 2023 in conjunction with cash generated from the execution of its 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 the Company’s 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 the Company 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 the Company and would be implemented, if assumed levels of revenue and gross margin are not achieved and additional funding is not obtained. 9 NOTE 2 – USE OF ESTIMATES The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company continually evaluates estimates used in the preparation of the financial statements for reasonableness. The most significant estimates relate to realization of deferred tax assets, accounting for uncertain tax positions, the impairment of intangible assets, including goodwill, capitalized software development costs, stock-based compensation costs related to market based awards, warrant assumptions, and standalone selling price related to multiple element revenue arrangements. Actual results could differ from those estimates. NOTE 3 – ACQUISITION On March 6, 2023, the Company entered into a share purchase and transfer agreement (the “Agreement”) with Swiss Re Reinsurance Holding Company Ltd (the “Seller”), pursuant to which the Company would acquire all of the outstanding shares of Movingdots GmbH (“Movingdots”), a wholly owned subsidiary of the Seller, for consideration consisting of € 1 and the issuance by the Company of a ten-year warrant to purchase 800,000 shares of the Company’s common stock at an exercise price of $ 7.00 per share (the “Common Stock Warrants”) and with fair value of approximately $ 1,300 at March 31, 2023 and noncash consideration with an immaterial fair value in the form of a non-exclusive irrevocable, perpetual, fully paid-up, royalty free license agreement between Movingdots and the Seller for certain of the acquired intellectual property (the “Acquisition”). The Acquisition was consummated on March 31, 2023 (the “Movingdots Closing”). As a result of the Acquisition, Movingdots, a German company providing insurance telematics and sustainable mobility solutions, became a direct, wholly owned subsidiary of Powerfleet. Movingdots end-to-end telematics app solution will enhance Powerfleet’s software-as-a-service (“SaaS”)-based fleet intelligence platform, Unity, with additional customization capabilities and insurance risk insights. Movingdots’ expertise in safety and sustainability aligns with Unity’s focus on data-powered applications. The Acquisition also strengthens Powerfleet’s global reach, particularly in Europe. As part of the Agreement the Seller was also obligated to (i) transfer certain intellectual property rights from the Seller to Movingdots, (ii) enter into a distribution agreement pursuant to which the Seller is allowed to promote the Movingdots solutions, and (iii) grant a license agreement between the Seller’s affiliates and Movingdots. The warrant was valued using the Black-Scholes Model using the following assumptions at the date of issuance: SCHEDULE OF WARRANTS VALUATION ASSUMPTIONS Expected volatility 50 % Expected term (in years) 10 Risk free interest rate 3.50 % Dividend yield 0 % Fair value per share $ 1.68 Warrants measurement input $ 1.68 Purchase Price Allocation The Acquisition met the criteria for a business combination to be accounted for using the acquisition method under ASC 805, Business Combinations (“ASC 805”), with the Company identified as the legal and the accounting acquirer. There was certain information that was not readily available at the time the financial statements of Movingdots were prepared as the Acquisition closed on March 31, 2023. For provisional purchase price allocation purposes, the assets acquired and liabilities assumed are stated at their carrying values which management assumed approximates their fair values given their short-term nature. Also, the Company recognized approximately $ 0 and $ 500 of acquisition-related costs which were expensed in the consolidated statement of operations for the three- and -nine-month periods ending September 30, 2023, respectively. 10 The following table details the provisional allocation of the purchase price to the assets acquired and liabilities assumed in connection with the acquisition of Movingdots: SCHEDULE OF PURCHASE PRICE ALLOCATION IN ASSETS ACQUIRED AND LIABILITIES Consideration: Cash $ - Fair value of Powerfleet warrants on March 31, 2023 1,347 Total consideration $ 1,347 Assets acquired: Cash $ 8,722 Accounts receivable 247 Prepaid expenses 103 Other assets 270 Inventory 96 Fixed assets 372 Total assets acquired 9,810 Liabilities assumed: Accounts payable and accrued expenses 946 Total liabilities assumed 946 Total identifiable net assets acquired 8,864 Gain on bargain purchase ( 7,517 ) Purchase price consideration $ 1,347 The provisional fair value estimates of the assets acquired and liabilities assumed, including intangibles, income taxes, and the non-cash consideration, are subject to subsequent adjustments as additional information is obtained during the applicable measurement period. Determining the fair values of the assets and liabilities of Movingdots required certain assumptions and judgment. During the second quarter of 2023, the valuation of certain assets acquired and liabilities assumed were revised resulting in an increase in the gain on bargain purchase of $ 283 . Consistent with the requirements of ASC 805, the Company assessed whether all assets acquired and liabilities assumed have been appropriately identified, measured and recognized, and performed re-measurements to verify that the consideration paid, assets acquired and liabilities assumed have been properly valued. After applying the requirements of ASC 805-30-25-4, the Company recognized a gain on bargain purchase as the estimated fair value of the identifiable net assets acquired exceeded the purchase consideration transferred by approximately $ 7,517 . Management believes that the recognized gain on bargain purchase represents the best estimates of the economic effect of the Acquisition based on all information that was available and existed as of the dates the financial statements were issued. The gain on bargain purchase primarily resulted from the Seller’s motivation to divest its investment in Movingdots and its telematics business, which was deemed a non-core business of the Seller on a go-forward basis. The sale of Movingdots was not subject to a competitive bidding process. Under the Agreement, the Seller also agreed to make a cash injection into Movingdots prior to the Movingdots Closing in a form of additional paid in capital to ensure Movingdots had available cash in the amount of € 8,000 to be used to ensure the liquidity of Movingdots and for broader combined business activities. If the Company makes an on-sale transfer of any shares of Movingdots that were acquired in connection with the Acquisition at any time between the signing date of the Agreement and through 12 months after the Movingdots Closing, to any third-party purchaser (an “on-sale transfer”), for an amount that is in excess of the purchase price consideration transferred, then the Company shall pay the Seller an amount in cash (“on sale compensation”) equal to (i) €8,000, plus (ii) the difference between such on-sale transfer price less the purchase price net of the net present value of the Common Stock Warrants. The Company does not currently intend to enter into an on-sale transfer. Management views that the insurance telematics and sustainability are important spaces for the Company to have propositions to enable future strategic value, supporting the more evolved, IOT data-rich mass subscription space. The acquisition of Movingdots and its business will, among other things: ● open strategic relationships with some key customers such as Mercedes, BMW and Vodafone; ● provide greater go-to-market opportunity to the Company with the European beachhead for future regional expansion, customer acquisition tool to upsell the Company’s portfolio into German and European markets, and maintain a distribution channel and partnership with the Seller; and ● provide the Company with access to a team with technical skillsets across application development and management, cloud platform development, user experience/user interface design development and technical product management; 11 The following table represents the combined pro forma revenue and earnings for the three- and nine-month periods ended September 30, 2022: SCHEDULE OF PRO FORMA REVENUE AND EARNINGS Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022 Historical Pro forma combined Historical Pro forma combined Revenues $ 34,288 $ 36,336 $ 102,043 $ 107,580 Operating loss $ ( 1,218 ) $ ( 994 ) $ ( 6,548 ) $ ( 6,027 ) Net loss per share - basic and diluted $ ( 0.10 ) $ ( 0.09 ) $ ( 0.25 ) $ ( 0.24 ) Net loss per share - basic $ ( 0.10 ) $ ( 0.09 ) $ ( 0.25 ) $ ( 0.24 ) The following table represents the combined pro forma revenue and earnings for the three- and nine-month periods ended September 30, 2023: Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 Historical Pro forma combined Historical Pro forma combined Revenues $ 34,195 $ 34,195 $ 99,084 $ 101,604 Operating loss $ ( 3,257 ) $ ( 3,257 ) $ ( 8,281 ) $ ( 7,765 ) Net loss per share – basic and diluted $ ( 0.14 ) $ ( 0.14 ) $ ( 0.16 ) $ ( 0.14 ) Net loss per share – basic $ ( 0.14 ) $ ( 0.14 ) $ ( 0.16 ) $ ( 0.14 ) The unaudited combined pro forma revenue and earnings for the three and nine-month periods ended September 30, 2022 and 2023 were prepared as though the Acquisition had occurred as of January 1, 2022. This summary is not necessarily indicative of what the results of operations would have been had the Acquisition occurred as of such date, nor does it purport to represent results of operations for any future periods. NOTE 4 – CASH AND CASH EQUIVALENTS The Company considers all highly liquid debt instruments with an original maturity of three months or less when purchased to be cash equivalents unless they are legally or contractually restricted. The Company’s cash and cash equivalent balances exceed Federal Deposit Insurance Corporation (“FDIC”) and other local jurisdictional limits (in Israel and Germany). Restricted cash at December 31, 2022 and September 30, 2023 consists of cash held in escrow for purchases from a vendor. 12 NOTE 5 - REVENUE RECOGNITION The Company and its subsidiaries generate revenue from sales of systems and products and from customer SaaS and hosting infrastructure fees. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes the Company collects concurrently with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The expected costs associated with the Company’s base warranties continue to be recognized as expense when the products are sold (see Note 14). Revenue is recognized when performance obligations under the terms of a contract with our customer are satisfied. Product sales are recognized at a point in time when title transfers, when the products are shipped, or when control of the system is transferred to the customer, which usually is upon delivery of the system and when contractual performance obligations have been satisfied. For products which do 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. Under the applicable accounting guidance, all of the Company’s billings for equipment and the related cost for these systems are deferred, recorded, and classified as a current and long-term liability and a current and long-term asset, respectively. The deferred revenue and cost are recognized over the service contract life, ranging from one to five years, beginning at the time that a customer acknowledges acceptance of the equipment and service. The Company recognizes revenue for remotely hosted SaaS agreements and post-contract maintenance and support agreements beyond our standard warranties over the life of the contract. Revenue is recognized ratably over the service periods and the cost of providing these services is expensed as incurred. Amounts invoiced to customers which are not recognized as revenue are classified as deferred revenue and classified as short-term or long-term based upon the terms of future services to be delivered. Deferred revenue also includes prepayment of extended maintenance, hosting and support contracts. The Company earns other service revenues from installation services, training and technical support services which are short-term in nature and revenue for these services are recognized at the time of performance when the service is provided. The Company also derives revenue from leasing arrangements. Such arrangements provide for monthly payments covering product or system sale, maintenance, support and interest. These arrangements meet the criteria to be accounted for as operating or sales-type leases. Accordingly, for sales-type leases an asset is established for the “sales-type lease receivable” at the present value of the expected lease payments and revenue is deferred and recognized over the service contract, as described above. Maintenance revenues and interest income are recognized monthly over the lease term. The Company’s contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on observable prices charged to customers or adjusted market assessment or using expected cost-plus margin when one is available. Adjusted market assessment price is determined based on overall pricing objectives taking into consideration market conditions and entity specific factors. The Company recognizes an asset for the incremental costs of obtaining the contract arising from the sales commissions to employees because the Company expects to recover those costs through future fees from the customers. The Company amortizes the asset over one to five years because the asset relates to the services transferred to the customer during the contract term of one to five years. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which the Company has the right to invoice for services performed. The following table presents the Company’s revenues disaggregated by revenue source for the three -and nine-months ended September 30, 2022 and 2023: SCHEDULE OF REVENUE DISAGGREGATED BY REVENUE SOURCE Three Months Ended September 30, Nine Months Ended September 30, 2022 2023 2022 2023 Products $ 14,021 $ 13,147 $ 43,231 $ 36,563 Services 20,267 21,048 58,812 62,521 $ 34,288 $ 34,195 $ 102,043 $ 99,084 13 The balances of contract assets and contract liabilities from contracts with customers are as follows as of December 31, 2022 and September 30, 2023: SCHEDULE OF CONTRACT ASSETS AND CONTRACT LIABILITIES FROM CONTRACTS WITH CUSTOMERS December 31, 2022 September 30, 2023 (Unaudited) Assets: Deferred contract cost $ 2,740 $ 2,591 Deferred cost $ 762 $ 191 Liabilities Deferred revenue – services ( 1 ) $ 9,815 $ 10,664 Deferred revenue – products ( 1 ) 938 241 Deferred revenue 10,753 10,905 Less: Deferred revenue and contract liabilities – current portion ( 6,363 ) ( 6,101 ) Deferred revenue and contract liabilities – less current portion $ 4,390 $ 4,804 (1) The Company records deferred revenues when cash payments are received or due in advance of the Company’s performance. For the three-month periods ended September 30, 2022 and 2023, the Company recognized revenue of $ 1,457 and $ 1,407 , respectively, which was included in the deferred revenue balance at the beginning of each reporting period. For the nine-month periods ended September 30, 2022 and 2023, the Company recognized revenue of $ 5,349 and $ 5,413 , respectively, which was included in the deferred revenue balance at the beginning of each reporting period. The Company expects to recognize as revenue these deferred revenue balances before the year 2028, when the services are performed and, therefore, satisfies its performance obligation to the customers. NOTE 6 – ALLOWANCE FOR CREDIT LOSSES The Company’s receivables were evaluated to determine an appropriate allowance for credit losses. For trade receivables, the Company’s historical collections were analyzed by the number of days past due to determine the uncollectible rate in each range of days past due and considerations of any changes expected in the future. The estimate of the allowance for credit losses is charged to the allowance for credit losses based on the age of receivables multiplied by the historical uncollectible rate for the range of days past due or earlier if the account is deemed uncollectible for other reasons. Recoveries of amounts previously charged as uncollectible are credited to the allowance for credit losses. An analysis of the allowance for credit losses for the period ended September 30, 2023 is as follows: SCHEDULE OF ALLOWANCE FOR CREDIT LOSSES Allowance for credit losses, December 31, 2022 $ 2,567 Allowance for credit losses, beginning balance $ 2,567 Current period provision for expected credit losses 1,161 Write-offs charged against the allowance ( 1,131 ) Foreign currency translation 80 Allowance for credit losses, September 30, 2023 $ 2,677 Allowance for credit losses, ending balance $ 2,677 During the nine-months ended September 30, 2023, the change in the allowance for credit losses was due to the change in the age of trade receivables. NOTE 7 – PREPAID EXPENSES AND OTHER ASSETS Prepaid expenses and other current assets consist of the following: SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS December 31, 2022 September 30, 2023 (Unaudited) Sales-type lease receivables, current $ 1,161 $ 1,237 Prepaid expenses 4,047 4,233 Contract assets 1,131 1,109 Other current assets 1,370 2,142 Prepaid expenses and other current assets $ 7,709 $ 8,721 14 NOTE 8 - INVENTORY Inventory, which primarily consists of finished goods and components used in the Company’s products, is stated at the lower of cost or net realizable value using the “moving average” cost method or the first-in first-out (FIFO) method. Inventory is shown net of a valuation reserve of $ 453 at December 31, 2022 and $ 701 at September 30, 2023. Inventories consist of the following: SCHEDULE OF INVENTORIES December 31, 2022 September 30, 2023 (Unaudited) Components $ 12,443 $ 11,054 Work in process 462 77 Finished goods, net 9,367 9,924 Inventory, Net $ 22,272 $ 21,055 NOTE 9 - FIXED ASSETS Fixed assets are stated at cost, less accumulated depreciation and amortization, and are summarized as follows: SCHEDULE OF FIXED ASSETS December 31, 2022 September 30, 2023 (Unaudited) Installed products $ 8,586 $ 10,433 Computer software 7,195 8,366 Computer and electronic equipment 5,658 5,941 Furniture and fixtures 2,041 2,145 Leasehold improvements 1,415 1,314 24,895 28,199 Accumulated depreciation and amortization ( 15,646 ) ( 17,977 ) $ 9,249 $ 10,222 Depreciation and amortization expense of fixed assets for the three- and nine-month periods ended September 30, 2022 was $ 752 and $ 2,336 , respectively, and for the three- and nine-month periods ended September 30, 2023 was $ 657 and $ 2,641 , respectively. This includes amortization of costs associated with computer software for the three- and nine-month periods ended September 30, 2022 of $ 11 and $ 145 , respectively, and for the three- and nine-month periods ended September 30, 2023 of $ 24 and $ 82 , respectively. 15 NOTE 10 - INTANGIBLE ASSETS AND GOODWILL Costs incurred internally in researching and developing software products are charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, software costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. The amortization of these costs will be included in cost of revenue over the estimated life of the products. The following table summarizes identifiable intangible assets of the Company as of December 31, 2022 and September 30, 2023: SCHEDULE OF INTANGIBLE ASSETS September 30, 2023 Useful Lives (In Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Amortized: Customer relationships 9 - 12 $ 19,264 $ ( 7,200 ) $ 12,064 Trademark and tradename 3 - 15 7,553 ( 3,486 ) 4,067 Patents 7 - 11 628 ( 418 ) 210 Technology 7 10,911 ( 10,149 ) 762 Favorable contract interest 4 388 ( 388 ) - Covenant not to compete 5 208 ( 208 ) - Software to be sold or leased 3 - 6 4,086 ( 197 ) 3,889 43,038 ( 22,046 ) 20,992 Unamortized Customer list 104 - 104 Trademark and tradename 61 - 61 165 - 165 Total $ 43,203 $ ( 22,046 ) $ 21,157 December 31, 2022 Useful Lives (In Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Amortized: Customer relationships 9 - 12 $ 20,031 $ ( 6,830 ) $ 13,201 Trademark and tradename 3 - 15 7,589 ( 2,990 ) 4,599 Patents 7 - 11 628 ( 351 ) 277 Technology 7 10,667 ( 7,866 ) 2,801 Favorable contract interest 4 388 ( 388 ) - Covenant not to compete 5 208 ( 208 ) - Software to be sold or leased 3 - 6 1,865 - 1,865 41,376 ( 18,633 ) 22,743 Unamortized Customer list 104 - 104 Trademark and tradename 61 - 61 165 - 165 Total $ 41,541 $ ( 18,633 ) $ 22,908 16 Global uncertainties continue to adversely impact the broader global economy and have caused significant volatility in financial markets. If there is a lack of recovery or further global softening in certain markets, or a sustained decline in the value of the Company’s common stock, the Company may conclude that indicators of impairment exist and would then be required to calculate whether or not an impairment exists for its goodwill, other intangibles, and long-lived assets, the results of which could result in material impairment charges. The Company tests goodwill and other indefinite lives intangible assets on an annual basis in the fourth quarter and more frequently if the Company believes indicators of impairment exists. As of December 31, 2022 and September 30, 2023, the Company determined that no impairment existed to the goodwill, customer list and trademark and trade name of its acquired intangibles. At September 30, 2023, the weighted-average amortization period for the intangible assets was 8.5 years. At September 30, 2023, the weighted-average amortization periods for customer relationships, trademarks and trade names, patents, technology, and capitalized software to be sold or leased were 11.9 , 9.6 , 7.0 , 4.3 , and 3.0 years, respectively. Amortization expense for the three- and nine-month periods ended September 30, 2022 was $ 1,267 and $ 3,816 , respectively, and for the three- and nine-month periods ended September 30, 2023 was $ 1,766 and $ 4,285 , respectively. Estimated future amortization expense for each of the five succeeding fiscal years for these intangible assets is as follows: SCHEDULE OF FINITE-LIVED INTANGIBLE ASSETS AMORTIZATION EXPENSE 2023 (remaining) $ 1,673 2024 3,984 2025 3,857 2026 2,754 2027 2,233 Thereafter 6,491 Finite-Lived intangible assets $ 20,992 There have been no changes in the carrying amount of goodwill from January 1, 2023 to September 30, 2023. For the nine-month period ended September 30, 2023, the Company did not identify any indicators of impairment. 17 NOTE 11 - STOCK-BASED COMPENSATION During the first fiscal quarter of 2023, the Company granted 75 shares of restricted stock to certain executives, which vest in four equal installments over a four-year period, provided that the executive is employed by the Company on each scheduled vesting date. During the first fiscal quarter of 2023, the Company granted options to purchase 405 shares of the Company’s common stock to certain executives, consisting of options to purchase 130 shares of common stock with time-based vesting conditions and options to purchase 275 shares of common stock with performance-based vesting conditions (which we refer to as “market-based stock options”). The options have an exercise price of $ 3.00 . The market-based stock options will vest and become exercisable if the volume weighted average price of the Company’s common stock during a consecutive 60-day trading period (the “60 Day VWAP”) reaches $ 12.00 . The Company valued the market-based stock option awards using a Monte Carlo simulation model using a daily price forecast over ten years until expiration utilizing Geometric Brownian Motion that considers a variety of factors including, but not limited to, the Company’s common stock price, risk-free rate ( 3.7 %), and expected stock price volatility ( 50 %) over the expected life of awards ( 5.1 years). The weighted average fair value of market-based stock options granted during the period was $ 1.38 . During the second fiscal quarter of 2023, the Company issued 162 shares of restricted stock to certain employees, which vests over four equal installments over a four-year period, provided that the employee is employed by the Company on each scheduled vesting date. During the second fiscal quarter of 2023, the Company issued options to purchase 930 shares of the Company’s common stock to certain employees, consisting of options to purchase 340 shares of common stock with time-based vesting conditions and options to purchase 590 shares of common stock with performance-based vesting conditions (which we refer to as “market-based stock options”). The options have an exercise price of $ 3.13 . The market-based stock options will vest and become exercisable if the 60 Day VWAP reaches $ 12.00 . The Company valued the market-based stock option awards using a Monte Carlo simulation model using a daily price forecast over ten years until expiration utilizing Geometric Brownian Motion that considers a variety of factors including, but not limited to, the Company’s common stock price, risk-free rate ( 3.7 %), and expected stock price volatility ( 50 %) over the expected life of awards ( 5.1 years). The weighted average fair value of market-based stock options issued during the period was $ 1.56 . During the third fiscal quarter of 2023, the Company granted 900 shares of restricted stock to Steve Towe, the Company’s Chief Executive Officer, which vest over four equal installments over a four-year period, provided that the Mr. Towe is employed by the Company on each scheduled vesting date. Additionally, 82 shares of restricted stock were granted to certain members of the board of directors, which vest in full on the date of grant, provided that the director is a director of the Company on such date. [A] Stock Options: The following table summarizes the activity relating to the Company’s market-based stock options that were granted to certain executives and employees for the nine-month period ended September 30, 2023: SCHEDULE OF STOCK OPTIONS ACTIVITY Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Terms Aggregate Intrinsic Value Outstanding at beginning of year 5,065 $ 14.14 $ - Granted 865 3.09 $ - Exercised - - $ - Forfeited or expired ( 450 ) 2.85 $ 54 Outstanding at end of period 5,480 $ 13.32 8.5 years $ - Exercisable at end of period - $ - $ - The following table summarizes the activity relating to the Company’s stock options, excluding the market-based stock options that were granted to certain executives and employees, for the nine-month period ended September 30, 2023: Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Terms Aggregate Intrinsic Value Outstanding at beginning of year 2,727 $ 5.29 $ 1 Granted 470 3.09 $ - Exercised ( 16 ) 2.33 $ 9 Forfeited or expired ( 964 ) 5.43 $ 19 Outstanding at end of period 2,217 $ 4.78 7.3 years $ - Exercisable at end of period 1,046 $ 5.56 5.9 years $ - The fair value of each option grant on the date of grant is estimated using the Black-Scholes option-pricing model reflecting the following weighted-average assumptions: SCHEDULE OF FAIR VALUE STOCK OPTION ASSUMPTIONS 2022 2023 September 30, 2022 2023 Expected volatility 49.4 % 55.6 % Expected life of options (in years) 7 6 Risk free interest rate 1.73 % 3.87 % Dividend yield 0 % 0 % Weighted-average fair value of options granted during the year $ 2.04 $ 1.66 Expected volatility is based on historical volatility of the Company’s common stock and the expected life of options is based on historical data with respect to employee exercise periods. The Company recorded stock-based compensation expense of $ 809 and $ 2,110 for the three- and nine-month periods ended September 30, 2022, respectively, and $ 781 and $ 1,984 for the three- and nine-month periods ended September 30, 2023, respectively, in connection with awards made under the stock option plans. The fair value of options vested during the nine-month periods ended September 30, 2022 and 2023 was $ 409 and $ 582 , respectively. 18 As of September 30, 2023, there was $ 1,561 of total unrecognized compensation cost related to non-vested options granted under the Company’s stock option plans that exclude the market-based stock options that were granted to certain senior managers, including the Company’s executive officers. That cost is expected to be recognized over a weighted-average period of 2.57 years. As of September 30, 2023, there was $ 5,245 of total unrecognized compensation cost related to non-vested options granted under the Company’s stock option plans for the market-based stock options that were granted to certain senior managers, including the Company’s executive officers. That cost is expected to be recognized over a weighted-average period of 4.11 years. The Company estimates forfeitures at the time of valuation and reduces expense ratably over the vesting period. This estimate is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate. [B] Restricted Stock Awards: The Company grants restricted stock to employees, whereby the employees are contractually restricted from transferring the shares until they are vested. The stock is unvested at the time of grant and, upon vesting, there are no legal restrictions on the stock. The fair value of each share is based on the Company’s closing stock price on the date of the grant. A summary of all non-vested restricted stock for the nine-month period ended September 30, 2023 is as follows: SCHEDULE OF NON-VESTED RESTRICTED STOCK ACTIVITY Number of Non- Vested Shares Weighted- Average Grant Date Fair Value Restricted stock, non-vested, beginning of year 706 $ 4.75 Granted 1,219 2.42 Vested ( 237 ) 4.18 Forfeited ( 141 ) 5.50 Restricted stock, non-vested, end of period 1,547 $ 2.94 The Company recorded stock-based compensation expenses of $ 254 and $ 997 for the three- and nine-month periods ended September 30, 2022, respectively, and $ 320 and $ 801 for the three -and nine-month periods ended September 30, 2023, respectively, in connection with restricted stock grants. As of September 30, 2023, there was $ 3,704 of total unrecognized compensation cost related to non-vested shares. That cost is expected to be recognized over a weighted-average period of 3.16 years. 19 NOTE 12 - NET LOSS PER SHARE Net loss per share for the three- and nine-month periods ended September 30, 2022 and 2023 are as follows: SCHEDULE OF NET LOSS PER SHARE BASIC AND DILUTED 2022 2023 2022 2023 Three Months Ended Nine Months Ended September 30, September 30, 2022 2023 2022 2023 Basic and diluted loss per share Net loss attributable to common stockholders $ ( 3,535 ) $ ( 4,969 ) $ ( 8,994 ) $ ( 5,749 ) Weighted-average common share outstanding – basic and diluted 35,406 35,653 35,375 35,602 Net loss attributable to common stockholders – basic and diluted $ ( 0.10 ) $ ( 0.14 ) $ ( 0.25 ) $ ( 0.16 ) Basic loss per share is calculated by dividing net loss attributable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution assuming common shares were issued upon the exercise of outstanding options and the proceeds thereof were used to purchase outstanding common shares. Dilutive potential common shares include outstanding stock options, warrants and restricted stock and performance share awards. We include participating securities (unvested share-based payment awards and equivalents that contain non-forfeitable rights to dividends or dividend equivalents) in the computation of earnings per share pursuant to the two-class method. Our participating securities consist solely of preferred stock, which have contractual participation rights equivalent to those of stockholders of unrestricted common stock. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company. For the nine-month periods ended September 30, 2022 and 2023, the basic and diluted weighted-average shares outstanding are the same, since the effect from the potential exercise of outstanding stock options, conversion of preferred stock, and vesting of restricted stock and restricted stock units totaling 16,517 and 18,265 , respectively, would have been anti-dilutive due to the loss. NOTE 13 - SHORT-TERM BANK DEBT AND LONG-TERM DEBT SCHEDULE OF LONG TERM DEBT December 31, September 30, 2022 2023 (unaudited) Short-term bank debt $ 5,709 $ 10,704 Current maturities of long-term debt $ 4,603 $ 1,433 Long-term debt - less current maturities $ 11,403 $ 9,617 20 Long-Term Debt In connection with the Transactions, Powerfleet Israel incurred NIS denominated debt in term loan borrowings on October 3, 2019 which was the closing date of the Transactions (the “Closing Date”), under the Credit Agreement, pursuant to which Hapoalim agreed to provide Powerfleet Israel with two senior secured term loan facilities in an initial aggregate principal amount of $ 30,000 (comprised of two facilities in the aggregate principal amount of $ 20,000 and $ 10,000 , respectively (the “Term A Facility” and “Term B Facility”, respectively, and collectively, the “Term Facilities”)) and a five-year revolving credit facility (the “Revolving Facility”) to Pointer denominated in NIS in an initial aggregate principal amount of $ 10,000 (collectively, the “Credit Facilities”). As of September 30, 2023, the Company borrowed NIS 8,420 , or $ 2,200 , under the Revolving Facility. The Credit Facilities will mature on the date that is five years from the Closing Date, or October 3, 2024. The indicative interest rate provided for the Term Facilities in the original Credit Agreement was approximately 4.73 % for the Term A Facility and 5.89 % for the Term B Facility. The interest rate for the Revolving Facility is, with respect to NIS-denominated loans, Hapoalim’s prime rate + 2.5%, and with respect to US dollar-denominated loans, LIBOR + 4.6% (amended to SOFR + 2.15%). In addition, the Company agreed to pay a 1% commitment fee on the unutilized and uncancelled availability under the Revolving Facility . The Credit Facilities are secured by the shares held by Powerfleet Israel in Pointer and by Pointer over all of its assets. The original Credit Agreement includes customary representations, warranties, affirmative covenants, negative covenants (including the following financial covenants, tested quarterly: Pointer’s net debt to EBITDA; Pointer’s net debt to working capital; minimum equity of Powerfleet Israel; Powerfleet Israel equity to total assets; Powerfleet Israel net debt to EBITDA; and Pointer EBITDA to current payments and events of default). On August 23, 2021, the Borrowers entered into an amendment (the “Amendment”), effective as of August 1, 2021, to the Credit Agreement with Hapoalim. The Amendment memorializes the agreements between the Borrowers and Hapoalim regarding a reduction in the interest rates of the two Term Facilities. Pursuant to the Amendment, commencing as of November 12, 2020, the interest rate with respect to the Term A Facility was reduced to a fixed rate of 3.65 % per annum and the interest rate with respect to the Term B Facility was reduced to a fixed rate of 4.5 % per annum. The Amendment also provides, among other things, for (i) a reduction in the credit allocation fee on undrawn and uncancelled amounts of the Revolving Facility from 1 % to 0.5 % per annum, (ii) removal of the requirement that Powerfleet Israel maintain $ 3,000 on deposit in a separate reserve fund, and (iii) modifications to certain of the affirmative and negative covenants, including a financial covenant regarding the ratio of the Borrowers’ debt levels to Pointer’s EBITDA. The Company is in compliance with all covenants as of September 30, 2023. In connection with the Credit Facilities, the Company incurred debt issuance costs of $ 742 . For the three-month periods ended September 30, 2022 and 2023, the Company recorded $ 49 and $ 29 , respectively, of amortization of the debt issuance costs. For the nine-month periods ended September 30, 2022 and 2023, the Company recorded $ 168 and $ 108 , respectively, of amortization of the debt issuance costs. The Company recorded charges of $ 196 and $ 132 to interest expense on its consolidated statements of operations for the three-month periods ended September 30, 2022 and 2023, respectively, related to interest expense associated with the Credit Facilities. The Company recorded charges of $ 642 and $ 445 to interest expense on its consolidated statements of operations for the nine-month periods ended September 30, 2022 and 2023, respectively, related to interest expense associated with the Credit Facilities. On October 31, 2022, the Borrowers entered into the Third Amendment with Hapoalim. 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 Revolver. As of September 30, 2023, the Company borrowed NIS 32,500 , or $ 8,500 , under the New Revolver. The New Revolver will initially bear interest at the SOFR + 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 . The 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. Pointer is required to pay a credit allocation fee equal to 0.5 % per annum on undrawn and uncancelled amounts of the New Revolver. Scheduled maturities of the long-term debt as of September 30, 2023 are as follows: SCHEDULE OF MATURITIES OF LONG TERM DEBT October 2023 - September 2024 $ 1,433 October 2024 9,617 Long Term debt 11,050 Less: Current portion 1,433 Total $ 9,617 The Term B Facility is not subject to amortization over the life of the loan and instead the original principal amount is due in one installment on the fifth anniversary of the Closing Date. 21 NOTE 14 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consist of the following: SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES December 31, September 30, 2022 2023 (unaudited) Accounts payable $ 14,751 $ 16,547 Accrued warranty 1,897 2,446 Accrued compensation 7,153 6,532 Government authorities 1,992 2,054 Other current liabilities 805 530 Accounts payable and accrued expenses $ 26,598 $ 28,109 The Company’s products are warranted against defects in materials and workmanship for a period of one to eight years from the date of acceptance of the product by the customer . The customers may purchase an extended warranty providing coverage up to a maximum of 60 months . A provision for estimated future warranty costs is recorded for expected or historical warranty matters related to equipment shipped and is included in accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets as of December 31, 2022 and September 30, 2023. The following table summarizes warranty activity for the nine-month periods ended September 30, 2022 and 2023: SCHEDULE OF PRODUCT WARRANTY LIABILITY Nine Months Ended September 30, 2022 2023 (unaudited) Accrued warranty reserve, beginning of year $ 1,333 $ 2,054 Accrual for product warranties issued 998 1,098 Product replacements and other warranty expenditures ( 373 ) ( 370 ) Expiration of warranties ( 83 ) ( 168 ) Accrued warranty reserve, end of period ( 1 ) $ 1,875 $ 2,614 (1) Includes non-current accrued warranty included in other long-term liabilities at September 30, 2022 and September 30, 2023 of $ 167 and $ 168 , respectively. 22 NOTE 15 - STOCKHOLDERS’ EQUITY [A] Redeemable Preferred Stock The Company is authorized to issue 150 shares of preferred stock, par value $ 0.01 per share of which 100 shares are designated Series A Preferred Stock and 50 shares are undesignated. Series A Preferred Stock In connection with the completion of the Transactions, on October 3, 2019, the Company issued 50 shares of Series A Preferred Stock to ABRY Senior Equity V, L.P., ABRY Senior Equity Co-Investment Fund V, L.P and ABRY Investment Partnership, L.P. (the “Investors”). For the nine-month periods ended September 30, 2022 and 2023, the Company issued 3 and 1 additional shares of Series A Preferred Stock, respectively. Liquidation The Series A Preferred Stock has a liquidation preference equal to the greater of (i) the original issuance price of $ 1,000.00 per share, subject to certain adjustments (the “Series A Issue Price”), plus all accrued and unpaid dividends thereon (except in the case of a deemed liquidation event, then 150% of such amount), and (ii) the amount such holder would have received if the Series A Preferred Stock had converted into common stock immediately prior to such liquidation . Dividends Holders of Series A Preferred Stock are entitled to receive cumulative dividends at a minimum rate of 7.5 % per annum (calculated on the basis of the Series A Issue Price), quarterly in arrears. The dividends are payable at the Company’s election, in kind, through the issuance of additional shares of Series A Preferred Stock, or in cash, provided no dividend payment failure has occurred and is continuing and that there has not previously occurred two or more dividend payment failures. Commencing on the 66-month anniversary of the date on which any shares of Series A Preferred Stock are first issued (the “Original Issuance Date”), and on each monthly anniversary thereafter, the dividend rate will increase by 100 basis points, until the dividend rate reaches 17.5 % per annum, subject to the Company’s right to defer the increase for up to three consecutive months on terms set forth in the Company’s Amended and Restated Certificate of Incorporation (the “Charter”). During the three -and nine-month periods ended September 30, 2022, the Company paid dividends in shares in amounts equal to $ 1,067 and $ 3,143 respectively, to the holders of the Series A Preferred Stock. During the three -and nine-month periods ended September 30, 2023, the Company paid dividends in shares in amounts equal to $ 0 and $ 1,107 , respectively, to the holders of the Series A Preferred Stock. During the three -and nine-month periods ended September 30, 2023, the Company paid dividends in cash in amounts equal to $ 1,128 and $ 2,257 , respectively, to the holders of the Series A Preferred Stock. As of September 30, 2023, dividends in arrears were $- 0 -. Voting; Consent Rights The holders of Series A Preferred Stock will be given notice by the Company of any meeting of stockholders or action to be taken by written consent in lieu of a meeting of stockholders as to which the holders of common stock are given notice at the same time as provided in, and in accordance with, the Company’s Amended and Restated Bylaws. Except as required by applicable law or as otherwise specifically set forth in the Charter, the holders of Series A Preferred Stock are not entitled to vote on any matter presented to the Company’s stockholders unless and until any holder of Series A Preferred Stock provides written notification to the Company that such holder is electing, on behalf of all holders of Series A Preferred Stock, to activate their voting rights and in doing so rendering the Series A Preferred Stock voting capital stock of the Company (such notice, a “Series A Voting Activation Notice”). From and after the delivery of a Series A Voting Activation Notice, all holders of the Series A Preferred Stock will be entitled to vote with the holders of common stock as a single class on an as-converted basis (provided, however, that any holder of Series A Preferred Stock shall not be entitled to cast votes for the number of shares of common stock issuable upon conversion of such shares of Series A Preferred Stock held by such holder that exceeds the quotient of (1) the aggregate Series A Issue Price for such shares of Series A Preferred Stock divided by (2) $5.57 (subject to adjustment for stock splits, stock dividends, combinations, reclassifications and similar events, as applicable)). So long as shares of Series A Preferred Stock are outstanding and convertible into shares of common stock that represent at least 10% of the voting power of the common stock, or the Investors or their affiliates continue to hold at least 33% of the aggregate amount of Series A Preferred Stock issued to the Investors on the Original Issuance Date, the consent of the holders of at least a majority of the outstanding shares of Series A Preferred Stock will be necessary for the Company to, among other things, (i) liquidate the Company or any operating subsidiary or effect any deemed liquidation event (as such term is defined in the Charter), except for a deemed liquidation event in which the holders of Series A Preferred Stock receive an amount in cash not less than the Redemption Price (as defined below), (ii) amend the Company’s organizational documents in a manner that adversely affects the Series A Preferred Stock, (iii) issue any securities that are senior to, or equal in priority with, the Series A Preferred Stock or issue additional shares of Series A Preferred Stock to any person other than the Investors or their affiliates, (iv) incur indebtedness above the agreed-upon threshold, (v) change the size of the Company’s board of directors to a number other than seven, or (vi) enter into certain affiliated arrangements or transactions . 23 Redemption At any time, each holder of Series A Preferred Stock may elect to convert each share of such holder’s then-outstanding Series A Preferred Stock into the number of shares of the Company’s common stock equal to the quotient of (x) the Series A Issue Price, plus any accrued and unpaid dividends, divided by (y) the Series A Conversion Price in effect at the time of conversion. The Series A Conversion Price is initially equal to $ 7.319 , subject to certain adjustments as set forth in the Charter. At any time after the third anniversary of the Original Issuance Date, subject to certain conditions, the Company may redeem the Series A Preferred Stock for an amount per share, equal to the greater of (i) the product of (x) 1.5 multiplied by (y) the sum of the Series A Issue Price, plus all accrued and unpaid dividends and (ii) the product of (x) the number of shares of common stock issuable upon conversion of such Series A Preferred Stock multiplied by (y) the volume weighted average price of the common stock during the 30 consecutive trading day period ending on the trading date immediately prior to the date of such redemption notice or, if calculated in connection with a deemed liquidation event, the value ascribed to a share of common stock in such deemed liquidation event (the “Redemption Price”) . Further, at any time (i) after the 66-month anniversary of the Original Issuance Date, (ii) following delivery of a mandatory conversion notice by us, or (iii) upon a deemed liquidation event, subject to Delaware law governing distributions to stockholders, the holders of the Series A Preferred Stock may elect to require us to redeem all or any portion of the outstanding shares of Series A Preferred Stock for an amount per share equal to the Redemption Price. NOTE 16 - ACCUMULATED OTHER COMPREHENSIVE LOSS Comprehensive loss includes net loss and foreign currency translation gains and losses. The accumulated balances for each classification of other comprehensive loss for the nine-month period ended September 30, 2023 are as follows: SCHEDULE OF ACCUMULATED OTHER COMPREHENSIVE LOSS Foreign currency translation adjustment Accumulated other comprehensive loss Balance at January 1, 2023 $ ( 1,210 ) $ ( 1,210 ) Net current period change ( 694 ) ( 694 ) Balance at September 30, 2023 $ ( 1,904 ) $ ( 1,904 ) The accumulated balances for each classification of other comprehensive loss for the nine-month period ended September 30, 2022 are as follows: Foreign currency translation adjustment Accumulated other comprehensive income/(loss) Balance at January 1, 2022 $ 391 $ 391 Net current period change ( 1,441 ) ( 1,441 ) Balance at September 30, 2022 $ ( 1,050 ) $ ( 1,050 ) The Company’s reporting currency is the U.S. dollar (“USD”). For businesses where the majority of the revenues are generated in USD or linked to the USD and a substantial portion of the costs are incurred in USD, the Company’s management believes that the USD is the primary currency of the economic environment and thus their functional currency. Due to the fact that Argentina has been determined to be highly inflationary, the financial statements of our subsidiary in Argentina have been remeasured as if its functional currency was the USD. The Company also has foreign operations where the functional currency is the local currency. For these operations, assets and liabilities are translated using the end-of-period exchange rates and revenues, expenses and cash flows are translated using average rates of exchange for the period. Equity is translated at the rate of exchange at the date of the equity transaction. Translation adjustments are recognized in stockholders’ equity as a component of accumulated other comprehensive income (loss). Net translation losses from the translation of foreign currency financial statements of $( 1,441 ) and $ ( 694 ) at September 30, 2022 and 2023, respectively, are included in comprehensive income (loss) in the Consolidated Statement of Changes in Stockholders’ Equity. Foreign currency transaction gains and losses related to operational expenses denominated in a currency other than the functional currency are included in determining net income or loss. Foreign currency transaction losses for the three- and nine-month periods ended September 30, 2022 of $( 922 ) and $( 1,844 ), respectively, and for the three- and nine-month periods ended September 30, 2023 of $ ( 358 ) and $ ( 126 ) , respectively, are included in selling, general and administrative expenses in the Consolidated Statement of Operations. Foreign currency transaction gains related to long-term debt for the three- and nine-month periods ended September 30, 2022 of $ 191 and $ 2,803 , respectively, and for the three- and-nine month periods ended September 30, 2023 of $ 429 and $ 1,139 , respectively, are included in interest expense in the Consolidated Statement of Operations. 24 NOTE 17 – SEGMENT INFORMATION The Company operates in one reportable segment, wireless IoT asset management. The following table summarizes revenues by geographic region. SCHEDULE OF REVENUES AND LONG LIVED ASSETS BY GEOGRAPHICAL REGION 2022 2023 2022 2023 Three Months Ended September 30, Nine Months Ended September 30, 2022 2023 2022 2023 United States $ 14,548 $ 16,014 $ 42,670 $ 43,374 Israel 10,925 10,248 34,007 31,823 Other 8,815 7,933 25,366 23,887 Total revenues $ 34,288 $ 34,195 $ 102,043 $ 99,084 December 31, September 30, 2022 2023 (Unaudited) Long lived assets by geographic region: United States $ 941 $ 840 Israel 3,545 3,846 Other 4,763 5,536 Long lived assets $ 9,249 $ 10,222 NOTE 18 - INCOME TAXES The Company records its interim tax provision based upon a projection of the Company’s annual effective tax rate (“AETR”). This AETR is applied to the year-to-date consolidated pre-tax income to determine the interim provision for income taxes before discrete items. The Company updates the AETR on a quarterly basis as the pre-tax income projections are revised and tax laws are enacted. The effective tax rate (“ETR”) each period is impacted by a number of factors, including the relative mix of domestic and foreign earnings and adjustments to recorded valuation allowances. The currently forecasted ETR may vary from the actual year-end due to the changes in these factors. SCHEDULE OF INCOME BEFORE INCOME TAX DOMESTIC AND FOREIGN 2022 2023 2022 2023 Three Months Ended September 30, Nine Months Ended September 30, 2022 2023 2022 2023 Domestic pre-tax book loss $ ( 3,739 ) $ ( 4,150 ) $ ( 12,083 ) $ ( 11,141 ) Foreign pre-tax book income 2,210 738 6,846 9,960 Total loss before income taxes ( 1,529 ) ( 3,412 ) ( 5,237 ) ( 1,181 ) Income tax expense ( 770 ) ( 262 ) ( 107 ) ( 698 ) Total loss after taxes ( 2,299 ) ( 3,674 ) $ ( 5,344 ) $ ( 1,879 ) Effective tax rate ( 50.35 )% ( 7.68 )% ( 2.04 )% ( 59.10 ) For the three- and nine-month periods ended September 30, 2022 and 2023, the effective tax rate differed from the statutory tax rates primarily due to the mix of domestic and foreign earnings amongst taxable jurisdictions, recorded valuation allowances to fully reserve against deferred tax assets in non-Israel jurisdictions, and certain discrete items. On August 16, 2022, the President of the United States signed into law H.R. 5376, commonly referred to as the Inflation Reduction Act of 2022 (the “IRA”). 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. The passage of the IRA did not have a material impact to the Company nor its calculated AETR as of September 30, 2023. On August 9, 2022, the President of the United States signed into law H.R. 4346, “The CHIPS and Science Act of 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. Tax measures include a 25% advanced investment tax credit for certain investments in semiconductor manufacturing. The passage of the CHIPS and Science Act did not have a material impact to the Company nor its calculated AETR as of September 30, 2023. 25 NOTE 19 - LEASES The Company has operating leases for office space and office equipment. The Company’s leases have remaining lease terms of one year to three years , some of which include options to extend the lease term for up to five years. The Company has lease arrangements which are classified as short-term in nature. These leases meet the criteria for operating lease classification. Lease costs associated with the short-term leases are included in selling, general and administrative expenses on the Company’s condensed consolidated statements of operations during the three- and nine-months ended September 30, 2022 and 2023. Components of lease expense are as follows: SCHEDULE OF COMPONENTS OF LEASE EXPENSE Three Months Ended September 30, Nine Months Ended September 30, 2022 2023 2022 2023 Short term lease cost: $ 102 $ 119 $ 346 $ 326 Supplemental cash flow information and non-cash activity related to our operating leases are as follows: SCHEDULE OF CASH FLOW INFORMATION AND NON CASH ACTIVITY OF OPERATING LEASES Nine Months Ended September 30, 2022 2023 Non-cash activity: $ 1,042 $ 1,117 Weighted-average remaining lease term and discount rate for our operating leases are as follows: SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERM AND DISCOUNT RATE September 30, 2023 Weighted-average remaining lease term (in years) 2.58 Weighted-average discount rate 6.11 % Scheduled maturities of operating lease liabilities outstanding as of September 30, 2023 are as follows: SCHEDULED MATURITIES OF OPERATING LEASE LIABILITIES October-December 2023 $ 1,338 2024 2,080 2025 1,816 2026 773 2027 103 Thereafter 1,234 Total lease payments 7,344 Less: Imputed interest ( 643 ) Present value of lease liabilities $ 6,701 26 NOTE 20 - FAIR VALUE OF FINANCIAL INSTRUMENTS The Company’s cash and cash equivalents are carried at fair value. The carrying value of financing receivables approximates fair value due to the interest rate implicit in the instruments approximating current market rates. The carrying value of accounts receivables, accounts payable and accrued liabilities and short term bank debt approximates their fair values due to the short period to maturity of these instruments. The fair value of the Company’s long-term debt is based on observable relevant market information and future cash flows discounted at current rates, which are Level 2 measurements. SCHEDULE OF FAIR VALUE OF FINANCIAL INSTRUMENTS September 30, 2023 Carrying Amount Fair Value Long-term debt $ 21,754 $ 20,321 NOTE 21 - CONCENTRATION OF CUSTOMERS For the three- and nine-month periods ended September 30, 2022 and 2023, there were no customers who generated revenues greater than 10 % of the Company’s consolidated total revenues or generated greater than 10 % of the Company’s consolidated accounts receivable. NOTE 22 - COMMITMENTS AND CONTINGENCIES Except for normal operating leases, the Company is not currently subject to any material commitments. From time to time, the Company is involved in various litigation matters involving claims incidental to its business and acquisitions, including employment matters, acquisition related claims, patent infringement and contractual matters, among other issues. While the outcome of any such litigation matters cannot be predicted with certainty, management currently believes that the outcome of these proceedings, including the matters described below, either individually or in the aggregate, will not have a material adverse effect on its business, results of operations or financial condition. The Company records reserves related to legal matters when losses related to such litigation or contingencies are both probable and reasonably estimable. In August 2014, Pointer do Brasil Comercial Ltda. (“Pointer Brazil”) received a notification of lack of payment of VAT tax (Brazilian ICMS tax) in the amount of $ 211 plus $ 1,119 of interest and penalty, totaling $ 1,330 as of September 30, 2023. The Company is vigorously defending this tax assessment before the administrative court in Brazil, but in light of the administrative and judicial processes in Brazil, it could take up to 14 years before the dispute is finally resolved. In case the administrative court rules against the Company, the Company could claim before the judicial court, an appellate court in Brazil, a substantial reduction of interest charged, potentially reducing the Company’s total exposure. The Company’s legal counsel is of the opinion that the chance of loss is not probable and for this reason the Company has not made any provision. In July 2015, Pointer Brazil received a tax deficiency notice alleging that the services provided by Pointer Brazil should be classified as “telecommunication services” and therefore Pointer Brazil should be subject to the state value-added tax. The aggregate amount claimed to be owed under the notice was approximately $ 12,861 as of September 30, 2023. On August 14, 2018, the lower chamber of the State Tax Administrative Court in São Paulo rendered a decision that was favorable to Pointer Brazil in relation to the ICMS demands, but adverse in regards to the clerical obligation of keeping in good order a set of ICMS books and related tax receipts. The remaining claim after this administrative decision is $ 218 . The state has appealed to the higher chamber of the State Tax Administrative Court. The Company’s legal counsel is of the opinion that the chance of loss is not probable and that no material costs will arise in respect to these claims. For this reason, the Company has not made any provision. On February 24, 2022, Pointer Mexico received a notification for 2016 and 2017 tax assessment in the amounts of $ 268 and $ 476 , respectively, regarding the underpayment of VAT and government fees from the Mexican Tax Service (“MTS”). Under the statute and case law, Pointer Mexico was entitled to appeal before the MTS or file a lawsuit before the Federal Court of Administrative Justice. On April 19, 2022, Pointer Mexico filed an appeal for revocation of the assessment. On May 2, 2022, Pointer Mexico filed additional evidence before the MTS. As of August 31, 2023, the cases have been closed and no payments were imposed. NOTE 23 - RECENT ACCOUNTING PRONOUNCEMENTS In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments,” which amends the guidance on measuring credit losses on financial assets held at amortized cost. The amendment is intended to address the issue that the previous “incurred loss” methodology was restrictive for an entity’s ability to record credit losses based on not yet meeting the “probable” threshold. The new language will require these assets to be valued at amortized cost presented at the net amount expected to be collected with a valuation provision. The Company adopted ASU No. 2016-13 on January 1, 2023. The adoption of the standard did not result in a material impact on the consolidated financial statements. NOTE 24 – SUBSEQUENT EVENTS On October 10, 2023, the Company 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 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 the Company’s common stock. As a result of the transactions, including the Scheme, contemplated by the Implementation Agreement (the “Scheme Transactions”), MiX Telematics will become an indirect, wholly owned subsidiary of the Company. The Scheme Transactions have been approved by the boards of directors of both companies, are subject to customary closing conditions, including approval by the Company’s 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 the Company’s common stock will continue to be listed on The Nasdaq Global Market and the Tel Aviv Stock Exchange under the symbol “PWFL.” Additionally, the Company’s 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 the Company with operational synergies and access to a broader base of customers. The pending Scheme Transactions will be accounted for as a business combination and the Company has been identified as the accounting acquirer. 27