Powerfleet, Inc. 10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31 , 2023 . ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______. Commission file number: 001-39080 POWERFLEET, INC. (Exact name of registrant as specified in its charter) Delaware 83-4366463 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 123 Tice Boulevard , Woodcliff Lake , New Jersey 07677 (Address of principal executive offices) (Zip Code) (201) 996-9000 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.01 per share PWFL The Nasdaq Global Market (Title of class) (Trading Symbol) (Name of exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: None Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☒ Emerging growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☒ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The aggregate market value of the registrant’s common stock held by non-affiliates, computed by reference to the price at which the common stock was last sold as of June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $ 105.8 million. The number of shares of the registrant’s Common Stock outstanding as of May 1, 2024 was 107,349,987 shares. EXPLANATORY NOTE References in this document to “Powerfleet”, “the Company”, “we”, “our”, or “us” are intended to mean Powerfleet, Inc., individually, or as the context requires, collectively with its subsidiaries on a consolidated basis. This Annual Report on Form 10-K (this “Form 10-K”) contains the Company’s audited financial statements for the year ended December 31, 2023 and restates certain financial information and related footnote disclosures in the Company’s previously issued Annual Reports on Form 10-K for the years ended December 31, 2022 and 2021 (collectively, the “Audited Financial Statements”), Quarterly Reports on Form 10-Q for the quarterly and year-to-date periods ended September 30, 2023 and 2022, Quarterly Reports on Form 10-Q for the quarterly and year-to-date periods ended June 30, 2023 and 2022 and Quarterly Reports on Form 10-Q for the quarterly and year-to-date periods ended March 31, 2023 and 2022 (collectively, the “Interim Unaudited Financial Statements”) to make certain changes as described below. In connection with the preparation of its audited consolidated financial statements for the year ended December 31, 2023, the Company determined that the accounting for the redemption premium associated with its Series A convertible preferred stock (the “Series A Preferred Stock”) was understated resulting in an understatement of “net loss attributable to common stockholders” and “net loss per share attributable to common stockholders” for each period, an understatement of the value of the “convertible redeemable preferred stock” as of each balance sheet date, and an overstatement of the “additional paid-in capital” as of each balance sheet date. The required adjustments to correct the redemption value calculation of the Series A Preferred Stock and the related accretion of the value of the preferred stock in the consolidated statement of operations, include the recording of non-cash accretion resulting in an increase in the net loss attributable to common stockholders, an increase in the convertible redeemable preferred stock and a decrease in additional paid-in capital in the Company’s consolidated financial statements. Because the correction of this misstatement is material to the previously reported results of operations of the Company included in our previously issued Audited Financial Statements and Interim Unaudited Financial Statements, the audit committee of the board of directors of the Company (the “Audit Committee”) concluded that the consolidated financial statements included in the Audited Financial Statements and Interim Unaudited Financial Statements should no longer be relied upon. In connection with the restatement to correct for this error, the Company determined that it is appropriate to revise the previously filed consolidated financial statements included in this Form 10-K to correct other unrelated errors that were either unrecorded or addressed as out-of-period adjustments in previously filed consolidated financial statements that were not material, individually or in the aggregate, to such financial statements. Due to the discovery of this error, the Company’s management identified a material weakness in the Company’s internal control over financial reporting that existed as of December 31, 2023 and prior periods, relating to the measurement and valuation of the Company’s Series A Preferred Stock. For a discussion of management’s consideration of the Company’s disclosure controls and procedures, internal control over financial reporting, and the material weaknesses identified, see Part II, Item 9A, “Controls and Procedures” of this Form 10-K. We have not filed, and do not intend to file, any amendments to our previously filed Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q for the restated periods. Accordingly, investors should rely only on the financial information and other disclosures regarding the restated periods in this Form 10-K or in our future filings with the Securities and Exchange Commission (the “SEC”), as applicable, and not on any previously issued or filed reports, earnings releases, investor presentations or other similar communications relating to the restated periods. See Note 2 to our financial statements, included in Part II, Item 8 of this Form 10-K, for additional information on the restatement of, and the related effects on, our consolidated financial statements for the restated periods. POWERFLEET, INC. TABLE OF CONTENTS Page PART I. Item 1. Business 4 Item 1A. Risk Factors 12 Item 1B. Unresolved Staff Comments 32 Item1C. Cybersecurity 32 Item 2. Properties 32 Item 3. Legal Proceedings 32 Item 4. Mine Safety Disclosures 32 PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 33 Item 6. Reserved 33 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 42 Item 8. Financial Statement and Supplementary Data 43 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 107 Item 9A. Controls and Procedures 107 Item 9B. Other Information 107 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 107 PART III. Item 10. Directors, Executive Officers and Corporate Governance 108 Item 11. Executive Compensation 112 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 119 Item 13. Certain Relationships and Related Transactions, and Director Independence 120 Item 14. Principal Accounting Fees and Services 121 PART IV. Item 15. Exhibits, Financial Statement Schedules 122 Item 16. Form 10-K Summary 125 2 PART I Cautionary Note Regarding Forward-Looking Statements In addition to historical information, this Form 10-K contains “forward-looking statements” (within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), which may include information concerning our beliefs, plans, objectives, goals, expectations, strategies, anticipations, assumptions, estimates, intentions, future events, future revenues or performance, capital expenditures and other information that is not historical information. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Many of these statements appear, in particular, under the headings “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K. When used in this report, the words “seek,” “estimate,” “expect,” “anticipate,” “project,” “plan,” “contemplate,” “plan,” “continue,” “intend,” “believe” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon our current expectations and various assumptions. We believe there is a reasonable basis for our expectations and beliefs, but there can be no assurance that we will realize our expectations or that our beliefs will prove to be correct. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this report. Important factors that could cause our 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 between Israel and Hamas; ● integration of our and MiX Telematics’ businesses and the ability to recognize the anticipated synergies and benefits of the business combination with MiX Telematics Limited (“MiX Telematics”); ● the commercial, reputational and regulatory risks to our business that may arise as a consequence of our need to restate certain of our consolidated financial statements for the Non-Reliance Periods; ● the loss of any of our key customers or reduction in the purchase of our products by any such customers; ● the failure of the markets for our products to continue to develop; ● our inability to adequately protect our intellectual property; ● our 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; and ● those risks and uncertainties set forth under the heading “Risk Factors” in Item 1A of this report. There may be other factors of which we are currently unaware or which we currently deem immaterial that may cause our actual results to differ materially from the forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date they are made and are expressly qualified in their entirety by the cautionary statements included in this report. Except as may be required by law, we undertake no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances occurring after the date they were made or to reflect the occurrence of unanticipated events, or otherwise. Note Regarding Trademarks We have, or have applied for, U.S. and/or foreign trademark protection for I.D. SYSTEMS ® and Design, the I.D. SYSTEMS Logo ® , VEHICLE ASSET COMMUNICATOR ® , POWERFLEET ® , POWERFLEET VISION ® , POWERFLEET IQ ® , POWERFLEET YARD ® , VERIWISE IQ ® , didBOX ® , FREIGHTCAM, KEYTROLLER ® , REEFERMATE ® , POWERFLEET and DESIGN ® , CAMERA Design ® , Mix Telematics, Mix Telematics – Logo, Matrix Vehicle Tracking Logo, Datatrak, Tracking. Simply Sorted, Beame Character Device, Beame Logo 2012, Beame Logo 2010, Mix-Drive, FM-WEB, Matrix – right by your side (2013 logo), Mix Vision, Mix Safedrive, FM Communicator, MIX ROVI, Beame Logo, Our Customers Are People, Not Vehicles, Tripmaster, Life Takes You Places, Matrix Brings you Home, MiX Intuition, Recovery. Simply Sorted, Geoloc Advanced Alert, MiX Now, Mix Recovery Protect, Mix Fleet Manager, Connected and Protected Fleet. 3 Item 1. Business. Overview 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. We are headquartered in Woodcliff Lake, New Jersey, with offices located around the globe. On April 2, 2024, we consummated the transactions contemplated by the Implementation Agreement, dated as of October 10, 2023 (the “Implementation Agreement”), that we entered into with 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, a public company incorporated under the laws of the Republic of South Africa (the “MiX Combination”). On such closing date, Powerfleet Sub acquired all 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, MiX Telematics became our indirect, wholly owned subsidiary. Our Powerfleet for Warehouse solutions are designed to provide on-premise or in-facility asset and operator management, monitoring, and visibility for warehouse trucks such as forklifts, man-lifts, tuggers and ground support equipment at airports. These solutions utilize a variety of communications capabilities such as Bluetooth ® , WiFi, and proprietary radio frequency. Our Powerfleet for Logistics solutions are designed to provide bumper-to-bumper asset management, monitoring, and visibility for over-the-road based assets such as heavy trucks, dry-van trailers, refrigerated trailers and shipping containers and their associated cargo. These systems provide mobile-asset tracking and condition-monitoring solutions to meet the transportation market’s desire for greater visibility, safety, security, and productivity throughout global supply chains. Our Powerfleet for Vehicles solutions are designed both to enhance the vehicle fleet management process, whether it’s a rental car, a private fleet, or automotive original equipment manufacturer (“OEM”) partners. We achieve this by providing critical information that can be used to increase revenues, reduce costs and improve customer service. Our patented technologies are a proven solution for organizations that must monitor and analyze their assets to improve safety, increase efficiency, reduce costs, and drive profitability. Our offerings are sold under the global brands Powerfleet, Pointer, and Cellocator. We have an established history of IoT device development and innovation creating devices that can withstand harsh and rugged environments. With 46 patents and patent applications and over 25 years’ experience, we believe we are well positioned to evolve our offerings for even greater value to customers through our cloud-based applications for unified operations. We deliver advanced data solutions that connect mobile assets to increase visibility, operational efficiency and profitability. Across our spectrum of vertical markets, we differentiate ourselves by developing mobility platforms that collect data from unique sensors. Further, because we are OEM agnostic, we help organizations view and manage their mixed assets homogeneously. All of our solutions are paired with software as a service (“SaaS”) and analytics platforms to provide an even deeper level of insights and understanding of how assets are utilized and how drivers and operators operate those assets. These insights include a full set of Key Performance Indicators (“KPIs”) to drive operational and strategic decisions. Our customers typically get a return on their investment in less than 12 months from deployment. Our enterprise software applications have machine learning capabilities and are built to integrate with our customers’ management systems to provide a single, integrated view of asset and operator activity across multiple locations while providing real-time enterprise-wide benchmarks and peer-industry comparisons. We look for analytics, as well as the data contained therein, to differentiate us from our competitors, adding significant value to customers’ business operations, and helping to contribute to their bottom line. Our solutions also feature open application programming interfaces (“APIs”) for additional integrations and development to boost other enterprise management systems and third-party applications. We market and sell our connected IoT data solutions to a wide range of customers in the commercial and government sectors. Our customers operate in diverse markets, such as manufacturing, automotive manufacturing, wholesale and retail, food and grocery distribution, pharmaceutical and medical distribution, construction, mining, utilities, aerospace, vehicle rental, as well as logistics, shipping, transportation, and field services. Traditionally, these businesses have relied on manual, often paper-based, processes or on-premise legacy software to operate their high-value assets, manage workforce resources, and distributed sites; and face environmental, safety, and other regulatory requirements. In today’s landscape, it is crucial for these businesses to invest in solutions that enable easy analysis and sharing of real-time information. Our Solutions We provide critical actionable information that powers unified operations throughout organizations. We are solving the challenge of inefficient data collection, real-time visibility, and analysis that leads to transformative business operations. Our SaaS cloud-based applications take data from our IoT devices and ecosystem of third-party and partner applications to present actionable information for customers to increase efficiencies, improve safety and security, and increase their profitability in easy-to-understand reports, dashboards, and real-time alerts. Key Applications of Our IoT Solutions We provide real-time intelligence for organizations with high-value assets allowing them to make informed decisions and ultimately improve their operations, safety, and bottom line. Our applications enable organizations to capture IoT data from various types of assets with devices and sensors creating a holistic view for analysis and action. 4 The core applications that our IoT solutions address include: End-to-End Visibility: Organizations with expensive assets such as vehicles, machinery, or equipment need to keep track of where the assets are located, monitor for misuse, and understand how and when assets are being used. By having complete visibility of their assets, customers can improve security, utilization and customer service. In addition, our visibility solutions help with personnel workflows and resource management, freight visibility through load status, equipment availability status, dwell and idle time, geofencing, two-way temperature control and management, multizone temperature monitoring, arrival and departure times, and supply chain allocation. Regulatory Compliance: Businesses must comply with government regulations and provide proof of compliance, which is commonly an onerous process to enforce and maintain. Our solutions provide critical data points and reports to help customers stay within compliance, avoid fines for non-compliance, and automate the reporting process. We deliver real-time position reports, hours-of-service, temperature monitoring and control, electronic safety checklists, workflow management, controlling vehicle access to only authorized operators, inspection reports, and history logs of use. Improve Safety: Our applications are designed to provide asset and operator management, monitoring, and visibility for safer environments. Our solutions allow our customers to monitor their fleet of vehicles on various parameters, including but not limited to, vehicle location, speed, engine fault codes, driver behavior, eco-driving, and ancillary sensors and can receive reports and alerts, either automatically or upon request wirelessly via the internet, email, mobile phone or an SMS. In addition, our dash camera provides critical video capture that can be used to help exonerate drivers when in accidents or help bolster training and coaching programs of employees. We also offer preventative solutions such as safety warning products to alert vehicle operators of objects or pedestrians in their pathway to prevent accidents, injuries, and damage. Our analytics platform features dashboards with KPIs and can help managers identify patterns, trends and outliers that can be used as flags for interventions. Drive Operational Efficiency & Productivity: To increase utilization of mobile assets, our solutions enable the identification of a change in status, real-time location, geo-fencing alerts when an asset is approaching or leaving its destination, cargo status, and on-board intelligence utilizing a motion sensor and proprietary logic that identifies the beginning of a drive and the end of a drive. Having this information enables customers to increase capacity, speed of service, right-size their fleets, and improve communication internally and with customers. In addition, customers can increase revenue per mile, reduce claims and claims processing times, and reduce the number of assets needed. This is achieved through proving such things as two-way integrated workflows for drivers, control assignments and work change, Electronic Driver Logging and automated record keeping for regulatory compliance, monitoring of asset pools and geofence violations, and various reporting insights that flag under-utilized assets, the closest assets, and alerts on dwell time and exceeding the allotted time for loading and unloading. We help customers to automate processes and increase productivity of their employees. Our applications enable customers to determine where operators are assigned and can temporarily reassign them based on peak needs, evaluate any disparity in the amount employees are paid compared to the time they actually spend operating a vehicle. Our applications help answer the question of why does it take some employees longer than others to do specific tasks, where to focus labor resources, and how to forecast vehicles and operators needed for future workflow. In addition, for our rental car vertical, our applications automatically upload vehicle identification number, mileage and fuel data as a vehicle enters and exits the rental lot, which can significantly expedite the rental and return processes for travelers, and provide the rental company with more timely inventory status, more accurate billing data that can generate higher fuel-related revenue, and an opportunity to utilize customer service personnel for more productive activities, such as inspecting vehicles for damage and helping customers with luggage. Our solution for “car sharing” permits a rental car company to remotely control, track and monitor their rental vehicles wherever they are parked. Whether for traditional “pod-based” rental or for the emerging rent-anywhere model, the system, through APIs integrated into any rental company’s fleet management system, (i) manages member reservations by smart phone or Internet, and (ii) charges members for vehicle use by the hour. 5 For our customers with a variety of make-model-years in their fleet, we have developed an unmatched library of certified vehicle code interfaces through our second-generation On-Board Diagnostics, industry standard. Our patented fleet management system helps fleet owners improve asset utilization, reduce capital costs, and cut operating expenses, such as vehicle maintenance or service and support. Increase Security: Our solutions allow our customers to reduce theft and improve inventory management. Customers can lockdown their assets with automated e-mail or text message alerts, emergency tracking of assets (higher frequency of reports) if theft is expected, geo-fencing alerts when an asset enters a prohibited geography or location, and near real-time sensors that alert based on changes in temperature and shock, among other things. We also provide stolen vehicle retrieval (“SVR”) services. Most of the SVR products used to provide our SVR services are mainly sold to (i) local car dealers and importers that in turn sell the products equipped in the vehicle to the end users who purchase the SVR services directly from us, or (ii) leasing companies which purchase our SVR services in order to secure their own vehicles. Reduce Costs We enable our customers to improve asset utilization, reduce capital costs, and cut operating expenses, such as vehicle maintenance or service and support. Our solutions provide engine performance, machine diagnostics, fuel consumption, and battery life to improve preventative maintenance scheduling, increase uptime, and gain a longer service life of equipment. Through our software applications, customers can optimize capacity, analyze resource allocation, and improve utilization of assets to reduce capital expenses such as purchasing new or leasing additional equipment. Our applications provide root cause analysis for any cargo claims and help with exoneration of drivers in accidents via dash camera visibility. Analytics and Machine Learning Our analytics platforms provide our customers with a holistic view of their asset activity across their enterprise. For example, our image machine learning system allows us to process images from our freight camera and other sources and identify key aspects of operations and geospatial information such as location, work being accomplished, type of cargo, how cargo is loaded and if there are any visible issues such as damage. Key Performance Indicators & Benchmarks Our cloud-based software applications provide a single, integrated view of asset activity across multiple locations, generating enterprise-wide benchmarks, peer-industry comparisons, and deeper insights into asset operations. In addition, our customers can set real-time alerts for exception-based reporting or critical activity that needs immediate attention. This enables management teams to make more informed, effective decisions, raise asset performance standards, increase productivity, reduce costs, and enhance safety. Specifically, our analytics platforms allow users to quantify best-practice enterprise benchmarks for asset utilization and safety, reveal variations and inefficiencies in asset activity across both sites and geographic regions, or identify opportunities to eliminate or reallocate assets, to reduce capital and operating costs. We provide an extensive set of decision-making tools and a variety of standard and customized reports to help businesses improve overall operations. We look for analytics and machine learning to make a growing contribution to drive platform and SaaS revenue, further differentiate our offerings and add value to our solutions. We also use our analytics platform for our own internal platform quality control. 6 Services Hosting Services : We provide the use of our systems as a remotely hosted service, with the system server and application software residing in our colocation center or on a cloud platform provider’s infrastructure (e.g., Azure, AWS). This approach helps us reduce support costs and improve quality control. It separates the system from the restrictions of the customers’ local IT networks, which helps reduce their system support efforts and makes it easier for them to receive the benefits of system enhancements and upgrades. Our hosting services are typically offered with extended maintenance and support services over a multi-year term of service, with automatic renewals following the end of the initial term. Software as a Service : We provide system monitoring, help desk technical support, escalation procedure development, routine diagnostic data analysis and software updates services as part of the ongoing contract term. These services ensure deployed systems remain in optimal performance condition throughout the contract term and provide access to newly developed features and functions on an annual basis. Maintenance Services : We provide a warranty on the hardware components of our system. During the warranty period, we either replace or repair defective hardware. We also make extended maintenance contracts available to customers and offer ongoing maintenance and support on a time and materials basis. Customer Support and Consulting Services for Ease of Use, Adoption, and Added Value : We have developed a framework for the various phases of system training and support that offer our customers both structure and flexibility. Major training phases include hardware installation and troubleshooting, software installation and troubleshooting, “train-the-trainer” training on asset hardware operation, preliminary software user training, system administrator training, information technology issue training, ad hoc training during system launch and advanced software user training. Increasingly, training services are provided through scalable online interactive training tools. Support and consulting services are priced based on the extent of training that the customer requests. To help our customers derive the most benefit from our system, we supply a broad range of documentation and support including videos, interactive online tools, hardware user guides, software manuals, vehicle installation overviews, troubleshooting guides, and issue escalation procedures. We provide our consulting services both as a standalone service to study the potential benefits of implementing an IoT business intelligence solution and as part of the system implementation itself. In some instances, customers prepay us for extended maintenance, support and consulting services. In those instances, the payment amount is recorded as deferred revenue and revenue is recognized over the service period. Growth Strategy Our objective is to become a leading global provider of IoT SaaS solutions for high-value enterprise assets to drive optimized operations and create safer environments. In 2023, we consolidated and augmented many of our existing capabilities on a single customer software platform branded as “Unity.” We have designed our Unity platform to enable rapid and deep integration with IoT devices and third-party business systems to a highly scalable data pipeline that powers artificial intelligence-driven insights to help companies save lives, time, and money. Unity is an increasingly important initiative to meet our objective of becoming a leading global provider of IoT SaaS solutions for high-value enterprise assets to drive optimized operations and create safer environments. To achieve this goal, we intend to prove value, retain and grow business with existing customers and pursue opportunities with new customers by: ● focusing our business solutions by vertical markets and go to market strategies to each market; ● positioning ourselves as an innovative thought leader; ● maintaining a world class sales and marketing team; ● identifying, seizing, and managing revenue opportunities; ● expanding our customer base, achieving wider market penetration and educating customers with mixed assets in their organization about our other applications; ● implementing improved marketing, sales and support strategies; 7 ● shortening our initial sales cycles by helping our customers through: ○ identifying and quantifying benefits expected from our solutions; ○ accelerating transitions from implementation to roll-out; and ○ building service revenue through long-term SaaS contracts; ● differentiating our product offering through analytics, machine learning, unique sensors, and value-added services; ● producing incremental revenue at a high profit margin; and ● expanding our partnerships and integrations. We also plan to expand into new applications and markets by: ● pursuing opportunities to integrate our system with computer hardware and software vendors, including: ○ OEMs; ○ transportation management systems; ○ warehouse management systems; ○ labor and timecard systems; ○ enterprise resource planning; and ○ yard management systems. ● establishing relationships with global distributors; and ● evaluating and pursuing strategically sound acquisitions of companies. Sales and Marketing Our sales and marketing objectives are to achieve broad market awareness and penetration, with an emphasis both on expanding business opportunities with existing customers and on securing new customers. We market our systems directly to commercial and government organizations and through indirect sales channels, such as OEMs, vehicle importers, distributors, and warehouse equipment dealers. In addition, we are actively pursuing strategic relationships with key companies in our target markets - including complementary hardware and software vendors and service providers - to further penetrate these markets by embedding our products in the assets our systems monitor and integrating our solutions with other systems. We sell our systems to corporate-level executives, division heads and site-level management within the enterprise. Typically, our initial system deployment serves as a basis for potential expansion across the customer’s organization. We work closely with customers to demonstrate a return on investment, which is usually less than 12 months, and help maximize the utilization and benefits of our system and demonstrate the value of enterprise-wide deployments. Post-implementation, we consult with our customers to further extend and customize the benefits to the enterprise by delivering enhanced analytics capabilities. 8 Customers We market and sell our wireless solutions to a wide range of customers in the commercial and government sectors. Our customers operate in diverse markets, such as automotive manufacturing, retail, food and grocery distribution, logistics, shipping, freight transportation, heavy industry, wholesale distribution, manufacturing, aerospace and vehicle rental. We enter into master agreements with our customers in the normal course of business. These agreements define the terms of any sales of products and/or services by us to the applicable customer, including, but not limited to, terms regarding payment, support services, termination and assignment rights. These agreements generally obligate us only when products or services are actually sold to the customer thereunder. We strive to establish long-term relationships with our customers in order to maximize opportunities for new application development and increased sales. Some of our global customers that benefit from the Company’s combined solutions to power their specific IoT and machine to machine mobility needs include Avis, Walmart, Toyota, and XPO Logistics. No individual customer generates revenue equal to or greater than 10% of the Company’s consolidated total revenue. Competition The market for our solutions is rapidly evolving, highly competitive and fragmented. Our target markets are also subject to quickly changing product technologies, shifting customer needs, regulatory requirements and frequent introductions of new products and services. In each of our global markets, we encounter different competitors due to the dynamics of each market. A significant number of companies have developed or are developing and marketing software and hardware for wireless products that currently compete or will compete directly with our solutions. We compete with organizations varying in size, including many small, start-up companies as well as large, well-capitalized organizations. While some of our competitors focus exclusively on providing wireless asset management solutions, many are involved in wireless technology as an extension of a broader business. Many of our larger competitors are able to dedicate extensive financial resources to the research and development and deployment of wireless solutions. As government and commercial entities expand the use of wireless technologies, we expect that competition will continue to increase within our target markets. Research and Development Our research and development team has expertise in areas such as hardware, software and firmware development and testing, database design and data analytics, wireless communications, artificial intelligence methods, mechanical and electrical engineering, and both product and project management. In addition, we utilize external contractors to supplement our team in the areas of software and firmware development, digital design, test development and product-level testing. Generally, our research and development efforts are focused on expanding the capabilities of our products; differentiating our offerings through our Unity platform build, simplifying the implementation, support and utilization of our solutions, reducing the cost of our solutions, increasing the reliability of our solutions, expanding the functionality of our solutions to meet customer and market requirements, applying new advances in technology to enhance existing solutions, and building further competitive advantages through our intellectual property portfolio. 9 Intellectual Property Patents We attempt to protect our technology and products through a variety of intellectual property protections, including the pursuit of patent protection in the United States and certain foreign jurisdictions. Because of the differences in patent laws and laws concerning proprietary rights, the extent of protection provided by U.S. patents or proprietary rights owned by us may differ from that of their foreign counterparts. Where strategically appropriate, we will attempt to pursue suspected violators of our patents and, whenever possible, monetize our intellectual property. We built a portfolio of patents and patent applications relating to various aspects of our technology and products, including our wireless asset management systems, connected car products, and vehicle management systems. As of February 29, 2024, our patent portfolio includes 39 U.S. patents, 3 pending U.S. patent applications, 2 pending foreign patent applications, and 2 foreign patents. With the timely payment of all maintenance fees, the U.S. patents have expiration dates falling between 2024 and 2040. No single patent or patent family is considered material to our business. Trademarks We have, or have applied for, U.S. and/or foreign trademark protection for I.D. SYSTEMS ® and Design, the I.D. SYSTEMS Logo ® , VEHICLE ASSET COMMUNICATOR ® , POWERFLEET ® , POWERFLEET VISION ® , POWERFLEET IQ ® , POWERFLEET YARD ® , VERIWISE IQ ® , didBOX ® , FREIGHTCAM, KEYTROLLER ® , REEFERMATE ® , POWERFLEET and DESIGN ® and CAMERA Design ® . Following the MiX Combination, we have additional trademarks for Mix Telematics, Mix Telematics – Logo, Matrix Vehicle Tracking Logo, Datatrak, Tracking. Simply Sorted, Beame Character Device, Beame Logo 2012, Beame Logo 2010, Mix-Drive, FM-WEB, Matrix – right by your side (2013 logo), Mix Vision, Mix Safedrive, FM Communicator, MIX ROVI, Beame Logo, Our Customers Are People, Not Vehicles, Tripmaster, Life Takes You Places, Matrix Brings you Home, MiX Intuition, Recovery. Simply Sorted, Geoloc Advanced Alert, MiX Now, Mix Recovery Protect, Mix Fleet Manager, Connected and Protected Fleet. We attempt to avoid infringing known proprietary rights of third parties in our product development and sales efforts. However, it is difficult to proceed with certainty in a rapidly evolving technological environment in which there may be numerous patent applications pending, many of which are confidential at the time of the application filing, with regard to similar technologies. If we were to discover that our products violate third-party proprietary rights, we may not be able to: ● obtain licenses to continue offering such products without substantial reengineering; ● re-engineer our products successfully to avoid infringement; ● obtain licenses on commercially reasonable terms, if at all; ● litigate an alleged infringement successfully; or ● settle without substantial expense and damage awards. Any claims against us relating to the infringement of third-party proprietary rights, even if without merit, could result in the expenditure of significant financial and managerial resources or in injunctions preventing us from distributing certain products. Such claims could materially adversely affect our business, financial condition and results of operations. Our software products are susceptible to unauthorized copying and uses that may go undetected, and policing such unauthorized use is difficult. In general, our efforts to protect our intellectual property rights through patent, copyright, trademark and trade secret laws and contractual safeguards may not be effective to prevent misappropriation of our technology, or to prevent the development and design by others of products or technologies similar to, or competitive with, those developed by us. Our failure or inability to protect our proprietary rights could materially and adversely affect our business, financial condition and results of operations. 10 Manufacturing We outsource our hardware manufacturing operations to contract manufacturers. This strategy enables us to focus on our core competencies - designing hardware and software systems and delivering solutions to customers - and avoid investing in capital-intensive electronics manufacturing infrastructure. Outsourcing also provides us with the ability to ramp up deliveries to meet increases in demand without increasing fixed expenses. Our manufacturers are responsible for obtaining the necessary components and supplies to manufacture our products. While components and supplies are generally available from a variety of sources, manufacturers generally depend on a limited number of suppliers. In the past, unexpected demand for communication products has caused worldwide shortages of certain electronic parts and allocation of such parts by suppliers that had an adverse impact on the ability of manufacturers to deliver products as well as on the cost of producing such products. Due to the general availability of manufacturers for our products, we do not believe that the loss of any of our manufacturers would have a long-term material adverse effect on our business, although there could be a short-term adverse effect on our business. We generally attempt to maintain sufficient inventory to meet customer demand for products, as well as to meet anticipated sales levels. If our product mix changes in unanticipated ways, or if sales for particular products do not materialize as anticipated, we may have excess inventory or inventory that becomes obsolete. In such cases, our operating results could be negatively affected. Government Regulations The use of radio emissions is subject to regulation in the United States by various federal agencies, including the Federal Communications Commission (the “FCC”) and the Occupational Safety and Health Administration. Various state agencies also have promulgated regulations which concern the use of lasers and radio/electromagnetic emissions standards. Regulatory changes in the United States and other countries in which we may operate in the future could require modifications to some of our products in order for us to continue manufacturing and marketing our products in those areas. Our products intentionally transmit radio signals, including narrow band and spread spectrum signals, as part of their normal operation. We have obtained certification from the FCC for our products that require certification. Users of these products in the United States do not require any license from the FCC to use or operate our products. To market and sell our integrated wireless solutions in the European Union, we also utilize unlicensed radio spectra and have obtained the required European Norm certifications. In addition, some of our operations use substances regulated under various federal, state and local laws governing the environment and worker health and safety, including those governing the discharge of pollutants into the ground, air and water, the management and disposal of hazardous substances and wastes and the cleanup of contaminated sites. Certain of our products are subject to various federal, state and local laws governing chemical substances in electronic products. The adoption of unfavorable regulations, or unfavorable interpretations of existing regulations by courts or regulatory bodies, could require us to incur significant compliance costs, cause the development of the affected markets to become impractical or otherwise adversely affect our ability to produce or market our products. Since 1996, our subsidiary Pointer Telocation Ltd. (“Pointer”) has held an operational license, which is renewed on a regular basis, from the Ministry of Communications in Israel to operate our wireless messaging system over 2 MHz in the 966 to 968 MHz radio spectrum band. It also obtains licenses from the Israeli Ministry of Communications in order to manufacture, import, market and sell its products in Israel. Our subsidiary Pointer Argentina S.A. (“Pointer Argentina”) obtains domestic licenses for the deployment of our SVR operation in Argentina and local operators are required to obtain a specific license for their operations. We are currently registered by the Federal Department of Security in Mexico to provide our services. 11 Certain of our South African subsidiaries, including Pointer SA (PTY) Ltd. (“Pointer South Africa”), are currently registered as security service providers under the Private Security Industry Regulation Act, 2001 in South Africa. Our products are also listed with the Independent Communications Authority of South Africa. While the use of our cellular monitoring units does not require regulatory approvals, in Israel, the use of our radio frequency products is subject to regulatory approvals from government agencies. In general, applications for regulatory approvals to date have not been problematic. However, we cannot guarantee that approvals already obtained are or will remain sufficient in the view of regulatory authorities indefinitely. Employees As of April 15, 2024 , we had 780 total employees globally, 100% of whom are full-time employees. We believe that our relationships with our employees are good. Recent Developments Higher interest rates and lingering inflation, fluctuations in currency values, continued supply chain disruptions, and ongoing geopolitical conflicts, such as the wars between Russia and Ukraine and between Israel and Hamas, 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. Other Information I.D. Systems, Inc. (“I.D. Systems”) was incorporated in the State of Delaware in 1993. Powerfleet, Inc. was incorporated in the State of Delaware in February 2019 for the purpose of effectuating the transactions pursuant to which we acquired Pointer (the “Pointer Merger”). Upon the closing of the Pointer Merger, Powerfleet became the parent entity of I.D. Systems and Pointer. Our primary website is www.powerfleet.com. We make available on this website, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish such information to, the SEC. Reports and other information we file with the SEC may also be viewed at the SEC’s website at www.sec.gov. We also make available on this website, free of charge, our Code of Ethics for Senior Financial Officers, which applies to our principal executive officer, principal financial officer and principal accounting officer. Item 1A. Risk Factors. In addition to the other information contained in this Form 10-K, the following risk factors should be considered carefully in evaluating the Company’s business. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. Additional risks not presently known to the Company or that the Company currently deems immaterial may also adversely affect our business, financial condition or results of operations. Risk Factor Summary Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this summary. These risks include, among others, the following: ● We may not realize the anticipated benefits and cost savings of the MiX Combination. ● Integrating our business and MiX Telematics’ business may be more difficult, time-consuming or costly than expected. ● The market price for shares of our common stock may decline as a result of the MiX Combination, including as a result of some of our stockholders adjusting their portfolios. ● The MiX Combination may not be accretive, and may be dilutive, to the combined company’s earnings per share, which may negatively affect the market price of shares of our common stock. ● We have incurred significant losses and have a substantial accumulated deficit. If we cannot achieve profitability, the market price of our common stock could decline significantly. ● The inability of our supply chain to deliver certain key components, such as semiconductors, could materially adversely affect our business, financial condition and results of operations. ● Our expansion into new products, services, and technologies subjects us to additional risks. ● If we are unable to keep up with rapid technological change, we may be unable to meet the needs of our customers, which could materially and adversely affect our financial condition and results of operations and reduce our ability to grow our market share. ● Inaccurate output from artificial intelligence could result in brand and reputation damage. ● We are subject to breaches of our information technology systems, which could damage our reputation, vendor, and customer relationships, and our customers’ access to our services. ● The industry in which we operate is highly competitive, and competitive pressures from existing and new companies could have a material adverse effect on our financial condition and results of operations. ● We may not be able to successfully execute our strategic initiatives or meet our long-term financial goals. ● We are an international company and may be susceptible to a number of political, economic and geographic risks that could harm our business. ● Conditions and changes in the global economic environment may adversely affect our business and financial results. ● The international scope of our business exposes us to risks associated with foreign exchange rates. ● We may need to obtain additional capital to fund our operations that could have negative consequences on our business. ● If the market for our technology does not develop or become sustainable, expands more slowly than we expect or becomes saturated, our revenues will decline and our financial condition and results of operations could be materially and adversely affected. 12 ● We rely significantly on channel partners to sell our products, and disruptions to, or our failure to develop and manage our channel partners would harm our business. ● If we are unable to protect our intellectual property rights, our financial condition and results of operations could be materially and adversely affected. ● We have been, and may continue to become, involved in intellectual property disputes that could subject us to significant liability and divert the time and attention of our management and prevent us from selling our products. ● Our Israeli subsidiaries have incurred significant indebtedness. ● The terms of the A&R Credit Agreement restrict Powerfleet Israel’s and Pointer’s current and future operations, particularly their ability to respond to changes or take certain actions. ● In connection with the MiX Combination, we have incurred significant additional indebtedness to finance the redemption of our Series A preferred stock. ● The restatement of our previously issued consolidated financial statements and the related analysis and ongoing remedial measures have been time-consuming and expensive and could expose us to additional risks that could materially adversely affect our financial position, results of operations and cash flows. ● In connection with the preparation of our annual financial statements for the fiscal year ended December 31, 2023, we identified material weaknesses in our internal control over financial reporting. Any failure to maintain effective internal control over financial reporting could harm us. ● We rely on subcontractors to manufacture and deliver our products. ● Our manufacturers rely on a limited number of suppliers for several significant components used in our products. ● The federal government or independent standards organizations may implement significant regulations or standards that could adversely affect our ability to produce or market our products. ● Because our products are complex, they may have undetected errors or failures when they are introduced, which could seriously harm our business, and our product liability insurance may not adequately protect us. ● Changes in practices of insurance companies in the markets in which we provide and sell our SVR services and products could adversely affect our revenues and growth potential. ● A decline in sales of consumer or commercial vehicles in the markets in which we operate could result in reduced demand for our products and services. ● A reduction in vehicle theft rates may adversely impact demand for our SVR services and products. ● The increasing availability of handheld general packet radio service GPRS devices may reduce the demand for our products for small fleet management. ● The use of our products is subject to international regulations. ● The adoption of industry standards that do not incorporate the technology we use may decrease or eliminate the demand for our services or products and could harm our results of operations. ● Our financial statements may not reflect certain payments we may be required to make to employees. ● Some of our employees in our subsidiaries are members of labor unions and a dispute between us and any such labor union could result in a labor strike that could delay or preclude altogether our ability to generate revenues in the markets where such employees are located. ● Under the current laws in jurisdictions in which we operate, we may not be able to enforce non-compete covenants and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees. ● Manufacturing of many of our products is highly complex, and an interruption by suppliers, subcontractors or vendors could adversely affect our business, financial condition or results of operations. ● If we lose our executive officers, or are unable to recruit additional personnel, our ability to manage our business could be materially and adversely affected. ● We provide financing to our customers for the purchase of our products, which may increase our credit risks in the event of a deterioration in a customer’s financial condition or in global credit conditions. ● Our cash and cash equivalents could be adversely affected by a downturn in the financial and credit markets. ● Goodwill impairment or intangible impairment charges may affect our results of operations in the future. ● We have operations located in Israel, and therefore our results may be adversely affected by political, military and economic conditions in Israel. ● Many of our employees in Israel are required to perform military reserve duty. ● Economic uncertainty and volatility in Mexico may adversely affect our business. ● Fluctuations in the value of the South African Rand may have a significant impact on our reported revenue and results of operations, which may make it difficult to evaluate our business performance between reporting periods. ● If we do not achieve applicable Broad-Based Black Economic Empowerment objectives in our South African businesses, we risk not being able to renew certain of our existing contracts which service South African government and quasi-governmental customers, as well as not being awarded future corporate and governmental contracts, each of which would result in the loss of revenue. ● Socio-economic inequality in South Africa or regionally may subject us to political and economic risks, which may affect the ownership or operation of our business. ● The concentration of common stock ownership among our executive officers and directors could limit the ability of other stockholders of the Company to influence the outcome of corporate transactions or other matters submitted for stockholder approval. ● Future sales of our common stock, including sales of our common stock acquired upon the exercise of outstanding options, may cause the market price of our common stock to decline. ● Our Amended and Restated Certificate of Incorporation, as amended provides that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between us and our stockholders, which could limit stockholders’ ability to obtain a judicial forum viewed by the stockholders as more favorable for disputes with us or our directors, officers or employees, and the enforceability of the exclusive forum provision may be subject to uncertainty. ● Provisions of Delaware law or the Charter could delay or prevent an acquisition of the Company, even if the acquisition would be beneficial to our stockholders and could make it more difficult for stockholders to change our management. 13 Risks Related to Our Business We may not realize the anticipated benefits and cost savings of the MiX Combination. The success of the MiX Combination will depend, in part, on our ability to realize the anticipated benefits and cost savings from combining the two businesses. Our ability to realize these anticipated benefits and cost savings is subject to certain risks, including, among others: ● the parties’ ability to successfully combine their respective businesses; ● the risk that the combined businesses will not perform as expected; ● the extent to which the parties will be able to realize the expected synergies, which include realizing potential savings from re-assessing priority assets and aligning investments, eliminating duplication and redundancy, adopting an optimized operating model between both companies and leveraging scale, and creating value resulting from the combination of the two businesses; ● the possibility that the aggregate consideration being paid for MiX Telematics is greater than the value we will derive from the MiX Combination; ● the possibility that the combined company will not achieve the unlevered free cash flow that the parties have projected; ● the incurrence of additional indebtedness in connection with the MiX Combination and the resulting limitations placed on the combined company’s operations; and ● the assumption of known and unknown liabilities of MiX Telematics, including potential tax and employee-related liabilities. If we are not able to successfully integrate the businesses within the anticipated time frame, or at all, the anticipated cost savings, synergies operational efficiencies and other benefits of the MiX Combination may not be realized fully or may take longer to realize than expected, and the combined company may not perform as expected. Integrating our business and MiX Telematics’ business may be more difficult, time-consuming or costly than expected. We and MiX Telematics have operated independently prior to completion of the MiX Combination on April 2, 2024, and there can be no assurances that our businesses can be integrated successfully. It is possible that the integration process could result in the loss of key employees, the disruption of our company’s ongoing business or unexpected integration issues, such as higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. Specifically, issues that must be addressed in integrating the operations of our company and MiX Telematics in order to realize the anticipated benefits of the MiX Combination so that the combined business performs as expected include, among others: ● combining the companies’ separate operational, financial, reporting and corporate functions; ● integrating the companies’ technologies, products and services; ● identifying and eliminating redundant and underperforming operations and assets; ● harmonizing the companies’ operating practices, employee development, compensation and benefit programs, internal controls and other policies, procedures and processes; ● addressing possible differences in corporate cultures and management philosophies; ● maintaining employee morale and retaining key management and other employees; ● attracting and recruiting prospective employees; ● consolidating the companies’ corporate, administrative and information technology infrastructure; ● coordinating sales, distribution and marketing efforts; ● managing the movement of certain businesses and positions to different locations; ● maintaining existing agreements with customers and vendors and avoiding delays in entering into new agreements with prospective customers and vendors; ● coordinating geographically dispersed organizations; and ● effecting potential actions that may be required in connection with obtaining regulatory approvals. In addition, at times, the attention of certain members of our management and our resources may be focused on the integration of the businesses of the two companies and diverted from day-to-day business operations, which may disrupt our ongoing business and, consequently, the business of the combined company. The market price for shares of our common stock may decline as a result of the MiX Combination, including as a result of some of our stockholders adjusting their portfolios. The market value of our common stock at the time of consummation of the MiX Combination varied significantly from the prices of our common stock on the date the Implementation Agreement was executed, the date of our special meeting of stockholders relating to the MiX Combination and the closing date of the MiX Combination. The market price of our common stock may decline if, among other things, the operational cost savings estimates in connection with the integration of ours and MiX Telematics’ businesses are not realized, or if the costs related to the MiX Combination are greater than expected. The market price also may decline if we do not achieve the perceived benefits of the MiX Combination as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the MiX Combination on our financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts. In addition, sales of our common stock by our stockholders after the completion of the MiX Combination may cause the market price of our common stock to decrease. Shareholders of MiX Telematics may decide not to hold the shares of our common stock that they received in the MiX Combination. Certain of our other stockholders, such as funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell the shares of our common stock that they received in the MiX Combination. Such sales of our common stock could have the effect of depressing the market price for our common stock and may take place promptly following the MiX Combination. Any of these events may make it more difficult for us to sell equity or equity-related securities and have an adverse impact on the price of our common stock. The MiX Combination may not be accretive, and may be dilutive, to the combined company’s earnings per share, which may negatively affect the market price of shares of our common stock. We currently believe the MiX Combination will result in a number of benefits, including cost savings, operating efficiencies, and stronger demand for our products and services, and that the MiX Combination will be accretive to our earnings. This belief is based, in part, on preliminary current estimates that may materially change. In addition, future events and conditions, including adverse changes in market conditions, additional transaction and integration-related costs and other factors such as the failure to realize some or all of the anticipated benefits of the MiX Combination, could decrease or delay the accretion that is currently anticipated or could result in dilution. Any dilution of, or decrease in or delay of any accretion to, the combined company’s earnings per share could cause the price of shares of our common stock to decline or grow at a reduced rate. 14 We have incurred significant losses and have a substantial accumulated deficit. If we cannot achieve profitability, the market price of our common stock could decline significantly. As of December 31, 2023, we had cash (including restricted cash) and cash equivalents of $19.3 million and working capital of $23.5 million. Our primary sources of cash are cash flows from the sales of 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. We incurred net losses of approximately $22.1 million (as restated), $16.9 million (as restated) and $17.3 million for the years ended December 31, 2021, 2022 and 2023, respectively, and have incurred additional net losses since inception. At December 31, 2023, we had an accumulated deficit of approximately $146.3 million. Our ability to increase our revenues from the sale of our solutions will depend on our ability to successfully implement our growth strategy and the continued expansion of our markets. If our revenues do not grow or if our operating expenses continue to increase, we may not be able to become profitable and the market price of our common stock could decline. The inability of our supply chain to deliver certain key components, such as semiconductors, could materially adversely affect our business, financial condition and results of operations. Our products contain a significant number of components that we source globally. If our supply chain fails to deliver products to us in sufficient quality and quantity on a timely basis, we will be challenged to meet our customer order delivery timelines and could incur significant additional expenses for expedited freight and other related costs. Similarly, many of our customers are dependent on an ever-greater number of global suppliers to manufacture their products. These global supply chains have continued to be adversely impacted by events outside of our control, including macroeconomic events, trade restrictions, economic recessions and ongoing geopolitical conflicts. Over the past two years, we have experienced delays in supply chain deliveries, extended lead times and shortages of key components, some raw material cost increases and slowdowns at certain production facilities. These disruptions have delayed and may continue to delay the timing of some orders and expected deliveries of our products, which has impacted our business and results of operations. Many of the products we supply are reliant on semiconductors. Globally, there is an ongoing significant shortage of semiconductors. The semiconductor supply chain is complex, with capacity constraints occurring throughout. We have and will continue to work closely with our suppliers and customers to minimize any potential adverse impacts of the global semiconductor chip shortage and monitor the availability of semiconductor chips and other key components, customer production schedules and any other supply chain inefficiencies that may arise. However, if we are not able to mitigate the impact of the semiconductor chip shortage semiconductor shortage impact, any direct or indirect supply chain disruptions may have a material adverse impact on our business, financial condition and results of operations. Our expansion into new products, services, and technologies subjects us to additional risks. We may have limited or no experience in our newer market segments, and our customers may not adopt our product or service offerings. These offerings, which can present new and difficult technology challenges, may subject us to claims if customers of these offerings experience service disruptions or failures or other quality issues. In addition, profitability, if any, in our newer activities may not meet our expectations, and we may not be successful enough in these newer activities to recoup our investments in them. Failure to realize the benefits of amounts we invest in new technologies, products, or services could result in the value of those investments being written down or written off. 15 If we are unable to keep up with rapid technological change, we may be unable to meet the needs of our customers, which could materially and adversely affect our financial condition and results of operations and reduce our ability to grow our market share. Our market is characterized by rapid technological change and frequent new product announcements. Significant technological changes could render our existing technology obsolete. We are active in the research and development of new products and technologies and in enhancing our current products. However, research and development in our industry is complex and filled with uncertainty. For example, it is common for research and development projects to encounter delays due to unforeseen problems, resulting in low initial volume production, fewer product features than originally considered desirable and higher production costs than initially budgeted, any of which may result in lost market opportunities. In addition, these new products may not adequately meet the requirements of the marketplace and may not achieve any significant degree of market acceptance. If our efforts do not lead to the successful development, marketing and release of new products that respond to technological developments or changing customer needs and preferences, our revenues and market share could be materially and adversely affected. We may expend a significant amount of resources in unsuccessful research and development efforts. In addition, new products or enhancements by our competitors may cause customers to defer or forego purchases of our products. Any of the foregoing could materially and adversely affect our financial condition and results of operations and reduce our ability to grow our market share. Inaccurate output from artificial intelligence could result in brand and reputation damage. Artificial intelligence (“AI”) is being integrated into a number of our solutions and/or products and could be a significant factor in future service offerings. While AI can present significant benefits, it also presents risks and challenges to our business. Data sourcing, technology, integration and process issues, program bias into decision-making algorithms, security challenges and the protection of personal privacy could impair the adoption and acceptance of AI solutions. If the output from AI solutions are deemed to be inaccurate or questionable, our brand and reputation may be harmed and we may potentially be subject to legal liability claims. We are subject to breaches of our information technology systems, which could damage our reputation, vendor, and customer relationships, and our customers’ access to our services. Our business operations require that we use and store sensitive data, including intellectual property and proprietary business information in our secure data centers and on our networks. We face a number of threats to our data centers and networks in the form of unauthorized access, security breaches and other system disruptions. It is critical to our business strategy that our infrastructure remains secure and is perceived by customers and partners to be secure. We require usernames and passwords in order to access our information technology systems. We also use encryption and authentication technologies to secure the transmission and storage of data. Despite our security measures, our information technology systems have been, and may continue to be, subject to cybersecurity threats and incidents. Any such security breach may compromise information used or stored on our networks and may result in significant data losses or theft of our, our customers’, or our business partners’ intellectual property or proprietary business information. A cybersecurity breach could negatively affect our reputation by adversely affecting the market’s perception of the security or reliability of our products or services. In addition, a cyber-attack could result in other negative consequences, including remediation costs, disruption of internal operations, increased cybersecurity protection costs, lost revenues or litigation, which could have a material adverse effect on our business, results of operations and financial condition. The industry in which we operate is highly competitive, and competitive pressures from existing and new companies could have a material adverse effect on our financial condition and results of operations. The industry in which we operate is highly competitive and influenced by the following: ● advances in technology; ● new product introductions; ● evolving industry standards; ● product improvements; ● rapidly changing customer needs; ● intellectual property invention and protection; ● marketing and distribution capabilities; ● ability to attract and retain highly skilled professionals; ● competition from highly capitalized companies; ● entrance of new competitors; ● ability of customers to invest in information technology; and ● price competition. 16 The products marketed by us and our competitors are becoming more complex. As the technological and functional capabilities of future products increase, these products may begin to compete with products being offered by traditional computer, network and communications industry participants that have substantially greater financial, technical, marketing and manufacturing resources than we do. Although we are not aware of any current competitors that provide the precise capabilities of our systems, we are aware of competitors that offer similar approaches to address the customer needs that our products address. Those companies include both emerging companies with limited operating histories and companies with longer operating histories, greater name recognition and/or significantly greater financial, technical and marketing resources than ours. We attempt to differentiate our solutions by continuing to innovate and by offering a choice of communication mode, patented battery management technology, sensor options, and installation configurations. If we do not keep pace with product and technology advances, including the development of superior products by our competitors, or if we are unable to otherwise compete successfully against our competitors, there could be a material adverse effect on our competitive position, revenues and prospects for growth. As a result, our financial condition and results of operations could be materially and adversely affected. We may not be able to successfully execute our strategic initiatives or meet our long-term financial goals. We have been engaged in strategic initiatives to focus on our core business to maximize long-term stockholder value, to improve our cost structure and efficiency and to increase our selling efforts and developing new business. We cannot provide any assurance that we will be able to successfully execute these or other strategic initiatives or that we will be able to execute these initiatives on our expected timetable. We may not be successful in focusing our core business and obtaining operational efficiencies or replacing revenues lost as a result of these strategic initiatives. We are an international company and may be susceptible to a number of political, economic and geographic risks that could harm our business. We are dependent on sales to customers outside the United States. Our international sales are likely to account for a significant percentage of our products and services revenue for the foreseeable future. As a result, the occurrence of any international, political, economic or geographic event (for example, continued global supply chain disruptions, inflation and other cost increases, and the conflict between Russia and Ukraine and between Israel and Hamas) could result in a significant decline in our revenue. In addition, compliance with complex foreign and U.S. laws and regulations that apply to our international operations will increase our cost of doing business in international jurisdictions. These numerous and sometimes conflicting laws and regulations include internal control and disclosure rules, data privacy and filtering requirements, anti-corruption laws, such as the Foreign Corrupt Practices Act, and other local laws prohibiting corrupt payments to governmental officials, and anti-competition regulations, among others. Violations of these laws and regulations could result in fines and penalties, criminal sanctions against us, our officers, or employees, prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries, and could also materially affect our brand, international expansion efforts, ability to attract and retain employees, business, and operating results. Although we plan to implement policies and procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our employees, contractors, or agents will not violate our policies. 17 Some of the risks and challenges of doing business internationally include: ● unexpected changes in regulatory requirements; ● fluctuations in international currency exchange rates including its impact on unhedgeable currencies and our forecast variations for hedgeable currencies; ● imposition of tariffs and other barriers and restrictions; ● management and operation of an enterprise spread over various countries; ● the burden of complying with a variety of laws and regulations in various countries; ● application of the income tax laws and regulations of multiple jurisdictions, including relatively low-rate and relatively high-rate jurisdictions, to our sales and other transactions, which results in additional complexity and uncertainty; ● the conduct of unethical business practices in certain developing countries; ● general economic and geopolitical conditions, including inflation and trade relationships; ● war and acts of terrorism; ● kidnapping and high crime rate; ● natural disasters or pandemics (for example, the COVID-19 pandemic); ● availability of U.S. dollars especially in countries with economies highly dependent on resource exports, particularly oil; and ● changes in export regulations. While these factors and the impacts of these factors are difficult to predict, any one or more of them could adversely affect our business, financial condition and results of operations in the future. Conditions and changes in the global economic environment may adversely affect our business and financial results. The global economy continues to be adversely affected by stock market volatility, tightening of credit markets, concerns of inflation, adverse business conditions and liquidity concerns, as well as recent bank failures. These events and the related uncertainty about future economic conditions could negatively impact our customers and, among other things, postpone their decision-making, decrease their spending and jeopardize or delay their ability or willingness to make payment obligations, any of which could adversely affect our business and results of operations. Uncertainty about current global economic conditions, in particular as a result of the continued global supply chain disruptions, inflation and other cost increases, and the conflicts between Russia and Ukraine and between Israel and Hamas, and recent bank failures, could also cause volatility of our stock price. During periods of economic downturns, our customers may decrease their demand for wireless technology solutions, as well as the maintenance, support and consulting services we provide. This slowdown may have an adverse effect on the wireless solutions industry in general and on demand for our products and services, but the magnitude of that impact is uncertain. Our future growth is dependent, in part, upon the demand for our products and services. Prolonged weakness in the economy may cause business enterprises to delay or cancel wireless solutions projects, reduce their overall wireless solutions budgets and/or reduce or cancel orders for our services. This, in turn, may lead to longer sales cycles, delays in purchase decisions, and payment and collection issues, and may also result in price pressures, causing us to realize lower revenues and operating margins. Additionally, if our customers cancel or delay their wireless solutions initiatives, our business, financial condition and results of operations could be materially and adversely affected. If the current uncertainty in the general economy does not change or continue to improve, our business, financial condition and results of operations could be harmed. 18 The international scope of our business exposes us to risks associated with foreign exchange rates. We report our financial results in U.S. dollars. However, a significant portion of our net sales, assets, indebtedness and other liabilities, and costs are denominated in foreign currencies. These currencies include, among others, the Euro, Israeli shekel, British pound sterling, Mexican peso, Argentine peso, Brazilian real and South African rand. In addition, several emerging market economies are particularly vulnerable to the impact of rising interest rates, inflationary pressures, and large external deficits. Risks in one country can limit our opportunities for growth and negatively affect our operations in another country or countries. As a result, any such unfavorable conditions or developments could have an adverse impact on our operations. Our results of operations and, in some cases, cash flows, have in the past been, and may in the future be, adversely affected by movements in exchange rates. In addition, we may also be exposed to credit risks in some of those markets. We may implement currency hedges or take other actions intended to reduce our exposure to changes in foreign currency exchange rates. If we are not successful in mitigating the effects of changes in exchange rates on our business, any such changes could materially impact our results. We may need to obtain additional capital to fund our operations that could have negative consequences on our business. We may require additional capital in the future to develop and commercialize additional products and technologies or take advantage of other opportunities that may arise, including potential acquisitions. We may seek to raise the necessary funds through public or private equity offerings, debt financings, additional operating improvements, asset sales or strategic alliances and licensing arrangements. To the extent we raise additional capital by issuing equity securities, our existing stockholders may experience substantial dilution. In addition, we may be required to relinquish rights to our technologies or systems, or grant licenses on terms that are not favorable to us in order to raise additional funds through strategic alliance, joint venture and licensing arrangements. We cannot provide assurance that the additional sources of funds will be available, or if available, would have reasonable terms. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of our development programs, and our business, financial condition, results of operations and stock price could be materially and adversely affected. If the market for our technology does not develop or become sustainable, expands more slowly than we expect or becomes saturated, our revenues will decline and our financial condition and results of operations could be materially and adversely affected. Our success is highly dependent on the continued market acceptance of our solutions. The market for our products and services is new and rapidly evolving. If the market for our products and services does not become sustainable, or becomes saturated with competing products or services, our revenues will decline and our financial condition and results of operations could be materially and adversely affected. We rely significantly on channel partners to sell our products, and disruptions to, or our failure to develop and manage our channel partners would harm our business. Recruiting and retaining qualified channel partners and training them in our technology and product offerings requires significant time and resources. In order to develop and expand our distribution channel, we must continue to scale and improve our processes and procedures that support our channel, including investment in systems and training. Those processes and procedures may become increasingly complex and difficult to manage as we grow our organization. We have no minimum purchase commitments from any of our channel partners, and our contracts with these channel partners do not prohibit them from offering products or services that compete with ours. Our competitors may provide incentives to existing and potential channel partners to favor their products or to prevent or reduce sales of our products. Our channel partners may choose not to offer our products exclusively or at all. Establishing relationships with channel partners who have a history of selling our competitors’ products may also prove to be difficult. Our failure to establish and maintain successful relationships with channel partners would harm our business and operating results. 19 If we are unable to protect our intellectual property rights, our financial condition and results of operations could be materially and adversely affected. We rely on a combination of patents, copyrights, trademarks, trade secrets and contractual measures to protect our intellectual property rights. Third parties may seek to challenge, invalidate, circumvent or render unenforceable any patents or proprietary rights owned by us. If such challenges are successful, our business will be materially and adversely affected. Our employees, consultants and advisors enter into confidentiality agreements with us that prohibit the disclosure or use of our confidential information. We also have entered into confidentiality agreements to protect our confidential information delivered to third parties for research and other purposes. Despite these efforts, we cannot assure you that we will be able to effectively enforce these agreements or our confidential information will not be disclosed, that others will not independently develop substantially equivalent confidential information and techniques or otherwise gain access to our confidential information or that we can meaningfully protect our confidential information. Disputes may arise in the future with respect to the ownership of rights to any technology developed with advisors or collaborators. These and other possible disagreements could lead to delays in the collaborative research, development or commercialization of our systems, or could require or result in costly and time-consuming litigation that may not be decided in our favor. Any such event could materially and adversely affect our financial condition and results of operations. Policing the unauthorized use of our intellectual property is difficult, and we cannot assure you that the steps we have taken will prevent unauthorized use of our technology or other intellectual property, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. Accordingly, we may not be able to protect our proprietary rights against unauthorized third party copying or use. If we are unsuccessful in protecting our intellectual property, we may lose any technological advantages we have over competitors and our financial condition and results of operations could be materially and adversely affected. We have been, and may continue to become, involved in intellectual property disputes that could subject us to significant liability, divert the time and attention of our management and prevent us from selling our products, any of which could materially and adversely affect our financial condition and results of operations. In recent years, there has been significant litigation in the United States and internationally involving claims of alleged infringement of patents and other intellectual property rights. Litigation has been, and may continue to be, necessary to enforce our intellectual property rights, defend ourselves against alleged infringement and determine the scope and validity of our intellectual property rights. Any such litigation, whether or not successful, could result in substantial costs, divert the time and attention of our management and prevent us from selling our products. If a claim of patent infringement was decided against us, we could be required to, among other things: ● pay substantial damages to the party making such claim; ● stop selling, making, having made or using products or services that incorporate the challenged intellectual property; ● obtain from the holder of the infringed intellectual property right a license to sell, make or use the relevant technology, which license may not be available on commercially reasonable terms, or at all; or ● redesign those products or services that incorporate such intellectual property. The failure to obtain the necessary licenses or other rights could preclude the sale, manufacture or distribution of our products and could materially and adversely affect our financial condition and results of operations. 20 Our Israeli subsidiaries have incurred significant indebtedness. On March 18, 2024, Powerfleet Israel Ltd. (“Powerfleet Israel”) and Pointer entered into an amended and restated credit agreement (the “A&R Credit Agreement”), with Bank Hapoalim B.M. (“Hapoalim”), which refinanced the facilities under, and amended and restated, the prior credit agreement, dated August 19, 2019 (as amended, the “Prior Credit Agreement”). The A&R Credit Agreement provides Powerfleet Israel with two senior secured term loan facilities denominated in New Israeli Shekel (“NIS”) in an aggregate principal amount of $30 million (comprised of two facilities in the aggregate principal amounts of $20 million and $10 million, respectively (“Facility A” and “Facility B,” respectively, and collectively, the “Term Facilities”)), and two revolving credit facilities to Pointer in an aggregate principal amount of $20 million (comprised of two revolvers in the aggregate principal amounts of $10 million and $10 million, respectively (“Facility C” and “Facility D,” respectively, and, collectively, the “Revolving Facilities” and, together with the Term Facilities, the “Credit Facilities”)). The outstanding amount under the facilities made available pursuant to the Prior Credit Agreement was approximately NIS 40.1 million, or $11.1 million, as of December 31, 2023. On March 18, 2024, Powerfleet Israel drew down $30 million in cash under the Term Facilities and used the proceeds to prepay approximately $11.2 million, representing the remaining outstanding balance, of the term loans extended to Powerfleet Israel under the Prior Credit Agreement and distributed the remaining proceeds to Powerfleet. Such indebtedness will have the effect, among other things, of reducing Powerfleet Israel’s and Pointer’s flexibility to respond to changing business and economic conditions, will increase our borrowing costs and, because such indebtedness is subject to floating interest rates and exposed to foreign currency fluctuations, may increase Powerfleet Israel’s and Pointer’s vulnerability to fluctuations in market interest and foreign exchange rates. The A&R Credit Agreement continues to require Powerfleet Israel and Pointer to satisfy various covenants, including negative covenants that directly or indirectly restrict our ability to engage in certain transactions without the consent of the lender. The indebtedness continues to be secured by first ranking and exclusive fixed and floating charges, including by Powerfleet Israel over the entire share capital of Pointer and by Pointer over all of its assets, as well as cross guarantees between Powerfleet Israel and Pointer. This may also make it more difficult for us to engage in future transactions without the consent of the lender. The increased levels of indebtedness could also reduce funds available to engage in investments in product development, capital expenditures and other activities and may create competitive disadvantages for us relative to other companies with lower debt levels. We may be required to raise additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes. Our ability to arrange additional financing will depend on, among other factors, our financial position and performance, as well as prevailing market conditions and other factors beyond its control. We cannot assure you that we will be able to obtain additional financing on terms acceptable to us or at all. The terms of the A&R Credit Agreement restrict Powerfleet Israel’s and Pointer’s current and future operations, particularly their ability to respond to changes or to take certain actions. The A&R Credit Agreement contains a number of restrictive covenants that impose significant operating and financial restrictions on Powerfleet Israel and Pointer and limits their ability to engage in acts that may be in their long-term best interest, including restrictions on their ability to: ● incur or guarantee additional indebtedness; ● incur liens; ● sell or otherwise dispose of assets; ● enter into transactions with affiliates; and ● enter into new lines of business. The A&R Credit Agreement also limits the ability of Powerfleet Israel and Pointer to consolidate or merge with or into another person. 21 In addition, the covenants in the A&R Credit Agreement require Powerfleet Israel and Pointer to maintain specified financial ratios, tested quarterly. Their ability to meet those financial ratios can be affected by events beyond their control, and they may be unable to meet them. A breach of the covenants or restrictions under the A&R Credit Agreement could result in an event of default, which may allow the lender to accelerate the indebtedness thereunder. In addition, an event of default under the A&R Credit Agreement would permit the lender to terminate all commitments to extend further credit pursuant to the Revolving Facilities. Furthermore, if Powerfleet Israel and Pointer are unable to repay the amounts due and payable under the A&R Credit Agreement, the lender could proceed against the collateral granted to it to secure the indebtedness under the A&R Credit Agreement. In the event the lender accelerates the repayment of borrowings, Powerfleet Israel and Pointer may not have sufficient assets to repay that indebtedness. As a result of these restrictions, we may be: ● limited in our flexibility in planning for, or reacting to, changes in our business and the markets we serve; ● unable to raise additional debt or equity financing to fund working capital, capital expenditures, new product development expenses and other general corporate requirements; or ● unable to compete effectively or to take advantage of new business or strategic acquisition opportunities. These restrictions may affect our ability to grow in accordance with our strategy. In connection with the MiX Combination, we have incurred significant additional indebtedness to finance the redemption of our Series A preferred stock. The closing of debt and/or equity financing in an amount sufficient to provide for the redemption in full in cash of all outstanding shares of our Series A Preferred Stock was a condition to closing the MiX Combination. On March 7, 2024, we, together with certain of our wholly owned subsidiaries, entered into a facilities agreement (the “Facilities Agreement”) with FirstRand Bank Limited (acting through its Rand Merchant Bank division) (“RMB”), pursuant to which RMB agreed to provide us with two term loan facilities in an aggregate principal amount of $85 million, the proceeds of which may be used to redeem all the outstanding shares of the Series A Preferred Stock and for general corporate purposes. On March 13, 2024, we drew down all $85 million available under such facilities. On April 2, 2024, concurrently with the closing of the MiX Combination, we used the net proceeds received from RMB and from incremental borrowing capacity as a result of the refinancing of Credit Facilities to redeem in full all of the outstanding shares of the Series A Preferred Stock. Such indebtedness will have the effect of, among other things, reducing our flexibility to respond to changing business and economic conditions, will increase our borrowing costs and, to the extent that such indebtedness is subject to floating interest rates, may increase our vulnerability to fluctuations in market interest rates. The increased levels of indebtedness could also reduce funds available to fund efforts to combine our and MiX Telematics’ businesses and realize expected benefits of the MiX Combination and/or engage in investments in product development, capital expenditures and other activities and may create competitive disadvantages for the combined company relative to other companies with lower debt levels. The restatement of our previously issued consolidated financial statements and the related analysis and ongoing remedial measures have been time consuming and expensive and could expose us to additional risks that could materially adversely affect our financial position, results of operations and cash flows. As discussed in the Explanatory Note to this Form 10-K and in Note 2 to our consolidated financial statements included in this Form 10-K, we have restated our previously issued audited consolidated financial statements for the fiscal years ended December 31, 2021 and 2022 and our unaudited consolidated financial statements covering each of the interim periods during the 2022 and 2023 fiscal years. These restatements have been, and the remediation efforts we have begun to undertake are and will be, time-consuming and expensive and could expose us to a number of additional risks that could materially adversely affect our financial position, results of operations and cash flows. 22 In particular, we have incurred significant expenses, including audit, legal, consulting and other professional fees, in connection with the restatement of our previously issued financial statements and the ongoing remediation of material weaknesses in our internal control over financial reporting. We are implementing and will continue to implement additional processes to address such material weaknesses utilizing existing resources and adding new resources as needed. To the extent these steps are not successful, we could be forced to incur additional time and expense. Our management’s attention has also been diverted from the operation of our business in connection with the restatements and ongoing remediation of material weaknesses in our internal controls. In addition, the restatements and related matters could impair our reputation and could cause our stakeholders to lose confidence in us, which could have an adverse effect on our business, results of operations, financial condition and stock price. In connection with the preparation of our annual financial statements for the fiscal year ended December 31, 2023, we identified material weaknesses in our internal control over financial reporting. Any failure to maintain effective internal control over financial reporting could harm us. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles. We identified material weaknesses in our internal control over financial reporting as of December 31, 2023, which have not been remediated (see Item 9A of this Form 10-K for more information). A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. Our management has concluded that material weaknesses in our internal control over financial reporting existed as of December 31, 2023 due to the lack of controls related to accounting for the redemption premium on convertible redeemable preferred stock, the determination of standalone selling price, capitalized software costs and the financial statement close process. We are still considering the full extent of the procedures to implement in order to remediate the material weaknesses described above. As part of the business combination with MiX Telematics, we expect to migrate our central corporate accounting function to MiX Telematics’ central corporate accounting function and team. Benefits from this migration will include: ● Implementation of a new enterprise resource planning (“ERP”) system; ● Access to a larger and highly qualified team; and ● Mature internal risk team who are responsible for ensuring systems, process and controls are clearly documented and widely understood and followed throughout the organization. The material weakness for the measurement and valuation of the convertible redeemable preferred stock that necessitated the need to restate prior period financial statements will not require remediation in 2024 as all of the outstanding shares of the Series A Preferred Stock were redeemed in full in April 2024. Additionally, the current remediation plan includes: (i) utilizing external resources to support our efforts to rework certain control gaps across the various processes in Israel and the United States with identified deficiencies; (ii) implementing enhanced documentation associated with management review controls and validation of the completeness and accuracy of key reports in Israel and the United States; and (iii) training relevant personnel to reinforce existing policies and enhancing policies with regard to appropriate steps and procedures required to be performed related to the execution and documentation of internal controls. We cannot assure you that any of our remedial measures will be effective in resolving this material weakness or that we will not suffer from other material weaknesses in the future. If our management is unable to conclude that we have effective internal control over financial reporting, or to certify the effectiveness of such controls, or if additional material weaknesses in our internal controls are identified in the future, we could be subject to regulatory scrutiny and a loss of public confidence, which could have a material adverse effect on our business and our stock price. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to manage our business effectively or accurately report our financial performance on a timely basis, which could cause a decline in our common stock price and adversely affect our results of operations and financial condition. 23 We rely on subcontractors to manufacture and deliver our products. Any quality or performance failures by our subcontractors or changes in their financial condition could disrupt our ability to supply quality products to our customers in a timely manner, resulting in business interruptions, increased costs, claims for damages, reputation damage and reduced revenue. In order to meet the requirements under our customer contracts, we rely on subcontractors to manufacture and deliver our products to our customers. Any quality or performance failures by our subcontractors or changes in their financial or business condition could disrupt our ability to supply quality products to our customers in a timely manner. If we are unable to fulfill orders from our customers in a timely manner, we could experience business interruptions, increased costs, damage to our reputation and loss of our customers. In addition, we may be subject to claims from our customers for failing to meet our contractual obligations. Although we have several sources for production, the inability to provide our products to our customers in a timely manner could result in the loss of customers and our revenues could be materially reduced. In addition, there is great competition for the most qualified and competent subcontractors. If we are unable to hire qualified subcontractors, the quality of our services and products could decline. Furthermore, third-party manufacturers in the electronic component industry are consolidating. The consolidation of third-party manufacturers may give remaining manufacturers greater leverage to increase the prices that they charge, thereby increasing our manufacturing costs. If this were to occur and we are unable to pass the increased costs onto our customers, our profitability could be materially and adversely affected. Our manufacturers rely on a limited number of suppliers for several significant components and raw materials used in our products. If we or our manufacturers are unable to obtain these components or raw materials on a timely basis, we will be unable to meet our customers’ orders, which could reduce our revenues, subject us to claims for damages and adversely affect our relationships with our customers. We rely on a limited number of suppliers for the components and raw materials used in our products. Although there are many suppliers for most of our component parts and raw materials, we are dependent on a limited number of suppliers for many of our significant components and raw materials. This reliance involves a number of significant risks, including: ● unavailability of materials and interruptions in delivery of components and raw materials from our suppliers, which could result in manufacturing delays; and ● fluctuations in the quality and price of components and raw materials. We currently do not have any long-term or exclusive purchase commitments with any of our suppliers. In addition, our suppliers may enter into exclusive arrangements with our competitors, be acquired by our competitors, or stop selling their products or components to us on commercially reasonable terms or at all. We may not be able to develop alternative sources for the components and raw materials. Even if alternate suppliers are available to us or our manufacturers, identifying them is often difficult and time consuming. If we or our manufacturers are unable to obtain an ample supply of product or raw materials from our existing suppliers or alternative sources of supply, we may be unable to satisfy our customers’ orders, which could reduce our revenues, subject us to claims for damages and adversely affect our relationships with our customers. 24 Because our products are complex, they may have undetected errors or failures when they are introduced, which could seriously harm our business, and our product liability insurance may not adequately protect us. Technical products like ours often contain undetected errors or failures when first introduced. Despite our efforts to eliminate these flaws, there still may be errors or failures in our products, even after the commencement of commercial shipments. We provide a reserve at the time of shipment, which may not be sufficient to cover actual repair costs. Because our products are used in business-critical applications, we could be subject to product liability claims if our systems fail to perform as intended. Even unsuccessful claims against us could result in costly litigation and the diversion of management’s time and resources and could damage our reputation and impair the marketability of our systems. Although we maintain insurance, there are no assurances that: ● our insurance will provide adequate coverage against potential liabilities if our products cause harm or fail to perform as promised; or ● adequate product liability insurance will continue to be available to us in the future on commercially reasonable terms or at all. If our insurance is insufficient to pay any product liability claims, our financial condition and results of operations could be materially and adversely affected. In addition, any such claims could permanently injure our reputation and customer relationships. Changes in practices of insurance companies in the markets in which we provide and sell our SVR services and products could adversely affect our revenues and growth potential. We depend on the practices of insurance companies in the markets in which we provide our SVR services and sell our SVR products. In Israel, which is our main SVR market, most of the insurance companies either mandate the use of SVR services and products for certain cars, or their equivalent, as a prerequisite for providing insurance coverage to owners of certain medium and high-end vehicles, or provide insurance premium discounts to encourage vehicle owners to subscribe to services and purchase products such as ours. Therefore, we rely on insurance companies’ continued practice of accepting vehicle location and recovery technology as a preferred security product. If any of these policies or practices changes, for regulatory or commercial reasons, or if market prices for these services fall, revenues from sales of our SVR services and products, primarily in Israel, could decline, which could adversely affect our revenues and growth potential. 25 A decline in sales of consumer or commercial vehicles in the markets in which we operate could result in reduced demand for our products and services. Our products are primarily installed before or immediately after the initial sale of private or commercial vehicles. Consequently, a reduction in sales of new vehicles could reduce our market for services and products. New vehicle sales may decline for various reasons, including inflation, an increase in new vehicle tariffs, taxes or gas prices, an increased difficulty in obtaining credit or financing in the applicable local or global economy, or the occurrence of natural disasters or public health crises, such as the COVID-19 pandemic. A decline in sales of new vehicles in the markets in which we operate could result in reduced demand for our services and products. A reduction in vehicle theft rates may adversely impact demand for our SVR services and products. Demand for our SVR services and products, depends primarily on prevailing or expected vehicle theft rates. Vehicle theft rates may decline as a result of various factors such as the availability of improved security systems, implementation of improved or more effective law enforcement measures, or improved economic or political conditions in markets that have high theft rates. If vehicle theft rates in some of, or entire of, our existing markets decline, or if insurance companies or our other customers believe that vehicle theft rates have declined or are expected to decline, demand for our SVR services and products may decline. The increasing availability of handheld GPRS devices may reduce the demand for our products for small fleet management. The increasing availability of low-cost handheld GPRS devices and smartphones may result in a decrease in the demand for our products by managers of small auto fleets or providers of low-level services. The availability of such devices has expanded considerably in recent years. Any such decline in demand for our products could cause a decline in our revenues and profitability. The use of our products is subject to international regulations. The use of our products is subject to regulatory approvals of government agencies in each of the countries in which our systems are operated, including Israel. Our operators typically must obtain authorization from each country in which our systems and products are installed. While in general, operators have not experienced problems in obtaining regulatory approvals to date, the regulatory schemes in each country are different and may change from time to time. We cannot guarantee that approvals, which our operators have obtained, will remain sufficient in the view of regulatory authorities. In addition, we cannot assure you that third party operators of our systems and products will obtain licenses and approvals in a timely manner in all jurisdictions in which we wish to sell our systems or that restrictions on the use of our systems will not be unduly burdensome. The adoption of industry standards that do not incorporate the technology we use may decrease or eliminate the demand for our services or products and could harm our results of operations. There are no established industry standards in all of the businesses in which we sell our products. For example, vehicle location devices may operate by employing various technologies, including network triangulation, GPS, satellite-based or network-based cellular or direction-finding homing systems. The development of industry standards that do not incorporate the technology we use may decrease or eliminate the demand for our services or products and we may not be able to develop new services and products that are in compliance with such new industry standards on a cost-effective basis. If industry standards develop and such standards do not incorporate our products and we are unable to effectively adapt to such new standards, such development could harm our results of operations. Our financial statements may not reflect certain payments we may be required to make to employees. In certain countries, we are not required to reflect future severance fees in our liabilities. In countries such as Argentina, Brazil and Mexico, companies do not generally dedicate amounts to potential future severance payments. Nonetheless, in such cases, companies must pay a severance payment in cash upon termination of employment. We also do not have a provision in our financial statements for potential future severance payments in the above countries and instead such expenses are recorded when such payments are actually made upon termination of employment. As a result, our financial statements may not adequately reflect possible future severance payments. 26 Some of our employees in our subsidiaries are members of labor unions and a dispute between us and any such labor union could result in a labor strike that could delay or preclude altogether our ability to generate revenues in the markets where such employees are located. Some of our employees in our subsidiaries are members of labor unions. If a labor dispute were to develop between us and our unionized employees, such employees could go on strike and we could suffer work stoppage for a significant period of time. A labor dispute can be difficult to resolve and may require us to seek arbitration for resolution, which can be time-consuming, distracting to management, expensive and difficult to predict. The occurrence of a labor dispute with our unionized employees could delay or preclude altogether our ability to generate revenues in the markets where such employees are located. In addition, labor disputes with unionized employees may involve substantial demands on behalf of the unionized employees, including substantial wage increases, which may not be correlated with our performance, thus impairing our financial results. Furthermore, labor laws applicable to our subsidiaries may vary and there is no assurance that any labor disputes will be resolved in our favor. Under the current laws in jurisdictions in which we operate, we may not be able to enforce non-compete covenants and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees. We currently have non-competition agreements with many of our employees. However, due to the difficulty of enforcing non-competition agreements globally, not all of our employees in foreign jurisdictions have such agreements. These agreements generally prohibit our employees, if they cease working for the Company, from directly competing with us or working for our competitors for a certain period of time following termination of their employment agreements. Israeli courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or its intellectual property. If we cannot demonstrate that harm would be caused to us, we may be unable to prevent our competitors from benefiting from the expertise of our former employees. In January 2023, the U.S. Federal Trade Commission (“FTC”) announced a Notice of Proposed Rulemaking for a broad ban on non-compete clauses between employers and workers and is currently seeking public comment on the proposed rule. Specifically, the proposed rule would make it illegal for an employer to, among other things, enter into or attempt to enter into a non-compete with a worker; maintain a non-compete with a worker; or represent to a worker, under certain circumstances, that the worker is subject to a non-compete. While we cannot predict whether or when the FTC’s proposed ban on non-compete arrangements will be implemented, or the impact that such ban will have on our operations if implemented, there is now increased uncertainty regarding the long-term enforceability of our non-competition agreements with employees in the United States. If the enforceability of non-competition agreements is affected by future lawmaking or regulatory action, it may impede our ability to ensure that former employees, who received training and experience through their employment with us, refrain from using their knowledge of our business and operations to compete with us. Manufacturing of many of our products is highly complex, and an interruption by suppliers, subcontractors or vendors could adversely affect our business, financial condition or results of operations. Many of our products are the result of complex manufacturing processes and are sometimes dependent on components with a limited source of supply. As a result, we can provide no assurances that supply sources will not be interrupted from time to time. Furthermore, our subcontractors or vendors may fail to obtain supply components and fail to deliver our products. As a result, a failure to deliver by our subcontractors or vendors can result in decreased revenues. Such interruption or delay of our suppliers to deliver components or interruption or delay of our vendors or subcontractors to deliver our products could affect our business, financial condition or results of operations. If we lose our executive officers, or are unable to recruit additional personnel, our ability to manage our business could be materially and adversely affected. We are dependent on the continued employment and performance of our executive officers. We currently do not have employment agreements with any of our executive officers. Like other companies in our industry, we face intense competition for qualified personnel. Many of our competitors have greater resources than we have to hire qualified personnel. Accordingly, if we are not successful in attracting or retaining qualified personnel in the future, our ability to manage our business could be materially and adversely affected. We provide financing to our customers for the purchase of our products, which may increase our credit risks in the event of a deterioration in a customer’s financial condition or in global credit conditions. We sell our products to a wide range of customers in the commercial and governmental sectors. We provide financing to customers for a portion of such sales which could be in the form of notes or leases receivable over two to five years. Although these customers are extended credit terms which are approved by us internally, our business could be materially and adversely affected in the event of a deterioration of the financial condition of one or more of our customers that results in such customers’ inability to repay us. This risk may increase during a general economic downturn affecting a large number of our customers or a widespread deterioration in global credit conditions, and in the event our customers do not adequately manage their businesses or properly disclose their financial condition. Our cash and cash equivalents could be adversely affected by a downturn in the financial and credit markets. We maintain our cash and cash equivalents with major financial institutions; however, our cash and cash equivalent balances with these institutions exceed the Federal Deposit Insurance Corporation insurance limits. While we monitor on a systematic basis the cash and cash equivalent balances in our operating accounts and adjust the balances as appropriate, these balances could be impacted if one or more of the financial institutions with which we deposit our cash and cash equivalents fails or is subject to other adverse conditions in the financial or credit markets. To date, we have experienced no loss of principal or lack of access to our invested cash or cash equivalents; however, we can provide no assurance that access to our invested cash and cash equivalents will not be affected if the financial institutions in which we hold our cash and cash equivalents fail or the financial and credit markets deteriorate. 27 Goodwill impairment or intangible impairment charges may affect our results of operations in the future. We test goodwill for impairment on an annual basis and more often if events occur or circumstances change that would likely reduce the fair value of a reporting unit to an amount below its carrying value. We also test for other possible intangible impairments if events occur or circumstances change that would indicate that the carrying amount of such intangible may not be recoverable. Any resulting impairment loss would be a non-cash charge and may have a material adverse impact on our results of operations in any future period in which we record a charge. Long-lived assets with determinable useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Such charges could have a material adverse effect on our results of operations in the period in which they are recorded. We have operations located in Israel, and therefore our results may be adversely affected by political, military and economic conditions in Israel. Our subsidiaries Powerfleet Israel and Pointer operate in Israel, and therefore our business and operations may be directly influenced by the political, economic and military conditions affecting Israel at any given time. A change in the security and political situation in Israel could have a material adverse effect on our business, operating results and financial condition. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors, including Hezbollah in Lebanon and Hamas in the Gaza Strip. In the last several years, these conflicts have involved missile strikes against civilian targets in various parts of Israel, particularly in southern Israel where Pointer’s main offices and manufacturing facility are located and have negatively affected business conditions in Israel. Most recently, on October 7, 2023, Hamas terrorists invaded southern Israel and launched missile strikes in a widespread terrorist attack on Israel. On the same day, the Israeli government declared that the country was at war and the Israeli military began to call up reservists for active duty, including a number of our Israeli employees, including members of the management team in Israel. As of the date of this report, the Israel-Hamas war remains ongoing and the conflict has had an adverse impact on, and may continue to adversely impact, our supply chain, our ability to manufacture and deliver products in Israel to customers and the stability of our Israeli workforce. In addition, political uprisings and conflicts in various countries in the Middle East, including Syria and Iraq, are affecting the political stability of those countries. It is not clear how this instability will develop and how it will affect the political and security situation in the Middle East. Furthermore, several countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities or political instability in the region continues or intensifies. These restrictions may limit materially our ability to obtain raw materials from these countries or sell our products to companies in these countries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could have a material adverse effect on our business, operating results and financial condition. Any downturn in the Israeli economy may also have a significant impact on our business. Israel’s economy has been subject to numerous destabilizing factors, including a period of rampant inflation in the early to mid-1980’s, low foreign exchange reserves, fluctuations in world commodity prices, military conflicts and civil unrest. The revenues of certain of our products and services may be adversely affected if fewer vehicles are used as a result of an economic downturn in Israel, an increase in use of mass transportation, an increase in vehicle related taxes, an increase in the imputed value of vehicles provided as a part of employee compensation or other macroeconomic changes affecting the use of vehicles. In addition, our SVR services significantly depend on Israeli insurance companies mandating subscription to a service such as the Company’s. If Israeli insurance companies cease to require such subscriptions, our business could be significantly adversely affected. We also rely on the renewal and retention of several operating licenses issued by certain Israeli regulatory authorities. Should such authorities fail to renew any of these licenses, suspend existing licenses, or require additional licenses, we may be forced to suspend or cease certain services we provide. Many of our employees in Israel are required to perform military reserve duty. All non-exempt male adult permanent residents of Israel under the age of 40, including some of Pointer’s employees, are obligated to perform military reserve duty and may be called to active duty under emergency circumstances. In the past there have been significant call ups of military reservists, and it is possible that there will be additional call-ups in the future. While Pointer has operated effectively despite these conditions in the past, we cannot assess the impact these conditions may have on it in the future, particularly if emergency circumstances occur. Our operations could be disrupted by the absence for a significant period of one or more of our key employees or a significant number of our other employees due to military service. Any disruption in our operations would harm our business. 28 Economic uncertainty and volatility in Mexico may adversely affect our business. Our subsidiaries Pointer Recuperacion Mexico S.A., de C.V. and Pointer Logistica y Monitoreo, S.A. de C.V. operate in Mexico, which has gradually experienced, since 2013, substantial decrease in the value of the Mexican peso against the U.S. dollar, together with growing inflation rates. The devaluation of the Mexican peso and rise in inflation rate has triggered demonstrations and heightened political tension. Severe devaluation may lead to future governmental actions, including actions to adjust the value of the Mexican peso, policies which may trigger further increases in inflation. There can be no assurance that inflation will not affect our business in Mexico in the future. In addition, any Mexican government’s actions to maintain economic stability, as well as public speculation about possible future actions, may contribute significantly to economic uncertainty in Mexico. Economic instability and or government imposition of exchange controls may also result in the disruption of the international foreign exchange markets and may limit our ability to transfer or convert pesos into U.S. dollars and other currencies. Such policies could destabilize the country and adversely and materially affect the economy, and thereby our business. Additionally, due to agreements with the Confederation of Workers of Mexico in Mexico and the country’s high inflation rate, we may be required to increase employee salaries at a rate which could adversely affect our business. Fluctuations in the value of the South African Rand may have a significant impact on our reported revenue and results of operations, which may make it difficult to evaluate our business performance between reporting periods. The majority of subscription agreements and operating expenses of our subsidiary, MiX Telematics, are incurred outside the United States and denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the South African Rand. Currency fluctuations, particularly those in respect of the South African Rand, may positively or negatively impact our reported income and expenses due to the effects of translating the functional currency of our foreign subsidiaries into our reporting currency of U.S. Dollars. If we do not achieve applicable Broad-Based Black Economic Empowerment objectives in our South African businesses, we risk not being able to renew certain of our existing contracts which service South African government and quasi-governmental customers, as well as not being awarded future corporate and governmental contracts, each of which would result in the loss of revenue. The South African government established a legislative framework for the promotion of Broad-Based Black Economic Empowerment (“B-BBEE”). Achievement of B-BBEE objectives is measured by a scorecard which establishes a weighting for the various components of B-BBEE which relates to: ● Ownership – measuring the share of Black ownership and corresponding rights in the business, including voting rights among others. ● Management Control – reflecting the percentage of Black people in managerial positions ranging from junior management upwards. ● Skills Development – measuring the amount of money that was spent on the training and development of Black people including amongst others short courses, bursaries and learnerships. ● Enterprise and Supplier Development (including Preferential Procurement) – with enterprise development measuring contributions to, and the development of small Black-owned businesses with the objective of enabling them to supply goods and services to the company in the future; with supplier development measuring contributions to, and the development of Black-owned suppliers to help grow their businesses; and with preferential procurement measuring the extent to which goods and services are procured from suppliers that are empowered and have a good B-BBEE rating; and ● Socio-Economic Development – assessing the initiatives that the company supports often to the benefit of groups of individuals and communities with the objective of promoting income-generating activities and sustainable access to the economy for these beneficiaries. The B-BBEE Codes have a continuous review process and are updated from time to time. Various amendments and clarifications with more onerous compliance requirements have been made over the years. It is important for us to make a meaningful contribution to the country, and we view the applicable B-BBEE objectives as an opportunity for us to ensure a brighter future for all, moreover in the context of the National Development Plan 2030. In addition, B-BBEE objectives are pursued, by and large, by requiring parties who contract with corporate, governmental and state-owned enterprises in South Africa to achieve B-BBEE compliance through satisfaction of the applicable scorecard. Parties improve their B-BBEE contributor level when contracting with businesses that have earned good B-BBEE contributor levels in relation to their scorecards. 29 Our subsidiary, MiX Telematics Enterprise SA (PTY) Ltd. (“MiX Enterprise”), engages with government and state-owned enterprises in tendering for business and is therefore required to maintain at least a certain B-BBEE contributor level to continue to provide the service. Currently, certain material end-customers require MiX Enterprise to maintain at least a B-BBEE contributor between levels 1 and 2 as measured under the new B-BBEE Codes. Additionally, the Employment Equity Act of 1998 (the “Employment Equity Act”) promotes equality in the workplace and ensures that employees are treated fairly and have equal opportunities within the workplace. In April 2023, the Employment Equity Amendment Bill (the “Amendment Bill”) was signed into law. The main objectives of the Amendment Bill are to enable the Employment and Labour Minister to impose sector-specific Employment Equity (“EE”) targets and compliance criteria to issue EE Compliance Certificates in terms of Section 53 of the Employment Equity Act. This has bestowed the South African government with the right to set specific equity targets by sector and region. Companies that want to do business with the South African government will be required to submit a certificate from the Department of Employment and Labour confirming that they comply with the Employment Equity Act and its objectives. Accordingly, MiX Telematics will not set its own EE targets, but certain targets will be imposed by the South African government. Failing to achieve applicable B-BBEE and EE objectives could jeopardize our ability to maintain existing business or to secure future business from corporate, governmental or state-owned enterprises that could materially and adversely affect our business, financial condition and results of operations. Socio-economic inequality in South Africa or regionally may subject us to political and economic risks, which may affect the ownership or operation of our business. We own significant operations in South Africa. As a result, we are subject to political and economic risks relating to South Africa. South Africa was transformed from a racially based government into a democracy in 1994, with successful rounds of democratic elections held under a modern constitution during 1994, 1999, 2004, 2009, 2014 and most recently, in May 2019. The next national elections are scheduled to be held in 2024. We fully support government policies aimed at redressing the disadvantages suffered by the majority of citizens under the previous non-democratic dispensation and recognize that in order to implement these policies, our operations and profits may be impacted. However, South Africa faces many challenges in overcoming substantial racial differences in levels of economic and social development among its people. While South Africa features highly developed and sophisticated business sectors and financial and legal infrastructure at the core of its economy, large parts of the country’s black population, particularly in rural areas, do not have access to adequate education, health care, housing and other services, including water and electricity. In addition, South Africa also has a higher level of unemployment than the United States. The ruling party which has controlled the South African government since democracy has committed itself to creating a stable, democratic, free market economy, which it has largely achieved. It remains difficult however, to predict the future political, social and economic direction of South Africa or the manner in which any future government will attempt to address the country’s inequalities. It is also difficult to predict the impact that addressing these inequalities will have on our business. Furthermore, there has been regional, political and economic instability in countries neighboring South Africa, which could materially and adversely affect our business, results of operations and financial condition. Although political conditions in South Africa are generally stable, changes may occur in the composition of its ruling party or in its political, fiscal and legal systems which might affect the ownership or operation of our business, which may, in turn, materially and adversely affect our business, financial condition and results of operations. These risks may include changes in legislation, arbitrary interference with private ownership of contract rights, and changes to exchange controls, taxation and other laws or policies affecting foreign trade or investment and could materially and adversely affect our business, financial condition and results of operations. Any changes in investment ratings, regulations and policies or a shift in political attitudes both within and towards South Africa are beyond our control and could materially and adversely affect our business, financial condition and results of operations. 30 Risks Related to our Securities The concentration of common stock ownership among our executive officers and directors could limit the ability of other stockholders of the Company to influence the outcome of corporate transactions or other matters submitted for stockholder approval. As of May 1, 2024, our executive officers and directors beneficially owned, in the aggregate, approximately 6.47% of our outstanding common stock, not including approximately 1,392,309 shares of common stock that our executive officers and directors may acquire upon the exercise of outstanding options and stock appreciation rights, or if they otherwise acquire additional shares of common stock in the future. As a result, our officers and directors may have the ability to influence the outcome of all corporate actions requiring stockholder approval, irrespective of how our other stockholders may vote, including the following actions: ● the election of directors; ● adoption of stock option or other equity incentive compensation plans; ● the amendment of our organizational documents; and ● the approval of certain mergers and other significant corporate transactions, including a sale of substantially all of our assets. Future sales of our common stock, including sales of our common stock acquired upon the exercise of outstanding options, may cause the market price of our common stock to decline. The market price of our common stock could decline as a result of sales by our existing stockholders of shares of common stock in the market, or sales of our common stock acquired upon the exercise of outstanding options, or the perception that these sales could occur. These sales also may make it more difficult for us to sell equity securities at a time and price that we deem appropriate. We have 107,349,987 shares of common stock outstanding as of May 1, 2024, of which 100,400,538 shares are freely transferable without restriction, and 6,949,449 shares are held by our officers and directors and, as such, are subject to the applicable volume, manner of sale, holding period and other limitations of Rule 144 under the Securities Act. In addition, as of December 31, 2023, time-based options and market-based stock options subject to performance-based vesting conditions, to purchase 2,192,000 and 5,445,000 shares of our common stock, respectively, were issued and outstanding, of which 1,189,000 and 0, respectively, were vested. The weighted-average exercise price of the vested non-market-based stock options is $5.54. We also may issue additional shares of stock in connection with our business, including in connection with acquisitions, and may grant additional stock options to our employees, officers, directors and consultants under our stock option plans or warrants to third parties. If a significant portion of these shares of common stock were sold in the public market, the market value of our common stock could be adversely affected. Our Amended and Restated Certificate of Incorporation, as amended, provides that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between us and our stockholders, which could limit stockholders’ ability to obtain a judicial forum viewed by the stockholders as more favorable for disputes with us or our directors, officers or employees, and the enforceability of the exclusive forum provision may be subject to uncertainty. Article SIXTEENTH of our Amended and Restated Certificate of Incorporation (as amended, the “Charter”) provides, subject to certain exceptions enumerated in Article SIXTEENTH, that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any stockholder to bring (i) any derivative action brought on behalf of the Company, (ii) any action asserting a claim of breach of fiduciary duty owed by any current or former director, officer or other employee or stockholder of the Company, (iii) any action asserting a claim arising pursuant to the General Corporation Law of Delaware (the “DGCL”) or the Charter or our Amended and Restated Bylaws or as to which the DGCL confers jurisdiction on such court, or (iv) any action asserting a claim governed by the internal affairs doctrine, except for, in each of the aforementioned actions, among other things, any claims which are vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery of the State of Delaware or for which the Court of Chancery of the State of Delaware does not have subject matter jurisdiction. Accordingly, the exclusive forum provision will not apply to claims arising under the Securities Act the Exchange Act or other federal securities laws for which there is exclusive federal or concurrent federal and state jurisdiction. Article SIXTEENTH provides that any person or entity who acquires an interest in our capital stock will be deemed to have notice of and consented to the provisions of Article SIXTEENTH. Stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. Although we believe this exclusive forum provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, this exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Further, in the event a court finds the exclusive forum provision contained in the Charter to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition. 31 Provisions of Delaware law or the Charter could delay or prevent an acquisition of the Company, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for stockholders to change our management. The Charter contains provisions that may discourage an unsolicited takeover proposal that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include: the absence of cumulative voting in the election of directors; the ability of our board of directors to issue up to 50,000 shares of currently undesignated and unissued preferred stock without prior stockholder approval; advance notice requirements for stockholder proposals or nominations of directors; limitations on the ability of stockholders to call special meetings or act by written consent; the requirement that certain amendments to the Charter be approved by 75% of the voting power of the outstanding shares of our capital stock; and the ability of our board of directors to amend our bylaws without stockholder approval. Item 1B. Unresolved Staff Comments. None. Item 1C. Cybersecurity. Cybersecurity Governance Our board of directors has the ultimate oversight responsibility for the risk management process and regularly reviews issues that present particular risk to us, including those involving cybersecurity. Our board is responsible for ensuring that management has processes in place designed to identify and assess cybersecurity risks to which the Company is exposed and implement processes and programs designed to manage cybersecurity risks and mitigate and remediate cybersecurity threats and incidents. Our management is responsible for identifying, considering and assessing material cybersecurity risks on an ongoing basis, establishing processes to ensure that such potential cybersecurity risk exposures are monitored, putting in place appropriate mitigation measures and maintaining cybersecurity programs. In managing cybersecurity risks, we adhere to a structured framework that outlines the roles and responsibilities of management positions and committees. Our Director of Security and Network Management (“SNM”) leads our cybersecurity initiative, holding various information technology (“IT”) and security certificates and possessing over 20 years of experience in risk assessments, regulatory compliance (across various frameworks such as ISO 27001, NIST, and GDPR), threat intelligence gathering, and orchestrating coordinated incident response efforts. Our Director of SNM ensures that our cybersecurity team is equipped with up-to-date threat intelligence and uses industry leading tools for threat monitoring and incident response. The cybersecurity team, led by our Director of SNM, is a collective of highly qualified individuals with diverse backgrounds in IT, security, cyber risk management, and digital forensics, and holding various professional certifications (such as CISA, GRCP, IPMP, IDPP, CEH, ISO27001). Under the Director of SNM’s leadership, our cybersecurity team continuously monitors for threats and implements necessary security controls, conducting regular reviews and updates to the cybersecurity strategy. Any potential or actual cybersecurity incidents are assessed for their financial impact by our Director of SNM and reported to our Chief Financial Officer for a comprehensive risk analysis. Additionally, we have an Information Security Steering Committee (the “ISS Committee”), which plays a pivotal role in the governance of our cybersecurity posture. Members of the ISS Committee are selected for their domain-specific expertise and strategic vision, with representation from our IT, security, finance, legal, operations, and compliance sectors. The ISS Committee is an assembly of cross-functional senior leaders from various groups within our company. Led by the Director of SNM, the ISS Committee’s function extends to the formulation of cybersecurity policies, setting risk management priorities and driving the adoption of security best practices across our company. By leveraging the collective expertise of the ISS Committee, we believe we ensure cybersecurity considerations are integrated into our company’s organizational strategy and decision-making processes. Our Director of SNM and Chief Financial Officer report material cybersecurity risks to our board of directors based on their and the ISS Committee’s assessment of risk. Cybersecurity Risk Management and Strategy Our processes for assessing, identifying, and managing cybersecurity threats are designed to be thorough and transparent, ensuring that investors have a clear understanding of our commitment to cybersecurity. Our cybersecurity team collaborates with leaders from each department to ensure cybersecurity risks are considered alongside operational, financial, and strategic risks. We conduct regular cybersecurity risk assessments as part of our enterprise risk management program, ensuring that the cybersecurity risks are tracked, rated, and managed with the same rigor as all other company risks. We regularly engage with external assessors, consultants, and auditors to ensure our cybersecurity practices are up to date and aligned with industry standards. These third parties conduct independent audits of our cybersecurity measures and validate the effectiveness of our risk management processes. We also engage specialized cybersecurity firms to perform penetration testing and vulnerability assessments. We have processes in place to manage and mitigate risks associated with the use of third-party service providers., including, but not limited to conducting due diligence before onboarding new service providers and continuously monitoring their compliance with our security standards. We require service providers to undergo regular security assessments, and we ensure that such providers have robust incident response plans in place during our engagement. To date, no risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect our business, our business strategy, our results of operations or our financial condition. For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do so, see our risk factors under “Item 1A. Risk Factors”. Item 2. Properties. Our corporate headquarters are located in Woodcliff Lake, New Jersey. We also have domestic offices in Tampa, Florida and Frisco, Texas. Our New Jersey offices measure approximately 13,899 square feet and are leased space. Our Florida offices consist of approximately 25,000 square feet of leased administrative and warehouse space, and our Texas offices consist of approximately 5,514 square feet of leased administrative space. We also have international offices located in Rosh Ha’ayin, Israel, Buenos Aires, Argentina, São Paulo, Brazil, Dusseldorf, Germany, Mexico City, Mexico, Cape Town, Midrand, and Durban, South Africa and Oxford, United Kingdom. Our principal offices in Israel consist of approximately 27,000 square feet of leased office space. We also lease a call center and warehouse space and additional smaller facilities and antenna sites in various locations in Israel. Additionally, our subsidiary MiX Telematics leases domestic offices in Boca Raton, Florida and international offices in South Africa, the United Kingdom, Uganda, Brazil, Australia, Romania and the United Arab Emirates. We believe that our existing facilities are adequate for our existing needs. Item 3. Legal Proceedings. The information contained in Note 19 to our consolidated financial statements included in this Form 10-K is incorporated herein by reference. Item 4. Mine Safety Disclosures. Not applicable. 32 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is traded on The Nasdaq Global Market and the Tel Aviv Stock Exchange, in each case under the symbol “PWFL,” and the Johannesburg Stock Exchange under the symbol “PWR.” Holders As of April 29, 2024, there were 65 holders of record of our common stock. Dividends We have never paid a cash dividend on our common stock and do not expect to pay a cash dividend in the near future. We currently intend to retain future earnings, if any, to finance our operations and expand our business. Sales of Unregistered Securities None. Issuer Purchases of Equity Securities. The following table provides information regarding our share repurchase activity for each month of the quarterly period ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2023 - October 31, 2023 - $ - $ - $ - November 1, 2023 - November 30, 2023 2,000 $ 1.80 (1) $ - $ - December 1, 2023 - December 31, 2023 - $ - $ - $ - Total 2,000 $ 1.80 $ - $ - (1) Represents shares of common stock withheld to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock. Item 6. Reserved. 33 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion is intended to assist you in understanding our financial condition and results of operations and should be read in conjunction with the financial statements and related notes included elsewhere in this Form 10-K. Many of the amounts and percentages in this section have been rounded for convenience of presentation, but actual recorded amounts have been used in computations. Accordingly, some information may appear not to compute accurately. Restatement of Previously Issued Consolidated Financial Statements As described in the Explanatory Note included in this Form 10-K, we have restated our previously issued consolidated financial statements for the Non-Reliance Periods. As a result, we have also restated certain previously reported financial information for the fiscal years ended December 31, 2022 and 2021 in this “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including but not limited to financial information under the sections entitled “Results of Operations” and “Liquidity and Capital Resources—Capital Requirements” to conform the discussion with the restated information. See Note 2 to our consolidated financial statements, included Item 8 of this Form 10-K, for additional information on the restatement of, and the related effects on, our consolidated financial statements for the Non-Reliance Periods. Overview Powerfleet is a global leader of IOT solutions providing valuable business intelligence for managing high-value enterprise assets that improve operational efficiencies. We are headquartered in Woodcliff Lake, New Jersey, with offices located around the globe. On April 2, 2024, we consummated the MiX Combination, pursuant to which MiX Telematics became our indirect, wholly owned subsidiary. Our Powerfleet for Warehouse solutions are designed to provide on-premise or in-facility asset and operator management, monitoring, and visibility for warehouse trucks such as forklifts, man-lifts, tuggers and ground support equipment at airports. These solutions utilize a variety of communications capabilities such as Bluetooth ® , WiFi, and proprietary radio frequency. Our Powerfleet for Logistics solutions are designed to provide bumper-to-bumper asset management, monitoring, and visibility for over-the-road based assets such as heavy trucks, dry-van trailers, refrigerated trailers and shipping containers and their associated cargo. These systems provide mobile-asset tracking and condition-monitoring solutions to meet the transportation market’s desire for greater visibility, safety, security, and productivity throughout global supply chains. Our Powerfleet for Vehicles solutions are designed both to enhance the vehicle fleet management process, whether it’s a rental car, a private fleet, or automotive OEM partners. We achieve this by providing critical information that can be used to increase revenues, reduce costs and improve customer service. Our patented technologies address the needs of organizations to monitor and analyze their assets to improve safety, increase efficiency and productivity, reduce costs, and improve profitability. Our offerings are sold under the global brands Powerfleet, Pointer and Cellocator. We deliver advanced mobility solutions that connect assets to increase visibility operational efficiency and profitability by leveraging our Unity platform product strategy. Across our vertical markets we differentiate ourselves by being OEM agnostic and helping mixed fleets view and manage their assets similarly. All of our solutions are paired with SaaS analytics platforms to provide an even deeper layer of insights. These insights include a full set of operational KPIs to drive operational and strategic decisions. These KPIs leverage industry comparisons to show how a company is performing versus their peers. The more data the system collects, the more accurate a client’s understanding becomes. The analytics platform, which is integrated into our customers’ management systems, is designed to provide a single, integrated view of asset and operator activity across multiple locations that provides enterprise-wide benchmarks and peer-industry comparisons. We look for analytics, as well as the data contained therein, to differentiate us from our competitors, make a growing contribution to revenue, add value to our solutions, and help keep us at the forefront of the wireless asset management markets we serve. We sell our wireless mobility solutions to both corporate-level executives, division heads and site-level management within the enterprise. We also utilize channel partners such as independent dealers and OEMs who may opt for us to white label our product. Typically, our initial system deployment serves as a basis for potential expansion across the customer’s organization. We work closely with customers to help maximize the utilization and benefits of our system and demonstrate the value of enterprise-wide deployments. Post-implementation, we consult with our customers to further extend and customize the benefits to the enterprise by delivering enhanced analytics capabilities. We market and sell our solutions to a wide range of customers in the commercial and government sectors. Our customers operate in diverse markets, such as automotive manufacturing, heavy industry, retail food and grocery distribution, logistics, wholesale distribution, transportation, aviation, manufacturing, aerospace and defense, homeland security and vehicle rental. We incurred net losses of approximately $22.1 million (as restated), $16.9 million (as restated), and $17.3 million for the years ended December 31, 2021, 2022 and 2023, respectively, and have incurred additional net losses since inception. As of December 31, 2023, we had cash (including restricted cash) and cash equivalents of $19.3 million, working capital of $23.5 million, and an accumulated deficit of $146.3 million. Our primary sources of cash are cash flows from sales of products and services, our holdings of cash, cash equivalents and investments from the sale of our capital stock and borrowings under our credit facilities. To date, we have not generated sufficient cash flow solely from operating activities to fund our operations. Critical Accounting Policies and Estimates We have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States in the preparation of our financial statements. Our significant accounting policies are described in Note 3 to our consolidated financial statements included in this Form 10-K. Certain accounting policies involve significant judgments and assumptions by our management that can have a material impact on the carrying value of certain assets and liabilities. We consider such accounting policies to be our critical accounting policies. The judgments and assumptions used by our management in these critical accounting policies are based on historical experience and other factors that our management believes to be reasonable under the circumstances. Because of the nature of these judgments and assumptions, actual results could differ significantly from these judgments and estimates, which could have a material impact on the carrying values of our assets and liabilities and our results of operations. Our critical accounting policies are described below. 34 Revenue Recognition We and our 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 we expect to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes we collect 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 our base warranties continue to be recognized as an expense when the products are sold. 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 are not distinct to the customer separate from the SaaS services provided, we consider both hardware and SaaS services a bundled performance obligation. Under the applicable accounting guidance, all of our billings for future services are deferred and classified as a current and long-term liability. The deferred revenue is 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. Payment terms are generally 30 days after invoice date. We recognize 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. We earn other service revenues from installation services, training and technical support services which are short-term in nature and revenue for these services is recognized at the time of performance when the service is provided. We also derive 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. Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on our relative standalone selling price (“SSP”). Judgment is required to determine the SSP for each distinct performance obligation. We generally determine standalone selling prices based on observable prices charged to customers. Significant pricing practices taken into consideration include our discounting practices, the size and volume of our transactions, the customer demographic, price lists, our go-to-market strategy and historical and current sales and contract prices. As our go-to-market strategies evolve, we may modify our pricing practices in the future, which could result in changes to SSP. In certain cases, we are able to establish SSP based on observable prices of products or services sold separately in comparable circumstances to similar customers. We use a single amount to estimate SSP when it has observable prices. If SSP is not directly observable, for example when pricing is highly variable, we use a range of SSP. We determine the SSP range using information that may include pricing practices or other observable inputs. We typically have more than one SSP for individual products and services due to the stratification of those products and services by customer size. We recognize an asset for the incremental costs of obtaining the contract arising from the sales commissions to employees because we expect to recover those costs through future fees from the customers. We amortize 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. Goodwill and Intangibles Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill and intangible assets deemed to have indefinite lives are not amortized and are tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets other than goodwill are amortized over their useful lives unless the lives are determined to be indefinite. Intangible assets are carried at cost, less accumulated amortization. Intangible assets consist of trademarks and trade names, patents, customer relationships and other intangible assets. Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. We operate in one reportable segment which is our only reporting unit. We test our goodwill for impairment annually, which is the first day of our fourth quarter or when an indicator of impairment exists, by comparing the fair value of the reporting unit to its carrying value. We test for goodwill impairment at the reporting unit level on October 1 of each year and between annual tests if a triggering event indicates the possibility of an impairment. We performed a quantitative assessment whereby the fair value of the reporting unit is calculated using a market approach and a discounted cash flow method, as a form of the income approach. The market approach includes the use of comparative revenue multiples to complement discounted cash flow results. The discounted cash flow method is based on the present value of the projected cash flows and a terminal value. The terminal value represents the expected normalized future cash flows of the reporting unit beyond the cash flows from the discrete projection period. The fair value of the reporting unit is calculated based on the sum of the present value of the cash flows from the discrete period and the present value of the terminal value. The discount rate represented our estimate of the WACC, or expected return, that a marketplace participant would have required as of the valuation date. The application of our goodwill impairment test required key assumptions underlying our valuation model. The discounted cash flow analysis factored in assumptions on discount rates and terminal growth rates to reflect risk profiles, as well as revenue and cost growth relative to history and market trends and expectations. The market multiples approach incorporated judgment involved in the selection of comparable public company multiples and benchmarks. The selection of companies and multiples was influenced by differences in growth and profitability, and volatility in market prices of peer companies. These valuation inputs are inherently judgmental, and an adverse change in one or a combination of these inputs could trigger a goodwill impairment loss in the future. In connection with our goodwill impairment testing as of October 1, 2023, the estimated fair value exceeded its carrying value by approximately 6%. For the years ended December 31, 2021, 2022 and 2023, we did not incur an impairment charge. Business Combinations In accordance with ASC 805 , Business Combinations (ASC 805), we recognize the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. Determining these fair values requires management to make significant estimates and assumptions, especially with respect to intangible assets. We recognize identifiable assets acquired and liabilities assumed at their acquisition date fair value. During the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill or bargain purchase to the extent we identify adjustments to the preliminary fair values. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, any subsequent adjustments are recorded to the consolidated statements of operations. Income Taxes We use the asset and liability method of accounting for deferred income taxes. Deferred income taxes are measured by applying enacted statutory rates to net operating loss carryforwards and to the differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets are reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. We recognize uncertainty in income taxes in the financial statements using a recognition threshold and measurement attribute of a tax position taken or expected to be taken in a tax return. We apply the “more-likely-than-not” recognition threshold to all tax positions. We have opted to classify interest and penalties that would accrue according to the provisions of relevant tax law as selling, general, and administrative expenses, in the consolidated statement of operations. For the years ended December 31, 2021, 2022 and 2023, interest and penalties were immaterial. 35 Results of Operations The following table sets forth certain items related to our statement of operations as a percentage of revenues for the periods indicated and should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Form 10-K. A detailed discussion of the material changes in our operating results is set forth below. Year Ended December 31, 2021 (As restated) 2022 (As restated) 2023 Revenues: Products 42.0 % 41.9 % 37.2 % Services 58.0 % 58.1 % 62.8 % Total revenues 100.0 % 100.0 % 100.0 % Cost of revenues: Cost of products 31.5 % 31.3 % 27.2 % Cost of services 21.1 % 20.9 % 22.6 % 52.6 % 52.2 % 49.8 % Gross profit 47.4 % 47.8 % 50.2 % Operating expenses: Selling, general and administrative expenses 44.9 % 46.7 % 53.3 % Research and development expenses 9.1 % 6.2 % 6.2 % Total operating expenses 53.9 % 52.9 % 59.5 % Loss from operations -6.5 % -5.1 % -9.4 % Interest income 0.0 % 0.1 % 0.1 % Interest expense, net -2.2 % 0.7 % -1.2 % Bargain purchase - Movingdots 0.0 % 0.0 % 6.8 % Other (expense) income, net 0.0 % 0.0 % 0.0 % Net loss before income taxes -8.6 % -4.3 % -3.8 % Income tax expense -1.5 % -0.6 % -0.4 % Net loss before non-controlling interest -10.1 % -5.0 % -4.2 % Non-controlling interest 0.0 % 0.0 % 0.0 % Net loss -10.1 % -5.0 % -4.2 % Accretion of preferred stock -4.1 % -4.3 % -5.3 % Preferred stock dividend -3.3 % -3.1 % -3.4 % Net loss attributable to common stockholders -17.5 % -12.4 % -12.9 % 36 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 REVENUES. Revenues decreased by approximately $2.2 million, or 1.6%, to $133.7 million in 2023 from $135.9 million (as restated) in 2022. Revenues from products decreased by approximately $7.2 million, or 12.7%, to $49.7 million in 2023 from $56.9 million (as restated) 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. These decreases were offset by increases in product revenue in our Powerfleet for Vehicles business in the United States due to new unit purchases from new and existing customers. Revenues from services increased by approximately $5.0 million, or 6.4%, to $84.0 million in 2023 from $79.0 million (as restated) in 2022. The increase in services revenues was principally due to an increase in our install base that generates service revenue, with revenue growth concentrated in North America where a positive market response to our Unity SaaS product offering has been a significant contributing factor. COST OF REVENUES. Cost of revenues decreased by approximately $4.3 million, or 6.0%, to $66.7 million in 2023 from $70.9 million in 2022. Gross profit was $67.1 million in 2023 compared to $65.0 million (as restated) in 2022. As a percentage of revenues, gross profit increased to 50.2% in 2023 from 47.8% in 2022. Cost of products decreased by approximately $6.2 million, or 14.5%, to $36.4 million in 2023 from $42.6 million in 2022. Gross profit for products was $13.3 million in 2023 compared to $14.4 million (as restated) in 2022. As a percentage of product revenues, gross profit increased to 26.8% in 2023 from 25.2% in 2022. The increase in gross profit as a percentage of product revenues was principally due to decisions to stop fulfilling low margin orders and decreases in raw materials costs related to global supply chain issues, which were more prevalent in 2022 than 2023. Cost of services increased by approximately $1.9 million, or 6.7%, to $30.3 million in 2023 from $28.4 million in 2022. Gross profit for services was $53.7 million in 2023 compared to $50.6 million (as restated) in 2022. As a percentage of service revenues, gross profit minimally decreased to 64.0% in 2023 from 64.1% in 2022. The decrease in gross profit as a percentage of services revenues was principally due to an increase in our install base that generates service revenue, offset by reduction due to the commencement of amortization for our Unity SaaS platform. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative (“SG&A”) expenses increased by approximately $7.8 million, or 12.2%, to $71.3 million in 2023 compared to $63.5 million (as restated) in 2022. The increase was principally due to an aggregate of $5.5 million in transaction-related costs in connection with our acquisition of Movingdots GmbH (“Movingdots”) and business combination with MiX Telematics, $2.1 million in SG&A costs incurred by Movingdots after the closing of such transaction, and increased salaries, investments in marketing programs and professional services fees. As a percentage of revenues, SG&A expenses increased to 53.3% in the year ended December 31, 2023, from 46.7% in the same period in 2022. RESEARCH AND DEVELOPMENT EXPENSES. Research and development (“R&D”) expenses decreased by approximately $0.1 million, or 1.1%, to $8.4 million in 2023 compared to $8.5 million (as restated) 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 $2.0 million to expenses. As a percentage of revenues, R&D expenses increased to 6.3% in the year ended December 31, 2023 from 6.2% in the same period in 2022. INTEREST EXPENSE. Interest expense increased by $2.6 million, or 261.2%, to $1.6 million in 2023 from $(1.0) million in 2022, principally due to foreign currency translation gains from the term facilities under the Prior Credit Agreement with Hapoalim. NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. Net loss attributable to common stockholders was $17.3 million, or $(0.49) per basic and diluted share, for 2023 as compared to net loss of $16.9 million (as restated), or $(0.48) per basic and diluted share, for the same period in 2022. The increase in net loss was due primarily to transaction costs of $5.5 million with respect to the Movingdots acquisition and the business combination with MiX Telematics, plus incremental SG&A spend from the Movingdots acquisition of $2.1 million, plus an increase in accretion of preferred stock of $1.2 million, offset by the bargain gain on the purchase of Movingdots of $9.0 million. 37 Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 REVENUES. Revenues increased by approximately $10.0 million, or 7.9%, to $135.9 million (as restated) in 2022 from $126.0 million (as restated) in 2021. Revenues from products increased by approximately $4.0 million, or 7.6%, to $56.9 million (as restated) in 2022 from $52.9 million (as restated) in 2021. The increase in product revenues was attributable to an increase in sales by our Powerfleet for Logistics and Powerfleet for Warehouse products. Revenues from services increased by approximately $5.9 million, or 8.1%, to $79.0 million (as restated) in 2022 from $73.1 million (as restated) in 2021. The increase in services revenues was principally due to an increase in our install base that generates service revenue. COST OF REVENUES. Cost of revenues increased by approximately $4.7 million, or 7.1%, to $70.9 million (as restated) in 2022 from $66.2 million (as restated) in 2021. Gross profit was $65.0 million (as restated) in 2022 compared to $59.8 million (as restated) in 2021. As a percentage of revenues, gross profit increased to 47.8% in 2022 from 47.4% in 2021. The minimal increase in gross profit as a percentage of revenues was principally due to less significant increases in raw material costs as a result of global supply chain issues in 2022 than in 2021. Cost of products increased by approximately $2.9 million, or 7.4%, to $42.6 million in 2022 from $39.6 million (as restated) in 2021. Gross profit for products was $14.4 million (as restated) in 2022 compared to $13.3 million (as restated) in 2021. As a percentage of product revenues, gross profit minimally increased to 25.2% in 2022 from 25.1% in 2021. The gross profit as a percentage of product revenues was impacted by product mix, higher costs associated with supply chain issues, electronic component shortages and inflation. Cost of services increased by approximately $1.8 million, or 6.7%, to $28.4 million in 2022 from $26.6 million in 2021. Gross profit for services was $50.6 million (as restated) in 2022 compared to $46.5 million (as restated) in 2021. As a percentage of service revenues, gross profit increased to 64.1% in 2022 from 63.6% in 2021. The increase in gross profit as a percentage of services revenues was principally due to an increase in our install base that generates service revenue. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased by approximately $7.0 million, or 12.3%, to $63.5 million (as restated) in 2022 compared to $56.5 million (as restated) in 2021, inclusive of higher foreign currency losses of $0.7 million and higher severance costs of $0.7 million. Other drivers of the increase in expenses include increased salaries and related expenses, professional fees, and marketing and travel expenses. As a percentage of revenues, SG&A expenses increased to 46.7% in the year ended December 31, 2022, from 44.9% in the same period in 2021. RESEARCH AND DEVELOPMENT EXPENSES. R&D expenses decreased by approximately $3.0 million, or 25.9%, to $8.5 million (as restated) in 2022 compared to $11.4 million (as restated) in 2021, principally due to the capitalization of software development expenses for new product development, which increased by $1.7 million in 2022. As a percentage of revenues, R&D expenses decreased to 6.2% in the year ended December 31, 2022 from 9.1% in the same period in 2021. INTEREST EXPENSE. Interest expense decreased by $3.8 million, or 136.0%, to $(1.0) million in 2022 from $2.8 million in 2021, principally due to foreign currency translation gains from the term facilities under the Prior Credit Agreement with Hapoalim. NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. Net loss attributable to common stockholders was $16.9 million (as restated), or $(0.48) per basic and diluted share, for 2022 as compared to net loss of $22.1 million (as restated), or $(0.64) per basic and diluted share, for the same period in 2021. The decrease in the net loss was due primarily to the reasons described above. 38 Headline Loss Earnings (Loss) per Share In connection with our secondary listing on the Johannesburg Stock Exchange (“JSE”), we are required to calculate and publicly disclose headline earnings (loss) per share and diluted headline earnings (loss) per share. Headline loss per share is calculated using net loss which has been determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Headline loss for the period represents the loss for the period attributable to common stockholders of Powerfleet adjusted for the remeasurements that are more closely aligned to the operating or trading results as set forth below, and headline loss per share represents headline loss divided by the weighted average number of shares of common stock outstanding. The table below presents a reconciliation between net loss attributable to common stockholders to headline loss for the years ended December 31, 2021 (as restated), 2022 (as restated) and 2023. Year Ended December 31, 2021 2022 (in thousands, except per share data) (As restated) (As restated) 2023 Net loss attributable to common stockholders $ (22,068 ) $ (16,891 ) $ (17,307 ) Adjusted for: Reversal of Bargain purchase – Movingdots - - (9,034 ) Headline loss (22,068 ) (16,891 ) (26,341 ) Weighted average common shares outstanding on which the net loss attributable to common shareholders per share and headline loss per share has been calculated - basic and diluted 34,571 35,393 35,628 Net loss per share attributable to common stockholders – basic and diluted $ (0.64 ) $ (0.48 ) $ (0.49 ) Headline loss per share attributable to common stockholders – basic and diluted $ (0.64 ) $ (0.48 ) $ (0.74 ) Use of Non-GAAP Measures The above disclosure was prepared for the purpose of complying with the reporting requirements of the JSE and includes certain non-GAAP measures, such as headline earnings (loss) and headline earnings (loss) per common share, and related reconciliations. Liquidity and Capital Resources On October 3, 2019, in connection with the completion of the Pointer Merger, we issued and sold 50,000 shares of the Series A Preferred Stock to ABRY Senior Equity V, L.P., ABRY Senior Equity Co-Investment Fund V, L.P and ABRY Investment Partnership, L.P. (the “Investors”) pursuant to the terms of an Investment and Transaction Agreement, dated as of March 13, 2019 (as amended, the “Investment Agreement”), for an aggregate purchase price of $50.0 million. The proceeds received from such sale were used to finance a portion of the cash consideration payable in our acquisition of Pointer. In addition, our wholly owned subsidiaries, Powerfleet Israel and Pointer (collectively, the “Borrowers”) were party to the Prior Credit Agreement with Hapoalim, pursuant to which Hapoalim agreed to provide Powerfleet Israel with two senior secured term loan facilities denominated in NIS in an initial aggregate principal amount of $30 million (comprised of two facilities in the aggregate principal amounts of $20 million and $10 million, respectively) and a five-year revolving credit facility to Pointer denominated in NIS in an initial aggregate principal amount of $10 million. The proceeds of the term loan facilities were used to finance a portion of the cash consideration payable in our acquisition of Pointer. The outstanding amount under the revolving facility was approximately NIS 4,915, or $1,355, as of December 31, 2023. On March 18, 2024, the Borrowers entered into the A&R Credit Agreement, which refinanced the facilities under, and amended and restated, the Prior Credit Agreement. The A&R Credit Agreement provides for (i) two senior secured term loan facilities denominated in NIS to Powerfleet Israel in an aggregate principal amount of $30 million (comprised of Facility A and Facility B in the aggregate principal amounts of $20 million and $10 million, respectively) and (ii) two revolving credit facilities to Pointer in an aggregate principal amount of $20 million (comprised of Facility C and Facility D in the aggregate principal amounts of $10 million and $10 million, respectively). The Term Facilities will mature on March 18, 2029. The Revolving Facilities are available for successive one-month periods until and including March 18, 2025, unless the Borrowers deliver prior notice to Hapoalim of their request not to renew the Revolving Facilities. On March 18, 2024, Powerfleet Israel drew down $30 million in cash under the Term Facilities and used the proceeds to prepay approximately $11.2 million, representing the remaining outstanding balance, of the term loans extended to Powerfleet Israel under the Prior Credit Agreement and distributed the remaining proceeds to Powerfleet. The proceeds of the Revolving Facilities may be used by Pointer for general corporate purposes, including working capital and capital expenditures. The Credit Facilities continue to be secured by first ranking and exclusive fixed and floating charges, including by Powerfleet Israel over the entire share capital of Pointer and by Pointer over all of its assets, as well as cross guarantees between Powerfleet Israel and Pointer, except that the Borrowers’ holdings in Pointer do Brasil Comercial Ltda., Pointer Argentina and Pointer South Africa are excluded from such floating charges. No other assets of our company will serve as collateral under the Credit Facilities. Borrowings under the Term Facilities will bear interest at a variable rate equal to the applicable prime interest rate, plus, in the case of borrowings under Facility A, 2.2% per annum, and, in the case of borrowings under Facility B, 2.3% per annum. Borrowings under Facility C will bear interest, in the case of borrowings made in NIS, at the applicable prime interest rate plus 2.5%, or, in the case of borrowings made in U.S. dollars, at SOFR plus 2.15%. Borrowings under Facility D will bear interest at the applicable interest rate set forth in the standard form documents entered into in connection with each utilization of Facility D. Borrowings under the Term Facilities will be denominated in NIS, based on the applicable conversion rate at the time of conversion but will be made available to the Borrowers in U.S. dollars if requested by the Borrowers. Pointer is required to pay a credit allocation fee in NIS, with respect to Facility C, and a non-utilization fee in U.S. dollars, with respect to Facility D, in each case, equal to 0.5% per annum on undrawn and uncancelled amounts of the Revolving Facilities during the period commencing on March 18, 2024 and ending on the last day of the applicable availability period of such Revolving Facilities. As a result of global supply chain disruptions, the conflicts between Russia and Ukraine and between Israel and Hamas, rising interest rates, fluctuations in currency values, inflation and other cost increases, there remains uncertainty surrounding the potential impact of such events on our results of operations and cash flows. We are proactively taking steps to increase available cash on hand including, but not limited to, targeted reductions in discretionary operating expenses and capital expenditures and borrowing under the revolving credit facility. 39 On April 2, 2024, we consummated the MiX Combination, pursuant to which MiX Telematics became our indirect, wholly owned subsidiary. The Implementation Agreement required, as a condition to closing of the MiX Combination, that we obtain debt and/or equity financing in an amount sufficient to provide for the redemption in full of all outstanding shares of our Series A Preferred Stock. In order to meet this condition, we entered into the Facilities Agreement on March 7, 2024 and shortly thereafter drew down $85 million in cash under the facilities provided thereunder. On April 2, 2024, concurrently with the closing of the MiX Combination, we used the net proceeds received from RMB and from incremental borrowing capacity as a result of the refinancing of Credit Facilities to redeem the full $90.3 million value of the outstanding shares of Series A Preferred Stock. We have incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of $146.3 million as of December 31, 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 Warehouse safety product offerings exceed necessary investments in operating expenses, capital expenditures and debt financing costs. Management believes our cash and cash equivalents of $19.3 million as of December 31, 2023, in conjunction with the debt proceeds from our lenders, plus 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 (May 9, 2024) and service our outstanding obligations. Capital Requirements As of December 31, 2023, we had cash (including restricted cash), cash equivalents and marketable securities of $19.3 million and working capital of $23.5 million, compared to cash (including restricted cash) and cash equivalents of $17.9 million and working capital of $36.7 million (as restated) as of December 31, 2022. Our primary sources of cash are cash flows from sales of products and services, our holdings of cash, cash equivalents and investments from the sale of our capital stock and borrowings under our credit facilities. The MiX Combination is also expected to be a source of positive cash flow. To date, we have not generated sufficient cash flow solely from operating activities to fund our operations. 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. 40 Operating Activities Net cash provided by operating activities was $4.4 million for the year ended December 31, 2023, compared to net cash provided by operating activities of $1.2 million (as restated) for the same period in 2022. The net cash provided by operating activities for the year ended December 31, 2023 reflects a net loss of $5.7 million and includes non-cash charges of $3.9 million for stock-based compensation, $9.4 million for depreciation and amortization expense, a gain on bargain purchase of $9.0 million, and $2.8 million for right of use asset amortization. Changes in operating assets and liabilities included: ● an increase in accounts receivable of $1.5 million; ● an increase in inventory of $1.7 million; ● a decrease in lease liabilities of $2.9 million; and ● an increase in accounts payable and accrued expenses of $4.5 million. Net cash provided by operating activities was $1.2 million (as restated) for the year ended December 31, 2022, compared to net cash used in operating activities of $5.4 million (as restated) for the same period in 2021. The net cash provided by operating activities for the year ended December 31, 2022 reflects a net loss of $6.8 million (as restated) and includes non-cash charges of $4.3 million for stock-based compensation, $8.3 million for depreciation and amortization expense and $2.8 million for right of use asset amortization. Changes in operating assets and liabilities included: ● an increase in accounts receivable of $1.4 million (as restated); ● an increase in inventory of $4.5 million; ● a decrease in lease liabilities of $2.7 million; and ● a decrease in accounts payable and accrued expenses of $0.6 (as restated) million. Investing Activities Net cash provided by investing activities was $1.5 million for the year ended December 31, 2023, compared to net cash used in investing activities of $6.3 million (as restated) 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 $3.6 million for the purchase of fixed assets and $3.5 million (as restated) for capitalized software development costs. Net cash used in investing activities was $6.3 million (as restated) for the year ended December 31, 2022, compared to net cash used in investing activities of $3.0 million (as restated) for the same period in 2021. The cash used in investing activities for the years ended December 31, 2022 and 2021 was for the purchase of fixed assets and capitalized software development. Financing Activities Net cash used in financing activities was $3.7 million for the year ended December 31, 2023, compared to net cash used in financing activities of $0.3 million for the same period in 2022. The increase in net cash used in financing activities was primarily due to the payment in cash of preferred stock dividends totaling $3.4 million compared to $0 in 2022, net of the changes in the repayment of long-term debt and change in short-term debt, net balance. Net cash used in financing activities was $0.3 million for the year ended December 31, 2022, compared to net cash provided by financing activities of $16.2 million for the same period in 2021. The 2021 period was represented by net proceeds from our stock offering of $26.9 million offset by the net repayment of long-term debt of $5.6 million and the payment of preferred stock dividends of $4.1 million. In 2022, dividends were not paid in cash and the net cash used in financing was primarily from the repayment of long-term debt, net of proceeds from debt. Inflation Rising inflation and other macroeconomic conditions in the U.S. have resulted in higher costs of raw materials, freight, and labor, which has impacted our operating 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. 41 Business Acquisitions In addition to focusing on our core applications, we adapt our systems to meet our customers’ broader asset management needs and seek opportunities to expand our solution offerings through strategic acquisitions. On March 6, 2023, we entered into a definitive share purchase and transfer agreement (the “SPA”) with Swiss Re Reinsurance Holding Company Ltd (“Swiss Re”) to acquire all of the outstanding shares of Movingdots for consideration consisting of €1 and the issuance by us of a ten-year warrant to purchase 800,000 shares of our common stock at an exercise price of $7.00 per share. Under the SPA, Swiss Re was required to ensure that Movingdots had available cash and cash equivalents of at least €8,000,000 as of the closing date. The transaction closed on March 31, 2023. On April 2, 2024, we consummated the MiX Combination, pursuant to which Powerfleet Sub acquired all 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, MiX Telematics became our indirect, wholly owned subsidiary. As a result of the MiX Combination, the combined company remains Powerfleet and our common stock continues to be listed on The Nasdaq Global Market and the Tel Aviv Stock Exchange under the symbol “PWFL.” Additionally, our common stock has been listed on the JSE by way of a secondary inward listing under the symbol “PWR.” 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 MiX Combination is expected to provide us with operational synergies and access to a broader base of customers. The MiX Combination has been accounted for as a business combination, and we have been identified as the accounting acquirer. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Recently Issued Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which requires additional operating segment disclosures in annual and interim consolidated financial statements. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and for interim periods beginning after December 15, 2024 on a retrospective basis, with early adoption permitted. We are evaluating the effect of adopting ASU 2023-07. In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other income tax-related disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a retrospective or prospective basis. We are evaluating the effect of adopting ASU 2023-09. 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. We 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. Item 7A. Quantitative and Qualitative Disclosures about Market Risks. Not applicable. 42 Item 8. Financial Statements and Supplementary Data. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 42 ) 44 Consolidated Balance Sheets at December 31, 2022 (As restated) and 2023 47 Consolidated Statements of Operations for the Years Ended December 31, 2021 (As restated), 2022 (As restated) and 2023 48 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2021 (As restated), 2022 (As restated) and 2023 49 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2021 (As restated), 2022 (As restated) and 2023 50 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 (As restated), 2022 (As restated) and 2023 51 Notes to the Consolidated Financial Statements 52 43 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Powerfleet, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of PowerFleet, Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated May 9, 2024 expressed an adverse opinion thereon. Restatement of 2022 and 2021 Financial Statements As discussed in Note 2 to the consolidated financial statements, the 2022 and 2021 consolidated financial statements have been restated to correct misstatements. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate. 44 Valuation of Goodwill Description of the Matter At December 31, 2023, the Company reported $83.5 million of goodwill. As discussed in Notes 3 and 9 to the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level. Auditing management’s annual goodwill impairment test was complex and highly judgmental due to the significant estimation required to determine the fair value of the reporting unit. In particular, the fair value estimate was sensitive to significant assumptions, such as the weighted average cost of capital, revenue growth and cost growth all of which are affected by expectations about future operations and market conditions. Further, the identified material weakness relating to management not adequately preparing and maintaining evidence of their review of significant assumptions relating to the annual goodwill impairment assessment affected our audit procedures in this area. How We Addressed the Matter in Our Audit To test the fair value of the Company’s reporting unit, we performed audit procedures with the assistance of internal valuation specialists that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis. We compared the significant assumptions used by management to current industry and economic trends, including key performance indicators, and evaluated whether changes in the Company’s business would affect the significant assumptions. We assessed the historical accuracy of management’s estimates and performed a sensitivity analysis of significant assumptions to evaluate the changes in the fair value of the reporting unit that would result from changes in the assumptions. We compared the data used in the analysis to supporting documentation and analyses. The nature and extent of our audit procedures considered the inability to rely on controls over management’s goodwill impairment review process as a result of the material weakness described above. Uncertain Tax Positions Description of the Matter As discussed in Note 18 of the consolidated financial statements, the Company has recorded a liability of $0.3 million related to uncertain tax positions as of December 31, 2023. The Company conducts business in the US and various foreign countries and is therefore subject to US federal and state income taxes, as well as income taxes of multiple foreign jurisdictions. Due to the multinational operations of the Company and changes in global income tax laws and regulations, including those in the US, there is complexity in the accounting for and monitoring of the provision for uncertain tax positions. Auditing management’s identification and measurement of uncertain tax positions involved complex analysis and auditor judgment related to the evaluation of the income tax consequences of changes in income tax laws and regulations in various jurisdictions, which are often subject to interpretation. How We Addressed the Matter in Our Audit Our audit procedures included, among others, evaluating the Company’s assumptions and the underlying data used to identify its uncertain tax positions and to estimate the amount of the related unrecognized income tax benefits by jurisdiction. We obtained an understanding of the Company’s legal structure by reviewing its organizational charts. Due to the complexity of the tax law in various jurisdictions, we involved our income tax professionals to assess the Company’s interpretation of and compliance with tax laws in these jurisdictions, as well as to identify relevant tax law changes. In certain circumstances, we involved our income tax professionals to evaluate the technical merits of the Company’s tax positions and to evaluate income tax opinions or other third-party advice obtained by the Company. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2019. Iselin, New Jersey May 9, 2024 45 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Powerfleet, Inc. Opinion on Internal Control Over Financial Reporting We have audited PowerFleet, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, because of the effect of the material weaknesses described below on the achievement of the objectives of the control criteria, PowerFleet, Inc. and subsidiaries (the Company) has not maintained effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment. Management has identified material weaknesses in the design and operation of controls related to the determination of standalone selling price, capitalized software, the Movingdots GmbH business combination, valuation of goodwill, measurement and valuation of the convertible redeemable preferred stock and the financial statement close process, which includes the information technology general controls in the areas of user access and change management over key information technology systems that support the Company’s financial reporting processes, the related process-level information technology dependent manual controls and application controls. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes. These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and this report does not affect our report dated May 9, 2024, which expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Iselin, New Jersey May 9, 2024 46 POWERFLEET, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except per share data) December 31, 2022 (As restated) December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 17,680 $ 19,022 Restricted cash 309 310 Accounts receivable, net of allowance for credit losses of $ 2,567 and $ 2,797 in 2022 and 2023, respectively 32,647 32,440 Inventory, net 22,272 22,602 Deferred costs – current 762 83 Prepaid expenses and other current assets 7,536 7,568 Total current assets 81,206 82,025 Fixed assets, net 9,249 12,383 Goodwill 83,487 83,487 Intangible assets, net 22,908 20,075 Right of use asset 7,820 6,195 Severance payable fund 3,760 3,802 Deferred tax asset 3,308 2,863 Other assets 6,318 6,916 Total assets $ 218,056 $ 217,746 LIABILITIES Current liabilities: Short-term bank debt and current maturities of long-term debt $ 10,312 $ 21,091 Accounts payable and accrued expenses 25,397 30,296 Deferred revenue – current 6,376 5,666 Lease liability – current 2,441 1,503 Total current liabilities 44,526 58,556 Long-term debt – less current maturities 11,403 - Deferred revenue – less current portion 4,431 4,956 Lease liability – less current portion 5,628 4,908 Accrued severance payable 4,365 4,533 Deferred tax liability 4,901 4,450 Other long-term liabilities 1,788 2,422 Total liabilities 77,042 79,825 Commitments and Contingencies (note 19) - - 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 December 31, 2023, respectively, at redemption value of $ 90,273 at December 31, 2023 72,031 80,277 STOCKHOLDERS’ EQUITY Preferred stock; authorized 50,000 shares, $ 0.01 par value; - - Common stock; authorized 75,000 shares, $ 0.01 par value; 37,605 and 38,716 shares issued at December 31, 2022 and December 31, 2023, respectively; shares outstanding, 36,170 and 37,229 at December 31, 2022 and December 31, 2023, respectively 376 387 Additional paid-in capital 219,055 212,703 Accumulated deficit ( 140,806 ) ( 146,281 ) Accumulated other comprehensive loss ( 1,210 ) ( 616 ) Treasury stock; 1,435 and 1,487 common shares at cost at December 31, 2022 and December 31, 2023, respectively ( 8,510 ) ( 8,651 ) Total Powerfleet, Inc. stockholders’ equity 68,905 57,542 Non-controlling interest 78 102 Total equity 68,983 57,644 Total liabilities, convertible redeemable preferred stock, and stockholders’ equity $ 218,056 $ 217,746 SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 47 POWERFLEET, INC. AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share data) Year Ended December 31, 2021 (As restated) 2022 (As restated) 2023 Revenues: Products $ 52,902 $ 56,945 $ 49,741 Services 73,058 78,967 83,995 Total revenues 125,960 135,912 133,736 Cost of revenues: Cost of products 39,627 42,569 36,404 Cost of services 26,580 28,350 30,256 Total cost of revenues 66,207 70,919 66,660 Gross profit 59,753 64,993 67,076 Operating expenses: Selling, general and administrative expenses 56,496 63,492 71,253 Research and development expenses 11,429 8,472 8,380 Total operating expenses 67,925 71,964 79,633 Loss from operations ( 8,172 ) ( 6,971 ) ( 12,557 ) Interest income 45 71 103 Interest expense, net ( 2,764 ) 994 ( 1,602 ) Bargain purchase – Movingdots - - 9,034 Other (expense) income, net 8 24 ( 29 ) Net loss before income taxes ( 10,883 ) ( 5,882 ) ( 5,051 ) Income tax expense ( 1,888 ) ( 870 ) ( 589 ) Net loss before non-controlling interest ( 12,771 ) ( 6,752 ) ( 5,640 ) Non-controlling interest 5 ( 2 ) ( 35 ) Net loss ( 12,766 ) ( 6,754 ) ( 5,675 ) Accretion of preferred stock ( 5,190 ) ( 5,906 ) ( 7,139 ) Preferred stock dividends ( 4,112 ) ( 4,231 ) ( 4,493 ) Net loss attributable to common stockholders $ ( 22,068 ) $ ( 16,891 ) $ ( 17,307 ) Net loss per share attributable to common stockholders – basic and diluted $ ( 0.64 ) $ ( 0.48 ) $ ( 0.49 ) Weighted average common shares outstanding – basic and diluted 34,571 35,393 35,628 SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 48 POWERFLEET, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Loss (In thousands, except per share data) December 31, 2021 (As restated) 2022 (As restated) 2023 Net loss attributable to common stockholders $ ( 22,068 ) $ ( 16,891 ) $ ( 17,307 ) Foreign currency translation adjustment ( 8 ) ( 1,601 ) 594 Total other comprehensive income (loss) ( 8 ) ( 1,601 ) 594 Comprehensive loss $ ( 22,076 ) $ ( 18,492 ) $ ( 16,713 ) SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 49 POWERFLEET, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders’ Equity (In thousands, except per share data) Common Stock Additional Accumulated Other Number of Shares Amount Paid-in Capital Accumulated Deficit Comprehensive Income (Loss) Treasury Stock Non-controlling Interest Stockholders’ Equity Balance at January 1, 2021 (As issued) 32,280 $ 323 $ 206,499 $ ( 121,150 ) $ 399 $ ( 6,858 ) $ 75 $ 79,288 Restatement adjustments - - ( 4,713 ) ( 137 ) - - - ( 4,850 ) Balance at January 1, 2021 (As restated) 32,280 323 201,786 ( 121,287 ) 399 ( 6,858 ) 75 74,438 Net loss attributable to common stockholders (As restated) - - ( 9,303 ) ( 12,765 ) - - - ( 22,068 ) Net loss attributable to non-controlling interest - - - - - - ( 5 ) ( 5 ) Foreign currency translation adjustment - - - - ( 8 ) - 16 8 Issuance of restricted shares 449 5 ( 4 ) - - - - 1 Forfeiture of restricted shares ( 89 ) ( 1 ) - - - - - ( 1 ) Vesting of restricted stock units 39 - - - - - - - Shares issued pursuant to exercise of stock options 156 2 875 - - - - 877 Shares withheld pursuant to exercise of stock options - - - - - ( 647 ) - ( 647 ) Shares withheld pursuant to vesting of restricted stock - - - - - ( 794 ) - ( 794 ) Common shares issued, net of issuance costs 4,428 44 26,822 - - - - 26,866 Stock based compensation - - 4,676 - - - - 4,676 Balance at December 31, 2021 (As restated) 37,263 $ 373 $ 224,852 $ ( 134,052 ) $ 391 $ ( 8,299 ) $ 86 $ 83,351 Net loss attributable to common stockholders (As restated) - - ( 10,137 ) ( 6,754 ) - - - ( 16,891 ) Net income attributable to non-controlling interest - - - - - - 2 2 Foreign currency translation adjustment - - - - ( 1,601 ) - ( 10 ) ( 1,611 ) Issuance of restricted shares 492 5 ( 5 ) - - - - - Forfeiture of restricted shares ( 186 ) ( 2 ) 2 - - - - - Vesting of restricted stock units 36 - - - - - - - Shares withheld pursuant to vesting of restricted stock - - - - - ( 211 ) - ( 211 ) Stock based compensation - - 4,343 - - - - 4,343 Balance at December 31, 2022 (As restated) 37,605 $ 376 $ 219,055 $ ( 140,806 ) $ ( 1,210 ) $ ( 8,510 ) $ 78 $ 68,983 Balance 37,605 $ 376 $ 219,055 $ ( 140,806 ) $ ( 1,210 ) $ ( 8,510 ) $ 78 $ 68,983 Retained earnings adjustment for adoption of ASU 2016-13 - - - 200 - - - 200 Net loss attributable to common stockholders (As restated) - - ( 11,632 ) ( 5,675 ) - - - ( 17,307 ) Net income attributable to non-controlling interest - - - - - - 35 35 Net income (loss) attributable to non-controlling interest - - - - - - 35 35 Warrant issued in connection with acquisition - - 1,347 - - - - 1,347 Foreign currency translation adjustment - - - - 594 - ( 11 ) 583 Issuance of restricted shares 1,247 13 ( 13 ) - - - - - Forfeiture of restricted shares ( 152 ) ( 2 ) 2 - - - - Exercise of stock options 16 - 36 - - - - 36 Shares withheld pursuant to vesting of restricted stock - - - - - ( 141 ) - ( 141 ) Stock based compensation - - 3,908 - - - - 3,908 Balance at December 31, 2023 38,716 $ 387 $ 212,703 $ ( 146,281 ) $ ( 616 ) $ ( 8,651 ) $ 102 $ 57,644 Balance 38,716 $ 387 $ 212,703 $ ( 146,281 ) $ ( 616 ) $ ( 8,651 ) $ 102 $ 57,644 SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 50 POWERFLEET, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows In thousands (except per share data) 2021 2022 2023 Year Ended December 31, 2021 (As restated) 2022 (As restated) 2023 Cash flows from operating activities: Net loss $ ( 12,766 ) $ ( 6,754 ) $ ( 5,675 ) Adjustments to reconcile net loss to cash (used in) provided by operating activities: Non-controlling interest ( 5 ) 2 35 Gain on bargain purchase - - ( 9,034 ) Inventory reserve ( 22 ) 149 1,500 Stock based compensation expense 4,676 4,343 3,908 Depreciation and amortization 8,553 8,262 9,445 Right-of-use assets, non-cash lease expense 2,908 2,756 2,814 Bad debt expense 997 66 1,767 Deferred income taxes 1,888 708 ( 6 ) Other non-cash items 305 707 103 Changes in: Accounts receivable ( 9,549 ) ( 1,368 ) ( 1,460 ) Inventory ( 5,943 ) ( 4,473 ) ( 1,743 ) Prepaid expenses and other assets ( 2,860 ) ( 816 ) 791 Deferred costs 2,990 1,608 679 Deferred revenue ( 1,767 ) ( 627 ) ( 295 ) Accounts payable and accrued expenses 8,140 ( 533 ) 4,440 Lease liabilities ( 2,790 ) ( 2,739 ) ( 2,851 ) Accrued severance payable, net ( 145 ) ( 42 ) ( 21 ) Net cash (used in) provided by operating activities ( 5,390 ) 1,249 4,397 Cash flows from investing activities: Acquisitions, net of cash assumed - - 8,722 Purchase of investments - ( 100 ) ( 100 ) Capitalized software development costs ( 627 ) ( 2,219 ) ( 3,629 ) Capital expenditures ( 2,400 ) ( 4,011 ) ( 3,464 ) Net cash (used in) provided by investing activities ( 3,027 ) ( 6,330 ) 1,529 Cash flows from financing activities: Net proceeds from stock offering 26,867 - - Repayment of long-term debt ( 5,571 ) ( 5,659 ) ( 4,408 ) Short-term bank debt, net ( 270 ) 5,709 4,321 Purchase of treasury stock upon vesting of restricted stock ( 794 ) ( 211 ) ( 141 ) Repayment of financing lease ( 138 ) ( 121 ) ( 129 ) Payment of preferred stock dividend ( 4,112 ) - ( 3,385 ) Proceeds from exercise of stock options, net 229 - 36 Net cash (used in) provided by financing activities 16,211 ( 282 ) ( 3,706 ) Effect of foreign exchange rate changes on cash and cash equivalents 531 ( 3,408 ) ( 877 ) Net increase (decrease) in cash, cash equivalents and restricted cash 8,325 ( 8,771 ) 1,343 Cash, cash equivalents and restricted cash - beginning of year 18,435 26,760 17,989 Cash, cash equivalents and restricted cash - end of year $ 26,760 $ 17,989 $ 19,332 Reconciliation of cash, cash equivalents, and restricted cash, beginning of year Cash and cash equivalents 18,127 26,452 17,680 Restricted cash 308 308 309 Cash, cash equivalents, and restricted cash, beginning of year $ 18,435 $ 26,760 $ 17,989 Reconciliation of cash, cash equivalents, and restricted cash, end of year Cash and cash equivalents 26,452 17,680 19,022 Restricted cash 308 309 310 Cash, cash equivalents, and restricted cash, end of year $ 26,760 $ 17,989 $ 19,332 Supplemental disclosure of cash flow information: Cash paid for: Taxes $ 58 $ 63 $ 175 Interest $ 1,474 $ 1,308 $ 1,656 Noncash investing and financing activities: Value of shares withheld pursuant to exercise of stock options $ 647 $ - $ - Value of warrant issued in connection with Movingdots acquisition $ - $ - $ 1,347 Value of licensed intellectual property acquired in connection with Movingdots acquisition $ - $ - $ 1,517 Preferred stock dividends paid in shares $ - $ 4,231 $ 1,108 SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 51 POWERFLEET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2022 and 2023 In thousands (except per share data) NOTE 1 - DESCRIPTION OF BUSINESS AND LIQUIDITY The Company 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. was incorporated in the State of Delaware in 1993. Powerfleet, Inc. was incorporated in the State of Delaware in February 2019 for the purpose of effectuating the transactions pursuant to which the Company acquired Pointer Telocation Ltd. (the “Pointer Merger”) and commenced operations on October 3, 2019, upon the closing of the Pointer Merger. Impact of Macroeconomic Conditions and Supply Chain Disruptions Higher interest rates and inflation, fluctuations in currency values, and the conflicts between Russia and Ukraine and between Israel and Hamas have resulted in significant economic disruption and adversely impacted the broader global economy, including our customers and suppliers. The extent of the impact of such conditions on our business and financial results will depend largely on future developments that cannot be accurately predicted at this time, including the duration of higher interest rates and inflation, the resilience of currency values, and the resolution or escalation of geopolitical conflicts, particularly those between Russia and Ukraine and between Israel and Hamas, and the impact of these and other factors on capital and financial markets and the related impact on the financial circumstances of our employees, customers and suppliers. In addition, the Company has experienced a significant impact to its supply chain given the challenges stemming from ongoing macroeconomic conditions, including delays in supply chain deliveries, extended lead times and shortages of certain key components, some raw material cost increases and slowdowns at certain production facilities. As a result of these supply chain issues, the Company has had to increase its volume of inventory beginning in 2022 to ensure supply. The Company incurred supply chain constraint expenses which lowered its gross margins and decreased its profitability primarily during the last six months of 2021 and first nine months of 2022. The supply chain disruptions have delayed and may continue to delay the timing of some orders and expected deliveries of the Company’s products. If the impact of the supply chain disruptions is more severe than the Company expects, it could result in longer lead times, inventory supply challenges and further increased costs, all of which could result in the deterioration of the Company’s results, potentially for a longer period than currently anticipated. As of the date of these audited consolidated financial statements, the full extent to which global economic conditions and geopolitical conflicts may materially impact the Company’s business, results of operations and financial condition is uncertain. Liquidity As of December 31, 2023, the Company had cash (including restricted cash) and cash equivalents of $ 19,300 and working capital of $ 23,500 . The Company’s primary sources of cash are cash flows from sales of products and services, its holdings of cash, cash equivalents and investments from the sale of its capital stock and borrowings under its credit facilities. 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”) were party to a Credit Agreement (the “Prior 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 amounts 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 Company borrowed net NIS 4,915 , or $ 1,355 , under the revolving credit facility as of December 31, 2023. See Note 12 for additional information. On March 18, 2024, the Borrowers entered into an amended and restated credit agreement (the “A&R Credit Agreement”), which refinanced the facilities under, and amended and restated, the Prior Credit Agreement. The A&R Credit Agreement provides for (i) two senior secured term loan facilities denominated in NIS to Powerfleet Israel in an aggregate principal amount of $ 30,000 (comprised of two facilities in the aggregate principal amounts of $ 20,000 and $ 10,000 , respectively) and (ii) two revolving credit facilities to Pointer in an aggregate principal amount of $ 20,000 (comprised of two revolvers in the aggregate principal amounts of $ 10,000 and $ 10,000 , respectively). On March 18, 2024, Powerfleet Israel drew down $ 30,000 in cash under the term loan facilities and used the proceeds to prepay approximately $ 11,200 , representing the remaining outstanding balance, of the term loans extended to Powerfleet Israel under the Prior Credit Agreement and distributed the remaining proceeds to Powerfleet. The proceeds of the revolving facilities may be used by Pointer for general corporate purposes, including working capital and capital expenditures. On April 2, 2024, the Company consummated the transactions contemplated by the Implementation Agreement, dated as of October 10, 2023 (the “Implementation Agreement”), that the Company entered into with Main Street 2000 Proprietary Limited, a private company incorporated in the Republic of South Africa and a wholly owned subsidiary of the Company, and MiX Telematics Limited, a public company incorporated under the laws of the Republic of South Africa (“MiX Telematics”), pursuant to which MiX Telematics became an indirect, wholly owned subsidiary of the Company (the “MiX Combination”). The Implementation Agreement required, as a condition to closing of the MiX Combination, that the Company obtain a debt and/or equity 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”). In order to meet this condition, the Company entered into a facilities agreement (the “Facilities Agreement”) with FirstRand Bank Limited (acting through its Rand Merchant Bank division) (“RMB”) on March 7, 2024 and shortly thereafter drew down $ 85,000 in cash under the Facilities Agreement. On April 2, 2024, concurrently with the closing of the MiX Combination, the Company used the net proceeds received from RMB and from incremental borrowing capacity as a result of the refinancing of credit facilities with Hapoalim to redeem in full $ 90,300 for the outstanding shares of the Series A Preferred Stock. 52 See Note 20 for additional information on the financings that occurred after the year ended December 31, 2023. Management believes the Company’s cash and cash equivalents of $ 19.3 million as of December 31, 2023 in conjunction with cash generated from the execution of its strategic plan over the next 12 months, and proceeds from the debt agreements are sufficient to fund the projected operations for at least the next 12 months from the issuance date of these financial statements (May 9, 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. NOTE 2 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS Description of Restatement Adjustments In connection with the preparation of the Company’s audited consolidated financial statements for the year ended December 31, 2023, the Company determined that the accounting for the redemption premium associated with the Series A Preferred Stock was understated resulting in an understatement of “net loss attributable to common stockholders” and “net loss per share attributable to common stockholders” for each period, an understatement of the value of the convertible redeemable preferred stock as of each balance sheet date, and an overstatement of the additional paid-in capital as of each balance sheet date. The required adjustments to correct the redemption value of the calculation of the Series A Preferred Stock and the related accretion of the value of the preferred stock in the consolidated statement of operations include the recording of a non-cash accretion resulting in an increase in the net loss attributable to common stockholders, an increase in the “convertible redeemable preferred stock”, and a decrease of “additional paid-in capital” for all annual and interim periods in fiscal years 2021, 2022, and through September 30, 2023. The correction of the error results in reporting the value of the convertible preferred stock including the accretion to the redemption value from the date of original issuance through each balance sheet date applying the interest method. The Company determined that it is appropriate to restate the financial statements for the fiscal years ended December 31, 2021 and 2022 and each of the interim periods during the 2022 and 2023 fiscal years included in this Annual Report on Form 10-K in addition to correcting other unrelated immaterial errors that were previously either unrecorded or recorded as out-of-period adjustments. The following tables present the impact of all of these adjustments on the Company’s previously reported consolidated financial statements. The “As Reported” amounts in the following tables are amounts derived from the Company’s previously filed Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. The amounts in the columns labeled “Redemption Premium Adjustment” represent the effect of adjustments resulting from the correction of the understatement of the Company’s net loss attributable to common stockholders and net loss per share attributable to common stockholders for each period for each period, as well as the impact of the cumulative amount on the value of the convertible redeemable preferred stock and additional paid-in capital as of each balance sheet date. The amounts in the columns labeled “Other Adjustments” represent the effect of other adjustments that relate to other unrelated errors in previously filed financial statements that were not material, individually or in the aggregate, to such filed financial statements. The effects of the restatement have been corrected in all impacted tables and footnotes throughout these consolidated financial statements. 53 Consolidation Financial Statements – Restatement Reconciliation Tables SCHEDULE OF CONSOLIDATION FINANCIAL STATEMENTS Audited Financial Statements The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Balance Sheet as of December 31, 2022: December 31, 2022 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated ASSETS Current assets: Cash and cash equivalents $ 17,680 $ - $ - $ 17,680 Restricted cash 309 - - 309 Accounts receivable 32,493 - 154 32,647 Inventory, net 22,272 - - 22,272 Deferred costs - current 762 - - 762 Prepaid expenses and other current assets 7,709 - ( 173 ) 7,536 Total current assets 81,225 - ( 19 ) 81,206 Deferred costs less current portion - - - - Fixed assets, net 9,249 - - 9,249 Goodwill 83,487 - - 83,487 Intangible assets, net 22,908 - - 22,908 Right of use asset 7,820 - - 7,820 Severance payable fund 3,760 - - 3,760 Deferred tax asset 3,225 - 83 3,308 Other assets 5,761 - 557 6,318 Total assets $ 217,435 $ - $ 621 $ 218,056 LIABILITIES Current liabilities: Short-term bank debt and current maturities of long-term debt $ 10,312 $ - $ - $ 10,312 Convertible note payable - - - - Accounts payable and accrued expenses 26,598 - ( 1,201 ) 25,397 Deferred revenue - current 6,363 - 13 6,376 Lease liability - current 2,441 - - 2,441 Total current liabilities 45,714 - ( 1,188 ) 44,526 Long-term debt - less current maturities 11,403 - - 11,403 Deferred revenue - less current portion 4,390 - 41 4,431 Lease liability - less current portion 5,628 - - 5,628 Accrued severance payable 4,365 - - 4,365 Deferred tax liability 4,919 - ( 18 ) 4,901 Other long-term liabilities 636 - 1,152 1,788 Total liabilities 77,055 - ( 13 ) 77,042 Commitments and Contingencies (note 19) Convertible redeemable preferred stock 57,565 14,466 - 72,031 Preferred stock - - - - Common stock 376 - - 376 Additional paid-in capital 233,521 ( 14,466 ) - 219,055 Accumulated deficit ( 141,440 ) - 634 ( 140,806 ) Accumulated other comprehensive loss ( 1,210 ) - - ( 1,210 ) Treasury stock ( 8,510 ) - - ( 8,510 ) STOCKHOLDERS’ EQUITY Total Powerfleet, Inc. stockholders’ equity 82,737 ( 14,466 ) 634 68,905 Non-controlling interest 78 - - 78 Total equity 82,815 ( 14,466 ) 634 68,983 Total liabilities, convertible redeemable preferred stock, and stockholders’ equity $ 217,435 $ - $ 621 $ 218,056 54 The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Operations for the year ended December 31, 2021: Year Ended December 31, 2021 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated Revenues: Products $ 52,981 $ - $ ( 79 ) $ 52,902 Services 73,227 - ( 169 ) 73,058 Total revenues 126,208 - ( 248 ) 125,960 Cost of revenues: Cost of products 39,445 - 182 39,627 Cost of services 26,580 - - 26,580 Total cost of revenues 66,025 - 182 66,207 Gross profit 60,183 - ( 430 ) 59,753 Operating expenses: Selling, general and administrative expenses 57,100 - ( 604 ) 56,496 Research and development expenses 11,058 - 371 11,429 Total operating expenses 68,158 - ( 233 ) 67,925 Loss from operations ( 7,975 ) - ( 197 ) ( 8,172 ) Interest income 45 - - 45 Interest expense, net ( 2,764 ) - - ( 2,764 ) Bargain purchase – Movingdots - - - - Other (expense) income, net 8 - - 8 Net loss before income taxes ( 10,686 ) - ( 197 ) ( 10,883 ) Income tax (expense) benefit ( 2,607 ) - 719 ( 1,888 ) Net loss before non-controlling interest ( 13,293 ) - 522 ( 12,771 ) Non-controlling interest 5 - - 5 Net loss ( 13,288 ) - 522 ( 12,766 ) Accretion of preferred stock ( 672 ) ( 4,518 ) - ( 5,190 ) Preferred stock dividends ( 4,112 ) - - ( 4,112 ) Net loss attributable to common stockholders $ ( 18,072 ) $ ( 4,518 ) $ 522 $ ( 22,068 ) Net loss per share attributable to common stockholders – basic and diluted $ ( 0.52 ) $ ( 0.13 ) $ 0.02 $ ( 0.64 ) Weighted average common shares outstanding – basic and diluted 34,571 34,571 34,571 34,571 55 The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Operations for the year ended December 31, 2022: Year Ended December 31, 2022 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated Revenues: Products $ 56,313 $ - $ 632 $ 56,945 Services 78,844 - 123 78,967 Total revenues 135,157 - 755 135,912 Cost of revenues: Cost of products 42,636 - ( 67 ) 42,569 Cost of services 28,350 - - 28,350 Total cost of revenues 70,986 - ( 67 ) 70,919 Gross profit 64,171 - 822 64,993 Operating expenses: Selling, general and administrative expenses 63,001 - 491 63,492 Research and development expenses 8,964 - ( 492 ) 8,472 Total operating expenses 71,965 - ( 1 ) 71,964 Loss from operations ( 7,794 ) - 823 ( 6,971 ) Interest income 71 - - 71 Interest expense, net 994 - - 994 Bargain purchase – Movingdots - - - - Other (expense) income, net 24 - - 24 Net loss before income taxes ( 6,705 ) - 823 ( 5,882 ) Income tax (expense) benefit ( 296 ) - ( 574 ) ( 870 ) Net loss before non-controlling interest ( 7,001 ) - 249 ( 6,752 ) Non-controlling interest ( 2 ) - - ( 2 ) Net loss ( 7,003 ) - 249 ( 6,754 ) Accretion of preferred stock ( 671 ) ( 5,235 ) - ( 5,906 ) Preferred stock dividends ( 4,231 ) - - ( 4,231 ) Net loss attributable to common stockholders $ ( 11,905 ) $ ( 5,235 ) $ 249 $ ( 16,891 ) Net loss per share attributable to common stockholders – basic and diluted $ ( 0.34 ) $ ( 0.15 ) $ 0.01 $ ( 0.48 ) Weighted average common shares outstanding – basic and diluted 35,393 35,393 35,393 35,393 56 The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2021 and 2022, respectively: CORRECTED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY As Reported Redemption premium adjustment Other Adjustments As Restated As Reported Redemption premium adjustment Other Adjustments As Restated Additional Paid-In Capital Accumulated Deficit CORRECTED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY As Reported Redemption premium adjustment Other Adjustments As Restated As Reported Redemption premium adjustment Other Adjustments As Restated Balance at December 31, 2020 $ 206,499 $ ( 4,713 ) $ - $ 201,786 $ ( 121,150 ) $ - $ ( 137 ) $ ( 121,287 ) Net loss attributable to common stockholders ( 4,785 ) ( 4,518 ) - ( 9,303 ) ( 13,287 ) - 522 ( 12,765 ) Issuance of restricted shares ( 4 ) - - ( 4 ) - - - - Shares issued pursuant to exercise of stock options 875 - - 875 - - - - Common shares issued, net of issuance costs 26,822 - - 26,822 - - - - Stock based compensation 4,676 - - 4,676 - - - - Balance at December 31, 2021 $ 234,083 $ ( 9,231 ) $ - $ 224,852 $ ( 134,437 ) $ - $ 385 $ ( 134,052 ) Net loss attributable to common stockholders ( 4,902 ) ( 5,235 ) - ( 10,137 ) ( 7,003 ) - 249 ( 6,754 ) Issuance of restricted shares ( 5 ) - - ( 5 ) - - - - Forfeiture of restricted shares 2 - - 2 - - - - Stock based compensation 4,343 - - 4,343 - - - - Balance at December 31, 2022 $ 233,521 $ ( 14,466 ) $ - $ 219,055 $ ( 141,440 ) $ - $ 634 $ ( 140,806 ) 57 The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Comprehensive Loss for the years ended December 31, 2021 and 2022, respectively: Year Ended December 31, 2021 (As restated) 2022 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated As Reported Redemption Premium Adjustment Other Adjustments As Restated Net loss attributable to common stockholders $ ( 18,072 ) $ ( 4,518 ) $ 522 $ ( 22,068 ) $ ( 11,905 ) $ ( 5,235 ) $ 249 $ ( 16,891 ) Foreign currency translation adjustment ( 8 ) - - ( 8 ) ( 1,601 ) - - ( 1,601 ) Total other comprehensive loss ( 8 ) - - ( 8 ) ( 1,601 ) - - ( 1,601 ) Comprehensive loss $ ( 18,080 ) $ ( 4,518 ) $ 522 $ ( 22,076 ) $ ( 13,506 ) $ ( 5,235 ) $ 249 $ ( 18,492 ) 58 The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Cash Flows for the year ended December 31, 2021: As Reported Other Adjustments As Restated Year Ended December 31, 2021 (As restated) As Reported Other Adjustments As Restated Cash flows from operating activities Net loss $ ( 13,288 ) $ 522 $ ( 12,766 ) Adjustments to reconcile net loss to cash (used in) provided by operating activities: Non-controlling interest ( 5 ) - ( 5 ) Gain on bargain purchase - - - Inventory reserve ( 22 ) - ( 22 ) Stock based compensation expense 4,676 - 4,676 Depreciation and amortization 8,553 - 8,553 Right-of-use assets, non-cash lease expense 2,859 49 2,908 Bad debt expense 1,442 ( 445 ) 997 Deferred income taxes 2,607 ( 719 ) 1,888 Other non-cash items 305 - 305 Changes in: Accounts receivable ( 9,643 ) 94 ( 9,549 ) Inventory ( 6,058 ) 115 ( 5,943 ) Prepaid expenses and other assets ( 2,918 ) 58 ( 2,860 ) Deferred costs 3,349 ( 359 ) 2,990 Deferred revenue ( 2,290 ) 523 ( 1,767 ) Accounts payable and accrued expenses 8,300 ( 160 ) 8,140 Lease liabilities ( 2,741 ) ( 49 ) ( 2,790 ) Accrued severance payable, net ( 145 ) - ( 145 ) Net cash used in operating activities ( 5,019 ) ( 371 ) ( 5,390 ) Cash flows from investing activities: Acquisitions, net of cash assumed - - - Purchase of investments - - - Capitalized software development costs ( 627 ) - ( 627 ) Capital expenditures ( 2,771 ) 371 ( 2,400 ) Net cash (used in) provided by investing activities ( 3,398 ) 371 ( 3,027 ) Cash flows from financing activities: Net proceeds from stock offering 26,867 - 26,867 Repayment of long-term debt ( 5,571 ) - ( 5,571 ) Repayment of financing lease ( 138 ) - ( 138 ) Short-term bank debt, net ( 270 ) - ( 270 ) Purchase of treasury stock upon vesting of restricted stock ( 794 ) - ( 794 ) Payment of preferred stock dividend ( 4,112 ) - ( 4,112 ) Proceeds from exercise of stock options, net 229 - 229 Net cash used in financing activities 16,211 - 16,211 Effect of foreign exchange rate changes on cash and cash equivalents 531 - 531 Net increase in cash, cash equivalents and restricted cash 8,325 - 8,325 Cash, cash equivalents and restricted cash – beginning of period 18,435 - 18,435 Cash, cash equivalents and restricted cash – end of period $ 26,760 $ - $ 26,760 Reconciliation of cash, cash equivalents, and restricted cash, beginning of period Cash and cash equivalents 18,127 - 18,127 Restricted cash 308 - 308 Cash, cash equivalents, and restricted cash, beginning of period $ 18,435 $ - $ 18,435 Reconciliation of cash, cash equivalents, and restricted cash, end of period Cash and cash equivalents 26,452 - 26,452 Restricted cash 308 - 308 Cash, cash equivalents, and restricted cash, end of period $ 26,760 $ - $ 26,760 Supplemental disclosure of cash flow information: Cash paid for: Taxes 58 - 58 Interest 1,474 - 1,474 Noncash investing and financing activities: Value of shares withheld pursuant to exercise of stock options $ 647 $ - $ 647 59 The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Cash Flows for the year ended December 31, 2022: Cash flows from operating activities As Reported Other Adjustments As Restated Year Ended December 31, 2022 (As restated) Cash flows from operating activities As Reported Other Adjustments As Restated Net loss $ ( 7,003 ) $ 249 $ ( 6,754 ) Adjustments to reconcile net loss to cash (used in) provided by operating activities: Non-controlling interest 2 - 2 Gain on bargain purchase - - - Inventory reserve 149 - 149 Stock based compensation expense 4,343 - 4,343 Depreciation and amortization 8,262 - 8,262 Right-of-use assets, non-cash lease expense 2,756 - 2,756 Bad debt expense 66 - 66 Deferred income taxes 134 574 708 Other non-cash items 707 - 707 Changes in: Accounts receivable ( 1,638 ) 270 ( 1,368 ) Inventory ( 4,473 ) - ( 4,473 ) Prepaid expenses and other assets ( 374 ) ( 442 ) ( 816 ) Deferred costs 1,249 359 1,608 Deferred revenue ( 158 ) ( 469 ) ( 627 ) Accounts payable and accrued expenses ( 484 ) ( 49 ) ( 533 ) Lease liabilities ( 2,739 ) - ( 2,739 ) Accrued severance payable, net ( 42 ) - ( 42 ) Net cash provided by operating activities 757 492 1,249 Cash flows from investing activities: Acquisitions, net of cash assumed - - - Purchase of investments ( 100 ) - ( 100 ) Capitalized software development costs ( 2,219 ) - ( 2,219 ) Capital expenditures ( 3,519 ) ( 492 ) ( 4,011 ) Net cash used in investing activities ( 5,838 ) ( 492 ) ( 6,330 ) Cash flows from financing activities: Net proceeds from stock offering - - - Repayment of long-term debt ( 5,659 ) - ( 5,659 ) Repayment of financing lease ( 121 ) - ( 121 ) Short-term bank debt, net 5,709 - 5,709 Purchase of treasury stock upon vesting of restricted stock ( 211 ) - ( 211 ) Payment of preferred stock dividend - - - Proceeds from exercise of stock options, net - - - Net cash used in financing activities ( 282 ) - ( 282 ) Effect of foreign exchange rate changes on cash and cash equivalents ( 3,408 ) - ( 3,408 ) Net decrease in cash, cash equivalents and restricted cash ( 8,771 ) - ( 8,771 ) Cash, cash equivalents and restricted cash – beginning of period 26,760 - 26,760 Cash, cash equivalents and restricted cash – end of period $ 17,989 $ - $ 17,989 Reconciliation of cash, cash equivalents, and restricted cash, beginning of period Cash and cash equivalents 26,452 - 26,452 Restricted cash 308 - 308 Cash, cash equivalents, and restricted cash, beginning of period $ 26,760 $ - $ 26,760 Reconciliation of cash, cash equivalents, and restricted cash, end of period Cash and cash equivalents 17,680 - 17,680 Restricted cash 309 - 309 Cash, cash equivalents, and restricted cash, end of period $ 17,989 $ - $ 17,989 Supplemental disclosure of cash flow information: Cash paid for: Taxes 63 - 63 Interest 1,308 - 1,308 Noncash investing and financing activities: Preferred stock dividends paid in shares $ 4,231 $ -- $ 4,231 60 Unaudited Financial Statements The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Balance Sheet as of March 31, 2022: As Reported Redemption Premium Adjustment Adjustments Corrected March 31, 2022 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated ASSETS Current assets: Cash and cash equivalents $ 20,559 $ - $ - $ 20,559 Restricted cash 308 - - 308 Accounts receivable 31,861 - 55 31,916 Inventory, net 20,313 - - 20,313 Deferred costs – current 1,416 - - 1,416 Prepaid expenses and other current assets 10,716 - - 10,716 Total current assets 85,173 - 55 85,228 Deferred costs less current portion 224 - - 224 Fixed assets, net 8,532 - - 8,532 Goodwill 83,487 - - 83,487 Intangible assets, net 24,848 - - 24,848 Right of use asset 9,597 - - 9,597 Severance payable fund 4,282 - - 4,282 Deferred tax asset 4,977 - - 4,977 Other assets 4,778 - 91 4,869 Total assets $ 225,898 $ - $ 146 $ 226,044 LIABILITIES Current liabilities: Short-term bank debt and current maturities of long-term debt $ 6,006 $ - $ - $ 6,006 Convertible note payable - - - - Accounts payable and accrued expenses 28,777 - ( 814 ) 27,963 Deferred revenue current 7,168 - 97 7,265 Lease liability – current 2,718 - - 2,718 Total current liabilities 44,669 - ( 717 ) 43,952 Long-term debt – less current maturities 16,258 - - 16,258 Deferred revenue – less current portion 4,466 - - 4,466 Lease liability – less current portion 7,128 - - 7,128 Accrued severance payable 4,857 - - 4,857 Deferred tax liability 5,305 - ( 14 ) 5,291 Other long-term liabilities 738 - 814 1,552 Total liabilities 83,421 - 83 83,504 Commitments and Contingencies (note 19) Convertible redeemable preferred stock 53,859 10,414 - 64,273 STOCKHOLDERS’ EQUITY Preferred stock - - - - Common stock 376 - - 376 Additional paid-in capital 233,342 ( 10,414 ) 317 223,245 Accumulated deficit ( 137,366 ) - ( 159 ) ( 137,525 ) Accumulated other comprehensive loss 644 - ( 95 ) 549 Treasury stock ( 8,480 ) - - ( 8,480 ) Total Powerfleet, Inc. stockholders’ equity 88,516 ( 10,414 ) 63 78,165 Non-controlling interest 102 - - 102 Total equity 88,618 ( 10,414 ) 63 78,267 Total liabilities, convertible redeemable preferred stock, and stockholders’ equity $ 225,898 $ - $ 146 $ 226,044 61 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Balance Sheet as of June 30, 2022: June 30, 2022 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated ASSETS Current assets: Cash and cash equivalents $ 17,703 $ - $ - $ 17,703 Restricted cash 309 - - 309 Accounts receivable 33,491 - ( 3 ) 33,488 Inventory, net 23,540 - - 23,540 Deferred costs – current 1,315 - - 1,315 Prepaid expenses and other current assets 9,020 - ( 78 ) 8,942 Total current assets 85,378 - ( 81 ) 85,297 Deferred costs less current portion - - - - Fixed assets, net 8,333 - - 8,333 Goodwill 83,487 - - 83,487 Intangible assets, net 24,022 - - 24,022 Right of use asset 8,463 - - 8,463 Severance payable fund 3,610 - - 3,610 Deferred tax asset 4,395 - ( 448 ) 3,947 Other assets 5,063 - ( 41 ) 5,022 Total assets $ 222,751 $ - $ ( 570 ) $ 222,181 LIABILITIES Current liabilities: Short-term bank debt and current maturities of long-term debt $ 7,794 $ - $ - $ 7,794 Convertible note payable - - - - Accounts payable and accrued expenses 29,233 - ( 997 ) 28,236 Deferred revenue – current 7,331 - - 7,331 Lease liability – current 2,494 - - 2,494 Total current liabilities 46,852 - ( 997 ) 45,855 Long-term debt – less current maturities 13,408 - - 13,408 Deferred revenue – less current portion 4,139 - - 4,139 Lease liability – less current portion 6,237 - - 6,237 Accrued severance payable 4,118 - - 4,118 Deferred tax liability 5,091 - ( 10 ) 5,081 Other long-term liabilities 647 - 997 1,644 - Total liabilities 80,492 - ( 10 ) 80,482 Commitments and Contingencies (note 19) Convertible redeemable preferred stock 55,074 11,678 - 66,752 STOCKHOLDERS’ EQUITY Preferred stock - - - - Common stock 375 - - 375 Additional paid-in capital 233,756 ( 11,678 ) - 222,078 Accumulated deficit ( 137,484 ) - ( 448 ) ( 137,932 ) Accumulated other comprehensive loss ( 1,062 ) - ( 112 ) ( 1,174 ) Treasury stock ( 8,485 ) - - ( 8,485 ) Total Powerfleet, Inc. stockholders’ equity 87,100 ( 11,678 ) ( 560 ) 74,862 Non-controlling interest 85 - - 85 Total equity 87,185 ( 11,678 ) ( 560 ) 74,947 Total liabilities, convertible redeemable preferred stock, and stockholders’ equity $ 222,751 $ - $ ( 570 ) $ 222,181 62 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Balance Sheet as of September 30, 2022: September 30, 2022 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated ASSETS Current assets: Cash and cash equivalents $ 16,703 $ - $ - $ 16,703 Restricted cash 309 - - 309 Accounts receivable 33,352 - 39 33,391 Inventory, net 23,572 - - 23,572 Deferred costs - current 1,025 - - 1,025 Prepaid expenses and other current assets 8,868 - ( 78 ) 8,790 Total current assets 83,829 - ( 39 ) 83,790 Deferred costs less current portion - - - - Fixed assets, net 8,994 - - 8,994 Goodwill 83,487 - - 83,487 Intangible assets, net 23,312 - - 23,312 Right of use asset 7,999 - - 7,999 Severance payable fund 3,614 - - 3,614 Deferred tax asset 3,740 - - 3,740 Other assets 5,086 - 184 5,270 Total assets $ 220,061 $ - $ 145 $ 220,206 LIABILITIES Current liabilities: Short-term bank debt and current maturities of long-term debt $ 9,366 $ - $ - $ 9,366 Convertible note payable - - - - Accounts payable and accrued expenses 28,818 - ( 1,114 ) 27,704 Deferred revenue - current 6,523 - - 6,523 Lease liability - current 2,464 - - 2,464 Total current liabilities 47,171 - ( 1,114 ) 46,057 Long-term debt - less current maturities 11,914 - - 11,914 Deferred revenue - less current portion 4,208 - - 4,208 Lease liability - less current portion 5,793 - - 5,793 Accrued severance payable 4,148 - - 4,148 Deferred tax liability 5,182 - ( 9 ) 5,173 Other long-term liabilities 628 - 1,126 1,754 Total liabilities 79,044 - 3 79,047 Commitments and Contingencies (note 19) Convertible redeemable preferred stock 56,309 13,032 - 69,341 STOCKHOLDERS’ EQUITY Preferred stock - - - - Common stock 376 - - 376 Additional paid-in capital 233,590 ( 13,032 ) - 220,558 Accumulated deficit ( 139,784 ) - 250 ( 139,534 ) Accumulated other comprehensive loss ( 1,050 ) - ( 108 ) ( 1,158 ) Treasury stock ( 8,492 ) - - ( 8,492 ) Total Powerfleet, Inc. stockholders’ equity 84,640 ( 13,032 ) 142 71,750 Non-controlling interest 68 - - 68 Total equity 84,708 ( 13,032 ) 142 71,818 Total liabilities, convertible redeemable preferred stock, and stockholders’ equity $ 220,061 $ - $ 145 $ 220,206 63 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Balance Sheet as of March 31, 2023: March 31, 2023 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated ASSETS Current assets: Cash and cash equivalents $ 24,780 $ - $ - $ 24,780 Restricted cash 309 - - 309 Accounts receivable 31,442 - 145 31,587 Inventory, net 22,649 - - 22,649 Deferred costs – current 523 - - 523 Prepaid expenses and other current assets 7,959 - - 7,959 Total current assets 87,662 - 145 87,807 Deferred costs less current portion - - - - Fixed assets, net 9,953 - ( 12 ) 9,941 Goodwill 83,487 - - 83,487 Intangible assets, net 22,328 - ( 45 ) 22,283 Right of use asset 7,332 - - 7,332 Severance payable fund 3,684 - - 3,684 Deferred tax asset 2,496 - 97 2,593 Other assets 5,984 - 658 6,642 Total assets $ 222,926 $ - $ 843 $ 223,769 LIABILITIES Current liabilities: Short-term bank debt and current maturities of long-term debt $ 9,359 $ - $ - $ 9,359 Convertible note payable - - - - Accounts payable and accrued expenses 27,682 - ( 1,446 ) 26,236 Deferred revenue – current 6,327 - 33 6,360 Lease liability – current 2,481 - - 2,481 Total current liabilities 45,849 - ( 1,413 ) 44,436 Long-term debt – less current maturities 10,638 - - 10,638 Deferred revenue – less current portion 4,378 - 109 4,487 Lease liability – less current portion 5,065 - - 5,065 Accrued severance payable 4,396 - - 4,396 Deferred tax liability 4,593 - ( 9 ) 4,584 Other long-term liabilities 623 - 1,446 2,069 Total liabilities 75,542 - 133 75,675 Commitments and Contingencies (note 19) Convertible redeemable preferred stock 58,840 15,952 - 74,792 STOCKHOLDERS’ EQUITY Preferred stock - - - - Common stock 376 - - 376 Additional paid-in capital 234,425 ( 15,952 ) - 218,473 Accumulated deficit ( 136,671 ) - 710 ( 135,961 ) Accumulated other comprehensive loss ( 1,098 ) - - ( 1,098 ) Treasury stock ( 8,554 ) - - ( 8,554 ) Total Powerfleet, Inc. stockholders’ equity 88,478 ( 15,952 ) 710 73,236 Non-controlling interest 66 - - 66 Total equity 88,544 ( 15,952 ) 710 73,302 Total liabilities, convertible redeemable preferred stock, and stockholders’ equity $ 222,926 $ - $ 843 $ 223,769 64 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Balance Sheet as of June 30, 2023: June 30, 2023 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated ASSETS Current assets: Cash and cash equivalents $ 21,729 $ - $ - $ 21,729 Restricted cash 309 - - 309 Accounts receivable 31,318 - ( 39 ) 31,279 Inventory, net 22,125 - - 22,125 Deferred costs – current 338 - - 338 Prepaid expenses and other current assets 7,298 - - 7,298 Total current assets 83,117 - ( 39 ) 83,078 Deferred costs less current portion - - - - Fixed assets, net 10,226 - ( 65 ) 10,161 Goodwill 83,487 - - 83,487 Intangible assets, net 21,871 - ( 91 ) 21,780 Right of use asset 6,936 - - 6,936 Severance payable fund 3,566 - - 3,566 Deferred tax asset 1,942 - 97 2,039 Other assets 6,131 - 625 6,756 Total assets $ 217,276 $ - $ 527 $ 217,803 LIABILITIES Current liabilities: Short-term bank debt and current maturities of long-term debt $ 11,197 $ - $ - $ 11,197 Convertible note payable - - - - Accounts payable and accrued expenses 24,960 - ( 1,571 ) 23,389 Deferred revenue – current 6,193 - 37 6,230 Lease liability – current 2,448 - - 2,448 Total current liabilities 44,798 - ( 1,534 ) 43,264 Long-term debt – less current maturities 9,940 - - 9,940 Deferred revenue – less current portion 4,582 - 126 4,708 Lease liability – less current portion 4,715 - - 4,715 Accrued severance payable 4,284 - - 4,284 Deferred tax liability 4,030 - ( 54 ) 3,976 Other long-term liabilities 668 - 1,571 2,239 Total liabilities 73,017 - 109 73,126 Commitments and Contingencies (note 19) Convertible redeemable preferred stock 59,008 17,557 - 76,565 STOCKHOLDERS’ EQUITY Preferred stock - - - - Common stock 377 - - 377 Additional paid-in capital 234,015 ( 17,557 ) - 216,458 Accumulated deficit ( 139,648 ) - 418 ( 139,230 ) Accumulated other comprehensive loss ( 998 ) - - ( 998 ) Treasury stock ( 8,558 ) - - ( 8,558 ) Total Powerfleet, Inc. stockholders’ equity 85,188 ( 17,557 ) 418 68,049 Non-controlling interest 63 - - 63 Total equity 85,251 ( 17,557 ) 418 68,112 Total liabilities, convertible redeemable preferred stock, and stockholders’ equity $ 217,276 $ - $ 527 $ 217,803 65 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Balance Sheet as of September 30, 2023: . September 30, 2023 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated ASSETS Current assets: Cash and cash equivalents $ 19,297 $ - $ - $ 19,297 Restricted cash 310 - - 310 Accounts receivable 33,606 - 188 33,794 Inventory, net 21,055 - - 21,055 Deferred costs - current 191 - - 191 Prepaid expenses and other current assets 8,721 - - 8,721 Total current assets 83,180 - 188 83,368 Deferred costs less current portion - - - - Fixed assets, net 10,222 - ( 119 ) 10,103 Goodwill 83,487 - - 83,487 Intangible assets, net 21,157 - ( 136 ) 21,021 Right of use asset 6,490 - - 6,490 Severance payable fund 3,427 - - 3,427 Deferred tax asset 1,915 - 97 2,012 Other assets 6,228 - 653 6,881 Total assets $ 216,106 $ - $ 683 $ 216,789 LIABILITIES Current liabilities: Short-term bank debt and current maturities of long-term debt $ 12,137 $ - $ - $ 12,137 Convertible note payable - - - - Accounts payable and accrued expenses 28,109 - ( 1,656 ) 26,453 Deferred revenue – current 6,101 - 37 6,138 Lease liability – current 2,286 - - 2,286 Total current liabilities 48,633 - ( 1,619 ) 47,014 Long-term debt – less current maturities 9,617 - - 9,617 Deferred revenue – less current portion 4,804 - 123 4,927 Lease liability – less current portion 4,415 - - 4,415 Accrued severance payable 4,142 - - 4,142 Deferred tax liability 4,283 - ( 21 ) 4,262 Other long-term liabilities 649 - 1,656 2,305 Total liabilities 76,543 - 139 76,682 Commitments and Contingencies (note 19) Convertible redeemable preferred stock 59,176 19,224 - 78,400 STOCKHOLDERS’ EQUITY Preferred stock - Common stock 387 - - 387 Additional paid-in capital 233,811 ( 19,224 ) - 214,587 Accumulated deficit ( 143,322 ) - 544 ( 142,778 ) Accumulated other comprehensive loss ( 1,904 ) - - ( 1,904 ) Treasury stock ( 8,648 ) - - ( 8,648 ) Total Powerfleet, Inc. stockholders’ equity 80,324 ( 19,224 ) 544 61,644 Non-controlling interest 63 - - 63 Total equity 80,387 ( 19,224 ) 544 61,707 Total liabilities, convertible redeemable preferred stock, and stockholders’ equity $ 216,106 $ - $ 683 $ 216,789 66 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Operations for the three months ended March 31, 2022 and 2023: Three Months Ended March 31, 2022 (As restated) Three Months Ended March 31, 2023 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated As Reported Redemption Premium Adjustment Other Adjustments As Restated Revenues: Products $ 14,392 $ - $ 127 $ 14,519 $ 12,404 $ - $ 104 $ 12,508 Services 18,769 - - 18,769 20,435 - ( 91 ) 20,344 Total revenues 33,161 - 127 33,288 32,839 - 13 32,852 Cost of revenues: Cost of products 11,978 - ( 67 ) 11,911 9,002 - - 9,002 Cost of services 6,784 - 6,784 7,219 - 57 7,276 Total cost of revenues 18,762 - ( 67 ) 18,695 16,221 - 57 16,278 Gross profit 14,399 - 194 14,593 16,618 - ( 44 ) 16,574 Operating expenses: Selling, general and administrative expenses 14,912 - 665 15,577 16,787 - 154 16,941 Research and development expenses 3,229 - ( 492 ) 2,737 1,723 - - 1,723 Total operating expenses 18,141 - 173 18,314 18,510 - 154 18,664 Loss from operations ( 3,742 ) - 21 ( 3,721 ) ( 1,892 ) - ( 198 ) ( 2,090 ) Interest income 13 - - 13 24 - - 24 Interest expense, net 100 - - 100 ( 137 ) - - ( 137 ) Bargain purchase – Movingdots - - - - 7,234 - - 7,234 Other (expense) income, net ( 1 ) - 95 94 ( 66 ) - 69 3 Net loss before income taxes ( 3,630 ) - 116 ( 3,514 ) 5,163 - ( 129 ) 5,034 Income tax (expense) benefit 703 - ( 661 ) 42 ( 397 ) - 5 ( 392 ) Net loss before non-controlling interest ( 2,927 ) - ( 545 ) ( 3,472 ) 4,766 - ( 124 ) 4,642 Non-controlling interest ( 1 ) - - ( 1 ) 3 - - 3 Net loss ( 2,928 ) - ( 545 ) ( 3,473 ) 4,769 - ( 124 ) 4,645 Accretion of preferred stock ( 168 ) ( 1,183 ) - ( 1,351 ) ( 168 ) ( 1,487 ) - ( 1,655 ) Preferred stock dividends ( 1,028 ) - - ( 1,028 ) ( 1,107 ) - - ( 1,107 ) Net loss attributable to common stockholders $ ( 4,124 ) $ ( 1,183 ) $ ( 545 ) $ ( 5,852 ) $ 3,494 $ ( 1,487 ) $ ( 124 ) $ 1,883 Net loss per share attributable to common stockholders - basic and diluted $ ( 0.12 ) $ ( 0.03 ) $ ( 0.02 ) $ ( 0.17 ) $ 0.11 $ ( 0.06 ) $ ( 0.01 ) $ 0.04 Weighted average common shares outstanding - basic 35,332 35,332 35,332 35,332 35,548 35,548 35,548 35,548 Weighted average common shares outstanding - diluted 35,332 35,332 35,332 35,332 35,628 35,628 35,628 35,628 67 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Operations for the three months ended June 30, 2022 and 2023: Three Months Ended June 30, 2022 (As restated) Three Months Ended June 30, 2023 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated As Reported Redemption Premium Adjustment Other Adjustments As Restated Revenues: Products $ 14,818 $ - $ ( 229 ) $ 14,589 $ 11,012 $ - $ 72 $ 11,084 Services 19,776 - 155 19,931 21,038 - ( 30 ) 21,008 Total revenues 34,594 - ( 74 ) 34,520 32,050 - 42 32,092 Cost of revenues: Cost of products 11,336 - - 11,336 8,550 - - 8,550 Cost of services 7,028 - - 7,028 7,467 - 57 7,524 Total cost of revenues 18,364 - - 18,364 16,017 - 57 16,074 Gross profit 16,230 - ( 74 ) 16,156 16,033 - ( 15 ) 16,018 Operating expenses: Selling, general and administrative expenses 15,817 - ( 220 ) 15,597 16,987 - 211 17,198 Research and development expenses 2,001 - - 2,001 2,179 - 42 2,221 Total operating expenses 17,818 - ( 220 ) 17,598 19,166 - 253 19,419 Loss from operations ( 1,588 ) - 146 ( 1,442 ) ( 3,133 ) - ( 268 ) ( 3,401 ) Interest income 15 - - 15 22 - - 22 Interest expense, net 1,493 - - 1,493 ( 173 ) - - ( 173 ) Bargain purchase – Movingdots - - - - 283 - - 283 Other (expense) income, net 3 - 17 20 69 - ( 69 ) - Net loss before income taxes ( 77 ) - 163 86 ( 2,932 ) - ( 337 ) ( 3,269 ) Income tax (expense) benefit ( 40 ) - ( 452 ) ( 492 ) ( 39 ) - 45 6 Net loss before non-controlling interest ( 117 ) - ( 289 ) ( 406 ) ( 2,971 ) - ( 292 ) ( 3,263 ) Non-controlling interest ( 1 ) - - ( 1 ) ( 6 ) - - ( 6 ) Net loss ( 118 ) - ( 289 ) ( 407 ) ( 2,977 ) - ( 292 ) ( 3,269 ) Accretion of preferred stock ( 168 ) ( 1,264 ) - ( 1,432 ) ( 168 ) ( 1,604 ) - ( 1,772 ) Preferred stock dividends ( 1,048 ) - - ( 1,048 ) ( 1,129 ) - - ( 1,129 ) Net loss attributable to common stockholders $ ( 1,334 ) $ ( 1,264 ) $ ( 289 ) $ ( 2,887 ) $ ( 4,274 ) $ ( 1,604 ) $ ( 292 ) $ ( 6,170 ) Net loss per share attributable to common stockholders – basic and diluted $ ( 0.04 ) $ ( 0.04 ) $ ( 0.01 ) $ ( 0.08 ) $ ( 0.12 ) $ ( 0.05 ) $ ( 0.01 ) $ ( 0.17 ) Weighted average common shares outstanding – basic 35,386 35,386 35,386 35,386 35,605 35,605 35,605 35,605 Weighted average common shares outstanding – diluted 35,386 35,386 35,386 35,386 35,605 35,605 35,605 35,605 68 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Operations for the six months ended June 30, 2022 and 2023: Six Months Ended June 30, 2022 (As restated) Six Months Ended June 30, 2023 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated As Reported Redemption Premium Adjustment Other Adjustments As Restated Revenues: Products $ 29,210 $ - $ ( 102 ) $ 29,108 $ 23,416 $ - $ 177 $ 23,593 Services 38,545 - 155 38,700 41,473 - ( 121 ) 41,352 Total revenues 67,755 - 53 67,808 64,889 - 56 64,945 Cost of revenues: Cost of products 23,314 - ( 67 ) 23,247 17,552 - - 17,552 Cost of services 13,812 - - 13,812 14,686 - 114 14,800 Total cost of revenues 37,126 - ( 67 ) 37,059 32,238 - 114 32,352 Gross profit 30,629 - 120 30,749 32,651 - ( 58 ) 32,593 Operating expenses: Selling, general and administrative expenses 30,729 - 445 31,174 33,774 - 365 34,139 Research and development expenses 5,230 - ( 492 ) 4,738 3,902 - 42 3,944 Total operating expenses 35,959 - ( 47 ) 35,912 37,676 - 407 38,083 Loss from operations ( 5,330 ) - 167 ( 5,163 ) ( 5,025 ) - ( 465 ) ( 5,490 ) Interest income 28 - 28 46 - 46 Interest expense, net 1,593 - - 1,593 ( 310 ) - - ( 310 ) Bargain purchase – Movingdots - - - - 7,517 - - 7,517 Other (expense) income, net 2 - 112 114 3 - - 3 Net loss before income taxes ( 3,707 ) - 279 ( 3,428 ) 2,231 - ( 465 ) 1,766 Income tax (expense) benefit 663 - ( 1,113 ) ( 450 ) ( 436 ) - 50 ( 386 ) Net loss before non-controlling interest ( 3,044 ) - ( 834 ) ( 3,878 ) 1,795 - ( 415 ) 1,380 Non-controlling interest ( 2 ) - - ( 2 ) ( 3 ) - - ( 3 ) Net loss ( 3,046 ) - ( 834 ) ( 3,880 ) 1,792 - ( 415 ) 1,377 Accretion of preferred stock ( 336 ) ( 2,447 ) - ( 2,783 ) ( 336 ) ( 3,091 ) - ( 3,427 ) Preferred stock dividends ( 2,076 ) - - ( 2,076 ) ( 2,236 ) - - ( 2,236 ) Net loss attributable to common stockholders $ ( 5,458 ) $ ( 2,447 ) $ ( 834 ) $ ( 8,739 ) $ ( 780 ) $ ( 3,091 ) $ ( 415 ) $ ( 4,286 ) Net loss per share attributable to common stockholders – basic and diluted $ ( 0.15 ) $ ( 0.07 ) $ ( 0.02 ) $ ( 0.25 ) $ 0.01 $ ( 0.12 ) $ ( 0.01 ) $ ( 0.12 ) Weighted average common shares outstanding – basic 35,359 35,359 35,359 35,359 35,577 35,577 35,577 35,577 Weighted average common shares outstanding – diluted 35,359 35,359 35,359 35,359 35,670 35,577 35,577 35,577 69 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Operations for the three months ended September 30, 2022 and 2023: Three Months Ended September 30, 2022 (As restated) Three Months Ended September 30, 2023 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated As Reported Redemption Premium Adjustment Other Adjustments As Restated Revenues: Products $ 14,021 $ - $ 419 $ 14,440 $ 13,147 $ - $ 85 $ 13,232 Services 20,267 - ( 152 ) 20,115 21,048 - ( 38 ) 21,010 Total revenues 34,288 - 267 34,555 34,195 - 4 7 34,242 Cost of revenues: Cost of products 9,839 - ( 59 ) 9,780 8,843 - - 8,843 Cost of services 7,268 - 59 7,327 8,237 - 57 8,294 Total cost of revenues 17,107 - - 17,107 17,080 - 57 17,137 Gross profit 17,181 - 267 17,448 17,115 - ( 10 ) 17,105 Operating expenses: Selling, general and administrative expenses 16,664 - ( 119 ) 16,545 17,988 - ( 211 ) 17,777 Research and development expenses 1,735 - 130 1,865 2,384 - 42 2,426 Total operating expenses 18,399 - 11 18,410 20,372 - ( 169 ) 20,203 Loss from operations ( 1,218 ) - 256 ( 962 ) ( 3,257 ) - 159 ( 3,098 ) Interest income 20 - - 20 23 - - 23 Interest expense, net ( 331 ) - - ( 331 ) ( 154 ) - - ( 154 ) Bargain purchase – Movingdots - - - - - - - - Other (expense) income, net - - ( 4 ) ( 4 ) ( 24 ) - - ( 24 ) Net loss before income taxes ( 1,529 ) - 252 ( 1,277 ) ( 3,412 ) - 159 ( 3,253 ) Income tax (expense) benefit ( 770 ) - 447 ( 323 ) ( 262 ) - ( 33 ) ( 295 ) Net loss before non-controlling interest ( 2,299 ) - 699 ( 1,600 ) ( 3,674 ) - 126 ( 3,548 ) Non-controlling interest ( 1 ) - - ( 1 ) - - - - Net loss ( 2,300 ) - 699 ( 1,601 ) ( 3,674 ) - 126 ( 3,548 ) Accretion of preferred stock ( 168 ) ( 1,353 ) - ( 1,521 ) ( 167 ) ( 1,667 ) - ( 1,834 ) Preferred stock dividends ( 1,067 ) - - ( 1,067 ) ( 1,128 ) - - ( 1,128 ) Net loss attributable to common stockholders $ ( 3,535 ) $ ( 1,353 ) $ 699 $ ( 4,189 ) $ ( 4,969 ) $ ( 1,667 ) $ 126 $ ( 6,510 ) Net loss per share attributable to common stockholders – basic and diluted $ ( 0.10 ) $ ( 0.04 ) $ 0.02 $ ( 0.12 ) $ ( 0.14 ) $ ( 0.05 ) $ 0.00 $ ( 0.18 ) Weighted average common shares outstanding – basic 35,406 35,406 35,406 35,406 35,653 35,653 35,653 35,653 Weighted average common shares outstanding – diluted 35,406 35,406 35,406 35,406 35,653 35,653 35,653 35,653 70 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Operations for the nine months ended September 30, 2022 and 2023: Nine Months Ended September 30, 2022 (As restated) Nine Months Ended September 30, 2023 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated As Reported Redemption Premium Adjustment Other Adjustments As Restated Revenues: Products $ 43,231 $ - $ 318 $ 43,549 $ 36,563 $ - $ 262 $ 36,825 Services 58,812 - 3 58,815 62,521 - ( 159 ) 62,362 Total revenues 102,043 - 321 102,364 99,084 - 103 99,187 Cost of revenues: Cost of products 33,152 - ( 126 ) 33,026 26,394 - - 26,394 Cost of services 21,081 - 59 21,140 22,923 - 171 23,094 Total cost of revenues 54,233 - ( 67 ) 54,166 49,317 - 171 49,488 Gross profit 47,810 - 388 48,198 49,767 - ( 68 ) 49,699 Operating expenses: Selling, general and administrative expenses 47,393 - 327 47,720 51,763 - 154 51,917 Research and development expenses 6,965 - ( 362 ) 6,603 6,285 - 84 6,369 Total operating expenses 54,358 - ( 35 ) 54,323 58,048 - 238 58,286 Loss from operations ( 6,548 ) - 423 ( 6,125 ) ( 8,281 ) - ( 306 ) ( 8,587 ) Interest income 48 - 48 69 - 69 Interest expense, net 1,262 - - 1,262 ( 464 ) - - ( 464 ) Bargain purchase - Movingdots - - - - 7,517 - 7,517 Other (expense) income, net 1 - 108 109 ( 22 ) - - ( 22 ) Net loss before income taxes ( 5,237 ) - 531 ( 4,706 ) ( 1,181 ) - ( 306 ) ( 1,487 ) Income tax (expense) benefit ( 107 ) - ( 666 ) ( 773 ) ( 698 ) - 17 ( 681 ) Net loss before non-controlling interest ( 5,344 ) - ( 135 ) ( 5,479 ) ( 1,879 ) - ( 289 ) ( 2,168 ) Non-controlling interest ( 3 ) - - ( 3 ) ( 3 ) - - ( 3 ) Net loss ( 5,347 ) - ( 135 ) ( 5,482 ) ( 1,882 ) - ( 289 ) ( 2,171 ) Accretion of preferred stock ( 504 ) ( 3,801 ) - ( 4,305 ) ( 503 ) ( 4,758 ) - ( 5,261 ) Preferred stock dividends ( 3,143 ) - - ( 3,143 ) ( 3,364 ) - - ( 3,364 ) Net loss attributable to common stockholders $ ( 8,994 ) $ ( 3,801 ) $ ( 135 ) $ ( 12,930 ) $ ( 5,749 ) $ ( 4,758 ) $ ( 289 ) $ ( 10,796 ) Net loss per share attributable to common stockholders – basic and diluted $ ( 0.25 ) $ ( 0.11 ) $ ( 0.00 ) $ ( 0.37 ) $ ( 0.16 ) $ ( 0.13 ) $ ( 0.01 ) $ ( 0.30 ) Weighted average common shares outstanding – basic 35,375 35,375 35,375 35,375 35,602 35,602 35,602 35,602 Weighted average common shares outstanding – diluted 35,375 35,375 35,375 35,375 35,602 35,602 35,602 35,602 71 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Comprehensive Loss for the three months ended March 31, 2022 and 2023, respectively: As Reported Redemption Premium Adjustment Other Adjustments As Restated As Reported Redemption Premium Adjustment Other Adjustments As Restated Three Months Ended March 31, 2022 (As restated) 2023 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated As Reported Redemption Premium Adjustment Other Adjustments As Restated Net loss attributable to common stockholders $ ( 4,124 ) $ ( 1,183 ) $ ( 545 ) $ ( 5,852 ) $ 3,494 $ ( 1,487 ) $ ( 124 ) $ 1,883 Foreign currency translation adjustment (As Restated) 158 - - 158 112 - - 112 Total other comprehensive income (loss) 158 - - 158 112 - - 112 Comprehensive loss $ ( 3,966 ) $ ( 1,183 ) $ ( 545 ) $ ( 5,694 ) $ 3,606 $ ( 1,487 ) $ ( 124 ) $ 1,995 72 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Comprehensive Loss for the three months ended June 30, 2022 and 2023, respectively: As Reported Redemption Premium Adjustment Other Adjustments As Restated As Reported Redemption Premium Adjustment Other Adjustments As Restated Three Months Ended June 30, 2022 (As restated) 2023 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated As Reported Redemption Premium Adjustment Other Adjustments As Restated Net loss attributable to common stockholders $ ( 1,334 ) $ ( 1,264 ) $ ( 289 ) $ ( 2,887 ) $ ( 4,274 ) $ ( 1,604 ) $ ( 292 ) $ ( 6,170 ) Foreign currency translation adjustment (As restated) ( 1,723 ) - - ( 1,723 ) 100 - - 100 Total other comprehensive income (loss) ( 1,723 ) - - ( 1,723 ) 100 - - 100 Comprehensive loss $ ( 3,057 ) $ ( 1,264 ) $ ( 289 ) $ ( 4,610 ) $ ( 4,174 ) $ ( 1,604 ) $ ( 292 ) $ ( 6,070 ) 73 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Comprehensive Loss for the six months ended June 30, 2022 and 2023, respectively: As Reported Redemption Premium Adjustment Other Adjustments As Restated As Reported Redemption Premium Adjustment Other Adjustments As Restated Six Months Ended June 30, 2022 (As restated) 2023 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated As Reported Redemption Premium Adjustment Other Adjustments As Restated Net loss attributable to common stockholders $ ( 5,458 ) $ ( 2,447 ) $ ( 834 ) $ ( 8,739 ) $ ( 780 ) $ ( 3,091 ) $ ( 415 ) $ ( 4,286 ) Foreign currency translation adjustment (As restated) ( 1,565 ) - - ( 1,565 ) 212 - - 212 Total other comprehensive income (loss) ( 1,565 ) - - ( 1,565 ) 212 - - 212 Comprehensive loss $ ( 7,023 ) $ ( 2,447 ) $ ( 834 ) $ ( 10,304 ) $ ( 568 ) $ ( 3,091 ) $ ( 415 ) $ ( 4,074 ) 74 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Comprehensive Loss for the three months ended September 30, 2022 and 2023, respectively: As Reported Redemption Premium Adjustment Other Adjustments As Restated As Reported Redemption Premium Adjustment Other Adjustments As Restated Three Months Ended September 30, 2022 (As restated) 2023 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated As Reported Redemption Premium Adjustment Other Adjustments As Restated Net loss attributable to common stockholders $ ( 3,535 ) $ ( 1,353 ) $ 699 $ ( 4,189 ) $ ( 4,969 ) $ ( 1,667 ) $ 126 $ ( 6,510 ) Foreign currency translation adjustment (As restated) 16 - - 16 ( 906 ) - - ( 906 ) Total other comprehensive income (loss) 16 - - 16 ( 906 ) - - ( 906 ) Comprehensive loss $ ( 3,519 ) $ ( 1,353 ) $ 699 $ ( 4,173 ) $ ( 5,875 ) $ ( 1,667 ) $ 126 $ ( 7,416 ) 75 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Comprehensive Loss for the nine months ended September 30, 2022 and 2023, respectively: As Reported Redemption Premium Adjustment Other Adjustments As Restated As Reported Redemption Premium Adjustment Other Adjustments As Restated Nine Months Ended September 30, 2022 (As restated) 2023 (As restated) As Reported Redemption Premium Adjustment Other Adjustments As Restated As Reported Redemption Premium Adjustment Other Adjustments As Restated Net loss attributable to common stockholders $ ( 8,994 ) $ ( 3,801 ) $ ( 135 ) $ ( 12,930 ) $ ( 5,749 ) $ ( 4,758 ) $ ( 289 ) $ ( 10,796 ) Foreign currency translation adjustment (As restated) ( 1,549 ) - - ( 1,549 ) ( 694 ) - - ( 694 ) Total other comprehensive loss ( 1,549 ) - - ( 1,549 ) ( 694 ) - - ( 694 ) Comprehensive loss $ ( 10,543 ) $ ( 3,801 ) $ ( 135 ) $ ( 14,479 ) $ ( 6,443 ) $ ( 4,758 ) $ ( 289 ) $ ( 11,490 ) 76 The following table presents the as restated balances in the unaudited Consolidated Statements of Changes in Stockholders’ Equity for the three-month periods ended March 31, 2022, June 30, 2022, and September 30, 2022: Common Stock Number of Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Treasury Stock Non-controlling Interest Stockholders’ Equity Balance at December 31, 2021 (As Reported) 37,263 $ 373 $ 234,083 $ ( 134,437 ) $ 391 $ ( 8,299 ) $ 86 $ 92,197 Effect of Restatement - - ( 9,231 ) 385 - - - ( 8,846 ) Balance at January 1, 2022 (As Restated) 37,263 $ 373 $ 224,852 $ ( 134,052 ) $ 391 $ ( 8,299 ) $ 86 $ 83,351 Net loss attributable to common stockholders (As restated) - - ( 2,379 ) ( 3,473 ) - - - ( 5,852 ) Net loss attributable to non-controlling interest - - - - - - 1 1 Foreign currency translation adjustment (As restated) - - - - 158 - 15 173 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 (As restated) - - 775 - - - - 775 Balance at March 31, 2022 (As Restated) 37,570 $ 376 $ 223,245 $ ( 137,525 ) $ 549 $ ( 8,480 ) $ 102 $ 78,267 Net loss attributable to common stockholders (As restated) - - ( 2,480 ) ( 407 ) - - - ( 2,887 ) Net loss attributable to non-controlling interest - - - - - - 1 1 Foreign currency translation adjustment (As restated) - - - - ( 1,723 ) - ( 18 ) ( 1,741 ) Forfeiture of restricted shares ( 24 ) ( 1 ) 1 - - - - - Shares withheld pursuant to vesting of restricted stock - - - - - ( 5 ) - ( 5 ) Stock based compensation (As restated) - - 1,312 - - - - 1,312 Balance at June 30, 2022 (As Restated) 37,546 $ 375 $ 222,078 $ ( 137,932 ) $ ( 1,174 ) $ ( 8,485 ) $ 85 $ 74,947 Net loss attributable to common stockholders (As restated) - - ( 2,589 ) ( 1,602 ) - - - ( 4,191 ) Net loss attributable to non-controlling interest - - - - - - 1 1 Foreign currency translation adjustment - - - - 16 - ( 18 ) ( 2 ) 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 (As Restated) 37,584 $ 376 $ 220,558 $ ( 139,534 ) $ ( 1,158 ) $ ( 8,492 ) $ 68 $ 71,818 77 The following table presents the total quarterly net impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statements of Changes in Stockholders’ Equity for the three-month periods ended March 31, 2023, June 30, 2023, and September 30, 2023: Number of Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Treasury Stock Non-controlling Interest Stockholders’ Equity Common Stock Number of Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Treasury Stock Non-controlling Interest Stockholders’ Equity Balance at January 1, 2023 (As Restated) 37,605 $ 376 $ 219,055 $ ( 140,806 ) $ ( 1,210 ) $ ( 8,510 ) $ 78 $ 68,983 Retained earnings adjustment for adoption of ASU 2016-13 - - - 200 - - - 200 Net (loss) income attributable to common stockholders (As restated) - - ( 2,761 ) 4,645 - - - 1,884 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 (As Restated) 37,621 $ 376 $ 218,473 $ ( 135,961 ) $ ( 1,098 ) $ ( 8,554 ) $ 66 $ 73,302 Net loss attributable to common stockholders (As restated) - - ( 2,902 ) ( 3,269 ) - - - ( 6,171 ) 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 (As Restated) 37,717 $ 377 $ 216,458 $ ( 139,230 ) $ ( 998 ) $ ( 8,558 ) $ 63 $ 68,112 Net loss attributable to common stockholders (As restated) - - ( 2,962 ) ( 3,548 ) - - - ( 6,510 ) Net loss attributable to non-controlling interest - - - - - - - - Foreign currency translation adjustment - - - - ( 906 ) - - ( 906 ) Issuance of restricted shares 982 10 ( 10 ) - - - - - Forfeiture of restricted shares - - - - - - - - Exercise of stock options - - - - - - - - Shares withheld pursuant to vesting of restricted stock - - - - - ( 90 ) - ( 90 ) Stock based compensation - - 1,101 - - - - 1,101 Balance at September 30, 2023 (As Restated) 38,699 $ 387 $ 214,587 $ ( 142,778 ) $ ( 1,904 ) $ ( 8,648 ) $ 63 $ 61,707 78 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Cash Flows for the three months ended March 31, 2022 and 2023: Three Months Ended March 31, 2022 (As restated) 2023 (As restated) As Reported Other Adjustments As Restated As Reported Other Adjustments As Restated Cash flows from operating activities Net (loss) income $ ( 2,928 ) $ ( 545 ) $ ( 3,473 ) $ 4,769 $ ( 124 ) $ 4,645 Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities: Non-controlling interest 1 - 1 ( 3 ) - ( 3 ) Gain on bargain purchase - - - ( 7,234 ) - ( 7,234 ) Inventory reserve 53 - 53 2 - 2 Stock based compensation expense 457 317 774 832 - 832 Depreciation and amortization 2,089 - 2,089 2,233 57 2,290 Right-of-use assets, non-cash lease expense 658 - 658 658 - 658 Bad debt expense 252 - 252 228 200 428 Deferred income taxes ( 703 ) 662 ( 41 ) 377 ( 5 ) 372 Other non-cash items 556 - 556 46 - 46 Changes in: - - Accounts receivable ( 533 ) 369 ( 164 ) 815 9 824 Inventory ( 1,929 ) - ( 1,929 ) ( 237 ) - ( 237 ) Prepaid expenses and other assets ( 1,337 ) ( 149 ) ( 1,486 ) 189 ( 274 ) ( 85 ) Deferred costs 372 359 731 239 239 Deferred revenue 689 ( 426 ) 263 ( 91 ) 88 ( 3 ) Accounts payable and accrued expenses 809 - 809 ( 374 ) 49 ( 325 ) Lease liabilities ( 631 ) - ( 631 ) ( 694 ) - ( 694 ) Net cash (used in) provided by operating activities ( 2,125 ) 587 ( 1,538 ) 1,755 - 1,755 Cash flows from investing activities: Acquisitions, net of cash assumed - - - 8,722 - 8,722 Purchase of investments - - - ( 100 ) - ( 100 ) Capitalized software development costs - - - ( 680 ) - ( 680 ) Capital expenditures ( 610 ) ( 492 ) ( 1,102 ) ( 1,100 ) - ( 1,100 ) Net cash (used in) provided by investing activities ( 610 ) ( 492 ) ( 1,102 ) 6,842 - 6,842 Cash flows from financing activities: Repayment of long-term debt ( 1,497 ) - ( 1,497 ) ( 1,329 ) - ( 1,329 ) Short-term bank debt, net - - - ( 1 ) - ( 1 ) Purchase of treasury stock upon vesting of restricted stock ( 181 ) - ( 181 ) ( 44 ) - ( 44 ) Net cash used in by financing activities ( 1,678 ) - ( 1,678 ) ( 1,374 ) - ( 1,374 ) Effect of foreign exchange rate changes on cash and cash equivalents ( 1,480 ) ( 95 ) ( 1,575 ) ( 123 ) - ( 123 ) Net (decrease) increase in cash, cash equivalents and restricted cash ( 5,893 ) - ( 5,893 ) 7,100 - 7,100 Cash, cash equivalents and restricted cash - beginning of period 26,760 - 26,760 17,989 - 17,989 Cash, cash equivalents and restricted cash - end of period $ 20,867 $ - $ 20,867 $ 25,089 $ - $ 25,089 Reconciliation of cash, cash equivalents, and restricted cash, beginning of period Cash and cash equivalents 26,452 - 26,452 17,680 - 17,680 Restricted cash 308 - 308 309 - 309 Cash, cash equivalents, and restricted cash, beginning of period $ 26,760 $ - $ 26,760 $ 17,989 $ - $ 17,989 Reconciliation of cash, cash equivalents, and restricted cash, end of period Cash and cash equivalents 20,559 - 20,559 24,780 - 24,780 Restricted cash 308 - 308 309 - 309 Cash, cash equivalents, and restricted cash, end of period $ 20,867 $ - $ 20,867 $ 25,089 $ - $ 25,089 Supplemental disclosure of cash flow information: Cash paid for: Taxes 3 - 3 5 - 5 Interest 326 - 326 383 - 383 Noncash investing and financing activities: Value of warrant issued in connection with Movingdots acquisition $ - $ - $ - $ 1,347 $ - $ 1,347 79 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Cash Flows for the six months ended June 30, 2022 and 2023: Six Months Ended June 30, 2022 (As restated) 2023 (As restated) Cash flows from operating activities As Reported Other Adjustments As Restated As Reported Other Adjustments As Restated Net loss (income) $ ( 3,046 ) $ ( 834 ) $ ( 3,880 ) $ 1,792 $ ( 415 ) $ 1,377 Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities: Non-controlling interest 2 - 2 3 - 3 Gain on bargain purchase - - - ( 7,517 ) - ( 7,517 ) Inventory reserve 119 - 119 375 - 375 Stock based compensation expense 2,086 - 2,086 1,684 - 1,684 Depreciation and amortization 4,133 - 4,133 4,498 114 4,612 Right-of-use assets, non-cash lease expense 1,382 - 1,382 1,318 - 1,318 Bad debt expense ( 364 ) ( 364 ) 826 200 1,026 Deferred income taxes ( 663 ) 1,113 450 398 ( 50 ) 348 Other non-cash items 604 - 604 73 - 73 Changes in: Accounts receivable ( 2,911 ) 428 ( 2,483 ) ( 37 ) 193 156 Inventory ( 5,410 ) - ( 5,410 ) 152 - 152 Prepaid expenses and other assets ( 412 ) 61 ( 351 ) 500 ( 241 ) 259 Deferred costs 696 359 1,055 424 - 424 Deferred revenue 533 ( 523 ) 10 ( 53 ) 108 55 Accounts payable and accrued expenses 1,856 - 1,856 ( 1,840 ) 49 ( 1,791 ) Lease liabilities ( 1,335 ) - ( 1,335 ) ( 1,344 ) - ( 1,344 ) Accrued severance payable, net 30 - 30 88 - 88 Net cash (used in) provided by operating activities ( 2,700 ) 604 ( 2,096 ) 1,340 ( 42 ) 1,298 Cash flows from investing activities: Acquisitions, net of cash assumed - - - 8,722 - 8,722 Purchase of investments - - - ( 100 ) - ( 100 ) Capitalized software development costs - - - ( 1,677 ) - ( 1,677 ) Capital expenditures ( 2,013 ) ( 492 ) ( 2,505 ) ( 2,108 ) 42 ( 2,066 ) Net cash (used in) provided by investing activities ( 2,013 ) ( 492 ) ( 2,505 ) 4,837 42 4,879 Cash flows from financing activities: Repayment of long-term debt ( 2,897 ) - ( 2,897 ) ( 2,658 ) - ( 2,658 ) Short-term bank debt, net 2,330 - 2,330 2,736 - 2,736 Purchase of treasury stock upon vesting of restricted stock ( 186 ) - ( 186 ) ( 48 ) - ( 48 ) Payment of preferred stock dividend - - - ( 1,128 ) - ( 1,128 ) Proceeds from exercise of stock options - - - 36 - 36 Net cash used in financing activities ( 753 ) - ( 753 ) ( 1,062 ) - ( 1,062 ) Effect of foreign exchange rate changes on cash and cash equivalents ( 3,282 ) ( 112 ) ( 3,394 ) ( 1,066 ) - ( 1,066 ) Net (decrease) increase in cash, cash equivalents and restricted cash ( 8,748 ) - ( 8,748 ) 4,049 - 4,049 Cash, cash equivalents and restricted cash - beginning of period 26,760 - 26,760 17,989 - 17,989 Cash, cash equivalents and restricted cash - end of period $ 18,012 $ - $ 18,012 $ 22,038 $ - $ 22,038 Reconciliation of cash, cash equivalents, and restricted cash, beginning of period Cash and cash equivalents 26,452 - 26,452 17,680 - 17,680 Restricted cash 308 - 308 309 - 309 Cash, cash equivalents, and restricted cash, beginning of period $ 26,760 $ - $ 26,760 $ 17,989 $ - $ 17,989 Reconciliation of cash, cash equivalents, and restricted cash, end of period Cash and cash equivalents 17,703 - 17,703 21,729 - 21,729 Restricted cash 309 - 309 309 - 309 Cash, cash equivalents, and restricted cash, end of period $ 18,012 $ - $ 18,012 $ 22,038 $ - $ 22,038 Supplemental disclosure of cash flow information: Cash paid for: Taxes 48 - 48 106 - 106 Interest 639 - 639 621 - 621 Noncash investing and financing activities: Value of warrant issued in connection with Movingdots acquisition $ - $ - $ - $ 1,347 $ - $ 1,347 80 The following table presents the impact of the financial statement adjustments on the Company’s previously reported unaudited Consolidated Statement of Cash Flows for the nine months ended September 30, 2022 and 2023: Nine Months Ended September 30, 2022 (As Restated) 2023 (As Restated) Cash flows from operating activities As Reported Other Adjustments As Restated As Reported Other Adjustments As Restated Net loss $ ( 5,347 ) $ ( 135 ) $ ( 5,482 ) $ ( 1,882 ) $ ( 289 ) $ ( 2,171 ) Adjustments to reconcile net loss to cash (used in) provided by operating activities: Non-controlling interest 3 - 3 3 - 3 Gain on bargain purchase - - - ( 7,517 ) - ( 7,517 ) Inventory reserve 177 - 177 619 - 619 Stock based compensation expense 3,156 - 3,156 2,785 - 2,785 Depreciation and amortization 6,152 - 6,152 6,926 171 7,097 Right-of-use assets, non-cash lease expense 2,071 - 2,071 1,900 - 1,900 Bad debt expense 102 - 102 1,161 200 1,361 Deferred income taxes 107 666 773 674 ( 17 ) 657 Other non-cash items 660 - 660 172 - 172 Changes in: Accounts receivable ( 3,025 ) 386 ( 2,639 ) ( 3,006 ) ( 36 ) ( 3,042 ) Inventory ( 5,544 ) - ( 5,544 ) ( 2,260 ) - ( 2,260 ) Prepaid expenses and other assets ( 761 ) ( 164 ) ( 925 ) 235 ( 269 ) ( 34 ) Deferred costs 986 359 1,345 571 571 Deferred revenue ( 197 ) ( 523 ) ( 720 ) 113 106 219 Accounts payable and accrued expenses 1,717 12 1,729 1,124 49 1,173 Lease liabilities ( 2,034 ) - ( 2,034 ) ( 1,941 ) - ( 1,941 ) Accrued severance payable, net 63 - 63 91 - 91 Net cash used in operating activities ( 1,714 ) 601 ( 1,113 ) ( 232 ) ( 85 ) ( 317 ) Cash flows from investing activities: Acquisitions, net of cash assumed - - - 8,722 - 8,722 Purchase of investments - - - ( 100 ) - ( 100 ) Capitalized software development costs - - - ( 2,727 ) - ( 2,727 ) Capital expenditures ( 4,001 ) ( 492 ) ( 4,493 ) ( 2,626 ) 85 ( 2,541 ) Net cash (used in) provided by investing activities ( 4,001 ) ( 492 ) ( 4,493 ) 3,269 85 3,354 Cash flows from financing activities: Repayment of long-term debt ( 4,279 ) - ( 4,279 ) ( 3,985 ) - ( 3,985 ) Short-term bank debt, net 3,949 - 3,949 4,995 - 4,995 Purchase of treasury stock upon vesting of restricted stock ( 193 ) - ( 193 ) ( 138 ) - ( 138 ) Payment of preferred stock dividend - - ( 2,257 ) - ( 2,257 ) Proceeds from exercise of stock options - - - 36 - 36 Net cash used in financing activities ( 523 ) - ( 523 ) ( 1,349 ) - ( 1,349 ) Effect of foreign exchange rate changes on cash and cash equivalents ( 3,510 ) ( 109 ) ( 3,619 ) ( 70 ) - ( 70 ) Net (decrease) increase in cash, cash equivalents and restricted cash ( 9,748 ) - ( 9,748 ) 1,618 - 1,618 Cash, cash equivalents and restricted cash - beginning of period 26,760 - 26,760 17,989 - 17,989 Cash, cash equivalents and restricted cash - end of period $ 17,012 $ - $ 17,012 $ 19,607 $ - $ 19,607 Reconciliation of cash, cash equivalents, and restricted cash, beginning of period Cash and cash equivalents 26,452 - 26,452 17,680 - 17,680 Restricted cash 308 - 308 309 - 309 Cash, cash equivalents, and restricted cash, beginning of period $ 26,760 $ - $ 26,760 $ 17,989 $ - $ 17,989 Reconciliation of cash, cash equivalents, and restricted cash, end of period Cash and cash equivalents 16,703 - 16,703 19,297 - 19,297 Restricted cash 309 - 309 310 - 310 Cash, cash equivalents, and restricted cash, end of period $ 17,012 $ - $ 17,012 $ 19,607 $ - $ 19,607 Supplemental disclosure of cash flow information: Cash paid for: Taxes 52 - 52 120 - 120 Interest 945 - 945 921 - 921 Noncash investing and financing activities: Value of warrant issued in connection with Movingdots acquisition $ - $ - $ - $ 1,347 $ - $ 1,347 81 NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [A] Principles of consolidation : The consolidated financial statements include the accounts of Powerfleet, Inc. and its subsidiaries (which, as noted above, are collectively referred to herein as the “Company”). All material intercompany balances and transactions have been eliminated in consolidation. [B] Use of estimates : The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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, market-based stock-based compensation costs, and assumptions used in business combinations. Actual results could differ from those estimates. As of December 31, 2023, the impact of global uncertainties continues to unfold. As a result, many of our estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods. [C] 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. Restricted cash at December 31, 2022 and 2023 consists of cash held in escrow for purchases from a vendor. 82 [D] Accounts receivable and allowance for credit losses : Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. The Company maintains an allowance for credit losses against its accounts receivable for potential 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. Accounts receivable is net of an allowance for credit losses in the amount of $ 2,567 and $ 2,797 in 2022 and 2023, respectively. The Company does not have any off-balance sheet credit exposure related to its customers. An analysis of the allowance for credit losses for the period ended December 31, 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 Adjustment for adoption of ASU 2016-13 ( 200 ) Current period provision for expected credit losses 1,767 Write-offs charged against the allowance ( 1,473 ) Foreign currency translation 136 Allowance for credit losses, December 31, 2023 $ 2,797 Allowance for credit losses, ending balance $ 2,797 During the year ended December 31, 2023, the change in the allowance for credit losses was due to the change in the age of trade receivables, offset by write-offs of bad debts. [E] 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 an expense when the products are sold (see Note 13). Revenue is recognized when performance obligations under the terms of a contract with the 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 are not distinct 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 future services are deferred and classified as a current and long-term liability. The deferred revenue is 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. Payment terms are generally 30 days after invoice date. 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 is 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. 83 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 (“SSP”). Judgment is required to determine the SSP for each distinct performance obligation. The Company generally determines standalone selling prices based on observable prices charged to customers. Significant pricing practices taken into consideration include the Company’s discounting practices, the size and volume of its transactions, the customer demographic, price lists, its go-to-market strategy and historical and current sales and contract prices. As the Company’s go-to-market strategies evolve, it may modify its pricing practices in the future, which could result in changes to SSP. In certain cases, the Company is able to establish SSP based on observable prices of products or services sold separately in comparable circumstances to similar customers. The Company uses a single amount to estimate SSP when it has observable prices. If SSP is not directly observable, for example when pricing is highly variable, the Company uses a range of SSP. The Company determines the SSP range using information that may include pricing practices or other observable inputs. The Company typically has more than one SSP for individual products and services due to the stratification of those products and services by customer size. 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. [F] Deferred costs : Deferred product costs consist of Powerfleet for Logistics equipment costs deferred in accordance with our revenue recognition policy. The Company evaluates the realizability of the carrying amount of the deferred contract costs. To the extent the carrying value of the deferred contract costs exceeds the contract revenue, an impairment loss will be recognized. [G] Inventory : Inventories are stated at the lower of cost or net realizable value. Cost is determined using the “moving average” cost method or the first-in first-out (“FIFO”) method. Inventory consists of components, work in process and finished products. Inventory valuation reserves are established in order to report inventories at the lower of cost or net realizable value in the consolidated balance sheet. The determination of inventory valuation reserves requires management to make estimates and judgments on the future salability of inventories. Valuation reserves for obsolete and slow-moving inventory are estimated based on assumptions of future sales forecasts, product life cycle expectations, the impact of new product introductions, production requirements, and specific identification of items, such as product discontinuance or engineering/material changes and by comparing the inventory levels to historical usage rates. [H] Fixed assets and depreciation : Fixed assets are recorded at cost, net of accumulated depreciation. Depreciation and amortization are recognized using the straight-line method over the estimated useful lives of the assets. The following table provides the range of estimated useful lives used for each asset type: SCHEDULE OF ESTIMATED USEFUL LIVES OF ASSET Useful Life (years) Computer software 3 - 5 Installed products 3 - 5 Computers and electronic equipment 3 - 10 Furniture and fixtures 5 - 7 Leasehold improvements Shorter of useful life or lease term 84 [I] Long-lived assets : Long-lived assets, which includes definite lived intangible assets and fixed assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is assessed by a comparison of the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets and would be charged to earnings. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. [J] Goodwill and intangibles : Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill and intangible assets deemed to have indefinite lives are not amortized and are tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets other than goodwill are amortized over their useful lives unless the lives are determined to be indefinite. Intangible assets are carried at cost, less accumulated amortization. Intangible assets consist of trademarks and trade name, patents, customer relationships, software to be sold or leased, and other intangible assets. Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. The Company operates in one operating segment which is its only reporting unit. The Company tests its goodwill for impairment annually, which is the first day of the Company’s fourth quarter or when an indicator of impairment exists, by comparing the fair value of the reporting unit to its carrying value. In the evaluation of goodwill for impairment, the Company has the option to perform a qualitative assessment to determine whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Under the qualitative assessment, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. By eliminating “Step 2” from the goodwill impairment test, the quantitative analysis of goodwill will result in an impairment loss for the amount that the carrying value of the reporting unit exceeds its fair value which is limited to the total amount of goodwill allocated to the reporting unit. The Company performed a quantitative assessment whereby the fair value of the reporting unit is calculated using a market approach and a discounted cash flow method, as a form of the income approach. The market approach includes the use of comparative revenue and adjusted EBITDA multiples to complement discounted cash flow results. The discounted cash flow method is based on the present value of the projected cash flows and a terminal value. The terminal value represents the expected normalized future cash flows of the reporting unit beyond the cash flows from the discrete projection period. The fair value of the reporting unit is calculated based on the sum of the present value of the cash flows from the discrete period and the present value of the terminal value. The discount rate represented our estimate of the WACC, or expected return, that a marketplace participant would have required as of the valuation date. The application of our goodwill impairment test required key assumptions underlying our valuation model. The discounted cash flow analysis factored in assumptions on discount rates and terminal growth rates to reflect risk profiles, as well as revenue and cost growth relative to history and market trends and expectations. The market multiples approach incorporated judgment involved in the selection of comparable public company multiples and benchmarks. The selection of companies and multiples was influenced by differences in growth and profitability, and volatility in market prices of peer companies. These valuation inputs are inherently judgmental, and an adverse change in one or a combination of these inputs could trigger a goodwill impairment loss in the future. In connection with the Company’s goodwill impairment testing as of October 1, 2023, the estimated fair value exceeded its carrying value by approximately 6 %. For the years ended December 31, 2021, 2022 and 2023, the Company did not incur an impairment charge. [K] Product warranties : The Company typically provides a 1 – 5-year warranty on its products. Estimated future warranty costs are accrued in the period that the related revenue is recognized. These estimates are derived from historical data and trends of product reliability and costs of repairing and replacing defective products. [L] Research and development : Research and development costs are charged to expense as incurred and consists primarily of salaries and related expenses, supplies and contractor costs. Research and development costs were $ 11,429 (as restated), $ 8,472 (as restated), and $ 8,380 in 2021, 2022 and 2023, respectively. [ M] Patent costs : Costs incurred in connection with acquiring patent rights are charged to expense as incurred. 85 [N] Concentrations of credit risk : Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash and cash equivalents, trade receivables and trade payables. The Company’s cash and cash equivalents are invested primarily in deposits with major banks worldwide. Generally, these deposits may be redeemed upon demand and, therefore, bear low risk. Management believes that the financial institutions that hold the Company’s investments have a high credit rating. For the years ended December 31, 2023, 2022, and 2021, 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. [O] Benefit plan : The Company maintains a retirement plan under Section 401(k) of the Internal Revenue Code, which covers all eligible employees. All employees with U.S. source income are eligible to participate in the plan immediately upon employment. The Company did not make any contributions to the plan during the year ended December 31, 2021. In 2022 and 2023, the Company contributed $ 285 and $ 379 , respectively, to the plan. [P] Severance pay : The liability of the Company’s subsidiaries in Israel for severance pay is calculated pursuant to Israel’s Severance Pay Law 5273-1963 (the “Severance Law”) based on the most recent salary of the employees multiplied by the number of years of employment as of balance sheet date and are presented on an undiscounted basis. Employees are entitled to one month’s salary for each year of employment, or a portion thereof. The liability for the Company and its subsidiaries in Israel is fully provided by monthly deposits with insurance policies and by accrual. The value of these policies is recorded as an asset in the Company’s balance sheet. The deposited funds may be withdrawn only upon the fulfillment of the obligation pursuant to the Severance Law or labor agreements. The value of the deposited funds is based on the cash surrendered value of these policies, and includes profits or losses accumulated to balance sheet date. Some of the Company’s employees are subject to Section 14 of the Severance Law and the General Approval of the Labor Minister dated June 30, 1998, issued in accordance to the said Section 14, mandating that upon termination of such employees’ employment, all the amounts accrued in their insurance policies shall be released to them. The severance pay liabilities and deposits covered by these plans are not reflected in the balance sheet as the severance pay risks have been irrevocably transferred to the severance funds. [Q] Stock-based compensation : The Company accounts for stock-based employee compensation for all share-based payments, including grants of stock options and restricted stock, as an operating expense based on their fair values on the grant date. The Company recorded stock-based compensation expense of $ 4,416 , $ 4,343 , and $ 3,908 for the years ended December 31, 2021, 2022 and 2023, respectively. The Company estimates the fair value of share-based option awards on the grant date using an option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service period in the Company’s consolidated statement of operations. The Company estimates forfeitures at the time of grant in order to estimate the amount of share-based awards that will ultimately vest. The estimate is based on the Company’s historical rates of forfeitures. Estimated forfeitures are revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. 86 [R] Income taxes : The Company uses the asset and liability method of accounting for deferred income taxes. Deferred income taxes are measured by applying enacted statutory rates to net operating loss carryforwards and to the differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets are reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company recognizes uncertainty in income taxes in the financial statements using a recognition threshold and measurement attribute of a tax position taken or expected to be taken in a tax return. The Company applies the “more-likely-than-not” recognition threshold to all tax positions, commencing at the adoption date of the applicable accounting guidance, which resulted in no unrecognized tax benefits as of such date. Additionally, there have been no unrecognized tax benefits subsequent to adoption. The Company has opted to classify interest and penalties that would accrue according to the provisions of relevant tax law as selling, general, and administrative expenses and incomes taxes, respectively, in the consolidated statement of operations. For the years ended December 31, 2021, 2022 and 2023, interest and penalties were immaterial. The Company elected to account for the U.S. tax on its Global Intangible Low-Taxed Income (“GILTI”) from its foreign subsidiaries as a period cost and, therefore included GILTI expense in its effective tax rate calculation. [S] Fair value of financial instruments : The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those levels: ● Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities ● Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. ● Level 3: Unobservable inputs that reflect the reporting entity’s estimates of market participant assumptions The Company’s cash and cash equivalents and investments in securities 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 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 December 31, 2023 Carrying Amount Fair Value Debt $ 21,091 $ 20,919 [T] Advertising and marketing expense : Advertising and marketing costs are expensed as incurred. Advertising and marketing expense for the years ended December 31, 2021, 2022 and 2023 amounted to $ 1,185 , $ 1,130 (as restated), and $ 2,300 , respectively. [U] Foreign currency : 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 gains (losses) from the translation of foreign currency are $ ( 8 ) , $ ( 1,601 ) and $ 594 at December 31, 2021, 2022 and 2023, respectively, which are included in comprehensive loss in the Consolidated Statement of Changes in Stockholders’ Equity. 87 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 gains (losses) for the years ended December 31, 2021, 2022 and 2023 of $ ( 128 ) , $ ( 847 ) , and $ 277 , respectively, are included in selling, general and administrative expenses in the Consolidated Statement of Operations. Foreign currency transaction gains (losses) related to long-term debt of $ 810 , $ 2,689 and $ 591 , for the years ended December 31, 2021, 2022 and 2023, respectively, are included in interest expense in the Consolidated Statement of Operations. [ V] Commitments and contingencies : 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. [W] Recently issued accounting pronouncements : In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which requires additional operating segment disclosures in annual and interim consolidated financial statements. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and for interim periods beginning after December 15, 2024 on a retrospective basis, with early adoption permitted. The Company is evaluating the effect of adopting ASU 2023-07. In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other income tax-related disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a retrospective or prospective basis. The Company is evaluating the effect of adopting ASU 2023-09. 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. This updated standard is effective for fiscal years beginning after December 15, 2022. 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. [X] Business Combinations In accordance with ASC 805, Business Combinations (ASC 805), the Company recognizes the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. Determining these fair values requires management to make significant estimates and assumptions, especially with respect to intangible assets. The Company recognizes identifiable assets acquired and liabilities assumed at their acquisition date fair value. During the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill or bargain purchase to the extent that it identifies adjustments to the preliminary fair values. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, any subsequent adjustments are recorded to the consolidated statements of operations. [Y] Segment Information : The Company has a single operating and reportable segment. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. The Company derives its revenue from the sale of systems and products and from customer SaaS and hosting infrastructure fees (see Note 17 – Segment Information). 88 NOTE 4 – ACQUISITION On March 6, 2023, the Company entered into a share purchase and transfer agreement (the “Movingdots Agreement”) with Swiss Re Reinsurance Holding Company Ltd (“Swiss Re”), pursuant to which the Company would acquire all of the outstanding shares of Movingdots GmbH (“Movingdots”), a wholly owned subsidiary of Swiss Re, 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 “Swiss Re Warrants”) with fair value of approximately $ 1,347 at March 31, 2023 and noncash consideration in the form of a nonexclusive irrevocable, perpetual, fully paid-up, royalty free license agreement between Movingdots and Swiss Re for certain of the acquired intellectual property (the “Movingdots Acquisition”) . The Movingdots Acquisition was consummated on March 31, 2023 (the “Movingdots Closing”). As a result of the Movingdots 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 Movingdots Acquisition also strengthens Powerfleet’s global reach, particularly in Europe. Revenue and net loss of Movingdots since the Movingdots Closing included in the consolidated income statement was $ 523 and $( 3,808 ), respectively. As part of the Movingdots Agreement Swiss Re was also obligated to (i) transfer certain intellectual property rights from Swiss Re to Movingdots, (ii) enter into a distribution agreement pursuant to which Swiss Re is allowed to promote the Movingdots solutions, and (iii) grant a license agreement between Swiss Re’s affiliates and Movingdots. The Swiss Re Warrants were 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 Movingdots 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. The Company recognized approximately $ 500 of acquisition-related costs which were expensed in the consolidated statement of operations for the year ended December 31, 2023. The following table details the 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 1,889 Total assets acquired 11,327 Liabilities assumed: Accounts payable and accrued expenses 946 Total liabilities assumed 946 Total identifiable net assets acquired 10,381 Gain on bargain purchase ( 9,034 ) Purchase price consideration $ 1,347 89 The fair value estimates of the assets acquired and liabilities assumed, including fixed assets and accounts payable and accrued expenses, were subject to adjustments through the initial measurement period. As of December 31, 2023, the measurement period was complete and an adjustment of approximately $ 1,500 was recorded to increase the fixed assets above for valuation of intellectual property, internal use software, and adjustments of an approximate $ 300 increase in net assets acquired related primarily to reductions in accounts payable and accrued expenses. Adjustments resulted in an increase to the gain on bargain purchase. Determining the fair values of the assets and liabilities of Movingdots required certain assumptions and judgment. The intellectual property was valued using the replacement method. Since this asset does not directly generate revenue (i.e., it is intended to support other revenue-generating assets and its utility is premised on avoided operating costs), the fair value analysis considers the costs that would be incurred to recreate the intellectual property in the event that the intellectual property did not exist (or the agreement to license the intellectual property did not exist). The replacement cost method utilized assumptions on the length of time expected to be incurred to recreate the intellectual property, the amount and cost of labor plus a 30% obsolescence factor, and 20% estimated developers profit. All other assets and liabilities acquired, as detailed in the allocation chart above, were valued at fair value based on their short-term nature. 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 $ 9,034 . Management believes that the recognized gain on bargain purchase represents the best estimates of the economic effect of the Movingdots 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 Swiss Re’s motivation to divest its investment in Movingdots and its telematics business, which was deemed a non-core business of Swiss Re on a go-forward basis. The sale of Movingdots was not subject to a competitive bidding process. Under the Movingdots Agreement, Swiss Re 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 Movingdots Acquisition at any time between the signing date of the Movingdots 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 Swiss Re 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 Swiss Re 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 Swiss Re; 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; The following table represents the unaudited combined pro forma revenue and earnings for the annual periods ended December 31, 2022 and 2023: SCHEDULE OF PRO FORMA REVENUE AND EARNINGS Year Ended December 31, 2022 Historical (as restated) Pro forma combined (unaudited) Revenues $ 135,912 $ 143,522 Operating loss $ ( 6,971 ) $ ( 7,465 ) Net loss per share – basic and diluted $ ( 0.48 ) $ ( 0.49 ) Net loss per share - basic $ ( 0.48 ) $ ( 0.49 ) Year Ended December 31, 2023 Historical Pro forma combined (unaudited) Revenues $ 133,736 $ 136,258 Operating loss $ ( 12,557 ) $ ( 12,547 ) Net loss per share – basic and diluted $ ( 0.49 ) $ ( 0.48 ) Net loss per share - basic $ ( 0.49 ) $ ( 0.48 ) The unaudited combined pro forma revenue and earnings for the annual periods ended December 31, 2022 and 2023 were prepared as though the Movingdots 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 Movingdots Acquisition occurred as of such date, nor does it purport to represent results of operations for any future periods. 90 NOTE 5 – REVENUE RECOGNITION The following table presents the Company’s revenues disaggregated by revenue source for the years ended December 31, 2021, 2022 and 2023. SCHEDULE OF REVENUE DISAGGREGATED BY REVENUE SOURCE Year Ended December 31, 2021 (as restated) 2022 (as restated) 2023 Products $ 52,902 $ 56,945 $ 49,741 Services 73,058 78,967 83,995 $ 125,960 $ 135,912 $ 133,736 The balances of contract assets and contract liabilities from contracts with customers are as follows as of December 31, 2022 and 2023 are as follows: SCHEDULE OF CONTRACT ASSETS AND CONTRACT LIABILITIES FROM CONTRACTS WITH CUSTOMERS 2022 2023 Year Ended December 31, 2022 (as restated) 2023 Assets: Deferred contract cost $ 2,740 $ 2,581 Deferred cost $ 762 $ 83 Liabilities: Deferred revenue – services (1) $ 9,869 $ 10,511 Deferred revenue – products (1) 938 111 Deferred revenue 10,807 10,622 Less: Deferred revenue – current portion ( 6,376 ) ( 5,666 ) Deferred revenue – long term $ 4,431 $ 4,956 (1) The Company records deferred revenues when cash payments are received or due in advance of the Company’s performance. For the years ended December 31, 2022 and 2023, the Company recognized revenue of $ 5,929 (as restated) and $ 6,046 , respectively, that was included in the deferred revenue balance at the beginning of each reporting period. The Company expects to recognize as revenue through year 2028, when it transfers those goods and services and, therefore, satisfies its performance obligation to the customers. 91 NOTE 6 – 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 (as restated) December 31, 2023 Sales-type lease receivables, current $ 1,083 $ 1,104 Prepaid expenses 3,952 3,900 Contract assets 1,131 1,164 Other current assets 1,370 1,400 Prepaid expenses and other current assets $ 7,536 $ 7,568 NOTE 7 – 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 $ 524 at December 31, 2023. Inventories consist of the following: SCHEDULE OF INVENTORIES December 31, 2022 December 31, 2023 Components $ 12,443 $ 10,272 Work in process 462 31 Finished goods, net 9,367 12,299 Inventory, Net $ 22,272 $ 22,602 NOTE 8 – 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 December 31, 2023 Installed products $ 8,586 $ 10,765 Computer software 7,195 10,650 Computer and electronic equipment 5,658 6,275 Furniture and fixtures 2,041 2,422 Leasehold improvements 1,415 1,417 24,895 31,529 Accumulated depreciation and amortization ( 15,646 ) ( 19,146 ) $ 9,249 $ 12,383 Depreciation and amortization expense for the years ended December 31, 2021, 2022 and 2023 was $ 3,399 , $ 3,183 , and $ 3,876 , respectively. This includes amortization of costs associated with computer software for the years ended December 31, 2021, 2022 and 2023 of $ 426 , $ 179 , and $ 605 , respectively. 92 NOTE 9 – INTANGIBLE ASSETS AND GOODWILL Beginning in 2022, the Company began to capitalize software costs for software to be sold, marketed, or leased to customers. 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, 2023 and 2022: SCHEDULE OF INTANGIBLE ASSETS December 31, 2023 Useful Lives (In Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Amortized: Customer relationships 9 - 12 $ 19,264 $ ( 7,606 ) $ 11,658 Trademark and tradename 3 - 15 7,553 ( 3,682 ) 3,871 Patents 7 - 11 628 ( 441 ) 187 Technology 7 10,911 ( 10,784 ) 127 Software to be sold or leased 3 - 6 4,602 ( 535 ) 4,067 42,958 ( 23,048 ) 19,910 Unamortized: Customer list 104 104 Trademark and tradename 61 - 61 165 - 165 Total $ 43,123 $ ( 23,048 ) $ 20,075 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 Software to be sold or leased 3 - 6 1,865 - 1,865 40,780 ( 18,037 ) 22,743 Unamortized: Customer list 104 - 104 Trademark and tradename 61 - 61 165 - 165 Total $ 40,945 $ ( 18,037 ) $ 22,908 93 At December 31, 2023, the weighted-average amortization period for the intangible assets was 8.6 years. At December 31, 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 years ended December 31, 2021, 2022 and 2023 was $ 5,154 , $ 5,079 , and $ 5,569 , 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 Year Ending December 31, 2024 $ 4,156 2025 4,029 2026 3,412 2027 2,232 2028 2,023 Thereafter 4,058 Finite-Lived intangible assets $ 19,910 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 for goodwill impairment at the reporting unit level on October 1 of each year and between annual tests if a triggering event indicates the possibility of an impairment. The Company monitors changing business conditions as well as industry and economic factors, among others, for events which could trigger the need for an interim impairment analysis. The Company performed a quantitative impairment analysis at October 1, 2023 using a market-based and income-based quantitative assessment utilizing a combination of the (i) the guideline public company method applying revenue multiples of similar companies and, (ii) the discounted cash flow method, respectively. The fair value determination used in the impairment assessment requires estimates of the fair values based present value or other valuation techniques or a combination thereof, necessitating subjective judgments and assumptions by management. These estimates and assumptions could result in significant differences to the amounts reported if underlying circumstances were to change. The Company concluded that no impairment relating to goodwill existed at December 31, 2023. As of December 31, 2022 and 2023, the Company determined that no impairment existed to the goodwill, customer list and trademark and trade name of its acquired intangible assets. There have been no changes in the carrying amount of goodwill from January 1, 2023 to December 31, 2023. 94 NOTE 10 – STOCK-BASED COMPENSATION The Company’s stockholders have approved the Company’s 2018 Incentive Plan (as amended the “2018 Plan”) pursuant to which the Company may grant stock options, restricted stock and other equity-based awards with respect to up to an aggregate of 7,500 shares of the Company’s common stock with a vesting period of approximately four to five years . There were 2,158 shares available for future issuance under the 2018 Plan as of December 31, 2023. The 2018 Plan is administered by the Compensation Committee of the Company’s Board of Directors, which has the authority to determine, among other things, the term during which an option may be exercised (not more than 10 years), the exercise price of an option and the vesting provisions . The Company recognizes all employee share-based payments in the statement of operations as an operating expense, based on their fair values on the applicable grant date. During the first fiscal quarter of 2022, the Company granted options to purchase 5,960 shares of the Company’s common stock to certain senior managers, including the Company’s executive officers, consisting of options to purchase 895 shares of common stock with time-based vesting conditions and options to purchase 5,065 shares of common stock with performance-based vesting conditions (which we refer to as “market-based stock options”). The market-based stock options have an exercise price that range from $ 2.85 to $ 21.00 . 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”) ranges between $ 10.50 and $ 21.00 . 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 ( 1.7 %), and expected stock price volatility ( 51.7 %) over the expected life of awards ( 10 years). The weighted average fair value of market-based stock options granted during the period was $ 1.60 . During the year ended December 31, 2023, the Company granted options to purchase 1,335 shares of the Company’s common stock to certain senior managers, including the Company’s executive officers, consisting of options to purchase 470 shares of common stock with time-based vesting conditions and options to purchase 865 shares of common stock with performance-based vesting conditions (which we refer to as “market-based stock options”). 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 year was $ 1.56 . During the year ended December 31, 2023, the Company granted 1,247 shares of restricted stock to certain senior managers, including the Company’s executive officers, 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. These grants included (i) a grant of 900 shares of restricted stock to Steve Towe, the Company’s Chief Executive Officer, which vests over four equal installments over a four-year period, provided that the Mr. Towe is employed by the Company on each scheduled vesting date, and (ii) grants of 82 shares of restricted stock to certain members of the board of directors, which vest in full on the first anniversary of the date of grant, provided that the director is a director of the Company on such date. 95 [A] Stock options: A summary of the status of the Company’s stock options, relating to the Company’s market-based stock options that were granted to certain senior managers, including the Company’s executive officers, as of December 31, 2021, 2022 and 2023 and changes during the years then ended, is presented below: SCHEDULE OF STOCK OPTIONS ACTIVITY 2021 2022 2023 Number of Shares Weighted- Average Exercise Price Number of Shares Weighted- Average Exercise Price Number of Shares Weighted- Average Exercise Price Outstanding at beginning of year - $ - - - $ 5,065 $ 14.14 Granted - $ - 5,065 $ 14.14 865 $ 3.09 Exercised - $ - - $ - - $ - Forfeited or expired - $ - - - $ ( 485 ) $ 2.87 $ $ $ Outstanding at end of year - $ - 5,065 $ 14.14 5,445 $ 13.39 $ $ $ Exercisable at end of year - $ - - $ - - $ - The following table summarizes information about stock options relating to the market-based stock options that were granted to certain senior managers, including the Company’s executive officers, at December 31, 2023. SUMMARY OF STOCK OPTION INFORMATION BY EXERCISE PRICE RANGE Options Outstanding Options Exercisable Exercise Prices ($) Number Outstanding Weighted - Average Remaining Contractual Life in Years Weighted Average Exercise Price Number Outstanding Weighted - Average Exercise Price $ 2.98 - $ 7.48 1,320 8.87 $ 3.18 - $ - $ 7.49 - $ 11.98 875 8.01 $ 10.50 - $ - $ 11.99 - $ 16.48 1,250 8.01 $ 14.00 - $ - $ 16.49 - $ 21.00 2,000 8.01 $ 21.00 - $ - 5,445 8.22 $ 13.38 - $ - A summary of the status of the Company’s stock options, excluding the market-based stock options that were granted to certain senior managers, including the Company’s executive officers, as of December 31, 2021, 2022 and 2023 and changes during the years then ended, is presented below: SCHEDULE OF STOCK OPTIONS ACTIVITY 2021 2022 2023 Number of Shares Weighted- Average Exercise Price Number of Shares Weighted- Average Exercise Price Number of Shares Weighted- Average Exercise Price Outstanding at beginning of year 3,624 $ 5.85 3,470 $ 5.91 2,727 $ 5.29 Granted 120 $ 7.77 895 $ 4.08 470 $ 3.09 Exercised ( 156 ) $ 5.60 - $ - ( 16 ) $ 2.33 Forfeited or expired ( 118 ) $ 6.34 ( 1,638 ) $ 5.95 ( 989 ) $ 5.40 Outstanding at end of year 3,470 $ 5.91 2,727 $ 5.29 2,192 $ 4.79 Exercisable at end of year 1,546 $ 5.67 1,247 $ 5.79 1,189 $ 5.54 SUMMARY OF STOCK OPTION INFORMATION BY EXERCISE PRICE RANGE Options Outstanding Options Exercisable Exercise Prices ($) Number Outstanding Weighted - Average Remaining Contractual Life in Years Weighted Average Exercise Price Number Outstanding Weighted - Average Exercise Price $ 2.98 - $ 4.23 696 8.82 $ 3.18 104 $ 3.26 $ 4.24 - $ 5.48 568 7.55 $ 4.83 188 $ 4.87 $ 5.49 - $ 6.73 895 5.08 $ 5.90 880 $ 5.90 $ 6.74 - $ 7.96 33 6.58 $ 7.80 17 $ 7.80 2,192 6.93 $ 4.79 1,189 $ 5.54 96 SCHEDULE OF OPTIONS OUTSTANDING AND EXERCISABLE As of December 31, 2023 Aggregate Intrinsic Value Weighted - Average Remaining Contractual Life in Years Options outstanding $ - 6.92 Options exercisable $ - 5.60 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 Year Ended December 31, 2021 2022 2023 Expected volatility 50.2 % 49.4 % 55.6 % Expected life of options (years) 6.5 6.5 6.1 Risk free interest rate 0.69 % 1.73 % 3.87 % Dividend yield 0 % 0 % 0 % Weighted-average fair value of options granted during the year $ 3.81 $ 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. For the years ended December 31, 2021, 2022 and 2023, the Company recorded $ 1,684 , $ 2,943 , and $ 2,712 , respectively, of stock-based compensation expense in connection with the stock option grants. The fair value of options vested during the years ended December 31, 2021, 2022 and 2023 was $ 1,201 , $ 869 , and $ 931 , respectively. The total intrinsic value of options exercised during the years ended December 31, 2021, 2022 and 2023 was $ 483 , $ 0 , and $ 9 , respectively. As of December 31, 2023, there was $ 1,342 of total unrecognized compensation costs related to non-vested options granted under the Company’s stock option plans excluding 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 2.41 years. As of December 31, 2023, there was $ 4,655 of total unrecognized compensation costs 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 3.13 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. 97 [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 the non-vested shares for the years ended December 31, 2021, 2022 and 2023 is as follows: SCHEDULE OF NON-VESTED RESTRICTED STOCK ACTIVITY Number of Non-Vested Shares Weighted- Average Grant Date Fair Value Non-vested, January 1, 2021 806 5.54 Granted 450 7.63 Vested ( 537 ) 5.35 Forfeited or expired ( 90 ) 6.51 Non-vested, December 31, 2021 629 7.06 Granted 492 3.72 Vested ( 229 ) 6.99 Forfeited or expired ( 186 ) 7.08 Non-vested, December 31, 2022 706 4.75 Granted 1,247 2.41 Vested ( 297 ) 4.24 Forfeited or expired ( 152 ) 5.32 Non-vested, December 31, 2023 1,504 2.86 For the years ended December 31, 2021, 2022 and 2023, the Company recorded $ 2,529 , $ 1,347 , and $ 1,196 , respectively, of stock-based compensation expense in connection with the restricted stock grants. As of December 31, 2023, there was $ 3,349 of total unrecognized compensation cost related to non-vested shares. That cost is expected to be recognized over a weighted-average period of 3.03 years. [C] Restricted Stock Units: The Company also grants restricted stock units (“RSUs”) to employees. The following table summarizes the activity relating to the Company’s RSUs for the years ended December 31, 2021, 2022 and 2023: SCHEDULE OF NON-VESTED RESTRICTED STOCK ACTIVITY Number of Restricted Stock Units Weighted-Average Grant Date Fair Value Restricted stock-units, non-vested, January 1, 2021 75 5.60 Vested ( 35 ) 5.60 Forfeited or expired ( 4 ) 5.60 Restricted stock-units, non-vested, December 31, 2021 36 5.60 Vested ( 36 ) 5.60 Forfeited or expired - - Restricted stock-units, non-vested, December 31, 2022 - - Vested - - Forfeited or expired - - Restricted stock-units, non-vested, December 31, 2023 - - For the years ended December 31, 2021, 2022 and 2023 the Company recorded $ 203 , $ 53 , and $ 0 , respectively, of stock-based compensation expense in connection with the RSUs. As of December 31, 2023, there was $- 0 - of total unrecognized compensation cost related to non-vested RSUs. NOTE 11 - NET LOSS PER SHARE SCHEDULE OF NET LOSS PER SHARE BASIC AND DILUTED 2021 2022 2023 December 31, 2021 (As restated) 2022 (As restated) 2023 Basic and diluted loss per share Net loss attributable to common stockholders $ ( 22,068 ) $ ( 16,891 ) $ ( 17,307 ) Weighted-average common share outstanding - basic and diluted 34,571 35,393 35,628 Net loss attributable to common stockholders - basic and diluted $ ( 0.64 ) $ ( 0.48 ) $ ( 0.49 ) 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 EPS pursuant to the two-cl