Powerfleet, Inc. 10-K

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-class method. Our participating securities consist solely of preferred stock, which have contractual participation rights equivalent to those of stockholders of unrestricted common stock. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company. For the years ended December 31, 2021, 2022 and 2023, the basic and diluted weighted-average shares outstanding are the same, since the effect from the potential exercise of outstanding stock options, conversion of preferred stock and vesting of restricted stock and restricted stock units totaling 11,628 , 16,571 and 18,164 , respectively, would have been anti-dilutive due to the loss. 98 NOTE 12 – SHORT-TERM BANK DEBT AND LONG-TERM DEBT SCHEDULE OF LONG-TERM DEBT December 31, December 31, 2022 2023 Short-term bank debt $ 5,709 $ 10,030 Current maturities of long-term debt $ 4,603 $ 11,061 Long-term debt - less current maturities $ 11,403 $ - Debt In connection with the Pointer Merger, Powerfleet Israel incurred NIS denominated debt in term loan borrowings on the October 3, 2019 under the Prior Credit Agreement, pursuant to which Hapoalim agreed to provide Powerfleet Israel with two senior secured term loan facilities in an initial aggregate principal amount of $ 30,000 (comprised of two facilities in the aggregate principal amount of $ 20,000 and $ 10,000 , respectively (the “Prior Term A Facility” and “Prior Term B Facility”, respectively, and collectively, the “Prior Term Facilities”)) and a five-year revolving credit facility (the “Prior Revolving Facility”) to Pointer denominated in NIS in an initial aggregate principal amount of $ 10,000 (collectively, the “Prior Credit Facilities”). As of December 31, 2023, the Company borrowed NIS 4,915 or $ 1,355 , under the Prior Revolving Facility. The available balance at December 31, 2023 was approximately $ 4,800 . The Prior Credit Facilities were scheduled to mature on October 3, 2024 . The indicative interest rate provided for the Prior Term Facilities in the Prior Credit Agreement was approximately 4.73 % for the Prior Term A Facility and 5.89 % for the Prior Term B Facility. The interest rate for the Prior Revolving Facility was, with respect to NIS-denominated loans, Hapoalim’s prime rate + 2.5%, and with respect to US dollar-denominated loans, LIBOR + 4.6% (amended to SOFR + 2.15%). The interest rate at December 31, 2023 was 7.53 %. In addition, the Company agreed to pay a 1% commitment fee on the unutilized and uncancelled availability under the Prior Revolving Facility . The Prior Credit Facilities were secured by the shares held by Powerfleet Israel in Pointer and by Pointer over all of its assets. The Prior Credit Agreement included customary representations, warranties, affirmative covenants, negative covenants (including the following financial covenants, tested quarterly: Pointer’s net debt to EBITDA; Pointer’s net debt to working capital; minimum equity of Powerfleet Israel; Powerfleet Israel equity to total assets; Powerfleet Israel net debt to EBITDA; and Pointer EBITDA to current payments and events of default. On August 23, 2021, Powerfleet Israel and Pointer (the “Borrowers”) entered into an amendment (the “Amendment”), effective as of August 1, 2021, to the Prior Credit Agreement with Hapoalim. The Amendment memorialized the agreements between the Borrowers and Hapoalim regarding a reduction in the interest rates of the two Prior Term Facilities. Pursuant to the Amendment, commencing as of November 12, 2020, the interest rate with respect to the Prior Term A Facility was reduced to a fixed rate of 3.65 % per annum and the interest rate with respect to the Prior Term B Facility was reduced to a fixed rate of 4.5 % per annum. The Amendment also provided, among other things, for (i) a reduction in the credit allocation fee on undrawn and uncancelled amounts of the Prior Revolving Facility from 1 % to 0.5 % per annum, (ii) removal of the requirement that Powerfleet Israel maintain $ 3,000 on deposit in a separate reserve fund, and (iii) modifications to certain of the affirmative and negative covenants, including a financial covenant regarding the ratio of the Borrowers’ debt levels to Pointer’s EBITDA. The Company was in compliance with the covenants as of December 31, 2023. In connection with the Prior Credit Facilities, the Company incurred debt issuance costs of $ 742 . For the years ended December 31, 2021, 2022, and 2023, the Company recorded $ 290 , $ 215 , and $ 133 , respectively, of amortization of the debt issuance costs. The Company recorded charges of $ 1,078 , $ 824 , and $ 572 to interest expense on its consolidated statements of operations for the years ended December 31, 2021, 2022 and 2023 related to interest expense associated with the Prior Credit Facilities. On October 31, 2022, the Borrowers entered into a third amendment to the Prior Credit Agreement (the “Third Amendment”) with Hapoalim. The Third Amendment provided for, among other things, an additional revolving credit facility to Pointer denominated in NIS in an initial aggregate principal amount of $ 10 million (the “Second Revolver”). The Second Revolver was available for a period of one month, commencing on October 31, 2022, and continued to be available for successive one-month periods until the Company’s entry into the A&R Credit Agreement. As of December 31, 2023, the Company borrowed NIS 31,464 , or $ 8,675 , under the Second Revolver. The interest rate at December 31, 2023 was 7.97 %. The available balance at December 31, 2023 was $ 1,325 . See Note 20 (Subsequent Events) for additional information regarding the debt of the Company, including the A&R Credit Agreement and the Facilities Agreement. 99 NOTE 13 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consist of the following: SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES December 31, December 31, 2022 (As restated) 2023 Accounts payable $ 14,702 $ 19,235 Accrued warranty 745 965 Accrued compensation 7,153 6,721 Government authorities 1,992 2,796 Other current liabilities 805 579 Accounts payable and accrued expenses $ 25,397 $ 30,296 The Company’s products are warranted against defects in materials and workmanship for a period of 1-8 years from the date of acceptance of the product by the customer . The customers may purchase an extended warranty providing coverage up to a maximum of 60 months . A provision for estimated future warranty costs is recorded for expected or historical warranty matters related to equipment shipped and is included in accounts payable and accrued expenses in the Consolidated Balance Sheets as of December 31, 2022 and 2023. The following table summarizes warranty activity during the years ended December 31, 2022 and 2023: SCHEDULE OF PRODUCT WARRANTY LIABILITY Year Ended December 31, 2022 2023 Accrued warranty reserve, beginning of year $ 1,333 $ 2,054 Accrual for product warranties issued 1,103 1,238 Product replacements and other warranty expenditures ( 481 ) ( 503 ) Expiration of warranties 99 ( 136 ) Accrued warranty reserve, end of year (a) $ 2,054 $ 2,653 (a) Includes accrued warranty included in other long-term liabilities at December 31, 2022 and 2023 of $ 1,309 (as restated) and $ 1,688 , respectively. NOTE 14 - LEASES The Company determines whether an arrangement is a lease at inception. The Company has operating leases for office space and office equipment. The Company’s leases have remaining lease terms of one year to 10 years, some of which include options to extend the lease term for up to five years . Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. The operating lease ROU asset also includes any lease payments made in advance of lease commencement and excludes lease incentives. The lease terms used in the calculations of the operating ROU assets and operating lease liabilities include options to extend or terminate the lease when the Company is reasonably certain that it will exercise those options. Lease expense for lease payments is recognized on a straight-line basis over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company has lease agreements with lease and non-lease components, which are generally not accounted for separately. The Company has lease agreements which are classified as short-term in nature. These leases meet the criteria for operating lease classification. Lease costs associated with the short-term leases are included in selling, general and administrative expenses on the Company’s consolidated statements of operations. Components of lease expense are as follows: SCHEDULE OF COMPONENTS OF LEASE EXPENSE Year Ended December 31, 2022 2023 Short term lease cost: $ 443 $ 453 Supplemental cash flow information and non-cash activity related to the Company’s operating leases are as follows: SCHEDULE OF CASH FLOW INFORMATION AND NON CASH ACTIVITY OF OPERATING LEASES Year Ended December 31, 2022 2023 Non-cash activity: Right-of-use assets obtained in exchange for lease obligations $ 1,450 $ 1,198 Weighted-average remaining lease term and discount rate for the Company’s operating leases are as follows: SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERM AND DISCOUNT RATE December 31, 2023 Weighted-average remaining lease term (in years) 2.73 Weighted-average discount rate 5.86 % 100 Scheduled maturities of operating lease liabilities outstanding as of December 31, 2023 are as follows: SCHEDULED MATURITIES OF OPERATING LEASE LIABILITIES Year ending December 31, 2024 $ 2,463 2025 2,170 2026 1,012 2027 377 2028 316 Thereafter 654 Total lease payments 6,992 Less: Imputed interest ( 581 ) Present value of lease liabilities $ 6,411 NOTE 15 – CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY [A] Public Offering: On February 1, 2021 the Company closed an underwritten public offering of 4,428 shares of common stock (which included the full exercise of the underwriters’ over-allotment option) for gross proceeds of approximately $ 28,800 , before deducting the underwriting discounts and commissions and other offering expenses. [B] Convertible Redeemable Preferred Stock: The Company is authorized to issue 150 shares of preferred stock, par value $ 0.01 per share of which 100 shares are designated Series A Preferred Stock and 50 shares are undesignated. Series A Preferred Stock In connection with the completion of the Pointer Merger, on October 3, 2019, the Company issued 50 shares of Series A Preferred Stock to ABRY Senior Equity V, L.P., ABRY Senior Equity Co-Investment Fund V, L.P and ABRY Investment Partnership, L.P. (the “Investors”). For the years ended December 31, 2022 and December 31, 2023, the Company issued 4 and 1 additional shares of Series A Preferred Stock. SCHEDULE OF PREFERRED CONVERTIBLE REDEEMABLE PREFERRED STOCK Number of Shares Amount (As Restated) Balance at January 1, 2021 55 $ 56,703 Dividend paid in kind shares issued - - Accretion of preferred stock - 5,191 Balance at December 31, 2021 55 $ 61,894 Dividend paid in kind shares issued 4 4,231 Accretion of preferred stock - 5,906 Balance at December 31, 2022 59 $ 72,031 Dividend paid in kind shares issued 1 1,107 Accretion of preferred stock - 7,139 Balance at December 31, 2023 60 $ 80,277 Liquidation The Series A Preferred Stock has a liquidation preference equal to the greater of (i) the original issuance price of $ 1,000.00 per share, subject to certain adjustments (the “Series A Issue Price”), plus all accrued and unpaid dividends thereon (except in the case of a deemed liquidation event, then 150% of such amount) and (ii) the amount such holder would have received if the Series A Preferred Stock had converted into common stock immediately prior to such liquidation . As of December 31, 2023, the Series A Preferred Stock had a liquidation preference of $ 30,091 calculated in accordance with clause (i) above. Dividends Holders of Series A Preferred Stock are entitled to receive cumulative dividends at a minimum rate of 7.5 % per annum (calculated on the basis of the Series A Issue Price), quarterly in arrears. The dividends are payable at the Company’s election, in kind, through the issuance of additional shares of Series A Preferred Stock, or in cash, provided no dividend payment failure has occurred and is continuing and that there has not previously occurred two or more dividend payment failures. Commencing on the 66-month anniversary of the date on which any shares of Series A Preferred Stock are first issued (the “Original Issuance Date”), and on each monthly anniversary thereafter, the dividend rate will increase by 100 basis points, until the dividend rate reaches 17.5 % per annum, subject to the Company’s right to defer the increase for up to three consecutive months on terms set forth in the Company’s Amended and Restated Certificate of Incorporation (the “Charter”). The following table summarizes the dividend paid activity for the years ended December 31, 2021, 2022, and 2023: SCHEDULE OF DIVIDEND PAID ACTIVITY Dividends paid in cash Dividends paid in shares Total Year Ended December 31, 2021 $ 4,112 $ - $ 4,112 Year Ended December 31, 2022 $ - $ 4,231 $ 4,231 Year Ended December 31, 2023 $ 3,385 $ 1,108 $ 4,493 As of December 31, 2022 and December 31, 2023, dividends in arrears were $- 0 - and $- 0 - respectively. 101 Voting; Consent Rights The holders of Series A Preferred Stock will be given notice by the Company of any meeting of stockholders or action to be taken by written consent in lieu of a meeting of stockholders as to which the holders of common stock are given notice at the same time as provided in, and in accordance with, the Company’s Amended and Restated Bylaws. Except as required by applicable law or as otherwise specifically set forth in the Charter, the holders of Series A Preferred Stock are not entitled to vote on any matter presented to the Company’s stockholders unless and until any holder of Series A Preferred Stock provides written notification to the Company that such holder is electing, on behalf of all holders of Series A Preferred Stock, to activate their voting rights and in doing so rendering the Series A Preferred Stock voting capital stock of the Company (such notice, a “Series A Voting Activation Notice”). From and after the delivery of a Series A Voting Activation Notice, all holders of the Series A Preferred Stock will be entitled to vote with the holders of common stock as a single class on an as-converted basis (provided, however, that any holder of Series A Preferred Stock shall not be entitled to cast votes for the number of shares of common stock issuable upon conversion of such shares of Series A Preferred Stock held by such holder that exceeds the quotient of (1) the aggregate Series A Issue Price for such shares of Series A Preferred Stock divided by (2) $5.57 (subject to adjustment for stock splits, stock dividends, combinations, reclassifications and similar events, as applicable)). So long as shares of Series A Preferred Stock are outstanding and convertible into shares of common stock that represent at least 10% of the voting power of the common stock, or the Investors or their affiliates continue to hold at least 33% of the aggregate amount of Series A Preferred Stock issued to the Investors on the Original Issuance Date, the consent of the holders of at least a majority of the outstanding shares of Series A Preferred Stock will be necessary for the Company to, among other things, (i) liquidate the Company or any operating subsidiary or effect any deemed liquidation event (as such term is defined in the Charter), except for a deemed liquidation event in which the holders of Series A Preferred Stock receive an amount in cash not less than the Redemption Price (as defined below), (ii) amend the Company’s organizational documents in a manner that adversely affects the Series A Preferred Stock, (iii) issue any securities that are senior to, or equal in priority with, the Series A Preferred Stock or issue additional shares of Series A Preferred Stock to any person other than the Investors or their affiliates, (iv) incur indebtedness above the agreed-upon threshold, (v) change the size of the Company’s board of directors to a number other than seven, or (vi) enter into certain affiliated arrangements or transactions . Redemption At any time, each holder of Series A Preferred Stock may elect to convert each share of such holder’s then-outstanding Series A Preferred Stock into the number of shares of the Company’s common stock equal to the quotient of (x) the Series A Issue Price, plus any accrued and unpaid dividends, divided by (y) the Series A Conversion Price in effect at the time of conversion. The Series A Conversion Price is initially equal to $ 7.319 , subject to certain adjustments as set forth in the Charter. At any time after the third anniversary of the Original Issuance Date, subject to certain conditions, the Company may redeem the Series A Preferred Stock for an amount per share, equal to the greater of (i) the product of (x) 1.5 multiplied by (y) the sum of the Series A Issue Price, plus all accrued and unpaid dividends and (ii) the product of (x) the number of shares of common stock issuable upon conversion of such Series A Preferred Stock multiplied by (y) the volume weighted average price of the common stock during the 30 consecutive trading day period ending on the trading date immediately prior to the date of such redemption notice or, if calculated in connection with a deemed liquidation event, the value ascribed to a share of common stock in such deemed liquidation event (the “Redemption Price”) . Further, at any time (i) after the 66-month anniversary of the Original Issuance Date, (ii) following delivery of a mandatory conversion notice by us, or (iii) upon a deemed liquidation event, subject to Delaware law governing distributions to stockholders, the holders of the Series A Preferred Stock may elect to require us to redeem all or any portion of the outstanding shares of Series A Preferred Stock for an amount per share equal to the Redemption Price. The Company classifies its Series A Preferred Stock outside of stockholders’ equity as the redemption of such shares is outside the Company’s control. The Company adjusts the carrying values of the Series A Preferred Stock to redemption value to the earliest redemption date using the effective interest rate method. Concurrently with the closing of the MiX Combination on April 2,2024, the Company redeemed in full all of the outstanding shares of the Series A Preferred Stock (see Note 20, Subsequent Events). 102 NOTE 16 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) includes net loss and unrealized gains or losses on available-for-sale investments and foreign currency translation gains and losses. Cumulative unrealized gains and losses on available-for-sale investments are reflected as accumulated other comprehensive loss in stockholders’ equity on the Company’s Consolidated Balance Sheets. The accumulated balances for each classification of other comprehensive income (loss) are as follows: SCHEDULE OF ACCUMULATED OTHER COMPREHENSIVE LOSS Foreign currency translation adjustment Unrealized gain (losses) on investments Accumulated other comprehensive income (loss) Balance at January 1, 2021 $ 399 $ - $ 399 Net current period change ( 8 ) - ( 8 ) Balance at December 31, 2021 $ 391 $ - $ 391 Net current period change ( 1,601 ) - ( 1,601 ) Balance at December 31, 2022 $ ( 1,210 ) $ - $ ( 1,210 ) Net current period change 594 - 594 Balance at December 31, 2023 $ ( 616 ) $ - $ ( 616 ) NOTE 17 – SEGMENT INFORMATION The Company operates in one reportable segment, wireless IoT asset management. The following table summarizes revenues by geographic region. SCHEDULE OF REVENUES AND LONG LIVED ASSETS BY GEOGRAPHICAL REGION 2021 2022 2023 Year Ended December 31, 2021 (as restated) 2022 (as restated) 2023 United States $ 50,772 $ 57,437 $ 59,233 Israel 44,673 44,580 41,689 Other 30,515 33,895 32,814 Total revenues $ 125,960 $ 135,912 $ 133,736 2021 2022 2023 Year Ended December 31, 2021 2022 2023 Long lived assets by geographic region: United States $ 1,123 $ 941 $ 1,081 Israel 3,675 3,545 3,923 Other 4,190 4,763 7,379 Long lived assets $ 8,988 $ 9,249 12,383 103 NOTE 18 - INCOME TAXES Loss before income taxes consists of the following: SCHEDULE OF LOSS BEFORE INCOME TAXES 2021 2022 2023 Year Ended December 31, 2021 (As restated) 2022 (As restated) 2023 U.S. operations $ ( 14,996 ) $ ( 10,303 ) $ ( 16,494 ) Foreign operations 4,113 4,421 11,443 Loss before income tax $ ( 10,883 ) $ ( 5,882 ) $ ( 5,051 ) The provision for income taxes consists of the following for the years ended December 31: SCHEDULE OF PROVISION FOR INCOME TAXES 2021 (As restated) 2022 (As restated) 2023 Current: Federal $ - $ - $ - State 16 93 68 Foreign 127 69 519 Total current provision $ 143 $ 162 $ 587 Deferred: Federal $ - $ - $ - State - - - Foreign 1,745 708 2 Total deferred provision $ 1,745 $ 708 $ 2 Total (benefit) provision for income taxes $ 1,888 $ 870 $ 589 The difference between income taxes at the statutory federal income tax rate and income taxes reported in the Consolidated Statements of Operations for the years ended December 31 is attributable to the following: SCHEDULE OF STATUTORY FEDERAL INCOME TAX RATE 2021 (As restated) 2022 (As restated) 2023 Income tax benefit at the federal statutory rate ( 2,285 ) ( 1,236 ) ( 1,061 ) State and local income taxes, net of federal taxes 411 ( 313 ) ( 298 ) (Decrease) increase in valuation allowance 595 ( 1,105 ) 1,488 Remeasurement of deferred tax adjustments 1,302 359 4 Permanent differences and other 269 810 678 Foreign rate differential 1,008 ( 151 ) ( 1,924 ) GILTI inclusion 509 2,425 1,586 Other 79 81 57 Acquisition fees - - 59 Income tax expense 1,888 870 589 104 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2022 and 2023 are presented below: SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES December 31, 2022 (As restated) December 31, 2023 Deferred tax assets: $ $ Net operating loss carryforwards 27,722 27,643 Capital loss carryforwards 10,670 10,465 Deferred revenue 2,035 2,241 Stock-based compensation 459 302 Federal research and development tax credits 1,058 1,058 Capitalized research 980 1,396 Inventories 324 411 Bad debt reserve 594 724 Deferred lease liability 548 425 Other deductible temporary differences 2,610 2,055 Acquisition costs - 923 Total gross deferred tax assets $ 47,000 $ 47,643 Less: valuation allowance ( 43,692 ) ( 44,780 ) Net deferred tax assets $ 3,308 $ 2,863 Deferred tax liabilities: $ $ Intangible amortization ( 4,403 ) ( 4,068 ) ROU assets ( 498 ) ( 382 ) Total deferred tax liabilities $ ( 4,901 ) $ ( 4,450 ) Net deferred tax liabilities $ ( 1,593 ) $ ( 1,587 ) A reconciliation of the beginning and ending amount of unrecognized tax positions is as follows as of December 31: SCHEDULE OF UNRECOGNIZED TAX POSITIONS 2022 (As restated) 2023 (revised) Balance at the beginning of the year $ 384 $ 344 Additions based on tax provisions taken related to current year 123 139 Reductions related to expiration of statute of limitations ( 163 ) ( 189 ) Balance at the end of year $ 344 $ 294 The unrecognized tax benefits, if recognized, would reduce the Company’s annual effective tax rate. The Company does not expect any significant changes to its unrecognized tax positions during the next twelve months. At December 31, 2023, the Company had an aggregate net operating loss carryforward of approximately $ 78,675 for U.S. federal income tax purposes. At December 31, 2023, the Company had an aggregate net operating loss carryforward of approximately $ 39,263 for state income tax purposes and a foreign net operating loss carryforwards of approximately $ 29,020 . Substantially all of the net operating loss carryforwards expire from 2024 through 2037 for pre-2018 federal net operating loss carryforwards and from 2024 through 2042 for state purposes. The net operating loss carryforwards may be limited to use in any particular year based on Internal Revenue Code (“IRC”) Section 382 related to change of ownership restrictions. Section 382 of the IRC imposes an annual limitation on the utilization of NOL carryforwards based on long-term bond rates and the value of the corporation at the time of a change in ownership as defined by Section 382 of the IRC. In 2019, the Company incurred a change in ownership under Section 382 of the IRC and this change of ownership is not expected to materially impact the Company’s ability to utilize its net operating loss carryforward amounts in the future. In addition, future stock issuances may subject the Company to further limitations on the utilization of its net operating loss carryforwards under the same Internal Revenue Code provision. At December 31, 2023, the Company has New Jersey net operating loss carryforwards (“NJ NOLs”) included above in the approximate amount of $ 8,567 expiring through 2043, which are available to reduce future earnings which would otherwise be subject to state income tax. The Company is asserting permanent reinvestment of all accumulated undistributed earnings of its foreign subsidiaries as of December 31, 2023 in excess of annual debt service costs requirements. For the year ended December 31, 2023, the Company’s valuation allowance increased to $ 44,780 , compared to $ 43,692 (as restated) as of December 31, 2022 primarily due to the increase of net operating losses and other timing differences. The Company has provided a valuation allowance against the full amount of its domestic deferred tax assets and the majority of the foreign deferred tax assets. The valuation allowance was established because of the uncertainty of realization of the deferred tax assets due to lack of sufficient history of generating taxable income. Realization is dependent upon generating sufficient taxable income prior to the expiration of the net operating loss carryforwards in future periods. The valuation decreased in 2022 by $ 1,333 and increased in 2023 by $ 1,088 . Audits for federal income tax returns are closed for the years through 2019. However, the Internal Revenue Service (“IRS”) can audit the NOL’s generated during those years in the years that the NOL’s are utilized. State income tax returns are generally subject to examination for a period of three to six years after the filing of the respective tax return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. Foreign income tax returns are generally subject to examination based on the tax laws of the respective jurisdictions. On August 16, 2022, the President of the United States signed into law H.R. 5376, commonly referred to as the Inflation Reduction Act of 2022 (the “IRA”). The IRA is federal legislation designed to raise revenue from, among other things, the imposition of certain corporate tax measures, while authorizing spending on energy and climate change initiatives and subsidizing the Affordable Care Act. The IRA also introduced a 1 % excise tax on certain corporate stock buybacks, which would impose a nondeductible 1% excise tax on the fair market value of certain stock that is “repurchased” during the taxable year by a publicly traded U.S. corporation or acquired by certain of its subsidiaries. The passage of the IRA did not have a material impact to the Company nor its calculated AETR as of December 31, 2023. On August 9, 2022, the President of the United States signed into law H.R. 4346, “The CHIPS and Science Act of 2022.” CHIPS is a federal statue providing funding for research and domestic production of semiconductors. Additional funding can be provided through CHIPS to various federal agencies as well as towards climate science research. Tax measures include a 25% advanced investment tax credit for certain investments in semiconductor manufacturing. The passage of the CHIPS and Science Act did not have a material impact to the Company nor its calculated AETR as of December 31, 2023. 105 NOTE 19 - COMMITMENTS AND CONTINGENCIES Except for normal operating leases, the Company is not currently subject to any material commitments. [A] 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. In August 2014, Pointer do Brasil Comercial Ltda. (“Pointer Brazil”) received a notification of lack of payment of VAT tax (Brazilian ICMS tax) in the amount of $ 219 plus $ 1,164 of interest and penalty, totaling $ 1,383 as of December 31, 2023. The Company is vigorously defending this tax assessment before the administrative court in Brazil, but in light of the administrative and judicial processes in Brazil, it could take up to 14 years before the dispute is finally resolved. In case the administrative court rules against the Company, the Company could claim before the judicial court, an appellate court in Brazil, a substantial reduction of interest charged, potentially reducing the Company’s total exposure. The Company’s legal counsel is of the opinion that the chance of loss is not probable and for this reason the Company has not made any provision. In July 2015, Pointer Brazil received a tax deficiency notice alleging that the services provided by Pointer Brazil should be classified as “telecommunication services” and therefore Pointer Brazil should be subject to the state value-added tax. The aggregate amount claimed to be owed under the notice was approximately $ 13,482 as of December 31, 2023. On August 14, 2018, the lower chamber of the State Tax Administrative Court in São Paulo rendered a decision that was favorable to Pointer Brazil in relation to the ICMS demands, but adverse in regards to the clerical obligation of keeping in good order a set of ICMS books and related tax receipts. The remaining claim after this administrative decision is $ 226 . The state has appealed to the higher chamber of the State Tax Administrative Court. The Company’s legal counsel is of the opinion that the chance of loss is not probable and that no material costs will arise in respect to these claims. For this reason, the Company has not made any provision. On February 24, 2022, Pointer Mexico received a notification for 2015 tax assessment in the amount of $ 238 regarding the underpayment of VAT and government fees from the Mexican Tax Service (“MTS”). Under the statute and case law, Pointer Mexico was entitled to appeal before the MTS or file a lawsuit before the Federal Court of Administrative Justice (Tribunal Federal de Justicia Administrativa). On April 19, 2022, Pointer Mexico filed an appeal for revocation of the assessment. On May 3, 2022, Pointer Mexico filed additional evidence before the MTS. On January 24, 2023, the MTS resolved the administrative revocation appeal, confirming the tax assessment against Pointer Mexico. Against this last resolution, Pointer Mexico is entitled to appeal before the Federal Court of Administrative Justice. The term for the filing of this appeal lapses on March 8, 2023. Based on the current analysis of the facts and case, the Company has recorded a provision of $ 238 . NOTE 20 – SUBSEQUENT EVENTS On February 28, 2024, the Company held a special meeting of stockholders during which the stockholders approved, among other things, the issuance of shares of common stock of the Company to shareholders of MiX Telematics pursuant to the Implementation Agreement and an amendment of the Company’s amended and restated certificate of incorporation to increase the number of authorized shares of common stock from 75 million to 175 million (the “Charter Amendment”). On March 22, 2024, the Company filed the Charter Amendment with the Secretary of State of the State of Delaware. On March 7, 2024, the Company entered into the Facilities Agreement with RMB, pursuant to which RMB agreed to provide the Company with two term loan facilities in an aggregate principal amount of $ 85 million, comprised of two facilities in the aggregate principal amount of $ 42.5 million and $ 42.5 million, respectively. The proceeds of the term loan facilities were used by the Company to redeem all the outstanding shares of the Series A Preferred Stock and for general corporate purposes. The Company drew down $85 million in cash under the term loan facilities on March 13, 2024. 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 two facilities 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 two revolvers in the aggregate principal amounts of $ 10 million and $ 10 million, respectively). Powerfleet Israel drew down $ 30 million in cash under the term loan facilities on March 18, 2024 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. On April 2, 2024, the MiX Combination was consummated, and MiX Telematics became an indirect, wholly owned subsidiary of the Company. 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 for $ 90.3 million for all of the outstanding shares of the Series A Preferred Stock. 106 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure. None.