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Item 4. Controls and Procedures

2024-08-28 compared with 2023-11-13 · 39 added, 78 removed, 4 unchanged (97% of the section changed)

1 unchanged sentence

Disclosure controls and procedures.

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)

under the Exchange Act) are controls and other procedures that are designed to ensure that information required to be disclosed by us

in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified

in the rules and forms of the SEC.

Disclosure controls and procedures include, without

limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file under the

Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial

officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls

and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable

assurance of achieving the desired control objectives.

Due to the inherent limitations of control systems, not all misstatements may

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can

occur because of a simple error or mistake.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion

of two or more people, or by management override of the control.

Controls and procedures can only provide reasonable, not absolute, assurance

that the above objectives have been met.

management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined

in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Under the supervision and with the participation of our management, including

our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness, as of December 31,

2022, of our internal control over financial reporting based on the framework in 2013 Internal Control - Integrated Framework issued

by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation under this framework, the Chief Executive

Officer and the Chief Financial Officer concluded that our internal control over financial reporting was not effective as of December

31, 2022, as disclosed under the caption “Management’s Report on Internal Control over Financial Report” in Item 9A

of our 2022 Annual Report, due to material weaknesses in our internal control over financial reporting described below, which have not

been remediated as of September 30, 2023.

material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is

a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented

or detected on a timely basis.

Management has concluded that material weaknesses existed as of December 31, 2022 with respect to the

were not designed or operating effectively to ensure that the standalone selling prices (SSP), used to determine the appropriate

allocation of revenue in multiple element arrangements, was appropriate.

Determining SSP involves management judgment, considering

among other factors the adjusted market assessment or the expected cost-plus margin, and management did not review timely the analysis

of SSP or the underlying data supporting the analysis.

were not designed or operating effectively to ensure that the costs capitalized for internal use software were appropriate.

Specifically,

these controls did not provide for adequate review or documentation of the amounts capitalized and the related phase of the project.

Furthermore, controls were not designed or operating effectively to ensure that the costs for software to be sold, leased or marketed

were appropriate.

Specifically, these controls did not provide for adequate review or documentation of the amounts capitalized and

when projects met technological feasibility.

over the financial statement close process were not designed or operating effectively to ensure the appropriate level of management

review, including the appropriate level of precision, adequate evidence of management’s review, and the completeness and accuracy

of key reports.

material weaknesses did not result in any restatements of consolidated financial statements previously reported by us, there were no

changes in previously released financial results and management concluded that the consolidated financial statements included in this

report present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented,

in conformity with accounting principles generally accepted in the United States.

will take certain steps to remediate the material weaknesses described above and otherwise improve the overall design and operation of

our control environment.

These steps include:

of a new enterprise resource planning (ERP) system;

external resources to support its efforts to rework certain control gaps across the various processes in Israel and the U.S.

identified deficiencies;

enhanced documentation associated with management review controls and validation of the completeness and accuracy of key reports

in Israel and the U.S.;

of relevant personnel reinforcing existing policies and enhanced policies with regards to the appropriate steps and procedures required

to be performed related to the execution and documentation of internal controls.

& Young LLP, our independent registered public accounting firm that audited the consolidated financial statements included in our

2022 Annual Report, issued an attestation report on the effectiveness of our internal control over financial reporting which appeared

in Part II, Item 8, “Financial Statements and Supplementary Data” of our 2022 Annual Report.

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Due to the inherent limitations of controls systems, irrespective of how well controls are designed and operated, not all misstatements may be detected.

These inherent limitations include, but are not limited to faulty judgments in decision-making, breakdown in controls can occur because of a simple error or mistake and/or controls can be circumvented by the individual act of persons, by the collusion of two or more people, or by management override of control.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such terms is defined in Rules 13a-15(f) under the Exchanges Act.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness, as of June 30, 2024, of our internal control over financial reporting.

Based on that evaluation, we concluded that, internal control over financial reporting were not effective as of June 30, 2024, due to material weaknesses in our internal control over financial reporting as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 and our Transition Report on Form 10-KT for the transition period ended March 31, 2024.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Management has identified material weaknesses in the design and operation of controls related to the determination of standalone selling prices, cost capitalized for internal use software software, the accounting for business acquisitions, 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 our financial reporting processes, the related process-level information technology dependent manual controls and application controls.

As disclosed in Note 3, “Acquisition,” in Part I, Item 1, “Financial Statements,” we completed the MiX Combination on April 2, 2024.

We excluded MiX’s disclosure controls and procedures that are subsumed by their internal control over financial reporting from the scope of management’s assessment of the effectiveness of our disclosure controls and procedures.

This exclusion is in accordance with the guidance issued by the Staff of the Securities and Exchange Commission that an assessment of recent business combinations may be omitted from management's assessment of internal control over financial reporting for one year following the acquisition.

As a result of our integration of the MiX disclosure controls and procedures, certain controls will be evaluated and may be changed.

MiX’s total revenues constituted approximately 58% o f our consolidated revenues for the three months ended June 30, 2024.

MiX’s total assets constituted approximately 38% of our consolidated total assets as of June 30, 2024.

As described in “Item 9A.

Controls and Procedures” in Part II of our Annual Report on Form 10-K for the year ended December 31, 2023 and our Transition Report on Form 10-KT for the transition period ended March 31, 2024, we started the implementation of the remediation plan to address the material weaknesses mentioned above, including the material weakness reported for MiX Telematics.

The remediation plan includes:

• Investigating and understanding the root causes of the control deficiencies that resulted in the material weaknesses, and will continue to refine the remediation plan in conjunction with the integration of operations, procedures, control processes and information systems.

• Utilizing external resources to support efforts to rework certain control gaps across the various processes in Israel and the United States with identified deficiencies.

• Implementing enhanced documentation associated with management review controls and validation of the completeness and accuracy of key reports across the group.

• Training of relevant personnel reinforcing existing and/or enhanced policies with regards to the appropriate steps and procedures required to be performed related to the execution and documentation of internal controls.

In addition, as part the business combination with MiX Telematics, we are in the process of migrating and integrating the central corporate accounting functions and teams.

This integration includes:

• Adopting and implementing the ERP system used by MiX Telematics across the group;

• Evaluating and integrating accounting principles to align and adopt consistent accounting policies and practices;

• Leveraging a larger highly qualified central corporate accounting team;

• Utilizing a more mature internal risk team to coordinate management's efforts to design and implement systems, processes and controls that are documented and widely understood and followed throughout the organization.

Management will continue with the implementation of the remediation plan and will reassess and test the design and operating effectiveness of controls.

The material weaknesses will not be considered remediated until applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively.

Changes in internal control over financial reporting.

was no change in our system of internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during

the quarter ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control

over financial reporting.

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

We are currently integrating policies, processes, people, technology and

operations for the combined companies.

Management will continue to evaluate our internal control over financial reporting as we execute

integration activities.

II - OTHER INFORMATION

Except for the controls related to the material weaknesses reported on during Annual Report on Form 10-K for the year ended December 31, 2023 and our Transition Report on Form 10-KT for the transition period ended March 31, 2024 related to the measurement and valuation of the acquired assets and liabilities assumed in connection with the business acquisitions, the annual measurement and valuation of our reporting unit, controls over the financial statement close process, specifically that the primary ERP had ineffective IT general controls in the area of user access and change management over key IT systems that support the financial reporting processes, and the measurement and valuation of the convertible redeemable preferred stock, there were no other changes in our system of internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

During the quarter ended June 30, 2024, we completed the MiX Combination.

As part of our ongoing post-transaction activities, we are in the process of planning and rolling out the implementation of the ERP and subscription billing system to certain Powerfleet operations.

Furthermore, as part of our integration activities, we expect additional changes to the internal controls over financial reporting as we continue with our integration activities which includes the evaluation, rationalization and standardization of internal controls over financial reporting.

While we believe the controls in the post-transaction environment, supported by a uniform ERP system will enhance the internal control environment, there are inherent risks associated to the integration and implementation of a new ERP system.

We will continue to evaluate the processes and controls related to the integration and system implementation as well as the assessment of the design adequacy and operating effectiveness of internal control over financial reporting throughout fiscal year 2025.

Other than as described above under “ Remediation ”, the integration efforts and the implementation of the ERP system, there were no changes to the Company's internal control over financial reporting, as defined in Rule 13a-15(f) and 15d- 15(f) promulgated under the Exchange Act, during the three months ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II - OTHER INFORMATION

Legal Proceedings

the ordinary course of its business, the Company is at times subject to various legal proceedings.

For a description of our material

pending legal proceedings, see Note 22 to our consolidated financial statements contained in Item 1 of Part I of this Quarterly Report

on Form 10-Q, which is incorporated herein by reference.

In the ordinary course of its business, we are at times subject to various legal proceedings.

For a description of our material pending legal proceedings, see Note 22 to our consolidated financial statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 4. Controls and Procedures