What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-08-28 · 115 added, 75 removed, 309 unchanged (38% of the section changed)

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In the following discussions, most percentages and dollar amounts have been rounded to aid presentation, and, accordingly, all amounts are approximations.

Amounts throughout this discussion and analysis for our unaudited interim condensed consolidated statements for the three months ended June 30, 2023 have been restated to reflect the impact of the restatement as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (“2023 Annual Report”).

Amounts throughout this discussion and analysis for our unaudited interim condensed consolidated statements for the three- and six-month periods ended September 30, 2023 have been restated to reflect the impact of the restatement as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (“2023 Annual Report”).

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 its Series A convertible preferred stock (“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.

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Important factors that could cause our actual results to differ materially from those expressed as forward-looking statements herein include, but are not limited, to:

the ability to recognize the anticipated benefit of the acquisition of MiX Telematics;

the possibility that we may not be able to integrate successfully the business, operations and employees of MiX Telematics;

the ability to recognize the anticipated benefit of the MiX Combination and the FC Acquisition;

the possibility that we may not be able to integrate successfully the businesses, operations and employees of MiX Telematics and Fleet Complete;

the ability of our supply chain to deliver certain key components;

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changes in laws and regulations or changes in generally accepted accounting policies, rules and practices;

and other risks detailed from time to time in our filings with the Securities and Exchange Commission (the “SEC”), including our Transition Report on Form 10-KT for the period ended March 31, 2024 (the “Form 10-KT”).

and other risks detailed from time to time in our filings with the Securities and

Exchange Commission (the “SEC”), including our Transition Report on Form 10-KT for the period ended March 31, 2024 (the “Form 10-KT”).

There may be other factors of which we are currently unaware or which we currently deem immaterial that may cause our actual results to differ materially from the forward-looking statements.

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The acquisition is expected to provide us with operational synergies and access to a broader base of customers.

The consolidated financial statements as of and for the three months ended June 30, 2024 include the financial results of MiX Telematics and its subsidiaries from the closing date of the MiX Combination.

See Note 3, “Acquisition” in Part I, Item 1, “Financial Statements” for additional information.

No operating results for MiX Telematics are included in the comparative period for the three months ended June 30, 2023.

The consolidated financial statements as of and for the three- and six-month periods ended September 30, 2024 include the financial results of MiX Telematics and its subsidiaries from the closing date of the MiX Combination.

See Note 3, “Acquisition” in Part I, Item 1, “Financial Statements (Unaudited)” for additional information.

No operating results for MiX Telematics are included in the comparative period for the three- and six-month periods ended September 30, 2023.

On May 8, 2024, our Board of Directors approved a change in our fiscal year end from December 31 to March 31 in order to better align our reporting calendar with the April 2, 2024 close of the MiX Combination and MiX Telematics’ historical March 31 fiscal year end.

This decision was already being considered by Powerfleet executives before the MiX Combination, as part of a broader finance transformation initiative, which includes shifting and outsourcing back-office functions (including central corporate accounting) from the United States to a more cost-effective solution in South Africa.

The decision was also driven by align the fiscal year with the close of the MiX Combination for investors and align the timing of audit work with the winter months in South Africa to help attract and retain accounting talent.

The decision was also driven by aligning the fiscal year with the close of the MiX Combination for investors and aligning the timing of audit work with the winter months in South Africa to help attract and retain accounting talent.

On October 1, 2024, we consummated the FC Acquisition, pursuant to which we acquired Fleet Complete.

Fleet Complete is a leading provider of essential fleet, asset, and mobile workforce management solutions across North America, Australia, and Europe.

A majority of Fleet Complete’s revenue is generated through strong distribution partnerships with major international telecommunications providers and market-leading original equipment manufacturer (“OEM”) partners.

See Note 24, “Subsequent Events” in Part I, Item 1, “Financial Statements (Unaudited)” for additional information.

Our Powerfleet for Warehouse solutions are designed to provide on-premise or in-facility asset and operator management, monitoring, and visibility for industrial trucks such as forklifts, man-lifts, tuggers and ground support equipment at airports.

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These systems provide mobile-asset tracking and condition-monitoring solutions to meet the transportation market’s desire for greater visibility, safety, security, and productivity throughout global supply chains.

Our Powerfleet for Vehicles solutions are designed both to enhance the vehicle fleet management process, whether it’s a rental car, a private fleet, or automotive original equipment manufacturer (“OEM”) partners.

Our Powerfleet for Vehicles solutions are designed both to enhance the vehicle fleet management process, whether it’s a rental car, a private fleet, or automotive OEM partners.

We achieve this by providing critical information that can be used to increase revenues, reduce costs and improve customer service.

Our patented technologies are a proven solution for organizations that must monitor and analyze their assets to improve safety, increase efficiency, reduce costs, and drive profitability.

Our offerings are sold under the global brands Powerfleet, Pointer, Cellocator, and MiX by Powerfleet.

Our offerings are sold under the global brands Powerfleet, Pointer, Cellocator, MiX by Powerfleet, and Fleet Complete.

We have an established history of IoT device development and innovation creating devices that can withstand harsh and rugged environments.

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Across our spectrum of vertical markets, we differentiate ourselves by developing mobility platforms that collect data from unique sensors.

Further, because we are OEM agnostic, we help organizations view and manage their

mixed assets homogeneously.

Further, because we are OEM agnostic, we help organizations view and manage their mixed assets homogeneously.

All of our solutions are paired with software as a service (“SaaS”) and analytics platforms to provide an even deeper level of insights and understanding of how assets are utilized and how drivers and operators operate those assets.

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Businesses must comply with government regulations and provide proof of compliance, which is commonly an onerous process to enforce and maintain.

Our solutions provide critical data points and reports to help customers stay within compliance, avoid fines for non-compliance, and automate the reporting process.

Our solutions provide critical data points and reports to help

customers stay within compliance, avoid fines for non-compliance, and automate the reporting process.

We deliver real-time position reports, hours-of-service, temperature monitoring and control, electronic safety checklists, workflow management, controlling vehicle access to only authorized operators, inspection reports, and history logs of use.

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We provide our consulting services both as a standalone service to study the potential benefits of implementing an IoT business intelligence solution and as part of the system implementation itself.

In some instances, customers prepay us for

extended maintenance, support and consulting services.

In some instances, customers prepay us for extended maintenance, support and consulting services.

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

Growth Strategy

Our objective is to become a leading global provider of IoT SaaS solutions for high-value enterprise assets to drive optimized operations and create safer environments.

As a leading global provider of IoT SaaS solutions for high-value enterprise assets, our objective is to drive optimized operations and create safer environments.

During the quarter ended March 31, 2023, we began to consolidate and augment many of our existing capabilities on a single customer software platform branded as “Unity.” We have designed our Unity platform to enable rapid and deep integration with IoT devices and third-party business systems to a highly scalable data pipeline that powers artificial intelligence-driven insights to help companies save lives, time, and money.

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• identifying, seizing, and managing revenue opportunities;

• expanding our customer base, achieving wider market penetration and educating customers with mixed assets in their organization about our other applications, including new solutions available post the business combination with MiX Telematics;

• implementing improved marketing, sales and support strategies;

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Recent Developments

Higher interest rates and inflation, fluctuations in currency values, supply chain disruptions 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.

Given the dynamic and uncertain nature of the current macroeconomic environment, we cannot reasonably estimate the impact of such developments on our financial condition, results of operations or cash flows into the foreseeable future.

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• develop and commercialize new products and technologies.

We have incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of $177.1 million as of June 30, 2024.

Management believes our cash and cash equivalents and restricted cash of $31.4 million as of June 30, 2024 in conjunction with the debt proceeds from our lenders, plus cash generated from the execution of our strategic plan over the next 12 months, are sufficient to fund the projected operations for at least the next 12 months from the issuance date of these condensed consolidated financial statements ( August 28, 2024 ) and service our outstanding obligations.

We have incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of $179.0 million as of September 30, 2024.

Management believes our cash and cash equivalents and restricted cash of $89.0 million ($61.9 million of proceeds from the Private Placement, net of costs to issue common stock, was held in restricted cash at September 30, 2024, and subsequently used for the FC Acquisition on October 1, 2024) as of September 30, 2024 in conjunction with the debt proceeds from our lenders, plus cash generated from the execution of our strategic plan over the next 12 months, are sufficient to fund the projected operations for at least the next 12 months from the issuance date of these condensed consolidated financial statements (November 12, 2024) and service our outstanding obligations.

Additional risks and uncertainties to which we are subject are described under the heading “Risk Factors” in Part II, Item 1A of this report and in the Form 10-KT.

Critical Accounting Policies

For the three-month period ended June 30, 2024, there were no significant changes to our critical accounting policies as identified in the Form 10-KT.

For the three- and six-month periods ended September 30, 2024, there were no significant changes to our critical accounting policies as identified in the Form 10-KT.

Results of Operations

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

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

(As Restated) 2024 2023 2024

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Total operating expenses 59.0 % 52.9 % 59.7 % 64.7 %

Loss from operations (10.6) % (24.2) %

(Loss)/profit from operations (9.0) % 0.7 % (9.8) % (11.6) %

Interest income 0.1 % 0.2 % 0.1 % 0.3 %

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Bargain purchase - Movingdots — % — % 0.4 % — %

Other income, net — % (0.8) %

Other (expense)/income, net (0.1) % 2.2 % — % 0.7 %

Net loss before income taxes (9.5) % (2.1) % (9.8) % (15.0) %

Income tax benefit/(expense) — % (1.4) %

Income tax expense (0.9) % (0.3) % (0.4) % (0.9) %

Net loss before non-controlling interest (10.4) % (2.4) % (10.3) % (15.9) %

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Net loss attributable to common stockholders (19.0) % (2.5) % (19.1) % (15.9) %

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Revenues increased by $43.3 million, or 135.0%, to $75.4 million in the three months ended June 30, 2024, from $32.1 million in the same period in 2023.

Revenues from products increased by $7.7 million, or 69.1%, to $18.7 million in the three months ended June 30, 2024 from $11.1 million in the same period in 2023.

The increase in product revenues was primarily due to the MiX Telematics business acquired which contributed $8.8 million in product revenues for the three months ended June 30, 2024, offset by lower demand from logistics customers in North America.

Revenues from services increased by $35.7 million, or 169.9%, to $56.7 million in the three months ended June 30, 2024 from $21.0 million in the same period in 2023.

The increase in services revenues was principally due to the MiX Telematics business acquired which contributed $34.9 million in service revenues for the three months ended June 30, 2024.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Revenues increased by $42.8 million, or 124.9%, to $77.0 million in the three months ended September 30, 2024, from $34.2 million in the same period in 2023.

Revenues from products increased by $7.1 million, or 53.4%, to $20.3 million in the three months ended September 30, 2024, from $13.2 million in the same period in 2023.

The increase in product revenues was primarily due to the MiX Telematics business acquired which contributed $8.9 million in product revenues for the three months ended September 30, 2024, offset by lower demand from logistics customers in North America.

Revenues from services increased by $35.7 million, or 170.0%, to $56.7 million in the three months ended September 30, 2024 from $21.0 million in the same period in 2023.

The increase in services revenues was principally due to the MiX Telematics business acquired which contributed $34.9 million in service revenues for the three months ended September 30, 2024.

COST OF REVENUES.

Cost of revenues increased by $19.7 million, or 122.6%, to $35.8 million in the three months ended June 30, 2024, from $16.1 million for the same period in 2023.

T he MiX Telematics business acquired contributed $19.4 million to cost of revenues for the three months ended June 30, 2024.

Gross profit was $39.6 million in the three months ended June 30, 2024, compared to $16.0 million for the same period in 2023.

As a percentage of revenues, gross profit increased to 52.6% in the three months ended June 30, 2024 from 49.9% in the same period in 2023.

Cost of products increased by $4.2 million, or 49.1%, to $12.8 million in the three months ended June 30, 2024, from $8.6 million in the same period in 2023.

Gross profit for products was $6.0 million in the three months ended June 30, 2024, compared to $2.5 million in the same period in 2023.

As a percentage of product revenues, gross profit increased to 32.0% in the three months ended June 30, 2024 from 22.9% in the same period in 2023.

Cost of revenues increased by $18.5 million, or 108.2%, to $35.7 million in the three months ended September 30, 2024, from $17.1 million for the same period in 2023.

The MiX Telematics business acquired contributed $17.5 million to cost of revenues for the three months ended September 30, 2024.

Gross profit was $41.3 million in the three months ended September 30, 2024, compared to $17.1 million for the same period in 2023.

As a percentage of revenues, gross profit increased to 53.7% in the three months ended September 30, 2024 from 50.0% in the same period in 2023.

Cost of products increased by $5.1 million, or 57.5%, to $13.9 million in the three months ended September 30, 2024, from $8.8 million in the same period in 2023.

Gross profit for products was $6.4 million in the three months ended September 30, 2024, compared to $4.4 million in the same period in 2023.

As a percentage of product revenues, gross profit decreased to 31.4% in the three months ended September 30, 2024 from 33.2% in the same period in 2023.

The decrease in gross profit as a percentage of product revenues was principally due to inventory write offs from product line rationalization following the MiX Combination.

Cost of services increased by $13.5 million, or 162.2%, to $21.7 million in the three months ended September 30, 2024, from $8.3 million in the same period in 2023.

The MiX Telematics business acquired contributed $12.6 million to cost of services for the three months ended September 30, 2024.

Gross profit for services was $35.0 million in the three months ended September 30, 2024, compared to $12.7 million in the same period in 2023.

As a percentage of service revenues, gross profit increased to 61.7% in the three months ended September 30, 2024 from 60.5% in the same period in 2023, as a result of the contribution from the MiX Telematics business acquired.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.

Selling, general and administrative (“SG&A”) expenses increased by $19.6 million, or 110.0%, to $37.3 million in the three months ended September 30, 2024, compared to $17.8 million in the same period in 2023, principally due to the MiX Telematics business acquired which contributed $18.1 million of SG&A expenses (excluding one-time costs), $1.4 million in acquisition-related expenses and $1.1 million in restructuring costs for the three months ended September 30, 2024.

As a percentage of revenues, SG&A expenses, excluding $3.9 million in one-time transaction costs and restructuring costs, decreased to 43.4% in the three months ended September 30, 2024, from 51.9% in the same period in 2023.

RESEARCH AND DEVELOPMENT EXPENSES.

Research and development (“R&D”) expenses increased by $1.0 million, or 41.6%, to $3.4 million in the three months ended September 30, 2024, compared to $2.4 million in the same period in 2023, principally due to $1.5 million incurred by the MiX Telematics business post-transaction.

As a percentage of revenues, R&D expenses decreased to 4.5% in the three months ended September 30, 2024, from 7.1% in the same period in 2023.

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS.

Net loss attributable to common stockholders was $1.9 million, or $(0.02) per basic and diluted share, for the three months ended September 30, 2024, as compared to net loss of $6.5 million, or $(0.18) per basic and diluted share, for the same period in 2023.

The net loss was primarily the result of $1.4 million in one-time transaction costs, $1.4 million in integration-related costs , $1.1 million in restructuring costs, and $1.2 million from the commencement of amortization of MiX Telematics acquisition-related intangibles, partially offset by $2.2 million gain in other income from the derivative mark-to-market adjustment .

Six Months Ended September 30, 2024 Compared to Six Months Ended September 30, 2023

Revenues increased by $86.1 million, or 129.8%, to $152.4 million in the six months ended September 30, 2024, from $66.3 million in the same period in 2023.

Revenues from products increased by $14.7 million, or 60.5%, to $39.0 million in the six months ended September 30, 2024, from $24.3 million in the same period in 2023.

The increase in product revenues was primarily due to the MiX Telematics business acquired which contributed $17.7 million in product revenues for the six months ended September 30, 2024, offset by lower demand from logistics customers in North America.

Revenues from services increased by $71.4 million, or 169.9%, to $113.4 million in the six months ended September 30, 2024, from $42.0 million in the same period in 2023.

The increase in services revenues was principally due to the MiX Telematics business acquired which contributed $69.8 million in service revenues for the six months ended September 30, 2024.

COST OF REVENUES.

Cost of revenues increased by $38.2 million, or 115.2%, to $71.5 million in the six months ended September 30, 2024, from $33.2 million for the same period in 2023.

The MiX Telematics acquired business contributed $36.9 million to cost of revenues for the six months ended September 30, 2024.

Gross profit was $81.0 million in the six months ended September 30, 2024, compared to $33.1 million for the same period in 2023.

As a percentage of revenues, gross profit increased to 53.1% in the six months ended September 30, 2024 from 49.9% in the same period in 2023.

Cost of products increased by $9.3 million, or 53.4%, to $26.7 million in the six months ended September 30, 2024, from $17.4 million in the same period in 2023.

Gross profit for products was $12.4 million in the six months ended September 30, 2024, compared to $6.9 million in the same period in 2023.

As a percentage of product revenues, gross profit increased to 31.6% in the six months ended September 30, 2024 from 28.5% in the same period in 2023.

The increase in gross profit as a percentage of product revenues was principally due to a larger proportion of sales being driven by higher margin product lines including in warehouse solutions.

Cost of services increased by $15.5 million, or 206.1%, to $23.0 million in the three months ended June 30, 2024, from $7.5 million in the same period in 2023.

Gross profit for services was $33.7 million in the three months ended June 30, 2024, compared to $13.5 million in the same period in 2023.

As a percentage of service revenues, gross profit decreased to 59.4% in the three months ended June 30, 2024 from 64.2% in the same period in 2023.

The decrease in gross profit as a percentage of revenues was mainly due to the commencement of amortization of MiX Telematics acquisition-related intangibles of $3.0 million, consisting of $2.1 million from customer relationships, $0.7 million from developed technology and $0.2 million from trade names.

Cost of services increased by $29.0 million, or 183.1%, to $44.8 million in the six months ended September 30, 2024, from $15.8 million in the same period in 2023.

The MiX Telematics acquired business contributed $24.9 million to cost of services for the six months ended September 30, 2024.

Gross profit for services was $68.6 million in the six months ended September 30, 2024, compared to $26.2 million in the same period in 2023.

As a percentage of service revenues, gross profit decreased to 60.5% in the six months ended September 30, 2024 from 62.4% in the same period in 2023.

The decrease in gross profit as a percentage of revenues was mainly due to the commencement of amortization of MiX Telematics acquisition-related intangibles.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.

Selling, general and administrative (“SG&A”) expenses increased by $37.6 million, or 218.5%, to $54.8 million in the three months ended June 30, 2024, compared to $17.2 million in the same period in 2023, principally due to the MiX Telematics business acquired which contributed $17.3 million of SG&A expenses (excluding one-time costs), $14.5 million in acquisition-related expenses, $4.7 million in accelerated stock-based compensation costs and a $0.8 million increase in restructuring costs for the three months ended June 30, 2024 .

As a percentage of revenues, SG&A expenses, excluding $20.4 million in one-time transaction, restructuring and accelerated stock-based compensation costs, decreased to 45.6% in the three months ended June 30, 2024, from 53.6% in the same period in 2023.

SG&A expenses increased by $57.1 million, or 163.4%, to $92.1 million in the six months ended September 30, 2024, compared to $35.0 million in the same period in 2023, principally due to the MiX Telematics business acquired which contributed $35.4 million of SG&A expenses (excluding one-time costs), $17.3 million in acquisition-related expenses, $4.7 million in accelerated stock-based compensation costs and $2.3 million in restructuring costs for the six months ended September 30, 2024.

As a percentage of revenues, SG&A expenses, excluding $24.3 million in one-time transaction, restructuring and accelerated stock-based compensation costs, decreased to 44.5% in the six months ended September 30, 2024, from 52.7% in the same period in 2023.

RESEARCH AND DEVELOPMENT EXPENSES.

Research and development (“R&D”) expenses increased by $0.9 million, or 39.6%, to $3.1 million in the three months ended June 30, 2024, compared to $2.2 million in the same period in 2023, principally due to $1.4 million incurred by the MiX Telematics business post acquisition .

As a percentage of revenues, R&D expenses decreased to 4.1% in the three months ended June 30, 2024, from 6.9% in the same period in 2023.

R&D expenses increased by $1.9 million, or 40.7%, to $6.5 million in the six months ended September 30, 2024, compared to $4.6 million in the same period in 2023, principally due to $2.9 million incurred by the MiX Telematics business post-transaction.

As a percentage of revenues, R&D expenses decreased to 4.3% in the six months ended September 30, 2024, from 7.0% in the same period in 2023.

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS.

Net loss attributable to common stockholders was $22.3 million, or $(0.21) per basic and diluted share, for the three months ended June 30, 2024, as compared to net loss of $6.2 million, or $(0.17) per basic and diluted share, for the same period in 2023.

The net loss was primarily the result of the increased SG&A expenses, including $20.4 million in one-time transaction, restructuring and accelerated stock-based compensation costs.

Net loss attributable to common stockholders was $24.2 million, or $(0.23) per basic and diluted share, for the six months ended September 30, 2024, as compared to net loss of $12.7 million, or $(0.36) per basic and diluted share, for the same period in 2023.

The net loss was primarily the result of $15.6 million in o ne-time transaction costs, $1.7 million in integration-related costs , $2.3 million in restructuring costs, $4.7 million in accelerated stock-based compensation costs and $4.2 million from the commencement of amortization of MiX Telematics acquisition-related intangibles, partially offset by $2.2 million gain in other income from the derivative mark-to-market adjustment .

Non-GAAP Financial Information

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Adjusted EBITDA

We define adjusted EBITDA as net loss attributable to common stockholders before non-controlling interest, preferred stock dividend and accretion, interest expense (net), income tax benefit/expense, depreciation and amortization, stock-based compensation, foreign currency gains/losses, restructuring-related expenses, gain on bargain purchase (Movingdots), acquisition-related expenses and severance-related expenses.

We define adjusted EBITDA as net loss attributable to common stockholders before non-controlling interest, preferred stock dividend and accretion, interest expense (net), income tax expense, depreciation and amortization, stock-based compensation, foreign currency gains/losses, restructuring-related expenses, gain on bargain purchase (Movingdots), derivative mark-to market adjustment and acquisition-related expenses.

We have included adjusted EBITDA in this Quarterly Report on Form 10-Q because it is a key measure that our management and board of directors use to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short and long-term operational plans.

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Reconciliation of Net Loss Attributable to Common Stockholders to Adjusted EBITDA

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

(As Restated) 2024 2023 2024

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Interest expense, net 131 3,345 588 6,261

Income tax (benefit)/expense (6) 1,053

Income tax expense 295 256 289 1,309

Depreciation and amortization 2,485 9,064 4,807 19,399

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Gain on bargain purchase - Movingdots — — (283) —

Derivative mark-to-market adjustment — (2,197) — (2,197)

Acquisition-related expenses 1,232 1,406 1,455 15,571

Integration-related expenses

— 1,410 — 1,739

Adjusted EBITDA $ 1,789 $ 14,477 $ 2,155 $ 28,212

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The proceeds of the Hapoalim Revolving Facilities may be used by Pointer for general corporate purposes, including working capital and capital expenditures.

As of September 30, 2024, Powerfleet Israel had utilized approximately $12.1 million under the Hapoalim Revolving Facilities.

The Hapoalim Credit Facilities continue to be secured by first ranking and exclusive fixed and floating charges, including by Powerfleet Israel over the entire share capital of Pointer and by Pointer over all of its assets, as well as cross guarantees between Powerfleet Israel and Pointer, except that the Borrowers’ holdings in Pointer do Brasil Comercial Ltda., Pointer Argentina and Pointer South Africa are excluded from such floating charges.

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The interest rates for borrowings under Hapoalim Facility A and Hapoalim Facility B are Hapoalim’s prime rate + 2.2% per annum, and Hapoalim’s prime rate + 2.3% per annum, respectively.

Hapoalim’s prime rate at June 30, 2024 was 6%.

Hapoalim’s prime rate at September 30, 2024 was 6%.

Interest is payable quarterly on March 25, June 25, September 25, and December 25 over five years.

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The Borrowers have also paid certain upfront fees and other fees and expenses to Hapoalim in connection with the A&R Credit Agreement.

Pointer is required to pay a credit allocation fee in NIS, with respect to Hapoalim Facility C, and a non-utilization fee in U.S.

dollars, with respect to Hapoalim Facility D, in each case, equal to 0.5% per annum on undrawn and uncancelled amounts of the Hapoalim Revolving Facilities during the period commencing on March 18, 2024 and ending on the last day of the applicable availability period of such Hapoalim Revolving Facilities.

On March 7, 2024, we entered into the Facilities Agreement with RMB, pursuant to which RMB agreed to provide us with the RMB Facilities in an aggregate principal amount of $85 million, composed of RMB Facility A and RMB Facility B, each having a principal amount of $42.5 million.

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The Credit Agreement and the rights and obligations of the parties are subject to the terms and conditions of the Facilities Agreement entered into on March 7, 2024, which is described in more detail below.

The RMB General Facility is repayable on demand and has a term of 365 days from the available date.

The RMB General Facility is repayable on demand and has a term of 365 days from the Available Date (as defined therein).

Repayment of the RMB General Facility, including capitalized interest, is due by the earlier of (a) the Available Date or (b) April 2, 2025, unless extended by agreement between MiX Telematics and RMB.

Interest rate for the RMB General Facility is calculated at South African prime rate minus 0.75% per annum and will be calculated on the daily outstanding balance, compounded monthly in arrears and repaid quarterly.

A s of June 30, 2024, MiX Telematics had not borrowed anything under the RMB General Facility .

The RMB General Facility was utilized in August 2024 to settle the Committed Facility

As of September 30, 2024, $19,728 of the RMB General Facility was utilized.

MiX Telematics also has the CFC Overdraft Facility with Standard Bank.

The CFC Overdraft Facility entitles MiX Telematics to utilize a maximum amount of R70.0 million (the equivalent of $3.8 million as of June 30, 2024).

The CFC Overdraft Facility entitles MiX Telematics to utilize a maximum amount of R70.0 million (the equivalent of $4.1 million as of September 30, 2024).

The CFC Overdraft Facility bears interest at the South African prime interest rate less 1.2% per annum.

As of June 30, 2024, $0.6 million of the CFC Overdraft Facility was utilized.

As of September 30, 2024, the CFC Overdraft Facility was not utilized.

There is a suretyship agreement entered into with Standard Bank providing that MiX Telematics and only one subsidiary being MiX Telematics International (Pty) Ltd , binds themselves as surety(ies) and co-principal debtor(s) for the payment, when due, of all the present and future debts of any kind of M iX Telematics and MiX Telematics International to Standard Bank .

On September 27, 2024, we entered into the Facility Agreement with RMB, pursuant to which RMB agreed to provide us with the New RMB Term Facility in an aggregate principal amount of $125 million.

On October 1, 2024, we drew down $125 million in cash under the New RMB Term Facility to pay a portion of the Purchase Price for the FC Acquisition.

Interest is payable quarterly in arrears at an interest rate of 5% per annum plus the applicable term SOFR reference rate.

The principal is repayable in one installment on October 31, 2029.

As a result of global supply chain disruptions, the conflicts between Russia and Ukraine and between Israel and Hamas, rising interest rates, fluctuations in currency values, inflation and other cost increases, there remains uncertainty surrounding the potential impact of such events on our results of operations and cash flows.

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Capital Requirements

As of June 30, 2024, we had cash and cash equivalents (including restricted cash) of $31.4 million and working capital of $25.0 million compared to cash and cash equivalents (including restricted cash) of $109.7 million and working capital of $126.2 million as of March 31, 2024.

As of September 30, 2024, we had cash and cash equivalents (including restricted cash) of $89.0 million and working capital of $81.2 million compared to cash and cash equivalents (including restricted cash) of $109.7 million and working capital of $126.2 million as of March 31, 2024.

Our primary sources of cash are cash flows from sales of products and services, our holdings of cash, cash equivalents and proceeds from the sale of our capital stock and borrowings under our credit facilities.

$85 million in borrowings from RMB that was held in restricted cash at March 31, 2024 was used as the primary source of funds to redeem all outstanding shares of the Series A Preferred Stock on the April 2, 2024 close date of the MiX Combination.

The MiX Combination is also expected to be a source of positive cash flow.

$61.9 million of proceeds from the Private Placement, net of costs to issue common stock, was held in restricted cash at September 30, 2024, which was used for the FC Acquisition on October 1, 2024.

The FC Acquisition is

also expected to be a source of positive cash flow, together with the MiX Combination completed on April 2, 2024.

To date, we have not generated sufficient cash flow solely from operating activities to fund our operations.

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Operating Activities

During the three months ended June 30, 2024, net cash used in operating activities was $7.6 million, compared to net cash used in operating activities of $0.5 million for the same period in 2023.

The net cash used in operating activities for the three-months ended June 30, 2024 primarily included non-cash charges of $5.9 million for stock-based compensation, $10.3 million for depreciation and amortization expense, $2.0 million for bad debts expense, $0.9 million for shares issued for transaction bonuses related to the MiX Combination and $0.8 million for ROU asset amortization.

During the six months ended September 30, 2024, net cash used in operating activities was $10.8 million, compared to net cash used in operating activities of $2.1 million for the same period in 2023.

The net cash used in operating activities for the six months ended September 30, 2024 primarily included non-cash charges of $7.3 million for stock-based compensation, $19.4 million for depreciation and amortization expense, $4.4 million for bad debts expense, $0.9 million for shares issued for transaction bonuses related to the MiX Combination and $1.5 million for ROU asset amortization.

Changes in operating assets and liabilities included:

• an increase in inventory, net of reserve of $0.6 million;

• an increase in accounts receivables of $12.6 million;

• an increase in prepaid expenses and other assets of $3.0 million;

• an increase in deferred costs of $3.6 million;

• an decrease in accounts payable of $0.1 million;

• a decrease in lease liabilities of $1.9 million;

• an increase in accounts payable of $5.0 million.

• a decrease in inventory, net of reserve of $1.0 million.

Investing Activities

Net cash provided by investing activities for the three months ended June 30, 2024 was $19.6 million, compared to net cash used in investing activities of $2.0 million for the same period in 2023 .

Net cash provided by investing activities for the six months ended September 30, 2024 was $12.9 million, compared to net cash used in investing activities of $3.5 million for the same period in 2023 .

The net cash provided by investing activities was primarily due to $27.5 million in net cash assumed from the MiX Combination, partially offset by $10.5 million for the purchase of fixed assets and $4.7 million for capitalized software development costs.

In contrast, the net cash used in investing activities of $2.0 million in the same period in 2023 was primarily for the purchase of fixed assets of $1.0 million and $1.0 million for capitalized software development costs.

The net cash used in investing activities of $3.5 million in the same period in 2023 was primarily for the purchase of fixed assets of $1.4 million and $2.0 million for capitalized software development costs.

Financing Activities

During the three months ended June 30, 2024 , net cash used in financing activities was $89.5 million, compared to $0.3 million from financing activities for the same period in 2023 .

The increase in net cash used in financing activities was primarily due to the repayment of Series A Preferred Stock of $90.3 million following the MiX Combination.

During the six months ended September 30, 2024 , net cash used in financing activities was $22.3 million, compared to a neutral position from financing activities for the same period in 2023 .

The cash used in financing activities was primarily due to the repayment of Series A Preferred Stock of $90.3 million following the MiX Combination, partially offset by $61.9 million received from the P rivate Placement , less costs, related to the FC Acquisition and $10.0 million received from s hort-term bank debt .

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Inflation and other macroeconomic conditions in the U.S.

have resulted in higher costs of raw materials, freight, and labor, which has impacted our operating costs.

Inflation and other macroeconomic conditions in the United States have resulted in higher costs of raw materials, freight, and labor, which has impacted our operating costs.

In addition, we operate in several emerging market economies that are particularly vulnerable to the impact of inflationary pressures that could materially and adversely impact our operations in the foreseeable future.

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On April 2, 2024, we consummated the MiX Combination, pursuant to which MiX Telematics became our indirect, wholly owned subsidiary.

See Note 3, “Acquisition,” in Part I, Item 1, “Financial Statements” for additional information.

See Note 3, “Acquisition,” in Part I, Item 1, “Financial Statements (Unaudited)” for additional information.

On October 1, 2024, we consummated the FC Acquisition, pursuant to which Fleet Complete became our wholly owned subsidiary.

See Note 24, “Subsequent Events” in Part I, Item 1, “Financial Statements (Unaudited)” for additional information.

Impact of Recently Issued Accounting Pronouncements

The Company is subject to recently issued accounting standards, accounting guidance and disclosure requirements.

For a description of these new accounting standards, see Note 23 to our consolidated financial statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is included herein.

Quantitative and Qualitative Disclosures About Market Risk

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What changed 10-Q

Item 2. Management’s Discussion and Analysis