Powerfleet, Inc. 10-Q

Item 4. Controls and Procedures a. Disclosure controls and procedures. 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. Management, including our Chief Executive Officer and Chief Financial Officer, 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. As disclosed in “Item 9A. Controls and Procedures” in Part II of our Form 10-K, management previously identified material weaknesses in our internal control over financial reporting. Specifically: • At I.D. Systems, the configuration of an automated control within the ERP system created a segregation of duties issue related to the processing of journal entries and the review of balance sheet reconciliations; and • At Pointer Mexico, the control deficiency related to the lack of workflow approval and sufficient documentation supporting the review of journal entries. In addition, as disclosed in Note 3, “Acquisition,” in Part I, Item 1, “Financial Statements (Unaudited),” we completed the FC Acquisition on October 1, 2024. We excluded Fleet Complete’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 SEC that an assessment of a recently acquired business’s internal control over financial reporting may be omitted from management’s assessment of internal control over financial reporting for one year following the business combination and/or acquisition. As a result of our integration efforts, certain controls will be evaluated and may be changed. Fleet Complete’s total revenues constituted approximately 27% of our consolidated revenues for the six months ended September 30, 2025. Fleet Complete’s total assets constituted approximately 23% of our consolidated total assets as of September 30, 2025. Despite the permitted exclusion of Fleet Complete from our assessment of the effectiveness of the Company’s internal control over financial reporting as of March 31, 2025, we identified a material weakness in controls over the financial close and reporting process. Specifically, there were insufficient effective controls in place to ensure the completeness and accuracy of Fleet Complete’s financial reporting information that is consolidated into Powerfleet’s financial statements. As of September 30, 2025, we carried out an evaluation, with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Due to the material weaknesses in internal control over financial reporting described above and previously disclosed in our Form 10-K, management concluded that our disclosure controls and procedures were not effective as of September 30, 2025. Notwithstanding the existence of these material weaknesses, management believes that the condensed consolidated financial statements in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 present, in all material aspects, our financial condition as reported, in conformity with U.S. GAAP. Remediation As described in “Item 9A. Controls and Procedures” in Part II of our Form 10-K, we started the implementation of the remediation plan to address the material weaknesses mentioned above. Management has completed, or is in the process of completing, the following remediation activities: 48 • As of April 1, 2025, redesigned and implemented automated controls within the ERP system used by I.D. Systems to prevent users from editing journal entries they did not create and to require a senior independent authorized individual to approve and post such journal entries. • Initiated plans to decommission the ERP system currently used by I.D. Systems in the third quarter of fiscal 2026, replacing it with a standardized ERP platform designated for use across the Company. • Designing and implementing workflow approval on critical transactions, such as manual journal entries for I.D. Systems. • Implementing controls that require documentation of independent reviews of manual journal entries at Pointer Mexico. • Designing and implementing controls over general information technology controls within the standardized ERP system related to user access and program change management over IT systems that support financial reporting processes at Fleet Complete. • Designing and implementing internal control over financial reporting for processes specific to Fleet Complete. 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 both designed and operating effectively. b. Changes in internal control over financial reporting. During the quarter ended June 30, 2024, we completed the MiX Combination and during the quarter ended December 31, 2024, we completed the FC Acquisition. As part of our integration activities, we are continuing the implementation of a single ERP and subscription billing system across all Powerfleet operations. Furthermore, as part of our integration activities, we expect additional changes to the internal control over financial reporting as we continue with our integration activities, which include the evaluation, rationalization and standardization of internal control over financial reporting. While we believe the controls in the post-integration environment, supported by a uniform ERP system, will enhance the internal control environment, there are inherent risks associated with 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 this fiscal year. Other than as described above under “Remediation,” the integration efforts and the implementation of the ERP system, there were no changes to our 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 September 30, 2025, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting. 49 PART II - OTHER INFORMATION Item 1. Legal Proceedings None. 50