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What changed in Powerfleet, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Powerfleet, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+300 added−287 removedSource: 10-K (2024-05-09) vs 10-K (2023-03-31)

Top changes in Powerfleet, Inc.'s 2024 10-K

300 paragraphs added · 287 removed · 161 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur patented technologies are a proven solution for organizations that must monitor and analyze their assets to improve safety, increase efficiency, reduce costs, and drive profitability. Our offerings are sold under the global brands Powerfleet, Pointer, and Cellocator. We have an established history of IoT device development and innovation creating devices that can withstand harsh and rugged environments.
Biggest changeWe achieve this by providing critical information that can be used to increase revenues, reduce costs and improve customer service. Our patented technologies are a proven solution for organizations that must monitor and analyze their assets to improve safety, increase efficiency, reduce costs, and drive profitability. Our offerings are sold under the global brands Powerfleet, Pointer, and Cellocator.
This is achieved through proving such things as two-way integrated workflows for drivers, control assignments and work change, Electronic Driver Logging (ELD) and automated record keeping for regulatory compliance, monitoring of asset pools and geofence violations, and various reporting insights that flag under-utilized assets, the closest assets, and alerts on dwell time and exceeding the allotted time for loading and unloading.
This is achieved through proving such things as two-way integrated workflows for drivers, control assignments and work change, Electronic Driver Logging and automated record keeping for regulatory compliance, monitoring of asset pools and geofence violations, and various reporting insights that flag under-utilized assets, the closest assets, and alerts on dwell time and exceeding the allotted time for loading and unloading.
We provide our consulting services both as a standalone service to study the potential benefits of implementing a 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.
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.
Government Regulations The use of radio emissions is subject to regulation in the United States by various federal agencies, including the Federal Communications Commission (the “FCC”) and the Occupational Safety and Health Administration (“OSHA”). Various state agencies also have promulgated regulations which concern the use of lasers and radio/electromagnetic emissions standards.
Government Regulations The use of radio emissions is subject to regulation in the United States by various federal agencies, including the Federal Communications Commission (the “FCC”) and the Occupational Safety and Health Administration. Various state agencies also have promulgated regulations which concern the use of lasers and radio/electromagnetic emissions standards.
Whether for traditional “pod-based” rental or for the emerging rent-anywhere model, the system, through APIs integrated into any rental company’s fleet management system, (i) manages member reservations by smart phone or Internet, and (ii) charges members for vehicle use by the hour. 5 For our customers with a variety of make-model-years in their fleet, we have developed an unmatched library of certified vehicle code interfaces through our second-generation On-Board Diagnostics (“OBD-II”), industry standard.
Whether for traditional “pod-based” rental or for the emerging rent-anywhere model, the system, through APIs integrated into any rental company’s fleet management system, (i) manages member reservations by smart phone or Internet, and (ii) charges members for vehicle use by the hour. 5 For our customers with a variety of make-model-years in their fleet, we have developed an unmatched library of certified vehicle code interfaces through our second-generation On-Board Diagnostics, industry standard.
We look for analytics, as well as the data contained therein, to differentiate us from our competitors, adding significant value to customers’ business operations, and helping to contribute to their bottom line. Our solutions also feature open application programming interfaces (APIs) for additional integrations and development to boost other enterprise management systems and third-party applications.
We look for analytics, as well as the data contained therein, to differentiate us from our competitors, adding significant value to customers’ business operations, and helping to contribute to their bottom line. Our solutions also feature open application programming interfaces (“APIs”) for additional integrations and development to boost other enterprise management systems and third-party applications.
To market and sell our integrated wireless solutions in the European Union, we also utilize unlicensed radio spectra and have obtained the required European Norm (“EN”) certifications.
To market and sell our integrated wireless solutions in the European Union, we also utilize unlicensed radio spectra and have obtained the required European Norm certifications.
Through our software applications, customers can optimize capacity, analyze resource allocation, and improve utilization of assets to reduce capital expenses such as purchasing new or leasing additional equipment. Our applications provide root cause analysis for any cargo claims and helps with exoneration of drivers in accidents via dash camera visibility.
Through our software applications, customers can optimize capacity, analyze resource allocation, and improve utilization of assets to reduce capital expenses such as purchasing new or leasing additional equipment. Our applications provide root cause analysis for any cargo claims and help with exoneration of drivers in accidents via dash camera visibility.
Sales and Marketing Our sales and marketing objectives are to achieve broad market awareness and penetration, with an emphasis both on expanding business opportunities with existing customers and on securing new customers. We market our systems directly to commercial and government organizations and through indirect sales channels, such as OEMs, vehicle importers, distributors, and industrial equipment dealers.
Sales and Marketing Our sales and marketing objectives are to achieve broad market awareness and penetration, with an emphasis both on expanding business opportunities with existing customers and on securing new customers. We market our systems directly to commercial and government organizations and through indirect sales channels, such as OEMs, vehicle importers, distributors, and warehouse equipment dealers.
SYSTEMS Logo ® , VEHICLE ASSET COMMUNICATOR ® , POWERFLEET ® , POWERFLEET VISION ® , POWERFLEET IQ ® , POWERFLEET YARD ® , VERIWISE IQ ® , ASSET INTELLIGENCE ® , didBOX ® , FREIGHTCAM, KEYTROLLER ® , REEFERMATE ® , POWERFLEET and Design ® and CAMERA Design ® .
SYSTEMS Logo ® , VEHICLE ASSET COMMUNICATOR ® , POWERFLEET ® , POWERFLEET VISION ® , POWERFLEET IQ ® , POWERFLEET YARD ® , VERIWISE IQ ® , didBOX ® , FREIGHTCAM, KEYTROLLER ® , REEFERMATE ® , POWERFLEET and DESIGN ® and CAMERA Design ® .
We work closely with customers to prove out a return on investment, which is usually less than 12 months, and help maximize the utilization and benefits of our system and demonstrate the value of enterprise-wide deployments.
We work closely with customers to demonstrate a return on investment, which is usually less than 12 months, and help maximize the utilization and benefits of our system and demonstrate the value of enterprise-wide deployments.
We make available on this website, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish such information to, the Securities and Exchange Commission (“SEC”).
We make available on this website, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish such information to, the SEC.
Given the dynamic and uncertain nature of the current macroeconomic environment, we cannot reasonably estimate the impact of such developments on our financial condition, results of operations or cash flows into the foreseeable future. The ultimate extent of the effects of these developments remain highly uncertain, and such effects could exist for an extended period of time.
Given the dynamic and uncertain nature of the current macroeconomic environment, we cannot reasonably estimate the impact of such developments on our financial condition, results of operations or cash flows into the foreseeable future. The ultimate extent of the effects of these developments remain highly uncertain, and such effects could exist for an extended period of time. Other Information I.D.
All of our solutions are paired with software as a service (SaaS) and analytics platforms to provide an even deeper level of insights and understanding of how assets are utilized and how drivers and operators operate those assets. These insights include a full set of Key Performance Indicators (KPIs) to drive operational and strategic decisions.
All of our solutions are paired with software as a service (“SaaS”) and analytics platforms to provide an even deeper level of insights and understanding of how assets are utilized and how drivers and operators operate those assets. These insights include a full set of Key Performance Indicators (“KPIs”) to drive operational and strategic decisions.
Unity will be an increasingly important initiative to meet our objective of becoming a leading global provider of IoT SaaS solutions for high-value enterprise assets to drive optimized operations and create safer environments.
Unity is an increasingly important initiative to meet our objective of becoming a leading global provider of IoT SaaS solutions for high-value enterprise assets to drive optimized operations and create safer environments.
Our subsidiary Pointer Argentina S.A. (“Pointer Argentina”) obtains domestic licenses for the deployment of our SVR operation in Argentina and local operators are required to obtain a specific license for their operations. We are currently registered by the Federal Department of Security in Mexico to provide our services. 11 Our subsidiary Pointer SA (PTY) Ltd.
Our subsidiary Pointer Argentina S.A. (“Pointer Argentina”) obtains domestic licenses for the deployment of our SVR operation in Argentina and local operators are required to obtain a specific license for their operations. We are currently registered by the Federal Department of Security in Mexico to provide our services. 11 Certain of our South African subsidiaries, including Pointer SA (PTY) Ltd.
Commencing in 2023 we plan 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 .
In 2023, we consolidated and augmented many of our existing capabilities on a single customer software platform branded as “Unity.” We have designed our Unity platform to enable rapid and deep integration with IoT devices and third-party business systems to a highly scalable data pipeline that powers artificial intelligence-driven insights to help companies save lives, time, and money.
(“Pointer South Africa”) is currently registered as a security service provider under the Private Security Industry Regulation Act, 2001 in South Africa. Our products are also listed with the Independent Communications Authority of South Africa.
(“Pointer South Africa”), are currently registered as security service providers under the Private Security Industry Regulation Act, 2001 in South Africa. Our products are also listed with the Independent Communications Authority of South Africa.
We built a portfolio of patents and patent applications relating to various aspects of our technology and products, including our wireless asset management systems, connected car products, and vehicle management systems. As of March 9, 2023, our patent portfolio includes 38 U.S. patents, 3 pending U.S. patent applications, 3 pending foreign patent applications, and 2 foreign patents.
We built a portfolio of patents and patent applications relating to various aspects of our technology and products, including our wireless asset management systems, connected car products, and vehicle management systems. As of February 29, 2024, our patent portfolio includes 39 U.S. patents, 3 pending U.S. patent applications, 2 pending foreign patent applications, and 2 foreign patents.
Item 1. Business. Overview PowerFleet, Inc. (together with its subsidiaries, “Powerfleet,” the “Company,” “we,” “our” or “us”) is a global leader of Internet-of-Things (IoT) solutions providing valuable business intelligence for managing high-value enterprise assets that improve operational efficiencies. We are headquartered in Woodcliff Lake, New Jersey, with offices located around the globe.
Item 1. Business. Overview Powerfleet is a global leader of Internet-of-Things (“IoT”) solutions providing valuable business intelligence for managing high-value enterprise assets that improve operational efficiencies. We are headquartered in Woodcliff Lake, New Jersey, with offices located around the globe.
Recent Developments Rising interest rates, higher inflation, fluctuations in currency values, supply chain disruptions and the conflict between Russia and Ukraine have resulted in significant economic disruption and adversely impacted the broader global economy, including our customers and suppliers.
Recent Developments Higher interest rates and lingering inflation, fluctuations in currency values, continued supply chain disruptions, and ongoing geopolitical conflicts, such as the wars between Russia and Ukraine and between Israel and Hamas, have resulted in significant economic disruption and adversely impacted the broader global economy, including our customers and suppliers.
This being said, we cannot guarantee that approvals already obtained are or will remain sufficient in the view of regulatory authorities indefinitely. Employees As of March 9, 2023, we had 795 total employees globally, 100% of whom are full-time employees. We believe that our relationships with our employees is good.
However, we cannot guarantee that approvals already obtained are or will remain sufficient in the view of regulatory authorities indefinitely. Employees As of April 15, 2024 , we had 780 total employees globally, 100% of whom are full-time employees. We believe that our relationships with our employees are good.
Across our spectrum of vertical markets, we differentiate ourselves by developing mobility platforms that collect data from unique sensors. Further, because we are original equipment manufacturer (OEM) agnostic, we help organizations view and manage their mixed assets homogeneously.
We deliver advanced data solutions that connect mobile assets to increase visibility, operational efficiency and profitability. Across our spectrum of vertical markets, we differentiate ourselves by developing mobility platforms that collect data from unique sensors. Further, because we are OEM agnostic, we help organizations view and manage their mixed assets homogeneously.
PowerFleet, Inc. was incorporated in the State of Delaware in February 2019 for the purpose of effectuating the transactions pursuant to which we acquired Pointer (the “Transactions”). Upon the closing of the Transactions, Powerfleet became the parent entity of I.D. Systems and Pointer. Our primary website is www.powerfleet.com.
Systems, Inc. (“I.D. Systems”) was incorporated in the State of Delaware in 1993. Powerfleet, Inc. was incorporated in the State of Delaware in February 2019 for the purpose of effectuating the transactions pursuant to which we acquired Pointer (the “Pointer Merger”). Upon the closing of the Pointer Merger, Powerfleet became the parent entity of I.D. Systems and Pointer.
We attempt to avoid infringing known proprietary rights of third parties in our product development and sales efforts. However, it is difficult to proceed with certainty in a rapidly evolving technological environment in which there may be numerous patent applications pending, many of which are confidential at the time of the application filing, with regard to similar technologies.
However, it is difficult to proceed with certainty in a rapidly evolving technological environment in which there may be numerous patent applications pending, many of which are confidential at the time of the application filing, with regard to similar technologies.
With 46 patents and patent applications and over 25 years’ experience, we believe we are well positioned to evolve our offerings for even greater value to customers through our cloud-based applications for unified operations. We deliver advanced data solutions that connect mobile assets to increase visibility, operational efficiency and profitability.
We have an established history of IoT device development and innovation creating devices that can withstand harsh and rugged environments. With 46 patents and patent applications and over 25 years’ experience, we believe we are well positioned to evolve our offerings for even greater value to customers through our cloud-based applications for unified operations.
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The Inflation Reduction Act of 2022 (the “IRA”) was signed into law in August 2022. 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.
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On April 2, 2024, we consummated the transactions contemplated by the Implementation Agreement, dated as of October 10, 2023 (the “Implementation Agreement”), that we entered into with Main Street 2000 Proprietary Limited, a private company incorporated in the Republic of South Africa and our wholly owned subsidiary (“Powerfleet Sub”), and MiX Telematics, a public company incorporated under the laws of the Republic of South Africa (the “MiX Combination”).
Removed
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.
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On such closing date, Powerfleet Sub acquired all the issued ordinary shares of MiX Telematics (including those represented by MiX Telematics’ American Depositary Shares) through the implementation of a scheme of arrangement (the “Scheme”) in accordance with Sections 114 and 115 of the South African Companies Act, No. 71 of 2008, as amended (the “Companies Act”), in exchange for shares of our common stock.
Removed
Management continues to monitor any potential impact of the IRA on our results. No immediate or direct effect from the legislation has had a material impact on our results at this time. The CHIPS and Science Act (“CHIPS”) was signed into law in August 2022. CHIPS is a federal statue providing funding for research and domestic production of semiconductors.
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As a result, MiX Telematics became our indirect, wholly owned subsidiary. Our Powerfleet for Warehouse solutions are designed to provide on-premise or in-facility asset and operator management, monitoring, and visibility for warehouse trucks such as forklifts, man-lifts, tuggers and ground support equipment at airports.
Removed
Additional funding can be provided through CHIPS to various federal agencies as well as towards climate science research. No immediate or direct material effect from the legislation has had a material impact on our results at this time. Other Information I.D. Systems, Inc. (“I.D. Systems”) was incorporated in the State of Delaware in 1993.
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These solutions utilize a variety of communications capabilities such as Bluetooth ® , WiFi, and proprietary radio frequency. Our Powerfleet for Logistics solutions are designed to provide bumper-to-bumper asset management, monitoring, and visibility for over-the-road based assets such as heavy trucks, dry-van trailers, refrigerated trailers and shipping containers and their associated cargo.
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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.
Added
Following the MiX Combination, we have additional trademarks for Mix Telematics, Mix Telematics – Logo, Matrix Vehicle Tracking Logo, Datatrak, Tracking.
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Simply Sorted, Beame Character Device, Beame Logo 2012, Beame Logo 2010, Mix-Drive, FM-WEB, Matrix – right by your side (2013 logo), Mix Vision, Mix Safedrive, FM Communicator, MIX ROVI, Beame Logo, Our Customers Are People, Not Vehicles, Tripmaster, Life Takes You Places, Matrix Brings you Home, MiX Intuition, Recovery.
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Simply Sorted, Geoloc Advanced Alert, MiX Now, Mix Recovery Protect, Mix Fleet Manager, Connected and Protected Fleet. We attempt to avoid infringing known proprietary rights of third parties in our product development and sales efforts.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny failure to maintain effective internal control over financial reporting could harm us. ● We have operations located in Israel, and therefore our results may be adversely affected by political, military and economic conditions in Israel. ● Many of our employees in Israel are required to perform military reserve duty. ● We may be adversely affected by a change of the Israeli Consumer Price Index. ● The Argentine government may enact or enforce measures to preempt or respond to social unrest or economic turmoil which may adversely affect our business in Argentina. ● Economic uncertainty and volatility in Brazil may adversely affect our business. ● The Brazilian government has exercised, and may continue to exercise, significant influence over the Brazilian economy. ● Political instability in Brazil may adversely affect Brazil’s economy and investment levels and have a material adverse effect on the Company. ● Economic uncertainty and volatility in Mexico may adversely affect our business. ● Holders of our Series A Preferred Stock can exercise significant control over the Company, which could limit the ability of our stockholders to influence the outcome of key transactions, including a change of control. ● The Series A Preferred Stock has rights, preferences and privileges that are not held by, and are preferential to, the rights of holders of our common stock, which could adversely affect our liquidity and financial condition, and may result in the interests of the holders of Series A Preferred Stock differing from those of the holders of our common stock. ● Any issuance of our common stock upon conversion of the Series A Preferred Stock will cause dilution to then existing Company stockholders and may depress the market price of our common stock. ● The concentration of common stock ownership among our executive officers and directors could limit the ability of other stockholders of the Company to influence the outcome of corporate transactions or other matters submitted for stockholder approval. ● Future sales of our common stock, including sales of our common stock acquired upon the exercise of outstanding options, may cause the market price of our common stock to decline. ● Our Charter provides that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between us and our stockholders, which could limit stockholders’ ability to obtain a judicial forum viewed by the stockholders as more favorable for disputes with us or our directors, officers or employees, and the enforceability of the exclusive forum provision may be subject to uncertainty. ● The Charter contains a provision renouncing our interest and expectancy in certain corporate opportunities which may prevent us from receiving the benefit of certain corporate opportunities. ● Provisions of Delaware law or the Charter could delay or prevent an acquisition of the Company, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for stockholders to change our management. 13 Risks Related to Our Business: We have incurred significant losses and have a substantial accumulated deficit.
Biggest changeAny failure to maintain effective internal control over financial reporting could harm us. ● We rely on subcontractors to manufacture and deliver our products. ● Our manufacturers rely on a limited number of suppliers for several significant components used in our products. ● The federal government or independent standards organizations may implement significant regulations or standards that could adversely affect our ability to produce or market our products. ● Because our products are complex, they may have undetected errors or failures when they are introduced, which could seriously harm our business, and our product liability insurance may not adequately protect us. ● Changes in practices of insurance companies in the markets in which we provide and sell our SVR services and products could adversely affect our revenues and growth potential. ● A decline in sales of consumer or commercial vehicles in the markets in which we operate could result in reduced demand for our products and services. ● A reduction in vehicle theft rates may adversely impact demand for our SVR services and products. ● The increasing availability of handheld general packet radio service GPRS devices may reduce the demand for our products for small fleet management. ● The use of our products is subject to international regulations. ● The adoption of industry standards that do not incorporate the technology we use may decrease or eliminate the demand for our services or products and could harm our results of operations. ● Our financial statements may not reflect certain payments we may be required to make to employees. ● Some of our employees in our subsidiaries are members of labor unions and a dispute between us and any such labor union could result in a labor strike that could delay or preclude altogether our ability to generate revenues in the markets where such employees are located. ● Under the current laws in jurisdictions in which we operate, we may not be able to enforce non-compete covenants and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees. ● Manufacturing of many of our products is highly complex, and an interruption by suppliers, subcontractors or vendors could adversely affect our business, financial condition or results of operations. ● If we lose our executive officers, or are unable to recruit additional personnel, our ability to manage our business could be materially and adversely affected. ● We provide financing to our customers for the purchase of our products, which may increase our credit risks in the event of a deterioration in a customer’s financial condition or in global credit conditions. ● Our cash and cash equivalents could be adversely affected by a downturn in the financial and credit markets. ● Goodwill impairment or intangible impairment charges may affect our results of operations in the future. ● We have operations located in Israel, and therefore our results may be adversely affected by political, military and economic conditions in Israel. ● Many of our employees in Israel are required to perform military reserve duty. ● Economic uncertainty and volatility in Mexico may adversely affect our business. ● Fluctuations in the value of the South African Rand may have a significant impact on our reported revenue and results of operations, which may make it difficult to evaluate our business performance between reporting periods. ● If we do not achieve applicable Broad-Based Black Economic Empowerment objectives in our South African businesses, we risk not being able to renew certain of our existing contracts which service South African government and quasi-governmental customers, as well as not being awarded future corporate and governmental contracts, each of which would result in the loss of revenue. ● Socio-economic inequality in South Africa or regionally may subject us to political and economic risks, which may affect the ownership or operation of our business. ● The concentration of common stock ownership among our executive officers and directors could limit the ability of other stockholders of the Company to influence the outcome of corporate transactions or other matters submitted for stockholder approval. ● Future sales of our common stock, including sales of our common stock acquired upon the exercise of outstanding options, may cause the market price of our common stock to decline. ● Our Amended and Restated Certificate of Incorporation, as amended provides that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between us and our stockholders, which could limit stockholders’ ability to obtain a judicial forum viewed by the stockholders as more favorable for disputes with us or our directors, officers or employees, and the enforceability of the exclusive forum provision may be subject to uncertainty. ● Provisions of Delaware law or the Charter could delay or prevent an acquisition of the Company, even if the acquisition would be beneficial to our stockholders and could make it more difficult for stockholders to change our management. 13 Risks Related to Our Business We may not realize the anticipated benefits and cost savings of the MiX Combination.
Although we plan to implement policies and procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our employees, contractors, or agents will not violate our policies. 16 Some of the risks and challenges of doing business internationally include: ● unexpected changes in regulatory requirements; ● fluctuations in international currency exchange rates including its impact on unhedgeable currencies and our forecast variations for hedgeable currencies; ● imposition of tariffs and other barriers and restrictions; ● management and operation of an enterprise spread over various countries; ● the burden of complying with a variety of laws and regulations in various countries; ● application of the income tax laws and regulations of multiple jurisdictions, including relatively low-rate and relatively high-rate jurisdictions, to our sales and other transactions, which results in additional complexity and uncertainty; ● the conduct of unethical business practices in certain developing countries; ● general economic and geopolitical conditions, including inflation and trade relationships; ● war and acts of terrorism; ● kidnapping and high crime rate; ● natural disasters or pandemics (for example, the COVID-19 pandemic); ● availability of U.S. dollars especially in countries with economies highly dependent on resource exports, particularly oil; and ● changes in export regulations.
Although we plan to implement policies and procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our employees, contractors, or agents will not violate our policies. 17 Some of the risks and challenges of doing business internationally include: ● unexpected changes in regulatory requirements; ● fluctuations in international currency exchange rates including its impact on unhedgeable currencies and our forecast variations for hedgeable currencies; ● imposition of tariffs and other barriers and restrictions; ● management and operation of an enterprise spread over various countries; ● the burden of complying with a variety of laws and regulations in various countries; ● application of the income tax laws and regulations of multiple jurisdictions, including relatively low-rate and relatively high-rate jurisdictions, to our sales and other transactions, which results in additional complexity and uncertainty; ● the conduct of unethical business practices in certain developing countries; ● general economic and geopolitical conditions, including inflation and trade relationships; ● war and acts of terrorism; ● kidnapping and high crime rate; ● natural disasters or pandemics (for example, the COVID-19 pandemic); ● availability of U.S. dollars especially in countries with economies highly dependent on resource exports, particularly oil; and ● changes in export regulations.
Their ability to meet those financial ratios can be affected by events beyond their control, and they may be unable to meet them. A breach of the covenants or restrictions under the Credit Agreement could result in an event of default, which may allow the lender to accelerate the indebtedness thereunder.
Their ability to meet those financial ratios can be affected by events beyond their control, and they may be unable to meet them. A breach of the covenants or restrictions under the A&R Credit Agreement could result in an event of default, which may allow the lender to accelerate the indebtedness thereunder.
In recent years, there has been significant litigation in the United States and internationally involving claims of alleged infringement of patents and other intellectual property rights. Litigation may be necessary to enforce our intellectual property rights, defend ourselves against alleged infringement and determine the scope and validity of our intellectual property rights.
In recent years, there has been significant litigation in the United States and internationally involving claims of alleged infringement of patents and other intellectual property rights. Litigation has been, and may continue to be, necessary to enforce our intellectual property rights, defend ourselves against alleged infringement and determine the scope and validity of our intellectual property rights.
Article SIXTEENTH of the Charter provides, subject to certain exceptions enumerated in Article SIXTEENTH, that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any stockholder to bring (i) any derivative action brought on behalf of the Company, (ii) any action asserting a claim of breach of fiduciary duty owed by any current or former director, officer or other employee or stockholder of the Company, (iii) any action asserting a claim arising pursuant to the General Corporation Law of Delaware (the “DGCL”) or the Charter or our Amended and Restated Bylaws or as to which the DGCL confers jurisdiction on such court, or (iv) any action asserting a claim governed by the internal affairs doctrine, except for, in each of the aforementioned actions, among other things, any claims which are vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery of the State of Delaware or for which the Court of Chancery of the State of Delaware does not have subject matter jurisdiction.
Article SIXTEENTH of our Amended and Restated Certificate of Incorporation (as amended, the “Charter”) provides, subject to certain exceptions enumerated in Article SIXTEENTH, that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any stockholder to bring (i) any derivative action brought on behalf of the Company, (ii) any action asserting a claim of breach of fiduciary duty owed by any current or former director, officer or other employee or stockholder of the Company, (iii) any action asserting a claim arising pursuant to the General Corporation Law of Delaware (the “DGCL”) or the Charter or our Amended and Restated Bylaws or as to which the DGCL confers jurisdiction on such court, or (iv) any action asserting a claim governed by the internal affairs doctrine, except for, in each of the aforementioned actions, among other things, any claims which are vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery of the State of Delaware or for which the Court of Chancery of the State of Delaware does not have subject matter jurisdiction.
The industry in which we operate is highly competitive and influenced by the following: ● advances in technology; ● new product introductions; ● evolving industry standards; ● product improvements; ● rapidly changing customer needs; ● intellectual property invention and protection; ● marketing and distribution capabilities; ● ability to attract and retain highly skilled professionals; ● competition from highly capitalized companies; ● entrance of new competitors; ● ability of customers to invest in information technology; and ● price competition. 15 The products marketed by us and our competitors are becoming more complex.
The industry in which we operate is highly competitive and influenced by the following: ● advances in technology; ● new product introductions; ● evolving industry standards; ● product improvements; ● rapidly changing customer needs; ● intellectual property invention and protection; ● marketing and distribution capabilities; ● ability to attract and retain highly skilled professionals; ● competition from highly capitalized companies; ● entrance of new competitors; ● ability of customers to invest in information technology; and ● price competition. 16 The products marketed by us and our competitors are becoming more complex.
Failure to realize the benefits of amounts we invest in new technologies, products, or services could result in the value of those investments being written down or written off. 14 If we are unable to keep up with rapid technological change, we may be unable to meet the needs of our customers, which could materially and adversely affect our financial condition and results of operations and reduce our ability to grow our market share.
Failure to realize the benefits of amounts we invest in new technologies, products, or services could result in the value of those investments being written down or written off. 15 If we are unable to keep up with rapid technological change, we may be unable to meet the needs of our customers, which could materially and adversely affect our financial condition and results of operations and reduce our ability to grow our market share.
As a result, our financial statements may not adequately reflect possible future severance payments. 23 Some of our employees in our subsidiaries are members of labor unions and a dispute between us and any such labor union could result in a labor strike that could delay or preclude altogether our ability to generate revenues in the markets where such employees are located.
As a result, our financial statements may not adequately reflect possible future severance payments. 26 Some of our employees in our subsidiaries are members of labor unions and a dispute between us and any such labor union could result in a labor strike that could delay or preclude altogether our ability to generate revenues in the markets where such employees are located.
If any of these policies or practices changes, for regulatory or commercial reasons, or if market prices for these services fall, revenues from sales of our SVR services and products, primarily in Israel, could decline, which could adversely affect our revenues and growth potential. 22 A decline in sales of consumer or commercial vehicles in the markets in which we operate could result in reduced demand for our products and services.
If any of these policies or practices changes, for regulatory or commercial reasons, or if market prices for these services fall, revenues from sales of our SVR services and products, primarily in Israel, could decline, which could adversely affect our revenues and growth potential. 25 A decline in sales of consumer or commercial vehicles in the markets in which we operate could result in reduced demand for our products and services.
The Credit Agreement contains a number of restrictive covenants that impose significant operating and financial restrictions on Powerfleet Israel and Pointer and limit their ability to engage in acts that may be in their long-term best interest, including restrictions on their ability to: ● incur or guarantee additional indebtedness; ● incur liens; ● sell or otherwise dispose of assets; ● enter into transactions with affiliates; and ● enter into new lines of business.
The A&R Credit Agreement contains a number of restrictive covenants that impose significant operating and financial restrictions on Powerfleet Israel and Pointer and limits their ability to engage in acts that may be in their long-term best interest, including restrictions on their ability to: ● incur or guarantee additional indebtedness; ● incur liens; ● sell or otherwise dispose of assets; ● enter into transactions with affiliates; and ● enter into new lines of business.
We face a number of threats to our data centers and networks in the form of unauthorized access, security breaches and other system disruptions. It is critical to our business strategy that our infrastructure remains secure and is perceived by customers and partners to be secure. We require user names and passwords in order to access our information technology systems.
We face a number of threats to our data centers and networks in the form of unauthorized access, security breaches and other system disruptions. It is critical to our business strategy that our infrastructure remains secure and is perceived by customers and partners to be secure. We require usernames and passwords in order to access our information technology systems.
Item 1A. Risk Factors. In addition to the other information contained in this Annual Report on Form 10-K, the following risk factors should be considered carefully in evaluating the Company’s business. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks.
Item 1A. Risk Factors. In addition to the other information contained in this Form 10-K, the following risk factors should be considered carefully in evaluating the Company’s business. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks.
We cannot assure you that we will be able to obtain additional financing on terms acceptable to us or at all. 24 The terms of the Credit Agreement restrict Powerfleet Israel’s and Pointer’s current and future operations, particularly their ability to respond to changes or to take certain actions.
We cannot assure you that we will be able to obtain additional financing on terms acceptable to us or at all. The terms of the A&R Credit Agreement restrict Powerfleet Israel’s and Pointer’s current and future operations, particularly their ability to respond to changes or to take certain actions.
We may be subject to breaches of our information technology systems, which could damage our reputation, vendor, and customer relationships, and our customers’ access to our services. Our business operations require that we use and store sensitive data, including intellectual property and proprietary business information in our secure data centers and on our networks.
We are subject to breaches of our information technology systems, which could damage our reputation, vendor, and customer relationships, and our customers’ access to our services. Our business operations require that we use and store sensitive data, including intellectual property and proprietary business information in our secure data centers and on our networks.
Our primary sources of cash are cash flows from operating activities, our holdings of cash, cash equivalents and investments from the sale of our capital stock and borrowings under our credit facility. To date, we have not generated sufficient cash flow solely from operating activities to fund our operations.
Our primary sources of cash are cash flows from the sales of products and services, our holdings of cash, cash equivalents and investments from the sale of our capital stock and borrowings under our credit facility. To date, we have not generated sufficient cash flow solely from operating activities to fund our operations.
While we cannot predict whether or when the FTC’s proposed ban on non-compete arrangements will be implemented, or the impact that such ban will have on our operations if implemented, there is now increased uncertainty regarding the long-term enforceability of our non-competition agreements with employees in the U.S.
While we cannot predict whether or when the FTC’s proposed ban on non-compete arrangements will be implemented, or the impact that such ban will have on our operations if implemented, there is now increased uncertainty regarding the long-term enforceability of our non-competition agreements with employees in the United States.
The Credit Agreement also limits the ability of Powerfleet Israel and Pointer to consolidate or merge with or into another person. In addition, the covenants in the Credit Agreement require Powerfleet Israel and Pointer to maintain specified financial ratios, tested quarterly.
The A&R Credit Agreement also limits the ability of Powerfleet Israel and Pointer to consolidate or merge with or into another person. 21 In addition, the covenants in the A&R Credit Agreement require Powerfleet Israel and Pointer to maintain specified financial ratios, tested quarterly.
We are an international company and may be susceptible to a number of political, economic and geographic risks that could harm our business. We are dependent on sales to customers outside the U.S. Our international sales are likely to account for a significant percentage of our products and services revenue for the foreseeable future.
We are an international company and may be susceptible to a number of political, economic and geographic risks that could harm our business. We are dependent on sales to customers outside the United States. Our international sales are likely to account for a significant percentage of our products and services revenue for the foreseeable future.
Our Charter provides that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between us and our stockholders, which could limit stockholders’ ability to obtain a judicial forum viewed by the stockholders as more favorable for disputes with us or our directors, officers or employees, and the enforceability of the exclusive forum provision may be subject to uncertainty.
Our Amended and Restated Certificate of Incorporation, as amended, provides that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between us and our stockholders, which could limit stockholders’ ability to obtain a judicial forum viewed by the stockholders as more favorable for disputes with us or our directors, officers or employees, and the enforceability of the exclusive forum provision may be subject to uncertainty.
Uncertainty about current global economic conditions, in particular as a result of the continued global supply chain disruptions, inflation and other cost increases, and the conflict between Russia and Ukraine and recent bank failures, could also cause volatility of our stock price.
Uncertainty about current global economic conditions, in particular as a result of the continued global supply chain disruptions, inflation and other cost increases, and the conflicts between Russia and Ukraine and between Israel and Hamas, and recent bank failures, could also cause volatility of our stock price.
We may seek to raise the necessary funds through public or private equity offerings, debt financings, additional operating improvements, asset sales or strategic alliances and licensing arrangements. To the extent we raise additional capital by issuing equity securities, including pursuant to our shelf registration statement, our existing stockholders may experience substantial dilution.
We may seek to raise the necessary funds through public or private equity offerings, debt financings, additional operating improvements, asset sales or strategic alliances and licensing arrangements. To the extent we raise additional capital by issuing equity securities, our existing stockholders may experience substantial dilution.
In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to manage our business effectively or accurately report our financial performance on a timely basis, which could cause a decline in our common stock price and adversely affect our results of operations and financial condition.
In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to manage our business effectively or accurately report our financial performance on a timely basis, which could cause a decline in our common stock price and adversely affect our results of operations and financial condition. 23 We rely on subcontractors to manufacture and deliver our products.
As a result, the occurrence of any international, political, economic or geographic event (for example, the COVID-19 pandemic, continued global supply chain disruptions, inflation and other cost increases, and the conflict between Russia and Ukraine) could result in a significant decline in our revenue.
As a result, the occurrence of any international, political, economic or geographic event (for example, continued global supply chain disruptions, inflation and other cost increases, and the conflict between Russia and Ukraine and between Israel and Hamas) could result in a significant decline in our revenue.
We identified material weaknesses in our internal control over financial reporting as of December 31, 2022, which have not been remediated (see Item 9A of this Annual Report on Form 10-K for more information).
We identified material weaknesses in our internal control over financial reporting as of December 31, 2023, which have not been remediated (see Item 9A of this Form 10-K for more information).
We may become involved in an intellectual property dispute that could subject us to significant liability, divert the time and attention of our management and prevent us from selling our products, any of which could materially and adversely affect our financial condition and results of operations.
We have been, and may continue to become, involved in intellectual property disputes that could subject us to significant liability, divert the time and attention of our management and prevent us from selling our products, any of which could materially and adversely affect our financial condition and results of operations.
The Credit Agreement requires Powerfleet Israel and Pointer to satisfy various covenants, including negative covenants that directly or indirectly restrict our ability to engage in certain transactions without the consent of the lender.
The A&R Credit Agreement continues to require Powerfleet Israel and Pointer to satisfy various covenants, including negative covenants that directly or indirectly restrict our ability to engage in certain transactions without the consent of the lender.
We report our financial results in U.S. dollars. However, a significant portion of our net sales, assets, indebtedness and other liabilities, and costs are denominated in foreign currencies. These currencies include, among others, the Euro, Israeli shekel, British pound sterling, Mexican peso, Argentine peso, Brazilian real and South African rand.
However, a significant portion of our net sales, assets, indebtedness and other liabilities, and costs are denominated in foreign currencies. These currencies include, among others, the Euro, Israeli shekel, British pound sterling, Mexican peso, Argentine peso, Brazilian real and South African rand.
In addition, an event of default under the Credit Agreement would permit the lender to terminate all commitments to extend further credit pursuant to the revolving credit facility.
In addition, an event of default under the A&R Credit Agreement would permit the lender to terminate all commitments to extend further credit pursuant to the Revolving Facilities.
Similarly, many of our customers are dependent on an ever-greater number of global suppliers to manufacture their products. These global supply chains have continued to be, adversely impacted by events outside of our control, including macroeconomic events, trade restrictions, economic recessions and ongoing disruptions from the COVID-19 pandemic.
Similarly, many of our customers are dependent on an ever-greater number of global suppliers to manufacture their products. These global supply chains have continued to be adversely impacted by events outside of our control, including macroeconomic events, trade restrictions, economic recessions and ongoing geopolitical conflicts.
We currently do not have employment agreements with any of our executive officers. Like other companies in our industry, we face intense competition for qualified personnel. Many of our competitors have greater resources than we have to hire qualified personnel.
We are dependent on the continued employment and performance of our executive officers. We currently do not have employment agreements with any of our executive officers. Like other companies in our industry, we face intense competition for qualified personnel. Many of our competitors have greater resources than we have to hire qualified personnel.
Despite our efforts to eliminate these flaws, there still may be errors or failures in our products, even after the commencement of commercial shipments. We provide a reserve at the time of shipment, which may not be sufficient to cover actual repair costs.
Technical products like ours often contain undetected errors or failures when first introduced. Despite our efforts to eliminate these flaws, there still may be errors or failures in our products, even after the commencement of commercial shipments. We provide a reserve at the time of shipment, which may not be sufficient to cover actual repair costs.
In addition, as of December 31, 2022, time-based options and market-based stock options subject to performance-based vesting conditions, to purchase 2,728,000 and 5,065,000 shares of our common stock, respectively, were issued and outstanding, of which 1,247,000 and 0, respectively were vested. The weighted-average exercise price of the vested non-market based stock options is $5.79.
In addition, as of December 31, 2023, time-based options and market-based stock options subject to performance-based vesting conditions, to purchase 2,192,000 and 5,445,000 shares of our common stock, respectively, were issued and outstanding, of which 1,189,000 and 0, respectively, were vested. The weighted-average exercise price of the vested non-market-based stock options is $5.54.
In addition, new products or enhancements by our competitors may cause customers to defer or forego purchases of our products. Any of the foregoing could materially and adversely affect our financial condition and results of operations and reduce our ability to grow our market share.
In addition, new products or enhancements by our competitors may cause customers to defer or forego purchases of our products. Any of the foregoing could materially and adversely affect our financial condition and results of operations and reduce our ability to grow our market share. Inaccurate output from artificial intelligence could result in brand and reputation damage.
Goodwill impairment or intangible impairment charges may affect our results of operations in the future. We test goodwill for impairment on an annual basis and more often if events occur or circumstances change that would likely reduce the fair value of a reporting unit to an amount below its carrying value.
We test goodwill for impairment on an annual basis and more often if events occur or circumstances change that would likely reduce the fair value of a reporting unit to an amount below its carrying value.
These provisions include: the right of the holders of the Series A Preferred Stock to appoint up to two directors; the absence of cumulative voting in the election of directors; the ability of our board of directors to issue up to 50,000 shares of currently undesignated and unissued preferred stock without prior stockholder approval; the consent rights of the holders of Series A Preferred Stock to certain corporate actions and transactions; advance notice requirements for stockholder proposals or nominations of directors; limitations on the ability of stockholders to call special meetings or act by written consent; preemptive rights of the holders of the Series A Preferred Stock to participate in future securities offerings of the Company; the requirement that certain amendments to the Charter be approved by 75% of the voting power of the outstanding shares of our capital stock; and the ability of our board of directors to amend our bylaws without stockholder approval.
These provisions include: the absence of cumulative voting in the election of directors; the ability of our board of directors to issue up to 50,000 shares of currently undesignated and unissued preferred stock without prior stockholder approval; advance notice requirements for stockholder proposals or nominations of directors; limitations on the ability of stockholders to call special meetings or act by written consent; the requirement that certain amendments to the Charter be approved by 75% of the voting power of the outstanding shares of our capital stock; and the ability of our board of directors to amend our bylaws without stockholder approval.
To date, we have experienced no loss of principal or lack of access to our invested cash or cash equivalents; however, we can provide no assurance that access to our invested cash and cash equivalents will not be affected if the financial institutions in which we hold our cash and cash equivalents fail or the financial and credit markets deteriorate.
To date, we have experienced no loss of principal or lack of access to our invested cash or cash equivalents; however, we can provide no assurance that access to our invested cash and cash equivalents will not be affected if the financial institutions in which we hold our cash and cash equivalents fail or the financial and credit markets deteriorate. 27 Goodwill impairment or intangible impairment charges may affect our results of operations in the future.
If we cannot achieve profitability, the market price of our common stock could decline significantly. As of December 31, 2022, we had cash (including restricted cash) and cash equivalents of $18.0 million and working capital of $35.5 million.
If we cannot achieve profitability, the market price of our common stock could decline significantly. As of December 31, 2023, we had cash (including restricted cash) and cash equivalents of $19.3 million and working capital of $23.5 million.
However, if we are not able to mitigate the impact of the semiconductor chip shortage semiconductor shortage impact, any direct or indirect supply chain disruptions may have a material adverse impact on our business, financial condition and results of operations.
However, if we are not able to mitigate the impact of the semiconductor chip shortage semiconductor shortage impact, any direct or indirect supply chain disruptions may have a material adverse impact on our business, financial condition and results of operations. Our expansion into new products, services, and technologies subjects us to additional risks.
Our management has concluded that material weaknesses in our internal control over financial reporting existed as of December 31, 2022 due to the lack of controls related to the determination of standalone selling price, capitalized software costs and the financial statement close process.
Our management has concluded that material weaknesses in our internal control over financial reporting existed as of December 31, 2023 due to the lack of controls related to accounting for the redemption premium on convertible redeemable preferred stock, the determination of standalone selling price, capitalized software costs and the financial statement close process.
Accordingly, if we are not successful in attracting or retaining qualified personnel in the future, our ability to manage our business could be materially and adversely affected. The unpredictability of our quarterly operating results could adversely affect the market price of our common stock.
Accordingly, if we are not successful in attracting or retaining qualified personnel in the future, our ability to manage our business could be materially and adversely affected.
As of March 20, 2023, our executive officers and directors beneficially owned, in the aggregate, approximately 3% of our outstanding common stock, not including approximately 6,055,000 shares of common stock that our executive officers and directors may acquire upon the exercise of outstanding options or if they otherwise acquire additional shares of common stock in the future.
As of May 1, 2024, our executive officers and directors beneficially owned, in the aggregate, approximately 6.47% of our outstanding common stock, not including approximately 1,392,309 shares of common stock that our executive officers and directors may acquire upon the exercise of outstanding options and stock appreciation rights, or if they otherwise acquire additional shares of common stock in the future.
Our operations could be disrupted by the absence for a significant period of one or more of our key employees or a significant number of our other employees due to military service. Any disruption in our operations would harm our business. We may be adversely affected by a change of the Israeli Consumer Price Index.
Our operations could be disrupted by the absence for a significant period of one or more of our key employees or a significant number of our other employees due to military service. Any disruption in our operations would harm our business. 28 Economic uncertainty and volatility in Mexico may adversely affect our business.
Any failure to maintain effective internal control over financial reporting could harm us. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles.
We are still considering the full extent of the procedures to implement in order to remediate the material weaknesses described above; however, the current remediation plan includes: (i) implementation of a new enterprise resource planning (ERP) system (ii) utilizing external resources to support our efforts to rework certain control gaps across the various processes in Israel and the U.S. with identified deficiencies, (iii) implementing enhanced documentation associated with management review controls and validation of the completeness and accuracy of key reports in Israel and the U.S., and (iv) training relevant personnel to reinforce existing policies and enhancing policies with regard to appropriate steps and procedures required to be performed related to the execution and documentation of internal controls.
Additionally, the current remediation plan includes: (i) utilizing external resources to support our efforts to rework certain control gaps across the various processes in Israel and the United States with identified deficiencies; (ii) implementing enhanced documentation associated with management review controls and validation of the completeness and accuracy of key reports in Israel and the United States; and (iii) training relevant personnel to reinforce existing policies and enhancing policies with regard to appropriate steps and procedures required to be performed related to the execution and documentation of internal controls.
Further, in the event a court finds the exclusive forum provision contained in the Charter to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Further, in the event a court finds the exclusive forum provision contained in the Charter to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition. 31 Provisions of Delaware law or the Charter could delay or prevent an acquisition of the Company, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for stockholders to change our management.
We incurred net losses of approximately $13.6 million, $18.1 million and $11.9 million for the years ended December 31, 2020, 2021 and 2022, respectively, and have incurred additional net losses since inception. At December 31, 2022, we had an accumulated deficit of approximately $141.4 million.
We incurred net losses of approximately $22.1 million (as restated), $16.9 million (as restated) and $17.3 million for the years ended December 31, 2021, 2022 and 2023, respectively, and have incurred additional net losses since inception. At December 31, 2023, we had an accumulated deficit of approximately $146.3 million.
Furthermore, if Powerfleet Israel and Pointer are unable to repay the amounts due and payable under the Credit Agreement, the lender could proceed against the collateral granted to it to secure the indebtedness under the Credit Agreement. In the event the lender accelerates the repayment of borrowings, Powerfleet Israel and Pointer may not have sufficient assets to repay that indebtedness.
Furthermore, if Powerfleet Israel and Pointer are unable to repay the amounts due and payable under the A&R Credit Agreement, the lender could proceed against the collateral granted to it to secure the indebtedness under the A&R Credit Agreement.
Long-lived assets with determinable useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Long-lived assets with determinable useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Such charges could have a material adverse effect on our results of operations in the period in which they are recorded.
We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
We have 36,170,299 shares of common stock outstanding as of March 20, 2023, of which 35,088,407 shares are freely transferable without restriction, and 1,081,892 shares are held by our officers and directors and, as such, are subject to the applicable volume, manner of sale, holding period and other limitations of Rule 144 under the Securities Act.
We have 107,349,987 shares of common stock outstanding as of May 1, 2024, of which 100,400,538 shares are freely transferable without restriction, and 6,949,449 shares are held by our officers and directors and, as such, are subject to the applicable volume, manner of sale, holding period and other limitations of Rule 144 under the Securities Act.
Our ability to arrange additional financing will depend on, among other factors, our financial position and performance, as well as prevailing market conditions and other factors beyond its control.
We may be required to raise additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes. Our ability to arrange additional financing will depend on, among other factors, our financial position and performance, as well as prevailing market conditions and other factors beyond its control.
The failure to obtain the necessary licenses or other rights could preclude the sale, manufacture or distribution of our products and could materially and adversely affect our financial condition and results of operations. 20 We rely on subcontractors to manufacture and deliver our products.
The failure to obtain the necessary licenses or other rights could preclude the sale, manufacture or distribution of our products and could materially and adversely affect our financial condition and results of operations. 20 Our Israeli subsidiaries have incurred significant indebtedness. On March 18, 2024, Powerfleet Israel Ltd.
If the market for our products and services does not become sustainable, or becomes saturated with competing products or services, our revenues will decline and our financial condition and results of operations could be materially and adversely affected. 18 We may incur additional charges for excess and obsolete inventory, which could adversely affect our cost of sales and gross profit.
The market for our products and services is new and rapidly evolving. If the market for our products and services does not become sustainable, or becomes saturated with competing products or services, our revenues will decline and our financial condition and results of operations could be materially and adversely affected.
We also use encryption and authentication technologies to secure the transmission and storage of data. Despite our security measures, our information technology systems may be vulnerable to attacks by hackers or other disruptive problems.
We also use encryption and authentication technologies to secure the transmission and storage of data. Despite our security measures, our information technology systems have been, and may continue to be, subject to cybersecurity threats and incidents.
The indebtedness is 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, and a first ranking fixed pledge and assignment by Pointer over its bank account that was opened in connection with the New Revolver and all of the rights relating thereunder, as well as cross guarantees between Powerfleet Israel and Pointer.
The indebtedness continues to be secured by first ranking and exclusive fixed and floating charges, including by Powerfleet Israel over the entire share capital of Pointer and by Pointer over all of its assets, as well as cross guarantees between Powerfleet Israel and Pointer.
(“Hapoalim”), pursuant to which Hapoalim agreed to provide Powerfleet Israel with two senior secured term loan facilities denominated in New Israeli Shekel (NIS) in an initial aggregate principal amount of $30,000,000 (comprised of two facilities in the initial aggregate principal amount of $20,000,000 and $10,000,000, (the “Term A Facility” and “Term B Facility,” respectively, and collectively, the “Term Facilities”)) and a five-year revolving credit facility to Pointer in an aggregate principal amount of $10,000,000.
The A&R Credit Agreement provides Powerfleet Israel with two senior secured term loan facilities denominated in New Israeli Shekel (“NIS”) in an aggregate principal amount of $30 million (comprised of two facilities in the aggregate principal amounts of $20 million and $10 million, respectively (“Facility A” and “Facility B,” respectively, and collectively, the “Term Facilities”)), and two revolving credit facilities to Pointer in an aggregate principal amount of $20 million (comprised of two revolvers in the aggregate principal amounts of $10 million and $10 million, respectively (“Facility C” and “Facility D,” respectively, and, collectively, the “Revolving Facilities” and, together with the Term Facilities, the “Credit Facilities”)).
If we or our manufacturers are unable to obtain an ample supply of product or raw materials from our existing suppliers or alternative sources of supply, we may be unable to satisfy our customers’ orders, which could reduce our revenues, subject us to claims for damages and adversely affect our relationships with our customers. 21 The federal government or independent standards organizations may implement significant regulations or standards that could adversely affect our ability to produce or market our products.
If we or our manufacturers are unable to obtain an ample supply of product or raw materials from our existing suppliers or alternative sources of supply, we may be unable to satisfy our customers’ orders, which could reduce our revenues, subject us to claims for damages and adversely affect our relationships with our customers. 24 Because our products are complex, they may have undetected errors or failures when they are introduced, which could seriously harm our business, and our product liability insurance may not adequately protect us.
(“Powerfleet Israel”) and Pointer entered into a credit agreement, dated August 19, 2019 (the “Credit Agreement”), with Bank Hapoalim B.M.
(“Powerfleet Israel”) and Pointer entered into an amended and restated credit agreement (the “A&R Credit Agreement”), with Bank Hapoalim B.M. (“Hapoalim”), which refinanced the facilities under, and amended and restated, the prior credit agreement, dated August 19, 2019 (as amended, the “Prior Credit Agreement”).
This may also make it more difficult for us to engage in future transactions without the consent of the lender. The increased levels of indebtedness could also reduce funds available to fund efforts to integrate I.D.
This may also make it more difficult for us to engage in future transactions without the consent of the lender. The increased levels of indebtedness could also reduce funds available to engage in investments in product development, capital expenditures and other activities and may create competitive disadvantages for us relative to other companies with lower debt levels.
If we cannot achieve profitability, the market price of our common stock could decline significantly. ● The inability of our supply chain to deliver certain key components, such as semiconductors, could materially adversely affect our business, financial condition and results of operations. ● We provide no assurance that we will be able to successfully integrate any businesses, products, technologies or personnel that we have acquired or might acquire in the future. ● Our expansion into new products, services, and technologies subjects us to additional risks. ● If we are unable to keep up with rapid technological change, we may be unable to meet the needs of our customers, which could materially and adversely affect our financial condition and results of operations and reduce our ability to grow our market share. ● We may be subject to breaches of our information technology systems, which could damage our reputation, vendor, and customer relationships, and our customers’ access to our services. ● The industry in which we operate is highly competitive, and competitive pressures from existing and new companies could have a material adverse effect on our financial condition and results of operations. ● We may not be able to successfully execute our strategic initiatives or meet our long-term financial goals. ● We are an international company and may be susceptible to a number of political, economic and geographic risks that could harm our business. ● Conditions and changes in the global economic environment may adversely affect our business and financial results. ● The international scope of our business exposes us to risks associated with foreign exchange rates. ● We may need to obtain additional capital to fund our operations that could have negative consequences on our business. ● If the market for our technology does not develop or become sustainable, expands more slowly than we expect or becomes saturated, our revenues will decline and our financial condition and results of operations could be materially and adversely affected. 12 ● We may incur additional charges for excess and obsolete inventory, which could adversely affect our cost of sales and gross profit. ● The long and variable sales cycles for our solutions may cause our revenues and operating results to vary significantly from quarter to quarter or year to year. ● We rely significantly on channel partners to sell our products, and disruptions to, or our failure to develop and manage our channel partners would harm our business. ● If we are unable to protect our intellectual property rights, our financial condition and results of operations could be materially and adversely affected. ● We may become involved in an intellectual property dispute that could subject us to significant liability and divert the time and attention of our management and prevent us from selling our products. ● We rely on subcontractors to manufacture and deliver our products. ● Our manufacturers rely on a limited number of suppliers for several significant components used in our products. ● The federal government or independent standards organizations may implement significant regulations or standards that could adversely affect our ability to produce or market our products. ● Because our products are complex, they may have undetected errors or failures when they are introduced, which could seriously harm our business, and our product liability insurance may not adequately protect us. ● Changes in practices of insurance companies in the markets in which we provide and sell our SVR services and products could adversely affect our revenues and growth potential. ● A decline in sales of consumer or commercial vehicles in the markets in which we operate could result in reduced demand for our products and services. ● A reduction in vehicle theft rates may adversely impact demand for our SVR services and products. ● The increasing availability of handheld general packet radio service GPRS devices may reduce the demand for our products for small fleet management. ● The use of our products is subject to international regulations. ● The adoption of industry standards that do not incorporate the technology we use may decrease or eliminate the demand for our services or products and could harm our results of operations. ● Our financial statements may not reflect certain payments we may be required to make to employees. ● Some of our employees in our subsidiaries are members of labor unions and a dispute between us and any such labor union could result in a labor strike that could delay or preclude altogether our ability to generate revenues in the markets where such employees are located. ● Under the current laws in jurisdictions in which we operate, we may not be able to enforce non-compete covenants and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees. ● Manufacturing of many of our products is highly complex, and an interruption by suppliers, subcontractors or vendors could adversely affect our business, financial condition or results of operations. ● Our Israeli subsidiaries have incurred significant indebtedness to finance the Transactions. ● The terms of the Credit Agreement restrict Powerfleet Israel’s and Pointer’s current and future operations, particularly their ability to respond to changes or to take certain actions. ● If we lose our executive officers, or are unable to recruit additional personnel, our ability to manage our business could be materially and adversely affected. ● The unpredictability of our quarterly operating results could adversely affect the market price of our common stock. ● We provide financing to our customers for the purchase of our products, which may increase our credit risks in the event of a deterioration in a customer’s financial condition or in global credit conditions. ● Our cash and cash equivalents could be adversely affected by a downturn in the financial and credit markets. ● Goodwill impairment or intangible impairment charges may affect our results of operations in the future. ● In connection with the preparation of our annual financial statements for the fiscal year ended December 31, 2022, we identified material weaknesses in our internal control over financial reporting.
If we cannot achieve profitability, the market price of our common stock could decline significantly. ● The inability of our supply chain to deliver certain key components, such as semiconductors, could materially adversely affect our business, financial condition and results of operations. ● Our expansion into new products, services, and technologies subjects us to additional risks. ● If we are unable to keep up with rapid technological change, we may be unable to meet the needs of our customers, which could materially and adversely affect our financial condition and results of operations and reduce our ability to grow our market share. ● Inaccurate output from artificial intelligence could result in brand and reputation damage. ● We are subject to breaches of our information technology systems, which could damage our reputation, vendor, and customer relationships, and our customers’ access to our services. ● The industry in which we operate is highly competitive, and competitive pressures from existing and new companies could have a material adverse effect on our financial condition and results of operations. ● We may not be able to successfully execute our strategic initiatives or meet our long-term financial goals. ● We are an international company and may be susceptible to a number of political, economic and geographic risks that could harm our business. ● Conditions and changes in the global economic environment may adversely affect our business and financial results. ● The international scope of our business exposes us to risks associated with foreign exchange rates. ● We may need to obtain additional capital to fund our operations that could have negative consequences on our business. ● If the market for our technology does not develop or become sustainable, expands more slowly than we expect or becomes saturated, our revenues will decline and our financial condition and results of operations could be materially and adversely affected. 12 ● We rely significantly on channel partners to sell our products, and disruptions to, or our failure to develop and manage our channel partners would harm our business. ● If we are unable to protect our intellectual property rights, our financial condition and results of operations could be materially and adversely affected. ● We have been, and may continue to become, involved in intellectual property disputes that could subject us to significant liability and divert the time and attention of our management and prevent us from selling our products. ● Our Israeli subsidiaries have incurred significant indebtedness. ● The terms of the A&R Credit Agreement restrict Powerfleet Israel’s and Pointer’s current and future operations, particularly their ability to respond to changes or take certain actions. ● In connection with the MiX Combination, we have incurred significant additional indebtedness to finance the redemption of our Series A preferred stock. ● The restatement of our previously issued consolidated financial statements and the related analysis and ongoing remedial measures have been time-consuming and expensive and could expose us to additional risks that could materially adversely affect our financial position, results of operations and cash flows. ● In connection with the preparation of our annual financial statements for the fiscal year ended December 31, 2023, we identified material weaknesses in our internal control over financial reporting.
Provisions of Delaware law or the Charter could delay or prevent an acquisition of the Company, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for stockholders to change our management. The Charter contains provisions that may discourage an unsolicited takeover proposal that stockholders may consider to be in their best interests.
The Charter contains provisions that may discourage an unsolicited takeover proposal that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control.
Systems’ and Pointer’s businesses and realize expected benefits of the Transactions and/or engage in investments in product development, capital expenditures and other activities and may create competitive disadvantages for us relative to other companies with lower debt levels. We may be required to raise additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes.
The increased levels of indebtedness could also reduce funds available to fund efforts to combine our and MiX Telematics’ businesses and realize expected benefits of the MiX Combination and/or engage in investments in product development, capital expenditures and other activities and may create competitive disadvantages for the combined company relative to other companies with lower debt levels.
These restrictions may affect our ability to grow in accordance with our strategy. 25 If we lose our executive officers, or are unable to recruit additional personnel, our ability to manage our business could be materially and adversely affected. We are dependent on the continued employment and performance of our executive officers.
Such interruption or delay of our suppliers to deliver components or interruption or delay of our vendors or subcontractors to deliver our products could affect our business, financial condition or results of operations. If we lose our executive officers, or are unable to recruit additional personnel, our ability to manage our business could be materially and adversely affected.
Such charges could have a material adverse effect on our results of operations in the period in which they are recorded. 26 In connection with the preparation of our annual financial statements for the fiscal year ended December 31, 2022, we identified material weaknesses in our internal control over financial reporting.
In connection with the preparation of our annual financial statements for the fiscal year ended December 31, 2023, we identified material weaknesses in our internal control over financial reporting. Any failure to maintain effective internal control over financial reporting could harm us. Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
If the current uncertainty in the general economy does not change or continue to improve, our business, financial condition and results of operations could be harmed. More recently, the closures of Silicon Valley Bank and Signature Bank and their placement into receivership with the Federal Deposit Insurance Corporation (“FDIC”) created bank-specific and broader financial institution liquidity risk and concerns.
If the current uncertainty in the general economy does not change or continue to improve, our business, financial condition and results of operations could be harmed. 18 The international scope of our business exposes us to risks associated with foreign exchange rates. We report our financial results in U.S. dollars.
The issuance of our common stock upon conversion of the Series A Preferred Stock will result in immediate and substantial dilution to the interests of holders of our common stock, and such dilution will increase over time in connection with the accrual of dividends on the Series A Preferred Stock. 31 The concentration of common stock ownership among our executive officers and directors could limit the ability of other stockholders of the Company to influence the outcome of corporate transactions or other matters submitted for stockholder approval.
Any changes in investment ratings, regulations and policies or a shift in political attitudes both within and towards South Africa are beyond our control and could materially and adversely affect our business, financial condition and results of operations. 30 Risks Related to our Securities The concentration of common stock ownership among our executive officers and directors could limit the ability of other stockholders of the Company to influence the outcome of corporate transactions or other matters submitted for stockholder approval.
Removed
These risks include, among others, the following: ● We have incurred significant losses and have a substantial accumulated deficit.
Added
These risks include, among others, the following: ● We may not realize the anticipated benefits and cost savings of the MiX Combination. ● Integrating our business and MiX Telematics’ business may be more difficult, time-consuming or costly than expected. ● The market price for shares of our common stock may decline as a result of the MiX Combination, including as a result of some of our stockholders adjusting their portfolios. ● The MiX Combination may not be accretive, and may be dilutive, to the combined company’s earnings per share, which may negatively affect the market price of shares of our common stock. ● We have incurred significant losses and have a substantial accumulated deficit.
Removed
We provide no assurance that we will be able to successfully integrate any businesses, products, technologies or personnel that we have acquired or might acquire in the future. We may, from time to time, consider combinations with or acquisitions of complementary companies, products, or technologies.
Added
The success of the MiX Combination will depend, in part, on our ability to realize the anticipated benefits and cost savings from combining the two businesses.
Removed
In the event of any future acquisitions or combinations, we could: ● issue stock that would dilute our current stockholders’ percentage ownership; ● incur debt; ● assume liabilities; ● incur expenses related to the impairment of goodwill; or ● incur large and immediate write-offs.
Added
Our ability to realize these anticipated benefits and cost savings is subject to certain risks, including, among others: ● the parties’ ability to successfully combine their respective businesses; ● the risk that the combined businesses will not perform as expected; ● the extent to which the parties will be able to realize the expected synergies, which include realizing potential savings from re-assessing priority assets and aligning investments, eliminating duplication and redundancy, adopting an optimized operating model between both companies and leveraging scale, and creating value resulting from the combination of the two businesses; ● the possibility that the aggregate consideration being paid for MiX Telematics is greater than the value we will derive from the MiX Combination; ● the possibility that the combined company will not achieve the unlevered free cash flow that the parties have projected; ● the incurrence of additional indebtedness in connection with the MiX Combination and the resulting limitations placed on the combined company’s operations; and ● the assumption of known and unknown liabilities of MiX Telematics, including potential tax and employee-related liabilities.
Removed
We may not be able to identify suitable acquisition candidates, and if we do identify suitable candidates, we may not be able to make these acquisitions on acceptable terms, or at all.
Added
If we are not able to successfully integrate the businesses within the anticipated time frame, or at all, the anticipated cost savings, synergies operational efficiencies and other benefits of the MiX Combination may not be realized fully or may take longer to realize than expected, and the combined company may not perform as expected.
Removed
For example, on March 6, 2023, we entered into a definitive share purchase and transfer agreement (the “SPA”) with Swiss Re Reinsurance Holding Company Ltd (“Swiss Re”) to acquire all of the outstanding shares of Movingdots GmbH (“Movingdots”), a leading provider of insurance telematics and sustainable mobility solutions and wholly owned subsidiary of Swiss Re.
Added
Integrating our business and MiX Telematics’ business may be more difficult, time-consuming or costly than expected. We and MiX Telematics have operated independently prior to completion of the MiX Combination on April 2, 2024, and there can be no assurances that our businesses can be integrated successfully.
Removed
Our operation of any acquired business, including Movingdots, will involve numerous risks, including: ● problems integrating the acquired operations, personnel, technologies or products; ● unanticipated costs; ● diversion of management’s time and attention from our core businesses; ● adverse effects on existing business relationships with suppliers and customers; ● risks associated with entering markets in which we have no or limited prior experience; and ● potential loss of key employees, particularly those of acquired companies.
Added
It is possible that the integration process could result in the loss of key employees, the disruption of our company’s ongoing business or unexpected integration issues, such as higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated.
Removed
In addition, if we make changes to our business strategy or if external conditions adversely affect our business operations, we may be required to record an impairment charge for goodwill or intangibles, which would lead to decreased assets and reduced net operating performance. Our expansion into new products, services, and technologies, subjects us to additional risks.
Added
Specifically, issues that must be addressed in integrating the operations of our company and MiX Telematics in order to realize the anticipated benefits of the MiX Combination so that the combined business performs as expected include, among others: ● combining the companies’ separate operational, financial, reporting and corporate functions; ● integrating the companies’ technologies, products and services; ● identifying and eliminating redundant and underperforming operations and assets; ● harmonizing the companies’ operating practices, employee development, compensation and benefit programs, internal controls and other policies, procedures and processes; ● addressing possible differences in corporate cultures and management philosophies; ● maintaining employee morale and retaining key management and other employees; ● attracting and recruiting prospective employees; ● consolidating the companies’ corporate, administrative and information technology infrastructure; ● coordinating sales, distribution and marketing efforts; ● managing the movement of certain businesses and positions to different locations; ● maintaining existing agreements with customers and vendors and avoiding delays in entering into new agreements with prospective customers and vendors; ● coordinating geographically dispersed organizations; and ● effecting potential actions that may be required in connection with obtaining regulatory approvals.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease a call center and warehouse space and additional smaller facilities and antenna sites in various locations in Israel. We believe that our existing facilities are adequate for our existing needs.
Biggest changeWe also lease a call center and warehouse space and additional smaller facilities and antenna sites in various locations in Israel. Additionally, our subsidiary MiX Telematics leases domestic offices in Boca Raton, Florida and international offices in South Africa, the United Kingdom, Uganda, Brazil, Australia, Romania and the United Arab Emirates.
Item 2. Properties. Our corporate headquarters are located in Woodcliff Lake, New Jersey. We also have domestic offices in Tampa, Florida and Frisco, Texas. Our New Jersey offices measure approximately 13,899 square feet and is leased space.
Item 2. Properties. Our corporate headquarters are located in Woodcliff Lake, New Jersey. We also have domestic offices in Tampa, Florida and Frisco, Texas. Our New Jersey offices measure approximately 13,899 square feet and are leased space.
Added
We believe that our existing facilities are adequate for our existing needs.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is traded on the Nasdaq Global Market and the Tel Aviv Stock Exchange, in each case under the symbol “PWFL.” Holders As of March 20, 2023, there were 27 holders of record of our common stock.
Biggest changeMarket Information Our common stock is traded on The Nasdaq Global Market and the Tel Aviv Stock Exchange, in each case under the symbol “PWFL,” and the Johannesburg Stock Exchange under the symbol “PWR.” Holders As of April 29, 2024, there were 65 holders of record of our common stock.
The following table provides information regarding our share repurchase activity for each month of the quarterly period ended December 31, 2022: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2022 - October 31, 2022 - $ - $ - $ - November 1, 2022 - November 30, 2022 6,000 $ 2.76 (1) $ - $ - December 1, 2022 - December 31, 2022 - $ - $ - $ - Total 6,000 $ 2.76 $ - $ - (1) Represents shares of common stock withheld to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock.
The following table provides information regarding our share repurchase activity for each month of the quarterly period ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2023 - October 31, 2023 - $ - $ - $ - November 1, 2023 - November 30, 2023 2,000 $ 1.80 (1) $ - $ - December 1, 2023 - December 31, 2023 - $ - $ - $ - Total 2,000 $ 1.80 $ - $ - (1) Represents shares of common stock withheld to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock.
Added
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

65 edited+63 added−25 removed27 unchanged
Biggest changeYear Ended December 31, 2020 2021 2022 Revenue: Products 40.2 % 42.0 % 41.7 % Services 59.8 % 58.0 % 58.3 % 100.0 % 100.0 % 100.0 % Cost of Revenue: Cost of products 26.6 % 31.2 % 31.5 % Cost of services 21.4 % 21.1 % 21.0 % 48.0 % 52.3 % 52.5 % Gross profit 52.0 % 47.7 % 47.5 % Operating expenses: Selling, general and administrative expenses 45.7 % 45.2 % 46.6 % Research and development expenses 9.3 % 8.8 % 6.7 % Total operating expenses 55.0 % 54.0 % 53.3 % Loss from operations -3.0 % -6.3 % -5.8 % Interest income 0.1 % 0.0 % 0.1 % Interest expense -3.9 % -2.2 % 0.7 % Other income (expenses) net, -0.1 % 0.0 % 0.0 % Net loss before income taxes -7.0 % -8.5 % -5.0 % Income tax benefit (expense) -0.9 % -2.0 % -0.2 % Net loss before non-controlling interest -7.9 % -10.5 % -5.2 % Non-controlling interest 0.0 % 0.0 % 0.0 % Net loss -7.9 % -10.5 % -5.2 % Accretion of preferred stock -0.6 % -0.5 % -0.5 % Preferred stock dividend -3.5 % -3.3 % -3.1 % Net loss attributable to common shareholders -11.9 % -14.3 % -8.8 % 37 Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 REVENUES.
Biggest changeYear Ended December 31, 2021 (As restated) 2022 (As restated) 2023 Revenues: Products 42.0 % 41.9 % 37.2 % Services 58.0 % 58.1 % 62.8 % Total revenues 100.0 % 100.0 % 100.0 % Cost of revenues: Cost of products 31.5 % 31.3 % 27.2 % Cost of services 21.1 % 20.9 % 22.6 % 52.6 % 52.2 % 49.8 % Gross profit 47.4 % 47.8 % 50.2 % Operating expenses: Selling, general and administrative expenses 44.9 % 46.7 % 53.3 % Research and development expenses 9.1 % 6.2 % 6.2 % Total operating expenses 53.9 % 52.9 % 59.5 % Loss from operations -6.5 % -5.1 % -9.4 % Interest income 0.0 % 0.1 % 0.1 % Interest expense, net -2.2 % 0.7 % -1.2 % Bargain purchase - Movingdots 0.0 % 0.0 % 6.8 % Other (expense) income, net 0.0 % 0.0 % 0.0 % Net loss before income taxes -8.6 % -4.3 % -3.8 % Income tax expense -1.5 % -0.6 % -0.4 % Net loss before non-controlling interest -10.1 % -5.0 % -4.2 % Non-controlling interest 0.0 % 0.0 % 0.0 % Net loss -10.1 % -5.0 % -4.2 % Accretion of preferred stock -4.1 % -4.3 % -5.3 % Preferred stock dividend -3.3 % -3.1 % -3.4 % Net loss attributable to common stockholders -17.5 % -12.4 % -12.9 % 36 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 REVENUES.
Financing Activities Net cash used in financing activities was $0.3 million for the year ended December 31, 2022, compared to net cash provided by financing activities of $16.2 million for the same period in 2021.
Net cash used in financing activities was $0.3 million for the year ended December 31, 2022, compared to net cash provided by financing activities of $16.2 million for the same period in 2021.
Our PowerFleet for Industrial 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. These solutions utilize a variety of communications capabilities such as Bluetooth ® , WiFi, and proprietary radio frequency.
Our Powerfleet for Warehouse solutions are designed to provide on-premise or in-facility asset and operator management, monitoring, and visibility for warehouse trucks such as forklifts, man-lifts, tuggers and ground support equipment at airports. These solutions utilize a variety of communications capabilities such as Bluetooth ® , WiFi, and proprietary radio frequency.
Our PowerFleet for Vehicles solutions are designed both to enhance the vehicle fleet management process, whether it’s a rental car, a private fleet, or automotive original equipment manufacturer (OEM) partners. We achieve this by providing critical information that can be used to increase revenues, reduce costs and improve customer service.
Our 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.
The 2021 period was represented by net proceeds from our stock offering of $26.9 million offset by the net repayment of long-term debt of $5.7 million and the payment of preferred stock dividends of $4.1 million.
The 2021 period was represented by net proceeds from our stock offering of $26.9 million offset by the net repayment of long-term debt of $5.6 million and the payment of preferred stock dividends of $4.1 million.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion is intended to assist you in understanding our financial condition and results of operations and should be read in conjunction with the financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion is intended to assist you in understanding our financial condition and results of operations and should be read in conjunction with the financial statements and related notes included elsewhere in this Form 10-K.
The cash used in investing activities for the years ended December 31, 2021 and 2020 was for the purchase of fixed assets and capitalized software development.
The cash used in investing activities for the years ended December 31, 2022 and 2021 was for the purchase of fixed assets and capitalized software development.
Many of the amounts and percentages in this section have been rounded for convenience of presentation, but actual recorded amounts have been used in computations. Accordingly, some information may appear not to compute accurately. Overview PowerFleet, Inc.
Many of the amounts and percentages in this section have been rounded for convenience of presentation, but actual recorded amounts have been used in computations. Accordingly, some information may appear not to compute accurately.
As a result of global supply chain disruptions, the conflict between Russia and Ukraine, 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.
As a result of global supply chain disruptions, the conflicts between Russia and Ukraine and between Israel and Hamas, rising interest rates, fluctuations in currency values, inflation and other cost increases, there remains uncertainty surrounding the potential impact of such events on our results of operations and cash flows.
We recognize 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.
We recognize an asset for the incremental costs of obtaining the contract arising from the sales commissions to employees because we expect to recover those costs through future fees from the customers.
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.
We performed a quantitative assessment whereby the fair value of the reporting unit is calculated using a market approach and a discounted cash flow method, as a form of the income approach. The market approach includes the use of comparative revenue multiples to complement discounted cash flow results.
The 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. Goodwill and Intangibles Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses.
We amortize the asset over one to five years because the asset relates to the services transferred to the customer during the contract term of one to five years. Goodwill and Intangibles Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses.
The net cash provided by operating activities for the year ended December 31, 2022 reflects a net loss of $7.0 million and includes non-cash charges of $4.3 million for stock-based compensation, $8.3 million for depreciation and amortization expense and $2.8 million for right of use asset amortization.
The net cash provided by operating activities for the year ended December 31, 2022 reflects a net loss of $6.8 million (as restated) and includes non-cash charges of $4.3 million for stock-based compensation, $8.3 million for depreciation and amortization expense and $2.8 million for right of use asset amortization.
Under the SPA, Swiss Re is required to ensure that Movingdots has available cash and cash equivalents of at least €8,000,000 as of the closing date. The transaction closed on March 31, 2023.
Under the SPA, Swiss Re was required to ensure that Movingdots had available cash and cash equivalents of at least €8,000,000 as of the closing date. The transaction closed on March 31, 2023.
For the years ended December 31, 2020, 2021 and 2022, interest and penalties were immaterial. 36 Results of Operations The following table sets forth certain items related to our statement of operations as a percentage of revenues for the periods indicated and should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.
For the years ended December 31, 2021, 2022 and 2023, interest and penalties were immaterial. 35 Results of Operations The following table sets forth certain items related to our statement of operations as a percentage of revenues for the periods indicated and should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Form 10-K.
In addition, our wholly owned subsidiaries, Powerfleet Israel and Pointer (collectively, the “Borrowers”) are party to the Credit Agreement with Hapoalim, pursuant to which Hapoalim agreed to provide Powerfleet Israel with two senior secured term loan facilities denominated in NIS in an initial aggregate principal amount of $30 million (comprised of the Term A Facility and the Term B Facility in the aggregate principal amount of $20 million and $10 million, respectively) and a five-year revolving credit facility to Pointer denominated in NIS in an initial aggregate principal amount of $10 million (the “Revolving Facility”).
In addition, our wholly owned subsidiaries, Powerfleet Israel and Pointer (collectively, the “Borrowers”) were party to the Prior Credit Agreement with Hapoalim, pursuant to which Hapoalim agreed to provide Powerfleet Israel with two senior secured term loan facilities denominated in NIS in an initial aggregate principal amount of $30 million (comprised of two facilities in the aggregate principal amounts of $20 million and $10 million, respectively) and a five-year revolving credit facility to Pointer denominated in NIS in an initial aggregate principal amount of $10 million.
Our patented technologies address the needs of organizations to monitor and analyze their assets to improve safety, increase efficiency and productivity, reduce costs, and improve profitability. Our offerings are sold under the global brands Powerfleet, Pointer and Cellocator. We deliver advanced mobility solutions that connect assets to increase visibility operational efficiency and profitability.
Our patented technologies address the needs of organizations to monitor and analyze their assets to improve safety, increase efficiency and productivity, reduce costs, and improve profitability. Our offerings are sold under the global brands Powerfleet, Pointer and Cellocator. We deliver advanced mobility solutions that connect assets to increase visibility operational efficiency and profitability by leveraging our Unity platform product strategy.
Our primary sources of cash are cash flows from operating activities, our holdings of cash, cash equivalents and investments from the sale of our capital stock and borrowings under our credit facility. To date, we have not generated sufficient cash flow solely from operating activities to fund our operations.
Our primary sources of cash are cash flows from sales of products and services, our holdings of cash, cash equivalents and investments from the sale of our capital stock and borrowings under our credit facilities. To date, we have not generated sufficient cash flow solely from operating activities to fund our operations.
Our critical accounting policies are described below. 35 Revenue Recognition We 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.
Our critical accounting policies are described below. 34 Revenue Recognition We and our subsidiaries generate revenue from sales of systems and products and from customer SaaS and hosting infrastructure fees. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services.
Intangible assets are carried at cost, less accumulated amortization. Intangible assets consist of trademarks and trade names, patents, customer relationships and other intangible assets. Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. The Company operates in one reportable segment which is its only reporting unit.
Intangible assets are carried at cost, less accumulated amortization. Intangible assets consist of trademarks and trade names, patents, customer relationships and other intangible assets. Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. We operate in one reportable segment which is our only reporting unit.
Critical Accounting Estimates We have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States in the preparation of our financial statements. Our significant accounting policies are described in Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K.
Critical Accounting Policies and Estimates We have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States in the preparation of our financial statements. Our significant accounting policies are described in Note 3 to our consolidated financial statements included in this Form 10-K.
As a percentage of revenues, SG&A expenses increased to 46.6% in the year ended December 31, 2022, from 45.2% in the same period in 2021. RESEARCH AND DEVELOPMENT EXPENSES.
As a percentage of revenues, SG&A expenses increased to 46.7% in the year ended December 31, 2022, from 44.9% in the same period in 2021. RESEARCH AND DEVELOPMENT EXPENSES.
On March 6, 2023, we entered into the SPA with Swiss Re to acquire all of the outstanding shares of Movingdots for consideration consisting of €1 and the issuance by us of a ten-year warrant to purchase 800,000 shares of our common stock at an exercise price of $7.00 per share.
On March 6, 2023, we entered into a definitive share purchase and transfer agreement (the “SPA”) with Swiss Re Reinsurance Holding Company Ltd (“Swiss Re”) to acquire all of the outstanding shares of Movingdots for consideration consisting of €1 and the issuance by us of a ten-year warrant to purchase 800,000 shares of our common stock at an exercise price of $7.00 per share.
Failure to generate positive cash flow from operations will have a material adverse effect on our business, financial condition and results of operations. 40 Operating Activities Net cash provided by operating activities was $0.8 million for the year ended December 31, 2022, compared to net cash used in operating activities of $5.0 million for the same period in 2021.
Failure to generate positive cash flow from operations will have a material adverse effect on our business, financial condition and results of operations. 40 Operating Activities Net cash provided by operating activities was $4.4 million for the year ended December 31, 2023, compared to net cash provided by operating activities of $1.2 million (as restated) for the same period in 2022.
Changes in working capital items included: ● an increase in accounts receivable of $1.6 million; ● an increase in inventory of $4.5 million; ● a decrease in lease liabilities of $2.7 million; ● a decrease in accounts payable and accrued expenses of $0.5 million.
Changes in operating assets and liabilities included: ● an increase in accounts receivable of $1.4 million (as restated); ● an increase in inventory of $4.5 million; ● a decrease in lease liabilities of $2.7 million; and ● a decrease in accounts payable and accrued expenses of $0.6 (as restated) million.
Investing Activities Net cash used in investing activities was $5.8 million for the year ended December 31, 2022, compared to net cash used in investing activities of $3.4 million for the same period in 2021.
Net cash used in investing activities was $6.3 million (as restated) for the year ended December 31, 2022, compared to net cash used in investing activities of $3.0 million (as restated) for the same period in 2021.
Across our vertical markets we differentiate ourselves by being OEM agnostic and helping mixed fleets view and manage their assets similarly. All of our solutions are paired with software as a service (SaaS) analytics platforms to provide an even deeper layer of insights.
Across our vertical markets we differentiate ourselves by being OEM agnostic and helping mixed fleets view and manage their assets similarly. All of our solutions are paired with SaaS analytics platforms to provide an even deeper layer of insights. These insights include a full set of operational KPIs to drive operational and strategic decisions.
The decrease in gross profit as a percentage of revenues was principally due to increases in raw material costs as a result of global supply chain issues. Cost of products increased by approximately $3.2 million, or 8.1%, to $42.6 million in 2022 from $39.4 million in 2021.
The minimal increase in gross profit as a percentage of revenues was principally due to less significant increases in raw material costs as a result of global supply chain issues in 2022 than in 2021. Cost of products increased by approximately $2.9 million, or 7.4%, to $42.6 million in 2022 from $39.6 million (as restated) in 2021.
Net cash used in operating activities was $5.0 million for the year ended December 31, 2021, compared to net cash provided by operating activities of $8.8 million for the same period in 2020.
Net cash provided by operating activities was $1.2 million (as restated) for the year ended December 31, 2022, compared to net cash used in operating activities of $5.4 million (as restated) for the same period in 2021.
The net cash used in operating activities for the year ended December 31, 2021 reflects a net loss of $13.3 million and includes non-cash charges of $4.7 million for stock-based compensation, $8.6 million for depreciation and amortization expense and $2.9 million for right of use asset amortization.
The net cash provided by operating activities for the year ended December 31, 2023 reflects a net loss of $5.7 million and includes non-cash charges of $3.9 million for stock-based compensation, $9.4 million for depreciation and amortization expense, a gain on bargain purchase of $9.0 million, and $2.8 million for right of use asset amortization.
Selling, general and administrative (“SG&A”) expenses increased by approximately $5.9 million, or 10.3%, to $63.0 million in 2022 compared to $57.1 million in 2021, inclusive of higher foreign currency losses of $0.7 million and higher severance costs of $0.7 million. Other drivers of the increase in expenses include increased salaries and related expenses, professional fees, and marketing and travel expenses.
SG&A expenses increased by approximately $7.0 million, or 12.3%, to $63.5 million (as restated) in 2022 compared to $56.5 million (as restated) in 2021, inclusive of higher foreign currency losses of $0.7 million and higher severance costs of $0.7 million. Other drivers of the increase in expenses include increased salaries and related expenses, professional fees, and marketing and travel expenses.
Cost of services increased by approximately $1.8 million, or 6.7%, to $28.4 million in 2022 from $26.6 million in 2021. Gross profit for services was $50.5 million in 2022 compared to $46.6 million in 2021. As a percentage of service revenues, gross profit increased to 64.0% in 2022 from 63.7% in 2021.
Gross profit for services was $50.6 million (as restated) in 2022 compared to $46.5 million (as restated) in 2021. As a percentage of service revenues, gross profit increased to 64.1% in 2022 from 63.6% in 2021.
The 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.
We test our goodwill for impairment annually, which is the first day of our fourth quarter or when an indicator of impairment exists, by comparing the fair value of the reporting unit to its carrying value.
As a percentage of revenues, R&D expenses decreased to 8.8% in the year ended December 31, 2021from 9.3% in the same period in 2020. INTEREST EXPENSE.
As a percentage of revenues, R&D expenses decreased to 6.2% in the year ended December 31, 2022 from 9.1% in the same period in 2021. INTEREST EXPENSE.
Revenues from services increased by approximately $5.6 million, or 7.7%, to $78.8 million in 2022 from $73.2 million in 2021. The increase in services revenues is principally due to an increase in our install base that generates service revenue. COST OF REVENUES.
The increase in services revenues was principally due to an increase in our install base that generates service revenue. COST OF REVENUES. Cost of revenues increased by approximately $4.7 million, or 7.1%, to $70.9 million (as restated) in 2022 from $66.2 million (as restated) in 2021.
We incurred net losses of approximately $13.6 million, $18.1 million, and $11.9 million for the years ended December 31, 2020, 2021 and 2022, respectively, and have incurred additional net losses since inception.
We incurred net losses of approximately $22.1 million (as restated), $16.9 million (as restated), and $17.3 million for the years ended December 31, 2021, 2022 and 2023, respectively, and have incurred additional net losses since inception.
Product gross profit was also impacted by product mix, higher costs associated with supply chain issues, electronic component shortages and inflation. Cost of services increased by approximately $2.2 million, or 9.1%, to $26.6 million in 2021 from $24.4 million in 2020. Gross profit for services was $46.6 million in 2021 compared to $43.6 million in 2020.
The gross profit as a percentage of product revenues was impacted by product mix, higher costs associated with supply chain issues, electronic component shortages and inflation. Cost of services increased by approximately $1.8 million, or 6.7%, to $28.4 million in 2022 from $26.6 million in 2021.
These insights include a full set of operational Key Performance Indicators (KPIs) to drive operational and strategic decisions. These KPIs leverage industry comparisons to show how a company is performing versus their peers. The more data the system collects, the more accurate a client’s understanding becomes.
These KPIs leverage industry comparisons to show how a company is performing versus their peers. The more data the system collects, the more accurate a client’s understanding becomes.
Net cash provided by financing activities was $16.2 million for the year ended December 31, 2021, compared to net cash used in financing activities of $3.9 million for the same period in 2020.
Financing Activities Net cash used in financing activities was $3.7 million for the year ended December 31, 2023, compared to net cash used in financing activities of $0.3 million for the same period in 2022.
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. Net loss attributable to common stockholders was $11.9 million, or $(0.34) per basic and diluted share, for 2022 as compared to net loss of $18.1 million, or $(0.52) per basic and diluted share, for the same period in 2021. The decrease in the net loss was due primarily to the reasons described above.
Net loss attributable to common stockholders was $16.9 million (as restated), or $(0.48) per basic and diluted share, for 2022 as compared to net loss of $22.1 million (as restated), or $(0.64) per basic and diluted share, for the same period in 2021.
Research and development (“R&D”) expenses decreased by approximately $2.1 million, or 18.9%, to $9.0 million in 2022 compared to $11.1 million in 2021, principally due to the capitalization of software development expenses for new product development, which increased by $2.2 million in 2022.
R&D expenses decreased by approximately $3.0 million, or 25.9%, to $8.5 million (as restated) in 2022 compared to $11.4 million (as restated) in 2021, principally due to the capitalization of software development expenses for new product development, which increased by $1.7 million in 2022.
As of December 31, 2022, we had cash (including restricted cash) and cash equivalents of $18.0 million, working capital of $35.5 million, and an accumulated deficit of $141.4 million.
As of December 31, 2023, we had cash (including restricted cash) and cash equivalents of $19.3 million, working capital of $23.5 million, and an accumulated deficit of $146.3 million.
The outstanding amount under the term loan facilities was approximately NIS 55.3 million, or $15.9 million, as of December 31, 2022. The proceeds of the term loan facilities were used to finance a portion of the cash consideration payable in our acquisition of Pointer. The proceeds of the revolving credit facility may be used by Pointer for general corporate purposes.
The proceeds of the term loan facilities were used to finance a portion of the cash consideration payable in our acquisition of Pointer. The outstanding amount under the revolving facility was approximately NIS 4,915, or $1,355, as of December 31, 2023.
Revenues increased by approximately $8.9 million, or 7.1%, to $135.2 million in 2022 from $126.2 million in 2021. Revenues from products increased by approximately $3.3 million, or 6.3%, to $56.3 million in 2022 from $53.0 million in 2021. The increase in product revenues is attributable to an increase in sales by our Powerfleet for Logistics and Powerfleet for Industrial products.
The increase in product revenues was attributable to an increase in sales by our Powerfleet for Logistics and Powerfleet for Warehouse products. Revenues from services increased by approximately $5.9 million, or 8.1%, to $79.0 million (as restated) in 2022 from $73.1 million (as restated) in 2021.
Cost of revenues increased by approximately $5.0 million, or 7.5%, to $71.0 million in 2022 from $66.0 million in 2021. Gross profit was $64.2 million in 2022 compared to $60.2 million in 2021. As a percentage of revenues, gross profit decreased to 47.5% in 2022 from 47.7% in 2021.
Cost of revenues decreased by approximately $4.3 million, or 6.0%, to $66.7 million in 2023 from $70.9 million in 2022. Gross profit was $67.1 million in 2023 compared to $65.0 million (as restated) in 2022. As a percentage of revenues, gross profit increased to 50.2% in 2023 from 47.8% in 2022.
Gross profit for products was $13.5 million in 2021 compared to $15.4 million in 2020. As a percentage of product revenues, gross profit decreased to 25.5% in 2021 from 33.8% in 2020.
Gross profit for products was $14.4 million (as restated) in 2022 compared to $13.3 million (as restated) in 2021. As a percentage of product revenues, gross profit minimally increased to 25.2% in 2022 from 25.1% in 2021.
Inflation Rising inflation and other macroeconomic conditions in the U.S. have resulted in higher costs of raw materials, freight, and labor, which has impacted our operating costs.
In 2022, dividends were not paid in cash and the net cash used in financing was primarily from the repayment of long-term debt, net of proceeds from debt. Inflation Rising inflation and other macroeconomic conditions in the U.S. have resulted in higher costs of raw materials, freight, and labor, which has impacted our operating costs.
As a percentage of revenues, R&D expenses decreased to 6.7% in the year ended December 31, 2022 from 8.8% in the same period in 2021. INTEREST EXPENSE. Interest expense decreased by $3.8 million, or 136.0%, to $(1.0) million in 2022 from $2.8 million in 2021, principally due to foreign currency translation gains from the Term Facilities.
As a percentage of revenues, R&D expenses increased to 6.3% in the year ended December 31, 2023 from 6.2% in the same period in 2022. INTEREST EXPENSE.
Changes in working capital items included: ● an increase in accounts receivable of $9.7 million; ● an increase in inventory of $6.1 million; and ● an increase in accounts payable and accrued expenses of $8.3 million.
Changes in operating assets and liabilities included: ● an increase in accounts receivable of $1.5 million; ● an increase in inventory of $1.7 million; ● a decrease in lease liabilities of $2.9 million; and ● an increase in accounts payable and accrued expenses of $4.5 million.
The cash used in investing activities for the years ended December 31, 2022 and 2021 was primarily for the purchase of fixed assets and capitalized software development. Net cash used in investing activities was $3.4 million for the year ended December 31, 2021, compared to net cash used in investing activities of $3.3 million for the same period in 2020.
Investing Activities Net cash provided by investing activities was $1.5 million for the year ended December 31, 2023, compared to net cash used in investing activities of $6.3 million (as restated) for the same period in 2022.
The New Revolver will be available for a period of one month, commencing on October 31, 2022, and will continue to be available for successive one-month periods until and including October 30, 2023, unless the Borrowers deliver a notice to Hapoalim of their request not to renew the New Revolver.
The Term Facilities will mature on March 18, 2029. The Revolving Facilities are available for successive one-month periods until and including March 18, 2025, unless the Borrowers deliver prior notice to Hapoalim of their request not to renew the Revolving Facilities.
Cost of revenues increased by approximately $11.4 million, or 21.0%, to $66.0 million in 2021 from $54.6 million in 2020. Gross profit was $60.2 million in 2021 compared to $59.0 million in 2020. As a percentage of revenues, gross profit decreased to 47.7% in 2021 from 52.0% in 2020.
Gross profit was $65.0 million (as restated) in 2022 compared to $59.8 million (as restated) in 2021. As a percentage of revenues, gross profit increased to 47.8% in 2022 from 47.4% in 2021.
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. Net loss attributable to common stockholders was $18.1 million, or $(0.52) per basic and diluted share, for 2021 as compared to net loss of $13.6 million, or $(0.46) per basic and diluted share, for the same period in 2020. The decrease in the net loss was due primarily to the reasons described above.
Net loss attributable to common stockholders was $17.3 million, or $(0.49) per basic and diluted share, for 2023 as compared to net loss of $16.9 million (as restated), or $(0.48) per basic and diluted share, for the same period in 2022.
There was an additional $1.0 million increase in severance and recruiting related expenses. As a percentage of revenues, SG&A expenses decreased to 45.2% in the year ended December 31, 2021, from 45.7% in the same period in 2020. RESEARCH AND DEVELOPMENT EXPENSES.
As a percentage of revenues, SG&A expenses increased to 53.3% in the year ended December 31, 2023, from 46.7% in the same period in 2022. RESEARCH AND DEVELOPMENT EXPENSES.
Our primary sources of cash are cash flows from operating activities, our holdings of cash, cash equivalents and investments from the sale of our capital stock and borrowings under our credit facility. To date, we have not generated sufficient cash flow solely from operating activities to fund our operations.
To date, we have not generated sufficient cash flow solely from operating activities to fund our operations.
We are proactively taking steps to increase available cash on hand including, but not limited to, targeted reductions in discretionary operating expenses and capital expenditures and borrowing under the revolving credit facility. Capital Requirements As of December 31, 2022, we had cash (including restricted cash), cash equivalents and marketable securities of $18.0 million and working capital of $35.5 million.
We are proactively taking steps to increase available cash on hand including, but not limited to, targeted reductions in discretionary operating expenses and capital expenditures and borrowing under the revolving credit facility. 39 On April 2, 2024, we consummated the MiX Combination, pursuant to which MiX Telematics became our indirect, wholly owned subsidiary.
The deferred revenue and cost are 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. Our 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.
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 change from the same period in 2020 was primarily due to the net proceeds from our stock offering of $26.9 million offset by the repayment of long-term debt of $5.6 million and the payment of preferred stock dividends of $4.1 million.
The increase in net cash used in financing activities was primarily due to the payment in cash of preferred stock dividends totaling $3.4 million compared to $0 in 2022, net of the changes in the repayment of long-term debt and change in short-term debt, net balance.
For products which do not have standalone value to the customer separate from the SaaS services provided, the Company considers both hardware and SaaS services a bundled performance obligation.
For products which are not distinct to the customer separate from the SaaS services provided, we consider both hardware and SaaS services a bundled performance obligation. Under the applicable accounting guidance, all of our billings for future services are deferred and classified as a current and long-term liability.
The guidance is generally effective as of January 1, 2021, with early adoption permitted. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
We adopted ASU No. 2016-13 on January 1, 2023. The adoption of the standard did not result in a material impact on the consolidated financial statements.
Gross profit for products was $13.7 million in 2022 compared to $13.5 million in 2021. As a percentage of product revenues, gross profit decreased to 24.3% in 2022 from 25.5% in 2021. The decrease in gross profit as a percentage of product revenues was impacted by product mix, higher costs associated with supply chain issues, electronic component shortages and inflation.
Cost of products decreased by approximately $6.2 million, or 14.5%, to $36.4 million in 2023 from $42.6 million in 2022. Gross profit for products was $13.3 million in 2023 compared to $14.4 million (as restated) in 2022. As a percentage of product revenues, gross profit increased to 26.8% in 2023 from 25.2% in 2022.
The proceeds received from such sale were used to finance a portion of the cash consideration payable in our acquisition of Pointer. Also, on October 3, 2019, we issued and sold the Notes to the Investors at the closing of the Transactions.
(the “Investors”) pursuant to the terms of an Investment and Transaction Agreement, dated as of March 13, 2019 (as amended, the “Investment Agreement”), for an aggregate purchase price of $50.0 million. The proceeds received from such sale were used to finance a portion of the cash consideration payable in our acquisition of Pointer.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 REVENUES. Revenues increased by approximately $12.6 million, or 11.1%, to $126.2 million in 2021 from $113.6 million in 2020. Revenues from products increased by approximately $7.3 million, or 16.1%, to $53.0 million in 2021 from $45.7 million in 2020.
Revenues increased by approximately $10.0 million, or 7.9%, to $135.9 million (as restated) in 2022 from $126.0 million (as restated) in 2021. Revenues from products increased by approximately $4.0 million, or 7.6%, to $56.9 million (as restated) in 2022 from $52.9 million (as restated) in 2021.
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. For the years ended December 31, 2020, 2021 and 2022, the Company did not incur an impairment charge. Income Taxes We use the asset and liability method of accounting for deferred income taxes.
These valuation inputs are inherently judgmental, and an adverse change in one or a combination of these inputs could trigger a goodwill impairment loss in the future. In connection with our goodwill impairment testing as of October 1, 2023, the estimated fair value exceeded its carrying value by approximately 6%.
Pointer is required to pay a credit allocation fee equal to 0.5% per annum on undrawn and uncancelled amounts of the New Revolver. Pointer also has a one-year $1,000 revolving credit facility available for use with Discount Bank, which renews annually, subject to the bank’s approval.
Pointer is required to pay a credit allocation fee in NIS, with respect to Facility C, and a non-utilization fee in U.S. dollars, with respect to Facility D, in each case, equal to 0.5% per annum on undrawn and uncancelled amounts of the Revolving Facilities during the period commencing on March 18, 2024 and ending on the last day of the applicable availability period of such Revolving Facilities.
Removed
(together with its subsidiaries, “Powerfleet,” the “Company,” “we,” “our” or “us”) is a global leader of Internet-of-Things (IOT) solutions providing valuable business intelligence for managing high-value enterprise assets that improve operational efficiencies. We are headquartered in Woodcliff Lake, New Jersey, with offices located around the globe.
Added
Restatement of Previously Issued Consolidated Financial Statements As described in the Explanatory Note included in this Form 10-K, we have restated our previously issued consolidated financial statements for the Non-Reliance Periods. As a result, we have also restated certain previously reported financial information for the fiscal years ended December 31, 2022 and 2021 in this “Item 7.
Removed
Under the applicable accounting guidance, all of the Company’s billings for equipment and the related cost for these systems are deferred, recorded, and classified as a current and long-term liability and a current and long-term asset, respectively.
Added
Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including but not limited to financial information under the sections entitled “Results of Operations” and “Liquidity and Capital Resources—Capital Requirements” to conform the discussion with the restated information.
Removed
The Company generally determines standalone selling prices based on observable prices charged to customers or adjusted market assessment or using expected cost-plus margin when one is available. Adjusted market assessment price is determined based on overall pricing objectives taking into consideration market conditions and entity specific factors.
Added
See Note 2 to our consolidated financial statements, included Item 8 of this Form 10-K, for additional information on the restatement of, and the related effects on, our consolidated financial statements for the Non-Reliance Periods. Overview Powerfleet is a global leader of IOT solutions providing valuable business intelligence for managing high-value enterprise assets that improve operational efficiencies.
Removed
The increase in product revenue is attributable to an increase in sales by our Powerfleet for Logistics products. Revenues from services increased by approximately $5.3 million, or 7.8%, to $73.2 million in 2021 from $67.9 million in 2020. The increase in services revenue is principally due to an increase in our install base that generates service revenue. COST OF REVENUES.
Added
We are headquartered in Woodcliff Lake, New Jersey, with offices located around the globe. On April 2, 2024, we consummated the MiX Combination, pursuant to which MiX Telematics became our indirect, wholly owned subsidiary.
Removed
The decrease in gross profit as a percentage of revenue was principally due to changes in product mix and higher costs for components as a result of the global supply chain issues. 38 Cost of products increased by approximately $9.2 million, or 30.5%, to $39.4 million in 2021 from $30.2 million in 2020.
Added
Sales, value add, and other taxes we collect concurrently with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The expected costs associated with our base warranties continue to be recognized as an expense when the products are sold.
Removed
The decrease in gross profit as a percentage of product revenues was primarily due to a $400,000 one-time expense related to an incentive program to expand business with an existing customer that is one of the largest chassis lessors in North America.
Added
We recognize revenue for remotely hosted SaaS agreements and post-contract maintenance and support agreements beyond our standard warranties over the life of the contract. Revenue is recognized ratably over the service periods and the cost of providing these services is expensed as incurred.
Removed
As a percentage of service revenues, gross profit decreased to 63.7% in 2021 from 64.2% in 2020. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.
Added
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.
Removed
SG&A expenses increased by approximately $5.2 million, or 10.0%, to $57.1 million in 2021 compared to $51.9 million in 2020 principally due to increased salaries due to the reversal of temporary cost reduction initiatives implemented during the first quarter of 2020 in response to the impact and uncertainty caused by COVID-19.

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