UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended:
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction | (I.R.S. Employer | |
| of incorporation or organization) | Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | |
| Non-accelerated filer ☐ | Smaller
reporting company |
| Emerging
growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
The number of shares of the registrant’s common stock, $0.01 par value per share, outstanding as of the close of business on November 7, 2023 was .
INDEX
PowerFleet, Inc. and Subsidiaries
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
POWERFLEET, INC. AND SUBSIDIARIES
Condensed Balance Sheets
(In thousands, except per share data)
| December 31, 2022 * | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net of allowance for credit losses of $ | ||||||||
| Inventory, net | ||||||||
| Deferred costs - current | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Fixed assets, net | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Right of use asset | ||||||||
| Severance payable fund | ||||||||
| Deferred tax asset | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES | ||||||||
| Current liabilities: | ||||||||
| Short-term bank debt and current maturities of long-term debt | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Deferred revenue - current | ||||||||
| Lease liability - current | ||||||||
| Total current liabilities | ||||||||
| Long-term debt, less current maturities | ||||||||
| Deferred revenue - less current portion | ||||||||
| Lease liability - less current portion | ||||||||
| Accrued severance payable | ||||||||
| Deferred tax liability | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (note 22) | ||||||||
| MEZZANINE EQUITY | ||||||||
| Convertible redeemable preferred stock: Series A – shares authorized, $ par value; and shares issued and outstanding at December 31, 2022 and September 30, 2023 | ||||||||
| Preferred stock; authorized shares, $ par value; | ||||||||
| Common stock; authorized shares, $ par value; and shares issued at December 31, 2022 and September 30, 2023, respectively; shares outstanding, and at December 31, 2022 and September 30, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Treasury stock; and common shares at cost at December 31, 2022 and September 30, 2023, respectively | ( | ) | ( | ) | ||||
| Total PowerFleet, Inc. stockholders’ equity | ||||||||
| Non-controlling interest | ||||||||
| Total equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
| * |
See accompanying notes to unaudited condensed consolidated financial statements.
| 3 |
POWERFLEET, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2023 | 2022 | 2023 | |||||||||||||
| Revenues: | ||||||||||||||||
| Products | $ | $ | $ | $ | ||||||||||||
| Services | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Cost of revenues: | ||||||||||||||||
| Cost of products | ||||||||||||||||
| Cost of services | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Research and development expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ||||||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Bargain purchase - Movingdots | ||||||||||||||||
| Other (expense) income, net | ( | ) | ( | ) | ||||||||||||
| Net loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss before non-controlling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Non-controlling interest | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Accretion of preferred stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Preferred stock dividend | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share attributable to common stockholders - basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share attributable to common stockholders - diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding - basic | ||||||||||||||||
| Weighted average common shares outstanding - diluted | ||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 4 |
POWERFLEET, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
(In thousands, except per share data)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2023 | 2022 | 2023 | |||||||||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss), net: | ||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other comprehensive income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 5 |
POWERFLEET, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Changes in Stockholders’ Equity
(In thousands, except per share data)
(Unaudited)
| Common Stock | Accumulated | |||||||||||||||||||||||||||||||
| Number of Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Other Comprehensive Income (Loss) | Treasury Stock | Non-controlling Interest | Stockholders’ Equity | |||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | | ||||||||||||||||||
| Net income (loss) attributable to common stockholders | - | ( | ) | |||||||||||||||||||||||||||||
| Net loss attributable to non-controlling interest | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | |||||||||||||||||||||||||||||
| Issuance of restricted shares | ||||||||||||||||||||||||||||||||
| Forfeiture of restricted shares | ( | ) | ||||||||||||||||||||||||||||||
| Shares withheld pursuant to vesting of restricted stock | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||||||
| Warrant issuance in connection with acquisition | - | |||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| Net loss attributable to common stockholders | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net income attributable to non-controlling interest | - | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | |||||||||||||||||||||||||||||
| Issuance of restricted shares | ( | ) | ||||||||||||||||||||||||||||||
| Forfeiture of restricted shares | ( | ) | ||||||||||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||||||||||
| Shares withheld pursuant to vesting of restricted stock | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| Net loss attributable to common stockholders | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Issuance of restricted shares | ( | ) | ||||||||||||||||||||||||||||||
| Shares withheld pursuant to vesting of restricted stock | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| Common Stock | Accumulated | |||||||||||||||||||||||||||||||
| Number of Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Other Comprehensive Income (Loss) | Treasury Stock | Non-controlling Interest | Stockholders’ Equity | |||||||||||||||||||||||||
| Balance at January 1, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | | ||||||||||||||||||||
| Net loss attributable to common stockholders | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net income attributable to non-controlling interest | - | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||||||
| Issuance of restricted shares | ( | ) | ||||||||||||||||||||||||||||||
| Forfeiture of restricted shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Vesting of restricted stock units | ||||||||||||||||||||||||||||||||
| Shares withheld pursuant to vesting of restricted stock | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Net loss attributable to common stockholders | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net income attributable to non-controlling interest | - | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Forfeiture of restricted shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Shares withheld pursuant to vesting of restricted stock | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| Net loss attributable to common stockholders | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net income attributable to non-controlling interest | - | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Issuance of restricted shares | ( | ) | ||||||||||||||||||||||||||||||
| Forfeiture of restricted shares | ( | ) | ||||||||||||||||||||||||||||||
| Shares withheld pursuant to vesting of restricted stock | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 6 |
POWERFLEET, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands, except per share data)
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2022 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities: | ||||||||
| Non-controlling interest | ||||||||
| Gain on bargain purchase | ( | ) | ||||||
| Inventory reserve | ||||||||
| Stock based compensation expense | ||||||||
| Depreciation and amortization | ||||||||
| Right-of-use assets, non-cash lease expense | ||||||||
| Bad debt expense | ||||||||
| Deferred income taxes | ||||||||
| Other non-cash items | ||||||||
| Changes in: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Deferred costs | ||||||||
| Deferred revenue | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Lease liabilities | ( | ) | ( | ) | ||||
| Accrued severance payable, net | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Acquisitions, net of cash assumed | ||||||||
| Purchase of investments | ( | ) | ||||||
| Capitalized software development costs | ( | ) | ||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Repayment of long-term debt | ( | ) | ( | ) | ||||
| Short-term bank debt, net | ||||||||
| Purchase of treasury stock upon vesting of restricted stock | ( | ) | ( | ) | ||||
| Payment of preferred stock dividend | ( | ) | ||||||
| Proceeds from exercise of stock options | ||||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Effect of foreign exchange rate changes on cash and cash equivalents | ( | ) | ( | ) | ||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | ( | ) | ||||||
| Cash, cash equivalents and restricted cash - beginning of period | ||||||||
| Cash, cash equivalents and restricted cash - end of period | $ | $ | ||||||
| Reconciliation of cash, cash equivalents, and restricted cash, beginning of period | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Cash, cash equivalents, and restricted cash, beginning of period | $ | $ | ||||||
| Reconciliation of cash, cash equivalents, and restricted cash, end of period | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for: | ||||||||
| Taxes | ||||||||
| Interest | ||||||||
| Noncash investing and financing activities: | ||||||||
| Value of warrant issued in connection with Movingdots acquisition | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 7 |
POWERFLEET, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 2023
In thousands (except per share data)
NOTE 1 - DESCRIPTION OF THE COMPANY AND BASIS OF PRESENTATION
Description of the Company
PowerFleet, Inc. (the “Company” or “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.
I.D. Systems, Inc. (“I.D. Systems”) was incorporated in the State of Delaware in 1993. Powerfleet was incorporated in the State of Delaware in February 2019 for the purpose of effectuating the transactions (the “Transactions”) pursuant to which the Company acquired Pointer Telocation Ltd. (“Pointer”) and commenced operations on October 3, 2019. Upon the closing of the Transactions, Powerfleet became the parent entity of I.D. Systems and Pointer.
Basis of Presentation
The unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the consolidated financial position of the Company as of September 30, 2023, the consolidated results of its operations for the three- and nine-month periods ended September 30, 2022 and 2023, the consolidated change in stockholders’ equity for the three-month periods ended March 31, June 30 and September 30, 2022 and 2023, and the consolidated cash flows for the nine-month periods ended September 30, 2022 and 2023. The results of operations for the three- and nine-month periods ended September 30, 2023 are not necessarily indicative of the operating results for the full year. These financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K for the year then ended.
| 8 |
Liquidity
As
of September 30, 2023, the Company had cash (including restricted cash) and cash equivalents of $
In
addition, the Company’s subsidiaries, PowerFleet Israel Ltd. (“Powerfleet Israel”) and Pointer Telocation Ltd. (“Pointer”
and, together with Powerfleet Israel, the “Borrowers”) are party to a Credit Agreement (the “Credit Agreement”)
with Bank Hapoalim B.M. (“Hapoalim”), pursuant to which Hapoalim provided Powerfleet Israel with two senior secured term
loan facilities denominated in New Israeli Shekels (NIS) in an initial aggregate principal amount of $
On
October 31, 2022, the Borrowers entered into a third amendment to the Credit Agreement (the “Third Amendment”) with Hapoalim.
The Third Amendment provides for, among other things, a new revolving credit facility to Pointer denominated in NIS in an initial aggregate
principal amount of $
The New Revolver is secured by a first ranking fixed pledge and assignment by Pointer over its new bank account, which was opened in connection with the New Revolver, and all of the rights relating thereunder as well as a cross guarantee by Powerfleet Israel.
Pointer
is required to pay a credit allocation fee equal to
On October 10, 2023, the Company entered into an Implementation Agreement (the “Implementation Agreement”), by and among the Company, Main Street 2000 Proprietary Limited, a private company incorporated in the Republic of South Africa and a wholly owned subsidiary of the Company (“Powerfleet Sub”), and MiX Telematics Limited, a public company incorporated under the laws of the Republic of South Africa (“MiX Telematics”), pursuant to which MiX Telematics will become an indirect, wholly owned subsidiary of the Company. The Implementation Agreement requires, as a condition to closing of the transactions contemplated therein, that the Company obtain a debt and/or equity financing (the “Financing”) in an amount sufficient to provide for the redemption in full of all outstanding shares of the Company’s Series A Convertible Preferred Stock (“Series A Preferred Stock”).
The
Company has incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of $
The Company has received credit committee
approval from its existing lender, Hapoalim, to enter into a new 5-year term debt facility with an approximate value of $
Management
believes the Company’s cash and cash equivalents of $
| 9 |
NOTE 2 – USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company continually evaluates estimates used in the preparation of the financial statements for reasonableness. The most significant estimates relate to realization of deferred tax assets, accounting for uncertain tax positions, the impairment of intangible assets, including goodwill, capitalized software development costs, stock-based compensation costs related to market based awards, warrant assumptions, and standalone selling price related to multiple element revenue arrangements. Actual results could differ from those estimates.
NOTE 3 – ACQUISITION
On March 6, 2023, the Company entered into a share purchase and transfer agreement (the “Agreement”) with Swiss Re Reinsurance Holding Company Ltd (the “Seller”), pursuant to which the Company would acquire all of the outstanding shares of Movingdots GmbH (“Movingdots”), a wholly owned subsidiary of the Seller, for consideration consisting of € and the issuance by the Company of a ten-year warrant to purchase shares of the Company’s common stock at an exercise price of $ per share (the “Common Stock Warrants”) and with fair value of approximately $ at March 31, 2023 and noncash consideration with an immaterial fair value in the form of a non-exclusive irrevocable, perpetual, fully paid-up, royalty free license agreement between Movingdots and the Seller for certain of the acquired intellectual property (the “Acquisition”). The Acquisition was consummated on March 31, 2023 (the “Movingdots Closing”).
As a result of the Acquisition, Movingdots, a German company providing insurance telematics and sustainable mobility solutions, became a direct, wholly owned subsidiary of Powerfleet. Movingdots end-to-end telematics app solution will enhance Powerfleet’s software-as-a-service (“SaaS”)-based fleet intelligence platform, Unity, with additional customization capabilities and insurance risk insights. Movingdots’ expertise in safety and sustainability aligns with Unity’s focus on data-powered applications. The Acquisition also strengthens Powerfleet’s global reach, particularly in Europe.
As part of the Agreement the Seller was also obligated to (i) transfer certain intellectual property rights from the Seller to Movingdots, (ii) enter into a distribution agreement pursuant to which the Seller is allowed to promote the Movingdots solutions, and (iii) grant a license agreement between the Seller’s affiliates and Movingdots.
The warrant was valued using the Black-Scholes Model using the following assumptions at the date of issuance:
| Expected volatility | % | |||
| Expected term (in years) | ||||
| Risk free interest rate | % | |||
| Dividend yield | % | |||
| Fair value per share | $ |
Purchase Price Allocation
The
Acquisition met the criteria for a business combination to be accounted for using the acquisition method under ASC 805, Business
Combinations (“ASC 805”), with the Company identified as the legal and the accounting acquirer. There was certain
information that was not readily available at the time the financial statements of Movingdots were prepared as the Acquisition
closed on March 31, 2023. For provisional purchase price allocation purposes, the assets acquired and liabilities assumed are stated
at their carrying values which management assumed approximates their fair values given their short-term nature. Also, the Company
recognized approximately $
| 10 |
The following table details the provisional allocation of the purchase price to the assets acquired and liabilities assumed in connection with the acquisition of Movingdots:
| Consideration: | ||||
| Cash | $ | |||
| Fair value of Powerfleet warrants on March 31, 2023 | ||||
| Total consideration | $ | |||
| Assets acquired: | ||||
| Cash | $ | |||
| Accounts receivable | ||||
| Prepaid expenses | ||||
| Other assets | ||||
| Inventory | ||||
| Fixed assets | ||||
| Total assets acquired | ||||
| Liabilities assumed: | ||||
| Accounts payable and accrued expenses | ||||
| Total liabilities assumed | ||||
| Total identifiable net assets acquired | ||||
| Gain on bargain purchase | ( | ) | ||
| Purchase price consideration | $ |
The
provisional fair value estimates of the assets acquired and liabilities assumed, including intangibles, income taxes, and the non-cash
consideration, are subject to subsequent adjustments as additional information is obtained during the applicable measurement period.
Determining the fair values of the assets and liabilities of Movingdots required certain assumptions and judgment. During the second
quarter of 2023, the valuation of certain assets acquired and liabilities assumed were revised resulting in an increase in the gain on
bargain purchase of $
Consistent
with the requirements of ASC 805, the Company assessed whether all assets acquired and liabilities assumed have been appropriately identified,
measured and recognized, and performed re-measurements to verify that the consideration paid, assets acquired and liabilities assumed
have been properly valued. After applying the requirements of ASC 805-30-25-4, the Company recognized a gain on bargain purchase as the
estimated fair value of the identifiable net assets acquired exceeded the purchase consideration transferred by approximately $
The
gain on bargain purchase primarily resulted from the Seller’s motivation to divest its investment in Movingdots and its telematics
business, which was deemed a non-core business of the Seller on a go-forward basis. The sale of Movingdots was not subject to a competitive
bidding process. Under the Agreement, the Seller also agreed to make a cash injection into Movingdots prior to the Movingdots Closing
in a form of additional paid in capital to ensure Movingdots had available cash in the amount of €
If
the Company makes an on-sale transfer of any shares of Movingdots that were acquired in connection with the Acquisition at any time
between the signing date of the Agreement and through 12 months after the Movingdots Closing, to any third-party purchaser (an
“on-sale transfer”), for an amount that is in excess of the purchase price consideration transferred, then the Company
shall pay the Seller an amount in cash (“on sale compensation”) equal to
Management views that the insurance telematics and sustainability are important spaces for the Company to have propositions to enable future strategic value, supporting the more evolved, IOT data-rich mass subscription space. The acquisition of Movingdots and its business will, among other things:
| ● | open strategic relationships with some key customers such as Mercedes, BMW and Vodafone; |
| ● | provide greater go-to-market opportunity to the Company with the European beachhead for future regional expansion, customer acquisition tool to upsell the Company’s portfolio into German and European markets, and maintain a distribution channel and partnership with the Seller; and |
| ● | provide the Company with access to a team with technical skillsets across application development and management, cloud platform development, user experience/user interface design development and technical product management; |
| 11 |
The following table represents the combined pro forma revenue and earnings for the three- and nine-month periods ended September 30, 2022:
Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2022 | |||||||||||||||
| Historical | Pro forma combined | Historical | Pro forma combined | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The following table represents the combined pro forma revenue and earnings for the three- and nine-month periods ended September 30, 2023:
Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | |||||||||||||||
| Historical | Pro forma combined | Historical | Pro forma combined | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share – basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The unaudited combined pro forma revenue and earnings for the three and nine-month periods ended September 30, 2022 and 2023 were prepared as though the Acquisition had occurred as of January 1, 2022. This summary is not necessarily indicative of what the results of operations would have been had the Acquisition occurred as of such date, nor does it purport to represent results of operations for any future periods.
NOTE 4 – CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with an original maturity of three months or less when purchased to be cash equivalents unless they are legally or contractually restricted. The Company’s cash and cash equivalent balances exceed Federal Deposit Insurance Corporation (“FDIC”) and other local jurisdictional limits (in Israel and Germany). Restricted cash at December 31, 2022 and September 30, 2023 consists of cash held in escrow for purchases from a vendor.
| 12 |
NOTE 5 - REVENUE RECOGNITION
The Company and its subsidiaries generate revenue from sales of systems and products and from customer SaaS and hosting infrastructure fees. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes the Company collects concurrently with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The expected costs associated with the Company’s base warranties continue to be recognized as expense when the products are sold (see Note 14).
Revenue is recognized when performance obligations under the terms of a contract with our customer are satisfied. Product sales are recognized at a point in time when title transfers, when the products are shipped, or when control of the system is transferred to the customer, which usually is upon delivery of the system and when contractual performance obligations have been satisfied. For products which 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. 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. 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.
The Company recognizes revenue for remotely hosted SaaS agreements and post-contract maintenance and support agreements beyond our standard warranties over the life of the contract. Revenue is recognized ratably over the service periods and the cost of providing these services is expensed as incurred. Amounts invoiced to customers which are not recognized as revenue are classified as deferred revenue and classified as short-term or long-term based upon the terms of future services to be delivered. Deferred revenue also includes prepayment of extended maintenance, hosting and support contracts.
The Company earns other service revenues from installation services, training and technical support services which are short-term in nature and revenue for these services are recognized at the time of performance when the service is provided.
The Company also derives revenue from leasing arrangements. Such arrangements provide for monthly payments covering product or system sale, maintenance, support and interest. These arrangements meet the criteria to be accounted for as operating or sales-type leases. Accordingly, for sales-type leases an asset is established for the “sales-type lease receivable” at the present value of the expected lease payments and revenue is deferred and recognized over the service contract, as described above. Maintenance revenues and interest income are recognized monthly over the lease term.
The Company’s contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. 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.
The Company recognizes an asset for the incremental costs of obtaining the contract arising from the sales commissions to employees because the Company expects to recover those costs through future fees from the customers. The Company amortizes the asset over one to five years because the asset relates to the services transferred to the customer during the contract term of one to five years.
The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which the Company has the right to invoice for services performed.
The following table presents the Company’s revenues disaggregated by revenue source for the three -and nine-months ended September 30, 2022 and 2023:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2023 | 2022 | 2023 | |||||||||||||
| Products | $ | $ | $ | $ | ||||||||||||
| Services | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| 13 |
The balances of contract assets and contract liabilities from contracts with customers are as follows as of December 31, 2022 and September 30, 2023:
| December 31, 2022 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Assets: | ||||||||
| Deferred contract cost | $ | $ | ||||||
| Deferred cost | $ | $ | ||||||
| Liabilities | ||||||||
| Deferred revenue – services (1) | $ | $ | ||||||
| Deferred revenue – products (1) | ||||||||
| Less: Deferred revenue and contract liabilities – current portion | ( | ) | ( | ) | ||||
| Deferred revenue and contract liabilities – less current portion | $ | $ | ||||||
| (1) |
NOTE 6 – ALLOWANCE FOR CREDIT LOSSES
The Company’s receivables were evaluated to determine an appropriate allowance for credit losses. For trade receivables, the Company’s historical collections were analyzed by the number of days past due to determine the uncollectible rate in each range of days past due and considerations of any changes expected in the future. The estimate of the allowance for credit losses is charged to the allowance for credit losses based on the age of receivables multiplied by the historical uncollectible rate for the range of days past due or earlier if the account is deemed uncollectible for other reasons. Recoveries of amounts previously charged as uncollectible are credited to the allowance for credit losses.
An analysis of the allowance for credit losses for the period ended September 30, 2023 is as follows:
| Allowance for credit losses, December 31, 2022 | $ | |||
| Current period provision for expected credit losses | ||||
| Write-offs charged against the allowance | ( | ) | ||
| Foreign currency translation | ||||
| Allowance for credit losses, September 30, 2023 | $ |
During the nine-months ended September 30, 2023, the change in the allowance for credit losses was due to the change in the age of trade receivables.
NOTE 7 – PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other current assets consist of the following:
| December 31, 2022 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Sales-type lease receivables, current | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Contract assets | ||||||||
| Other current assets | ||||||||
| $ | $ | |||||||
| 14 |
NOTE 8 - INVENTORY
Inventory,
which primarily consists of finished goods and components used in the Company’s products, is stated at the lower of cost or net
realizable value using the “moving average” cost method or the first-in first-out (FIFO) method. Inventory is shown net of
a valuation reserve of $
Inventories consist of the following:
| December 31, 2022 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Components | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods, net | ||||||||
| $ | $ | |||||||
NOTE 9 - FIXED ASSETS
Fixed assets are stated at cost, less accumulated depreciation and amortization, and are summarized as follows:
| December 31, 2022 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Installed products | $ | $ | ||||||
| Computer software | ||||||||
| Computer and electronic equipment | ||||||||
| Furniture and fixtures | ||||||||
| Leasehold improvements | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation
and amortization expense of fixed assets for the three- and nine-month periods ended September 30, 2022 was $
| 15 |
NOTE 10 - INTANGIBLE ASSETS AND GOODWILL
Costs incurred internally in researching and developing software products are charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, software costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. The amortization of these costs will be included in cost of revenue over the estimated life of the products.
The following table summarizes identifiable intangible assets of the Company as of December 31, 2022 and September 30, 2023:
| September 30, 2023 | Useful Lives (In Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
| Amortized: | ||||||||||||||
| Customer relationships | $ | $ | ( | ) | $ | |||||||||
| Trademark and tradename | ( | ) | ||||||||||||
| Patents | ( | ) | ||||||||||||
| Technology | ( | ) | ||||||||||||
| Favorable contract interest | ( | ) | ||||||||||||
| Covenant not to compete | ( | ) | ||||||||||||
| Software to be sold or leased | ( | ) | ||||||||||||
| ( | ) | |||||||||||||
| Unamortized | ||||||||||||||
| Customer list | - | |||||||||||||
| Trademark and tradename | - | |||||||||||||
| - | ||||||||||||||
| Total | $ | $ | ( | ) | $ | |||||||||
| December 31, 2022 | Useful Lives (In Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
| Amortized: | ||||||||||||||
| Customer relationships | $ | $ | ( | ) | $ | |||||||||
| Trademark and tradename | ( | ) | ||||||||||||
| Patents | ( | ) | ||||||||||||
| Technology | ( | ) | ||||||||||||
| Favorable contract interest | ( | ) | ||||||||||||
| Covenant not to compete | ( | ) | ||||||||||||
| Software to be sold or leased | ||||||||||||||
| ( | ) | |||||||||||||
| Unamortized | ||||||||||||||
| Customer list | - | |||||||||||||
| Trademark and tradename | - | |||||||||||||
| - | ||||||||||||||
| Total | $ | $ | ( | ) | $ | |||||||||
| 16 |
Global uncertainties continue to adversely impact the broader global economy and have caused significant volatility in financial markets. If there is a lack of recovery or further global softening in certain markets, or a sustained decline in the value of the Company’s common stock, the Company may conclude that indicators of impairment exist and would then be required to calculate whether or not an impairment exists for its goodwill, other intangibles, and long-lived assets, the results of which could result in material impairment charges. The Company tests goodwill and other indefinite lives intangible assets on an annual basis in the fourth quarter and more frequently if the Company believes indicators of impairment exists. As of December 31, 2022 and September 30, 2023, the Company determined that no impairment existed to the goodwill, customer list and trademark and trade name of its acquired intangibles.
At
September 30, 2023, the weighted-average amortization period for the intangible assets was
Amortization
expense for the three- and nine-month periods ended September 30, 2022 was $
| 2023 (remaining) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| $ |
There have been no changes in the carrying amount of goodwill from January 1, 2023 to September 30, 2023.
For the nine-month period ended September 30, 2023, the Company did not identify any indicators of impairment.
| 17 |
During the first fiscal quarter of 2023, the Company granted shares of restricted stock to certain executives, which vest in four equal installments over a four-year period, provided that the executive is employed by the Company on each scheduled vesting date.
During the first fiscal quarter of 2023, the Company granted options to purchase shares of the Company’s common stock to certain executives, consisting of options to purchase shares of common stock with time-based vesting conditions and options to purchase shares of common stock with performance-based vesting conditions (which we refer to as “market-based stock options”). The options have an exercise price of $. The market-based stock options will vest and become exercisable if the volume weighted average price of the Company’s common stock during a consecutive 60-day trading period (the “60 Day VWAP”) reaches $. The Company valued the market-based stock option awards using a Monte Carlo simulation model using a daily price forecast over ten years until expiration utilizing Geometric Brownian Motion that considers a variety of factors including, but not limited to, the Company’s common stock price, risk-free rate (%), and expected stock price volatility (%) over the expected life of awards ( years). The weighted average fair value of market-based stock options granted during the period was $.
During the second fiscal quarter of 2023, the Company issued shares of restricted stock to certain employees, which vests over four equal installments over a four-year period, provided that the employee is employed by the Company on each scheduled vesting date.
During the second fiscal quarter of 2023, the Company issued options to purchase shares of the Company’s common stock to certain employees, consisting of options to purchase shares of common stock with time-based vesting conditions and options to purchase shares of common stock with performance-based vesting conditions (which we refer to as “market-based stock options”). The options have an exercise price of $. The market-based stock options will vest and become exercisable if the 60 Day VWAP reaches $. The Company valued the market-based stock option awards using a Monte Carlo simulation model using a daily price forecast over ten years until expiration utilizing Geometric Brownian Motion that considers a variety of factors including, but not limited to, the Company’s common stock price, risk-free rate (%), and expected stock price volatility (%) over the expected life of awards ( years). The weighted average fair value of market-based stock options issued during the period was $.
During
the third fiscal quarter of 2023, the Company granted shares of restricted stock to Steve Towe, the Company’s Chief Executive
Officer, which vest over four equal installments over a four-year period, provided that the Mr. Towe is employed by the Company on each
scheduled vesting date. Additionally, 82 shares of restricted stock were granted to certain members of the board of directors, which
vest in full on the date of grant, provided that the director is a director of the Company on such date.
[A] Stock Options:
| Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Terms | Aggregate Intrinsic Value | |||||||||||
| Outstanding at beginning of year | $ | $ | ||||||||||||
| Granted | $ | - | ||||||||||||
| Exercised | $ | - | ||||||||||||
| Forfeited or expired | ( | ) | $ | |||||||||||
| Outstanding at end of period | $ | years | $ | |||||||||||
| Exercisable at end of period | $ | $ | ||||||||||||
The following table summarizes the activity relating to the Company’s stock options, excluding the market-based stock options that were granted to certain executives and employees, for the nine-month period ended September 30, 2023:
| Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Terms | Aggregate Intrinsic Value | |||||||||||
| Outstanding at beginning of year | $ | $ | ||||||||||||
| Granted | $ | - | ||||||||||||
| Exercised | ( | ) | $ | |||||||||||
| Forfeited or expired | ( | ) | $ | |||||||||||
| Outstanding at end of period | $ | years | $ | |||||||||||
| Exercisable at end of period | $ | years | $ | |||||||||||
| September 30, | ||||||||
| 2022 | 2023 | |||||||
| Expected volatility | % | % | ||||||
| Expected life of options (in years) | ||||||||
| Risk free interest rate | % | % | ||||||
| Dividend yield | % | % | ||||||
| Weighted-average fair value of options granted during the year | $ | $ | ||||||
Expected volatility is based on historical volatility of the Company’s common stock and the expected life of options is based on historical data with respect to employee exercise periods.
The Company recorded stock-based compensation expense of $ and $ for the three- and nine-month periods ended September 30, 2022, respectively, and $ and $ for the three- and nine-month periods ended September 30, 2023, respectively, in connection with awards made under the stock option plans.
The fair value of options vested during the nine-month periods ended September 30, 2022 and 2023 was $ and $, respectively.
| 18 |
As of September 30, 2023, there was $ of total unrecognized compensation cost related to non-vested options granted under the Company’s stock option plans that exclude the market-based stock options that were granted to certain senior managers, including the Company’s executive officers. That cost is expected to be recognized over a weighted-average period of years.
As of September 30, 2023, there was $ of total unrecognized compensation cost related to non-vested options granted under the Company’s stock option plans for the market-based stock options that were granted to certain senior managers, including the Company’s executive officers. That cost is expected to be recognized over a weighted-average period of years.
The Company estimates forfeitures at the time of valuation and reduces expense ratably over the vesting period. This estimate is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate.
[B] Restricted Stock Awards:
The Company grants restricted stock to employees, whereby the employees are contractually restricted from transferring the shares until they are vested. The stock is unvested at the time of grant and, upon vesting, there are no legal restrictions on the stock. The fair value of each share is based on the Company’s closing stock price on the date of the grant. A summary of all non-vested restricted stock for the nine-month period ended September 30, 2023 is as follows:
| Number of Non- Vested Shares | Weighted- Average Grant Date Fair Value | |||||||
| Restricted stock, non-vested, beginning of year | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Restricted stock, non-vested, end of period | $ | |||||||
The Company recorded stock-based compensation expenses of $ and $ for the three- and nine-month periods ended September 30, 2022, respectively, and $ and $ for the three -and nine-month periods ended September 30, 2023, respectively, in connection with restricted stock grants. As of September 30, 2023, there was $ of total unrecognized compensation cost related to non-vested shares. That cost is expected to be recognized over a weighted-average period of years.
| 19 |
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2023 | 2022 | 2023 | |||||||||||||
| Basic and diluted loss per share | ||||||||||||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted-average common share outstanding – basic and diluted | ||||||||||||||||
| Net loss attributable to common stockholders – basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
Basic loss per share is calculated by dividing net loss attributable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution assuming common shares were issued upon the exercise of outstanding options and the proceeds thereof were used to purchase outstanding common shares. Dilutive potential common shares include outstanding stock options, warrants and restricted stock and performance share awards. We include participating securities (unvested share-based payment awards and equivalents that contain non-forfeitable rights to dividends or dividend equivalents) in the computation of earnings per share pursuant to the two-class method. Our participating securities consist solely of preferred stock, which have contractual participation rights equivalent to those of stockholders of unrestricted common stock. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company. For the nine-month periods ended September 30, 2022 and 2023, the basic and diluted weighted-average shares outstanding are the same, since the effect from the potential exercise of outstanding stock options, conversion of preferred stock, and vesting of restricted stock and restricted stock units totaling and , respectively, would have been anti-dilutive due to the loss.
NOTE 13 - SHORT-TERM BANK DEBT AND LONG-TERM DEBT
| December 31, | September 30, | |||||||
| 2022 | 2023 | |||||||
| (unaudited) | ||||||||
| Short-term bank debt | $ | $ | ||||||
| Current maturities of long-term debt | $ | $ | ||||||
| Long-term debt - less current maturities | $ | $ | ||||||
| 20 |
Long-Term Debt
In
connection with the Transactions, Powerfleet Israel incurred NIS denominated debt in term loan borrowings on October 3, 2019 which was
the closing date of the Transactions (the “Closing Date”), under the Credit Agreement, pursuant to which Hapoalim agreed
to provide Powerfleet Israel with two senior secured term loan facilities in an initial aggregate principal amount of $
The
Credit Facilities will mature on the date that is five years from the Closing Date, or October 3, 2024. The indicative interest rate
provided for the Term Facilities in the original Credit Agreement was approximately
On
August 23, 2021, the Borrowers entered into an amendment (the “Amendment”), effective as of August 1, 2021, to the Credit
Agreement with Hapoalim. The Amendment memorializes the agreements between the Borrowers and Hapoalim regarding a reduction in the interest
rates of the two Term Facilities. Pursuant to the Amendment, commencing as of November 12, 2020, the interest rate with respect to the
Term A Facility was reduced to a fixed rate of
In
connection with the Credit Facilities, the Company incurred debt issuance costs of $
On
October 31, 2022, the Borrowers entered into the Third Amendment with Hapoalim. The Third Amendment provides for, among other things,
the New Revolver. 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. As of September 30, 2023, the Company borrowed NIS
The New Revolver is secured by a first ranking fixed pledge and assignment by Pointer over its new bank account, which was opened in connection with the New Revolver, and all of the rights relating thereunder as well as a cross guarantee by Powerfleet Israel.
Pointer
is required to pay a credit allocation fee equal to
Scheduled maturities of the long-term debt as of September 30, 2023 are as follows:
| October 2023 - September 2024 | $ | |||
| October 2024 | ||||
| Less: Current portion | ||||
| Total | $ |
The Term B Facility is not subject to amortization over the life of the loan and instead the original principal amount is due in one installment on the fifth anniversary of the Closing Date.
| 21 |
NOTE 14 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
| December 31, | September 30, | |||||||
| 2022 | 2023 | |||||||
| (unaudited) | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued warranty | ||||||||
| Accrued compensation | ||||||||
| Government authorities | ||||||||
| Other current liabilities | ||||||||
| $ | $ | |||||||
The following table summarizes warranty activity for the nine-month periods ended September 30, 2022 and 2023:
| Nine Months Ended September 30, | ||||||||
| 2022 | 2023 | |||||||
| (unaudited) | ||||||||
| Accrued warranty reserve, beginning of year | $ | $ | ||||||
| Accrual for product warranties issued | ||||||||
| Product replacements and other warranty expenditures | ( | ) | ( | ) | ||||
| Expiration of warranties | ( | ) | ( | ) | ||||
| Accrued warranty reserve, end of period (1) | $ | $ | ||||||
| (1) |
| 22 |
NOTE 15 - STOCKHOLDERS’ EQUITY
[A] Redeemable Preferred Stock
The Company is authorized to issue shares of preferred stock, par value $ per share of which shares are designated Series A Preferred Stock and shares are undesignated.
Series A Preferred Stock
In connection with the completion of the Transactions, on October 3, 2019, the Company issued shares of Series A Preferred Stock to ABRY Senior Equity V, L.P., ABRY Senior Equity Co-Investment Fund V, L.P and ABRY Investment Partnership, L.P. (the “Investors”). For the nine-month periods ended September 30, 2022 and 2023, the Company issued and additional shares of Series A Preferred Stock, respectively.
Liquidation
Dividends
Holders
of Series A Preferred Stock are entitled to receive cumulative dividends at a minimum rate of
Voting; Consent Rights
The
holders of Series A Preferred Stock will be given notice by the Company of any meeting of stockholders or action to be taken by written
consent in lieu of a meeting of stockholders as to which the holders of common stock are given notice at the same time as provided in,
and in accordance with, the Company’s Amended and Restated Bylaws. Except as required by applicable law or as otherwise specifically
set forth in the Charter, the holders of Series A Preferred Stock are not entitled to vote on any matter presented to the Company’s
stockholders unless and until any holder of Series A Preferred Stock provides written notification to the Company that such holder is
electing, on behalf of all holders of Series A Preferred Stock, to activate their voting rights and in doing so rendering the Series
A Preferred Stock voting capital stock of the Company (such notice, a “Series A Voting Activation Notice”).
| 23 |
Redemption
At
any time, each holder of Series A Preferred Stock may elect to convert each share of such holder’s then-outstanding Series A Preferred
Stock into the number of shares of the Company’s common stock equal to the quotient of (x) the Series A Issue Price, plus any accrued
and unpaid dividends, divided by (y) the Series A Conversion Price in effect at the time of conversion. The Series A Conversion Price
is initially equal to $
Further, at any time (i) after the 66-month anniversary of the Original Issuance Date, (ii) following delivery of a mandatory conversion notice by us, or (iii) upon a deemed liquidation event, subject to Delaware law governing distributions to stockholders, the holders of the Series A Preferred Stock may elect to require us to redeem all or any portion of the outstanding shares of Series A Preferred Stock for an amount per share equal to the Redemption Price.
NOTE 16 - ACCUMULATED OTHER COMPREHENSIVE LOSS
Comprehensive loss includes net loss and foreign currency translation gains and losses.
The accumulated balances for each classification of other comprehensive loss for the nine-month period ended September 30, 2023 are as follows:
Foreign currency translation adjustment | Accumulated other comprehensive loss | |||||||
| Balance at January 1, 2023 | $ | ( | ) | $ | ( | ) | ||
| Net current period change | ( | ) | ( | ) | ||||