false000177417003/312025Q1SUBSEQUENT EVENTS
The directors are not aware of any matter material or otherwise arising since June 30, 2024 and up to the date of this report.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
—————————
FORM 10-Q
—————————
(Mark One)
☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

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: 001-39080

POWERFLEET, INC.
(Exact name of registrant as specified in its charter)
Delaware83-4366463
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)
123 Tice Boulevard
Woodcliff Lake,New Jersey07677
(Address of principal executive offices)(Zip Code)
(201)996-9000
(Registrant’s telephone number, including area code)
December 31
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareAIOTThe Nasdaq Global Market

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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 ☐
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 ☐ No ☒

The number of shares of the registrant’s common stock, $0.01 par value per share, outstanding as of the close of business on August 16, 2024 was 107,758,010.


INDEX

POWERFLEET, INC. AND SUBSIDIARIES
 
Page
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 2024 and June 30, 2024


Condensed Consolidated Statements of Operations - for the three months ended June 30, 2023 and 2024


Condensed Consolidated Statements of Comprehensive Loss - for the three months ended June 30, 2023 and 2024
Condensed Consolidated Statement of Changes in Stockholders’ Equity - for the three months ended June 30, 2023 and 2024


Condensed Consolidated Statements of Cash Flows - for the three months ended June 30, 2023 and 2024
Notes to Condensed Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
Signatures
 


2

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
POWERFLEET, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
March 31, 2024 *June 30, 2024
ASSETS
Current assets:
Cash and cash equivalents$24,354 $30,242 
Restricted cash85,310 1,151 
Accounts receivables, net of allowance for credit losses of $3,197 and $3,727 as of March 31, 2024 and June 30, 2024, respectively
30,333 60,132 
Inventory, net21,658 25,832 
Deferred costs - current4224
Prepaid expenses and other current assets8,091 16,498 
Total current assets169,788 133,879 
Fixed assets, net12,719 49,705 
Goodwill83,487 300,775 
Intangible assets, net19,652 170,093 
Right-of-use asset7,428 10,722 
Severance payable fund3,796 3,760 
Deferred tax asset2,781 3,544 
Other assets9,029 12,435 
Total assets$308,680 $684,913 
LIABILITIES
Current liabilities:
Short-term bank debt and current maturities of long-term debt$1,951 $27,604 
Accounts payable and accrued expenses34,008 68,771 
Deferred revenue - current5,842 10,019 
Lease liability - current1,789 2,441 
Total current liabilities43,590 108,835 
Long-term debt - less current maturities113,810 111,957 
Deferred revenue - less current portion4,892 4,825 
Lease liability - less current portion5,921 8,555 
Accrued severance payable4,597 4,533 
Deferred tax liability4,465 52,645 
Other long-term liabilities2,496 3,015 
Total liabilities179,771 294,365 
Commitments and Contingencies (Note 22)
Convertible redeemable preferred stock: Series A - 100 shares authorized, $0.01 par value; 60 and 0 shares issued and outstanding at March 31, 2024 and June 30, 2024, respectively, at redemption value of $90,273 at March 31, 2024
90,273 — 
STOCKHOLDERS’ EQUITY
Preferred stock; authorized 50,000 shares, $0.01 par value
— — 
3

Common stock; authorized 175,000 shares, $0.01 par value; 38,709 and 109,641 shares issued at March 31, 2024 and June 30, 2024, respectively; shares outstanding, 37,212 and 107,578 at March 31, 2024 and June 30, 2024, respectively
387 1,096 
Additional paid-in capital202,607 578,514 
Accumulated deficit(154,796)(177,108)
Accumulated other comprehensive loss(985)(567)
Treasury stock; 1,497 and 2,063 common shares at cost at March 31, 2024 and June 30, 2024, respectively
(8,682)(11,518)
Total Powerfleet, Inc. stockholders’ equity38,531 390,417 
Non-controlling interest105 131 
Total equity38,636 390,548 
Total liabilities, convertible redeemable preferred stock, and stockholders’ equity$308,680 $684,913 

* Derived from audited balance sheet as of March 31, 2024.

See accompanying notes to condensed consolidated financial statements.





































4

POWERFLEET, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended June 30,
2023
(As Restated)		2024
Revenues:
Products$11,084 $18,738 
Services21,008 56,692 
Total revenues32,092 75,430 
Cost of revenues:
Cost of products8,550 12,751 
Cost of services7,524 23,031 
Total cost of revenues16,074 35,782 
Gross profit16,018 39,648 
Operating expenses:
Selling, general and administrative expenses17,198 54,782 
Research and development expenses2,221 3,101 
Total operating expenses19,419 57,883 
Loss from operations(3,401)(18,235)
Interest income22 304 
Interest expense(173)(2,691)
Bargain purchase - Movingdots283 — 
Other income, net— (624)
Net loss before income taxes(3,269)(21,246)
Income tax benefit/(expense)6 (1,053)
Net loss before non-controlling interest(3,263)(22,299)
Non-controlling interest(6)(13)
Net loss(3,269)(22,312)
Accretion of preferred stock(1,772)— 
Preferred stock dividend(1,129)(25)
Net loss attributable to common stockholders$(6,170)$(22,337)
Net loss per share attributable to common stockholders - basic and diluted$(0.17)$(0.21)
Weighted average common shares outstanding - basic and diluted35,605 107,136 

See accompanying notes to condensed consolidated financial statements.
5

POWERFLEET, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)

Three Months Ended June 30,
2023
(As Restated)		2024
Net loss attributable to common stockholders$(6,170)$(22,337)
Foreign currency translation adjustment100 418 
Total other comprehensive income100 418 
Comprehensive loss$(6,070)$(21,919)

See accompanying notes to condensed consolidated financial statements.





































6

POWERFLEET, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Changes in Stockholders’ Equity
(In thousands)
(Unaudited)
Three Months Ended June 30, 2023 and 2024
Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income/(Loss)Treasury StockNon-Controlling InterestTotal Stockholder’s Equity
Number of SharesAmount
Balance as of April 1, 2023 (As Restated)37,621$376 $218,473 $(135,961)$(1,098)$(8,554)$66 $73,302 
Net loss attributable to common stockholders— — (2,901)(3,269)— — — (6,170)
Net income attributable to non-controlling interest— — — — — — 6 6 
Foreign currency translation adjustment— — — — 100 — (9)91 
Issuance of restricted shares162 1 (1)— — — — — 
Forfeiture of restricted shares(82)— — — — — — — 
Exercise of stock options16 — 36 — — — — 36 
Shares withheld pursuant to vesting of restricted stock— — — — — (4)— (4)
Stock-based compensation— — 852 — — — — 852 
Balance as of June 30, 2023 (As Restated)37,717 $377 $216,458 $(139,230)$(998)$(8,558)$63 $68,112 
Balance as of April 1, 202438,709$387 $202,607 $(154,796)$(985)$(8,682)$105 $38,636 
Net loss attributable to common stockholders— — (25)(22,312)— — — (22,337)
Net loss attributable to non-controlling interest— — — — — — 13 13 
Foreign currency translation adjustment— — — — 418 — 8 426 
Issuance of restricted shares54 1 (1)— — — — — 
Shares issued for transaction bonus
174 1 888 — — — — 889 
Shares issued in connection with MiX Combination70,704 707 361,298 — — — — 362,005 
Acquired through MiX Combination— — 7,818 — — — 5 7,823 
Shares withheld pursuant to vesting of restricted stock— — — — — (2,836)— (2,836)
Stock-based compensation— — 5,929 — — — — 5,929 
Balance as of June 30, 2024109,641 $1,096 $578,514 $(177,108)$(567)$(11,518)$131 $390,548 
        
See accompanying notes to condensed consolidated financial statements.
7

POWERFLEET, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended June 30,
20232024
Cash flows from operating activities
Net loss$(3,269)$(22,312)
Adjustments to reconcile net loss to cash used in operating activities:
Non-controlling interest6 13 
Gain on bargain purchase(283)— 
Inventory reserve373 257 
Stock based compensation expense852 5,929 
Depreciation and amortization2,322 10,335 
Right-of-use assets, non-cash lease expense660 760 
Bad debts expense598 1,993 
Deferred income taxes(24)1,021 
Shares issued for transaction bonuses— 889 
Other non-cash items27 482 
Changes in operating assets and liabilities:
Accounts receivables(668)(6,973)
Inventories389 (624)
Prepaid expenses and other current assets344 (1,518)
Deferred costs185 (1,789)
Deferred revenue58 (142)
Accounts payable and accrued expenses(1,466)4,993 
Lease liabilities(650)(927)
Accrued severance payable, net88 (2)
Net cash used in operating activities(458)(7,615)
Cash flows from investing activities
Acquisition, net of cash assumed
— 27,531 
Capitalized software development costs(997)(2,308)
Capital expenditures(966)(5,586)
Net cash (used in)/provided by investing activities (1,963)19,637 
Cash flows from financing activities
Repayment of long-term debt(1,329)(493)
Short-term bank debt, net2,737 4,161 
Purchase of treasury stock upon vesting of restricted stock
(4)(2,836)
Payment of preferred stock dividend and redemption of preferred stock(1,129)(90,298)
Proceeds from exercise of stock options, net36 — 
Cash paid on dividends to affiliates— (4)
Net cash from/(used in) financing activities311 (89,470)
Effect of foreign exchange rate changes on cash and cash equivalents(941)(823)
8

Net decrease in cash and cash equivalents, and restricted cash(3,051)(78,271)
Cash and cash equivalents, and restricted cash at beginning of the period25,089 109,664 
Cash and cash equivalents, and restricted cash at end of the period$22,038 $31,393 
Reconciliation of cash and cash equivalents, and restricted cash, at beginning of the period
Cash and cash equivalents24,780 24,354 
Restricted cash309 85,310 
Cash and cash equivalents, and restricted cash, at beginning of the period$25,089 $109,664 
Reconciliation of cash and cash equivalents, and restricted cash, at end of the period
Cash and cash equivalents21,729 30,242 
Restricted cash309 1,151 
Cash and cash equivalents, and restricted cash, at end of the period$22,038 $31,393 
Supplemental disclosure of cash flow information:
Cash paid for:
Taxes$101 $41 
Interest$238 $3,057 
Noncash investing and financing activities:
Common stock issued for transaction bonus$— $9 
Shares issued in connection with MiX Combination$— $362,005 



See accompanying notes to condensed consolidated financial statements.



9

POWERFLEET, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2024
In thousands (except per share data)
(Unaudited)

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 pursuant to which the Company acquired Pointer Telocation Ltd. (“Pointer”) and commenced operations on October 3, 2019. Upon the closing of such transactions, Powerfleet became the parent entity of I.D. Systems and Pointer.

On April 2, 2024 (the “Implementation Date”), the Company consummated the transactions contemplated by the Implementation Agreement, dated as of October 10, 2023 (the “Implementation Agreement”), that the Company entered into with 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 became an indirect, wholly owned subsidiary of the Company (the “MiX Combination”). The consolidated financial statements as of and for the three months ended June 30, 2024 include the financial results of MiX Telematics and its subsidiaries from the Implementation Date. See Note 3 for additional information.


Basis of Preparation

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 March 31, 2024 and June 30, 2024, the consolidated results of its operations for the three-month periods ended June 30, 2023 and 2024, the consolidated change in stockholders’ equity for the three-month periods ended June 30, 2023 and 2024, and the consolidated cash flows for the three-month periods ended June 30, 2023 and 2024. The results of operations for the three-month period ended June 30, 2024 are not necessarily indicative of the operating results for the full year. On May 8, 2024, our Board of Directors approved a change in our fiscal year end from December 31 to March 31 in order to better align our reporting calendar with the April 2, 2024 close of the MiX Combination and MiX Telematics’ historical March 31 fiscal year end. These financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures for the fiscal year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K for the year then ended, and the audited consolidated financial statements and related disclosures for the three-month transition period ended March 31, 2024 included in the Company’s Transition Report on Form 10-KT for the period then ended.

Restatement of Previously Issued Consolidated Financial Statements

In connection with the preparation of the Company’s audited consolidated financial statements for the year ended December 31, 2023, the Company determined that the accounting for the redemption premium associated with its Series A convertible preferred stock (“Series A Preferred Stock”) was understated resulting in an understatement of “net loss attributable to common stockholders” and “net loss per share attributable to common stockholders” for each period, an understatement of the value of the convertible redeemable preferred stock as of each balance sheet date, and an overstatement of the additional paid-in capital as of each balance sheet date. The required adjustments to correct the redemption value of the calculation of the Series A Preferred Stock and the related accretion of the value of the preferred stock in the consolidated statement of operations included the recording of a non-cash accretion which resulted in an increase in the net loss attributable to common stockholders, an increase in the “convertible redeemable preferred stock”, and a decrease of “additional paid-in capital” for the fiscal years ended December 31, 2021 and 2022 and each of the interim periods during the 2022 and 2023 fiscal years.

10

The correction of the error resulted in reporting the value of the convertible preferred stock including the accretion to the redemption value from the date of original issuance through each balance sheet date applying the interest method. The restatement to non-cash accretion resulted in an increase in the net loss attributable to common stockholders and a decrease in “additional paid-in capital” of $1,604 for the 3 months ended June 30, 2023. The Company had determined that it was appropriate to restate the financial statements for the fiscal years ended December 31, 2021 and 2022 and each of the interim periods during the 2022 and 2023 fiscal years included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”). In addition, the Company also corrected other unrelated immaterial errors that were previously either unrecorded or recorded as out-of-period adjustments. For additional information refer to Note 2 to the financial statements included in the 2023 Annual Report.


Going Concern

As of June 30, 2024, the Company had cash and cash equivalents of $30,242 and working capital of $25,044. The Company’s primary sources of cash are cash flows from sales of products and services, its holdings of cash, cash equivalents and proceeds from the sale of its capital stock and borrowings under its credit facilities. See Note 13 for additional information on the Company’s available credit facilities.

Management believes the Company’s cash, cash equivalents, and restricted cash of $31,393 as of June 30, 2024 in conjunction with cash generated from the execution of its strategic plan over the next 12 months, and proceeds from the debt agreements are sufficient to fund the projected operations for at least the next 12 months from the issuance date of these financial statements (August 28, 2024) and service the Company’s outstanding obligations. Such expectation is based, in part, on the achievement of a certain volume of assumed revenue and gross margin; however, there is no guarantee the Company will achieve this amount of revenue and gross margin during the assumed time period. Management assessed various additional operating cost reduction options that are available to the Company and would be implemented, if assumed levels of revenue and gross margin are not achieved and additional funding is not obtained.

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 assumptions used in business combinations, allowance for credit losses, income taxes, realization of deferred tax assets, accounting for uncertain tax positions, the impairment of intangible assets, including goodwill and long-lived assets, capitalized software development costs, inventory reserves, standalone selling prices (“SSP”), valuation of the derivative asset, and market-based stock-based compensation costs. Actual results could differ from those estimates.


NOTE 3 - ACQUISITION

On April 2, 2024, the Company consummated the MiX Combination. On the Implementation 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 in accordance with Sections 114 and 115 of the South African Companies Act, No. 71 of 2008, as amended, in exchange for shares of the Company’s common stock. As a result, MiX Telematics became the Company’s indirect, wholly owned subsidiary.

The MiX Combination 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.

The Company was determined to be the accounting acquirer under Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”) based on the evaluation of the following facts and circumstances favoring Powerfleet as the accounting acquirer over those supporting MiX Telematics as the accounting acquirer:
•The majority of the Board of Directors is comprised by Directors with prior affiliation to the Company. In addition the Company’s Board Chairperson continued in the role post the acquisition date;
•Post acquisition the majority of the senior management team, including the Chief Executive Officer, comprised of the Company’s senior management team who were already operating in that capacity for the company prior to the acquisition date;
•While the voting rights of 65.5% in favor of MiX Telematics is an indicator that MiX Telematics is the acquirer, the Company believes that the weight of the indicator is tempered given that the negotiated premium paid by Powerfleet to MiX Telematics contributed to the relative ownership split, and that, qualitatively, the significant reduction in the
11

carryover MiX Telematics institutional investor base would have reduced the legacy MiX Telematics shareholders’ ability to control the combined entity, particularly in the light of the significant concentration of institutional investors on the Powerfleet side; and
•While no individual or organized group owns a large minority interest in the combined entity, the Company notes that the largest institutional investor post-transaction is an investor of legacy Powerfleet. Additionally, the Company also notes that, immediately following the closing of the Business Combination, 30% out of the approximately 35% of total shares held by shareholders of legacy Powerfleet were concentrated in the Company’s top 20 institutional shareholders, compared to only 9% out of the approximately 65% of total shares held by shareholders of legacy MiX Telematics.

The acquisition of MiX Telematics and its business will, among other things:
•create a mobile asset IoT SaaS organization with significant scale, serving all mobile asset types. The increased scale is expected to enable the combined entity to more efficiently serve its customers and create advantages to compete in an industry characterized by the need for high pace of development and innovation;
•enable the Company to maximize significant cross-sell and upsell opportunities within its large joint customer base due to the joint entity’s combined geographical footprint, deep vertical expertise and expanded software solution sets coupled with its extensive direct and indirect sales channel capabilities; and
•enable the combined organization to accelerate the delivery of top-class solutions with improved competitive advantage by integrating Powerfleet’s and MiX Telematics’ world-class engineering and technology teams.

The preliminary estimated fair value of the consideration transferred for MiX Telematics was $362.0 million as of the Implementation Date, which consisted of the following:

(in thousands, except for share price and exchange ratio)April 2,
2024
Number of MiX Telematics ordinary shares outstanding554,021 
Exchange ratio0.12762
Shares of Powerfleet common stock to be issued for MiX Telematics ordinary shares outstanding70,704 
Powerfleet stock price*5.12
Fair value of Powerfleet common stock transferred to MiX Telematics shareholders362,005 
Replacement of acquiree’s equity awards by the acquirer**7,818 
Total fair value of preliminary consideration369,823 

* Powerfleet’s closing share price on April 2, 2024.
** The portion of the fair-value-based measure of the replacement award that is part of the consideration transferred in exchange for the acquiree equals the portion of the acquiree award that is attributable to pre-combination vesting.

Preliminary Allocation of Purchase Price

The purchase price was allocated to the assets and liabilities assumed based on the estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill. Goodwill is primarily attributed to the assembled workforce, expected synergies from future expected economic benefits, including enhanced revenue growth from expanded products and capabilities, as well as substantial cost savings from duplicative overheads, streamlined operations and enhanced efficiency. Goodwill is not deductible for tax purposes. Goodwill associated with the acquisition has not yet been assigned to the Company's geographical regions pending finalization of the purchase accounting.

The preliminary allocation of purchase price was as follows (in thousands):

12

April 2,
2024
Assets acquired:
Cash and cash equivalents$26,737 
Restricted cash794 
Accounts receivable, net 24,675 
Inventory, net4,142 
Prepaid expenses and other current assets8,886 
Fixed assets, net35,587 
Intangible assets, net153,000 
Right-of-use asset3,794 
Deferred tax assets1,093 
Other assets973 
Total assets acquired$259,681 
Liabilities assumed:
Short-term bank debt and current maturities of long-term debt$20,158 
Accounts payable and accrued expenses26,400 
Deferred revenue - current6,394 
Lease liability - current859 
Income taxes payable355 
Lease liability - less current portion2,852 
Deferred tax liability48,725 
Other long-term liabilities484 
Total liabilities assumed$106,227 
Total identifiable net assets acquired$153,454 
Non-controlling interest(5)
Goodwill216,374 
Purchase price consideration$369,823 

The above fair values of assets acquired and liabilities assumed are preliminary and are based on the information that was available as of the reporting date. The Company’s allocation of the preliminary purchase price to certain assets acquired and liabilities assumed is provisional and the Company will continue to adjust those estimates as additional information pertaining to events or circumstances present at April 2, 2024 becomes available and final valuation and analysis are completed. In addition, the Company is still in the process of determining the fair value of acquired assets and assumed liabilities, which may also result in adjustments of the provisional amounts recorded. The fair values of the assets acquired and liabilities assumed, including the identifiable assets acquired, have been preliminarily determined using the income and cost approach, and are partially based on inputs that are unobservable. The Company used discounted cash flow (“DCF”) analyses, which represent Level 3 fair value measurements, to assess certain components of its purchase price allocation as a result of the acquisition. The fair value of the customer relationships was determined using the multi-period excess earnings method. The fair value of the tradename and developed technology was determined using an income approach based on the relief from royalty method.

For the fair value estimates, the Company used (i) forecasted future cash flows, (ii) historical and projected financial information, (iii) synergies including cost savings, (iv) revenue growth rates, (v) customer attrition rates, (vi) royalty rates, and (vii) discount rates, as relevant, that market participants would consider when estimating fair values. These estimates require judgment and are subject to change. Differences between the preliminary estimates and final accounting may occur, and those could be material.

The Company believes that the information provides a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities, but the potential for measurement period adjustments exists based on the Company’s continuing review of
13

matters related to the acquisition. Adjustments to initial preliminary fair value of the assets acquired and assumed liabilities during the measurement period until April 2, 2025, will be recorded during the period in which the adjustments are determined, including the effect on earnings of any amounts we would have recorded in previous periods if the accounting had been completed (i.e. the historical reported financial statements will not be retrospectively adjusted).

The provisional amounts for assets acquired and liabilities assumed include:
•The fair value of accounts receivable and other receivables which may be subject to adjustment for reassessment of collectability as of the date of acquisition, collections and other adjustment subsequent to the acquisition;
•Property, and equipment, for which the preliminary estimates are subject to revision for finalization of preliminary appraisals;
•Right-of-use assets and lease liabilities, which will be subject to adjustment upon completion of the review of the inputs, including sublease assumptions, for the calculations;
•Acquired inventory, which values are still being assessed on an individual basis;
•Prepaid expenses, accounts payable and accrued expenses, which will be subject to adjustment based upon completion of working capital clean up and assessment of other factors;
•The recognition and measurement of contract assets and contract liabilities acquired in accordance with ASC 606 will be subject to adjustment upon completion of assessment;
•Acquired intangible assets will be subject to adjustment as additional assets are identified, estimates and forecasts are refined and disaggregated, useful lives are finalized, and other factors deemed relevant are considered;
•Deferred income taxes will be subject to adjustment based upon the completion of the review of the book and tax bases of assets acquired and liabilities assumed, applicable tax rates and the impact of the revisions of estimates for the items described above; and
•Goodwill will be subject to adjustment for the impact of the revisions of estimates for the items described above.

The Company expects to complete the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.

Acquired Identifiable Intangible Assets

The following table sets forth preliminary estimated fair values of the components of the identifiable intangible assets acquired and their estimated useful lives:

(in thousands)Fair valueWeighted average useful lives
Trade name$10,000 14years
Developed technology30,000 5years
Customer relationships113,000 13years
$153,000 

Acquisition-Related Expenses

The Company expensed a total of $20,291 of acquisition-related costs in the consolidated statement of operations related to the MiX Combination, of which $14,491 was expensed in the three-month period ended June 30, 2024.

Unaudited Pro Forma Financial Information

The business acquired in the MiX Combination contributed revenue of $43,689 and a net loss of $6,932, after amortization of identified intangibles, for the three months ended June 30, 2024.


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. Restricted cash at March 31, 2024 consisted of escrow amounts of $85,000 for the Facilities Agreement deposited in escrow for the MiX Combination and cash of $310 held in escrow for purchases from a vendor. Restricted cash at June 30, 2024 consists of cash of $310 held in escrow for purchases from a vendor, cash of $787 held by MiX Telematics Enterprise BEE Trust (a VIE which is consolidated) to be used
14

solely for the benefit of its beneficiaries and cash securing guarantees of $54 issued in respect of property lease agreements entered into by MiX Telematics Australasia.


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 an expense. The expected costs associated with the Company’s base warranties continue to be recognized as an expense when the products are sold (see Note 14).

Revenue is recognized when performance obligations under the terms of a contract with the 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. The Company utilizes significant judgment to determine whether control of the hardware has transferred to the customer (i.e. distinct to the customer separate from SaaS services provided). For products which are not distinct 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 future services are deferred and classified as a current and long-term liability. 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 Company recognizes revenue for remotely hosted SaaS agreements and post-contract maintenance and support agreements beyond its 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 current 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 is 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 SSP. Judgment is required to determine the SSP for each distinct performance obligation. The Company generally determines standalone selling prices based on observable prices charged to customers. Significant pricing practices taken into consideration include the Company’s discounting practices, the size and volume of its transactions, the customer demographic, price lists, its go-to-market strategy and historical and current sales and contract prices. As the Company’s go-to-market strategies evolve, it may modify its pricing practices in the future, which could result in changes to SSP.

In certain cases, the Company is able to establish SSP based on observable prices of products or services sold separately in comparable circumstances to similar customers. The Company uses a single amount to estimate SSP when it has observable prices. If SSP is not directly observable, for example when pricing is highly variable, the Company uses a range of SSP. The Company determines the SSP range using information that may include pricing practices or other observable inputs. The Company typically has more than one SSP for individual products and services due to the stratification of those products and services by customer size.

The Company recognizes an asset for the incremental costs of obtaining the contract arising from the sales commissions to distributors and 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.

15

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-months ended June 30, 2023 and 2024 (in thousands):

Three Months Ended June 30,
20232024
Products$11,084 $18,738 
Services21,008 56,692 
$32,092 $75,430 

The balances of contract assets and contract liabilities from contracts with customers are as follows as of March 31, 2024 and June 30, 2024 (in thousands):

March 31, 2024June 30, 2024
Contract Assets:
Deferred contract cost(1)
$2,632 $4,322 
Deferred costs - current$42 $24 
Contract Liabilities
Deferred revenue – services (2)
$10,674 $14,724 
Deferred revenue – products (2)
60 120 
10,734 14,844 
Less: Deferred revenue – current(5,842)(10,019)
Deferred revenue – less current portion$4,892 $4,825 
(1) Deferred Contract costs are included in Other assets on the Condensed Consolidated Balance sheets.
(2) The Company records deferred revenues when cash payments are received or due in advance of the Company’s performance. For the three-month periods ended June 30, 2023 and 2024, the Company recognized revenue of $1,766 and $2,986, respectively, which was included in the deferred revenue balance at the beginning of each reporting period. The Company expects to recognize as revenue through year 2029, when it transfers those goods and services and, therefore, satisfies its performance obligation to the customers.


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 periods ended June 30, 2023 and 2024 is as follows (in thousands):

16

Three Months Ended June 30,
20232024
Allowance for credit losses, March 31$2,328 $3,197 
Current period provision for expected credit losses598 1,993 
Write-offs charged against the allowance
(222)(1,509)
Foreign currency translation62 46 
Allowance for credit losses, June 30$2,766 $3,727 


NOTE 7 - PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other current assets comprise the following (in thousands):
March 31,
2024		June 30,
2024
Sales-type lease receivables, current$1,100 $1,125 
Prepaid expenses*2,817 5,772 
Contract assets1,162 1,141 
Tax receivables125 790 
Vat receivable— 2,059 
Sundry debtors— 2,602 
Other current assets2,887 3,009 
$8,091 $16,498 

*This represents the prepaid portion of total deferred contract assets

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 $538 at March 31, 2024 and $97 at June 30, 2024.

Inventories consist of the following (in thousands):

March 31,
2024		June 30,
2024
Components$9,403 $9,195 
Work in process49 1,788 
Finished goods, net12,206 14,849 
$21,658 $25,832 












17

NOTE 9 - FIXED ASSETS

Fixed assets are stated at cost, less accumulated depreciation and amortization, and are summarized as follows (in thousands):

March 31,
2024		June 30,
2024
Installed and uninstalled products$11,030 $46,129 
Computer software11,496 12,231 
Computer and electronic equipment6,179 7,126 
Furniture and fixtures2,361 3,733 
Leasehold improvements1,498 1,445 
Plant and equipment— 293 
Assets in progress— 19 
32,564 70,976 
Accumulated depreciation and amortization(19,845)(21,271)
$12,719 $49,705 

Depreciation and amortization expense for the three-month periods ended June 30, 2023 and 2024 was $967 and $4,749, respectively.



NOTE 10 - INTANGIBLE ASSETS AND GOODWILL

The Company capitalizes costs for software to be sold, marketed, or leased to customers. 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 is included in cost of revenue over the estimated life of the products.


The following table summarizes identifiable intangible assets of the Company as of March 31, 2024 and June 30, 2024 (in thousands):

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June 30, 2024Useful Lives (In Years)Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Amortized:
Customer relationships
1 - 13
$132,264 $(10,834)$121,430 
Trademark and tradename
3 - 15
17,553 (4,253)13,300 
Patents
7 - 11
628 (486)142 
Technology
1 - 20
44,561 (14,236)30,325 
Software to be sold or leased
3 - 6
5,727 (996)4,731 
200,733 (30,805)169,928 
Unamortized
Customer list104 — 104 
Trademark and tradename61 — 61 
165 — 165 
Total$200,898 $(30,805)$170,093 

March 31, 2024Useful Lives (In Years)Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Amortized:
Customer relationships
9 - 12
$19,264 $(8,012)$11,252 
Trademark and tradename
3 - 15
7,553 (3,877)3,676 
Patents
7 - 11
628 (464)164 
Technology
 7
10,911 (10,911)— 
Software to be sold or leased
3
5,159 (764)4,395 
43,515 (24,028)19,487 
Unamortized
Customer list104 — 104 
Trademark and tradename61 — 61 
165 — 165 
Total$43,680 $(24,028)$19,652 

At June 30, 2024, the weighted-average amortization periods for customer relationships, trademarks and trade names, patents, technology, and capitalized software to be sold or leased were 12.7, 12.1, 7, 11.6, and 3.0 years, respectively.

For the three months ended June 30, 2023 and 2024, amortization expense of $1,356 and $5,586 respectively was recognized in both periods.

Estimated future amortization expense for each of the five succeeding fiscal years for these intangible assets is as follows:

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2025 (remaining)$15,528 
202622,138 
202721,145 
202818,067 
202914,578 
Thereafter78,472 
$169,928 

Refer to Note 3 for the change in the carrying amount of goodwill from April 1, 2024 to June 30, 2024 as a result of the MiX Combination.

For the three-month period ended June 30, 2024, the Company did not identify any indicators of impairment.

NOTE 11 - STOCK-BASED COMPENSATION

During the three-month period ended June 30, 2024, the Company granted options to purchase 375 shares of common stock with time-based vesting conditions.

[A] Stock Options:

The following table summarizes the activity relating to the Company’s market-based stock options for the three-month period ended June 30, 2024:
OptionsWeighted-
Average
Exercise Price 		Weighted Average Contractual Remaining Term (years)Aggregate Intrinsic Values (in thousands)*
Outstanding as of April 1, 20245,445 13.39 — — 
Granted— — — — 
Exercised— — — — 
Forfeited— — — — 
Outstanding as of June 30, 20245,445 13.397.72$1,488 
Vested as of June 30, 2024— — — $— 





















20

The following table summarizes the activity relating to the Company’s stock options, excluding the market-based stock options, for the three-month period ended June 30, 2024:

OptionsWeighted-
Average
Exercise Price		Weighted Average Contractual Remaining Term (years)Aggregate Intrinsic Values (in thousands)*
Outstanding as of April 1, 20241,979 4.68 — — 
Granted375 4.31 — — 
Exercised— — — — 
Forfeited(6)6.10 — — 
Outstanding as of June 30, 20242,348 4.627.2$779 
Vested as of June 30, 20241,973 4.67 6.6$779 

The fair value of each option grant on the date of grant is estimated using the Black-Scholes option-pricing model reflecting the following weighted-average assumptions:

June 30, 2023June 30, 2024
Expected volatility 55.6 %60.2 %
Expected life of options6.16.5
Risk free interest rate3.87 %4.23 %
Dividend yield— — 
Weighted-average fair value of options granted during the year$1.66$2.66

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 $585 and $1,817 for the three-month periods ended June 30, 2023 and June 30, 2024, respectively, in connection with awards made under the stock option plans. The increase in the recognized expense is due to the approved acceleration of vesting of unvested restricted stock and stock option awards with time-based vesting conditions that are outstanding under the Powerfleet equity plans (including any inducement awards with time-based vesting). The accelerated vesting of the Company’s equity awards is not part of what was acquired in the MiX Combination, nor what was paid for in the MiX Combination because it was for the benefit of the Company’s employees rather than for the benefit of MiX Telematics employees. Therefore, the acceleration of the equity awards was treated as a separate transaction from the MiX Combination and the acceleration of vesting was accounted for immediately upon closing of the MiX Combination on April 2, 2024.

The fair value of options vested during the three-month periods ended June 30, 2023 and 2024 was $562 and $1,457, respectively. There were no option exercises that occurred during the three-month periods ended June 30, 2023 and 2024.

As of June 30, 2024, there was $983 of total unrecognized compensation costs related to non-vested options granted under the Company’s stock option plans excluding 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 1.34 years.

As of June 30, 2024, there was $3,597 of total unrecognized compensation costs 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 7.72 years.

The Company estimates forfeitures at the time of valuation and reduces expenses 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.

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[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. Some participants have the option to have their shares withheld for their taxes upon vesting. Shares withheld for taxes are treated as a purchase of treasury 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 three-month period ended June 30, 2024 is as follows:

Number of
Non-Vested Shares
Weighted- Average
Grant Date Fair Value
Non-vested, March 31, 20241,370 2.68 
Granted54 5.45 
Vested(1,369)2.68 
Forfeited or expired— — 
Non-vested, June 30, 202455 2.68 

The Company recorded stock-based compensation expenses of $267 and $3,095 for the three-month periods ended June 30, 2023 and 2024, respectively, in connection with restricted stock grants. As of June 30, 2024, there was $258 of total unrecognized compensation cost related to non-vested shares. That cost is expected to be recognized over a weighted-average period of 0.88 years. The increase in the recognized expense is due to the approved acceleration of vesting of unvested restricted stock and stock option awards with time-based vesting conditions that are outstanding under the Powerfleet equity plans (including any inducement awards with time-based vesting). The accelerated vesting of the Company’s equity awards is not part of what was acquired in the MiX Combination, nor what was paid for in the MiX Combination because it was for the benefit of the Company’s employees rather than for the benefit of MiX Telematics employees. Therefore, the acceleration of the equity awards was treated as a separate transaction from the MiX Combination and the acceleration of vesting was accounted for immediately upon closing of the MiX Combination on April 2, 2024.

[C] Stock Appreciation Rights:

In connection with the closing of the MiX Combination, the Company assumed each of the MiX Telematics’ share plans. MiX Telematics issued equity-classified share incentives under the MiX Telematics Long-Term Incentive Plan (“LTIP”) to directors and certain key employees within the Company.

The LTIP provides for three types of grants to be issued, namely performance shares, restricted share units and stock appreciation rights (“SARs”). On the Implementation Date,the only issued and outstanding equity awards under the LTIP were SARs, and the Company assumed the outstanding SARs in issue. No additional performance shares or restricted share units will be issued or assumed by the Company.

The replacement of MiX Telematics’ share-based payment awards has been treated as a modification under ASC 718, Compensation—Stock Compensation as of the Implementation Date. The fair value of the replacement SARs issued was allocated between pre-combination and post-combination service based on the vesting period. The fair value related to pre-combination service is included as part of the fair value of the consideration in the MiX Combination (see Note 3), and the fair value related to post-combination service is to be recognized as an expense over the remaining vesting period.

The total stock-based compensation expense recognized during the three months ended June 30, 2024 was $1.0 million.

The following table summarizes the activities for the outstanding SARs:

22

Number of SARsWeighted-
Average
Exercise Price		Weighted Average Contractual Remaining Term (years)Aggregate Intrinsic Values (in thousands)*
Outstanding as of April 1, 2024— — 
Acquired through MiX Combination5,740 2.61 
Granted— — 
Exercised— — 
Forfeited— — 
Outstanding as of June 30, 20245,740 2.613.33
Vested as of June 30, 20241,813 2.98 1.80$2,881 

As of June 30, 2024, there was $7.5 million of unrecognized compensation cost related to unvested SARs. This amount is expected to be recognized over a weighted-average period of 3.26 years.


NOTE 12 - NET LOSS PER SHARE

Net loss per share for the three-month periods ended June 30, 2023 and 2024 are as follows:

Three Months Ended June 30,
20232024
Basic and diluted loss per share
Net loss attributable to common stockholders$(6,170)$(22,337)
Net loss per share attributable to common stockholders - basic and diluted$(0.17)$(0.21)
Weighted-average common share outstanding - basic and diluted35,605 107,136 

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. The Company’s 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.

NOTE 13 - SHORT-TERM BANK DEBT AND LONG-TERM DEBT

March 31,
2024		June 30,
2024
Short-term bank debt$— $25,007 
Current maturities of long-term debt$1,951 $2,597 
Long-term debt - less current maturities$113,810 $111,957 



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Short-Term Bank Debt

As of June 30, 2024 short-term debt comprised $24,323 of borrowing facilities and $684 of book overdrafts.

Investec Facility

The Investec Bank Limited (“Investec”) credit facility was a 364-day renewable committed general credit facility of R350,000 (the equivalent of $19,232 as of June 30, 2024) (the “Committed Facility”). As of June 30, 2024, $19,232 of the Committed Facility was utilized. The Committed Facility was settled in August 2024 and closed.

Under the Committed Facility, MiX Telematics paid a commitment fee charged at 30bps on any undrawn portion of the Committed Facility (plus VAT on such amount), calculated monthly and payable, free of deduction, monthly in arrears on the first business day of each month.

The loans under the Committed Facility bore interest at South African prime interest rate less 1.5% per annum. As of June 30, 2024, the South African prime interest rate was 11.75%. Interest was payable monthly in arrears on the first business day of each month, or as otherwise specified in the credit agreement between Investec and MiX Telematics.

MiX Telematics Africa (Pty) Ltd, MiX Telematics International (Pty) Ltd and MiX Telematics Enterprise SA (Pty) Ltd issued guarantees in favor of Investec in terms of which they guaranteed the performance by MiX Telematics of all its obligations to Investec.

Standard Bank Facility

The Standard Bank facility is in the form of a customer foreign currency account overdraft facility (the “CFC Overdraft Facility”). The CFC Overdraft Facility entitles MiX Telematics to utilize a maximum amount of R70,000 (the equivalent of $3,846 as of June 30, 2024). The CFC Overdraft Facility bears interest at the South African prime interest rate less 1.2% per annum. As of June 30, 2024, $554 of the CFC Overdraft Facility was utilized.

There is a suretyship agreement entered into with Standard Bank providing that MiX Telematics and only one subsidiary being MiX Telematics International (Pty) Ltd, binds themselves as surety(ies) and co-principal debtor(s) for the payment, when due, of all the present and future debts of any kind of MiX Telematics and MiX Telematics International to Standard Bank. The Standard Bank facility has no fixed renewal date and is repayable on demand.

RMB Facility

On March 7, 2024, as part of the MiX Combination, MiX Telematics and Powerfleet entered into the Facilities Agreement with RMB. Following the signing of the Facilities Agreement, MiX Telematics entered into a Facility Notice and General Terms and Conditions (the “Credit Agreement”) with RMB on March 14, 2024 for a 364-day committed general banking facility of R350,000 (the equivalent of $19,200 as at June 30, 2024) (the “RMB General Facility”). The Credit Agreement and the rights and obligations of the parties are subject to the terms and conditions of the Facilities Agreement entered into on March 7, 2024, which is described in more detail below.

The RMB General Facility is repayable on demand and has a term of 365 days from the Available Date (as defined therein). Repayment of the RMB General Facility, including capitalized interest, is due by the earlier of (a) the Available Date or (b) April 2, 2025, unless extended by agreement between MiX Telematics and RMB. Interest rate for the RMB General Facility is calculated at South African prime rate minus 0.75% per annum and will be calculated on the daily outstanding balance, compounded monthly in arrears and repaid quarterly. As of June 30, 2024, MiX Telematics had not borrowed anything under the RMB General Facility. The RMB General Facility was utilized in August 2024 to settle the Committed Facility.

Hapoalim Debt

As of June 30, 2024, Pointer Israel had utilized approximately $4,388 under the Hapoalim Revolving Facilities, which are described below.

Long-Term Debt

Hapoalim Debt

In connection with the Pointer acquisition, Powerfleet Israel incurred NIS denominated debt in term loan borrowings on October 3, 2019 under the Prior Credit Agreement, pursuant to which Hapoalim agreed to provide Powerfleet Israel with two
24

senior secured term loan facilities in an initial aggregate principal amount of $30,000 (composed of two facilities in the aggregate principal amount of $20,000 and $10,000, respectively and a five-year revolving credit facility to Pointer denominated in NIS in an initial aggregate principal amount of $10,000 (collectively, the “Prior Credit Facilities”). The Prior Credit Facilities were scheduled to mature on October 3, 2024.

On March 18, 2024, the Borrowers entered into the A&R Credit Agreement, which refinanced the facilities under, and amended and restated, the Prior Credit Agreement. The A&R Credit Agreement provides for (i) two senior secured term loan facilities denominated in NIS to Powerfleet Israel in an aggregate principal amount of $30,000 (composed of two facilities in the aggregate principal amounts of $20,000 and $10,000, respectively) (the “Hapoalim Term Facilities”) and (ii) two revolving credit facilities to Pointer in an aggregate principal amount of $20,000 (composed of two revolvers in the aggregate principal amounts of $10,000 and $10,000, respectively) (the “Hapoalim Revolving Facilities” and, together with the Hapoalim Term Facilities, the “Hapoalim Credit Facilities”)). Powerfleet Israel drew down $30,000 in cash under the Hapoalim Term Facilities on March 18, 2024 and used the proceeds to prepay approximately $11,200, representing the remaining outstanding balance, of the term facilities extended to Powerfleet Israel under the Prior Credit Agreement and remaining proceeds will be distributed to Powerfleet. The proceeds of the Hapoalim Revolving Facilities may be used by Pointer for general corporate purposes, including working capital and capital expenditures. As of June 30, 2024, Pointer had utilized $4,388 under the revolving facilities. The available undrawn facility balance at June 30, 2024 was $15,612.

The interest rates for borrowings under Hapoalim Facility A and Hapoalim Facility B are Hapoalim’s prime rate + 2.2% per annum, and Hapoalim’s prime rate + 2.3% per annum, respectively. Hapoalim’s prime rate at June 30, 2024 was 6%. Interest is payable quarterly on March 25, June 25, September 25, and December 25 over five years. The first interest period ended on June 25, 2024. Hapoalim Facility A amortizes in quarterly installments over its five-year term and will be payable in the following aggregate annual amounts: (i) 10% of the principal amount of Hapoalim Facility A from March 18, 2024 until March 18, 2025, (ii) 25% of the principal amount of Hapoalim Facility A from March 18, 2025 until March 18, 2026, (iii) 27.5% of the principal amount of Hapoalim Facility A from March 18, 2026 until March 18, 2027, (iv) 27.5% of the principal amount of Hapoalim Facility A from March 18, 2027 until March 18, 2028, and (v) 10% of the principal amount of Hapoalim Facility A from March 18, 2028 until March 18, 2029. Hapoalim Facility B does not amortize and will be payable in full on March 18, 2029.

The interest rate for borrowings under Hapoalim Facility C is, with respect to NIS-denominated loans, Hapoalim’s prime rate + 2.5%, and with respect to U.S. dollar-denominated loans, SOFR + 2.15%. Borrowings under Hapoalim Facility D will bear interest at the applicable interest rate set forth in the standard form documents entered into in connection with each utilization of Hapoalim Facility D. In addition, Pointer is required to pay a credit allocation fee in NIS, with respect to Hapoalim Facility C, and a non-utilization fee in U.S. dollars, with respect to Hapoalim Facility D, in each case, equal to 0.5% per annum on undrawn and uncancelled amounts of the 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. The Borrowers have also paid certain upfront fees and other fees and expenses to Hapoalim in connection with the A&R Credit Agreement. The Hapoalim Revolving Facilities mature on March 18, 2025.

Borrowings under the Hapoalim Term Facilities are voluntarily prepayable at any time, in whole or in part, and are not subject to any prepayment premium. Voluntary prepayments of the Hapoalim Term Facilities must be made in minimum increments of NIS 1 million. In addition to certain customary mandatory prepayment requirements, the A&R Credit Agreement also requires Powerfleet Israel to make prepayments on the Hapoalim Term Facilities to the extent it receives distributions from Pointer, except for any such distributions made to cover certain expenses of Powerfleet Israel in its normal course of operations.

The A&R Credit Agreement contains certain customary affirmative and negative covenants, including financial covenants with respect to Pointer’s net debt levels which must be less than 100% of Working Capital as defined in the A&R Credit Agreement, the ratio of each Borrower’s net debt to Pointer’s EBITDA must not exceed 4.75, Powerfleet Israel’s minimum equity which must not be less than $60,000, and the ratio of Powerfleet Israel’s equity to its total assets which must be greater than 35% and the ratio of Pointer’s net debt to EBITDA ratio must not exceed 2. The occurrence of any event of default under the A&R Credit Agreement may result in all outstanding indebtedness under the Hapoalim Credit Facilities becoming immediately due and payable. The financial covenants have been met for the quarter ending June 30, 2024.

The Hapoalim Credit Facilities continue to be secured by first ranking and exclusive fixed and floating charges, including by Powerfleet Israel over the entire share capital of Pointer and by Pointer over all of its assets, as well as cross guarantees between Powerfleet Israel and Pointer, except that the Borrowers’ holdings in Pointer do Brasil Comercial Ltda., Pointer Argentina and Pointer South Africa are excluded from such floating charges. No other assets of the Company will serve as collateral under the Hapoalim Credit Facilities.

The Hapoalim Term Facilities under the A&R Credit Agreement have been accounted for as modifications of the term facilities that were provided under the Prior Credit Agreement because the change in the present value of the cash flows under the A&R
25

Credit Agreement is less than 10% of the present value of the cash flows under the Prior Credit Agreement. The proceeds of the Hapoalim Term Facilities ($30,000), less the prepayment of the term loans under the Prior Credit Facility (approximately $11,200), amounting to approximately $18,800, has been recognized as an increase in the carrying value of the prior term loans that was recognized previously.

For the three months ended June 30, 2023, the Company recorded $35 of additional deferred costs to the original debt issuance costs and the refinancing fee paid to Hapoalim. For the three months ended June 30, 2024, the Company recorded $30 of amortization of the original debt issuance costs and the refinancing fee paid to Hapoalim. The Company recorded charges of $152 and $655 to interest expense on its consolidated statements of operations for the three months ended June 30, 2023 and 2024, respectively, related to interest expense associated with the Hapoalim debt.

RMB Debt

On March 7, 2024, the Company entered into the Facilities Agreement with RMB, pursuant to which RMB agreed to provide the Company with two term loan facilities in an aggregate principal amount of $85,000, composed of Facility A and Facility B, each with a principal amount of $42,500 (“RMB Facility A” and “RMB Facility B,” respectively, and collectively, the “RMB Facilities”). The Company drew down $85,000 in cash under the term loan facilities on March 13, 2024, and the proceeds to redeem all the outstanding shares of the Series A Preferred Stock and for general corporate purposes. The RMB Facilities are guaranteed by the Company, I.D. Systems and Movingdots, and there is a security agreement over the shares in Main Street 2000 Proprietary Limited, I.D. Systems, and Movingdots.

The interest rates of borrowings under RMB Facility A and RMB Facility B are 8.699% per annum and 8.979% per annum, respectively. Interest is payable quarterly in arrears. RMB Facility A matures on March 31, 2027, and RMB Facility B matures on March 31, 2029. The Company may prepay the RMB Facilities at any time, subject to a minimum reduction of $5,000 and multiples of $1,000. If the Company prepays any amount during the first or second annual period of the funding, a refinancing fee equal to 2% or 1%, respectively, of the prepayment will be payable. Also, the RMB Facilities are mandatorily prepayable upon the occurrence of uncertain future events, such as a change of control or a transfer of the business. In the event that either prepayment occurs, the respective prepayment amount will be adjusted for RMB’s break gains or losses, which relate mainly to the unwinding of interest rate derivatives (the “Prepayment Derivative”) which RMB entered into with third parties to fix the interest rates on the RMB Facilities. Since RMB’s break gains/losses could result in the Company prepaying at a discount, or a premium, of 10% or more to the initial carrying amount of the RMB Facilities, the optional and contingent repayment features were to be embedded derivatives in the scope of ASC 815-15 Embedded Derivatives. The Prepayment Derivative within each RMB Facility has been bifurcated and accounted for at fair value separately from the respective debt-host contracts which are accounted for at amortized cost. The terms of the debt-host contracts have been bifurcated to adjust the carrying value of the debt upon separating the derivative. Upon initial recognition of the RMB Facilities, a Prepayment Derivative asset of $610 and $1,616 for RMB Facility A and RMB Facility B, respectively, was recognized with a corresponding increase in the initial carrying amount of each debt-host contract. The fair value of the embedded derivative is estimated using a “with-and-without” approach as the difference between the value of the RMB Facilities with and without the embedded derivative using both the binomial lattice model and discounted cash flow analysis.
Key assumptions used were:

Facility AFacility B
Credit spread volatility50 %35 %
Credit spread4.48 %4.99 %
Credit ratingB-B-
Risk free rateSOFR Spot RateSOFR Spot rate
The Prepayment Derivative is classified as a level 3 in the fair value hierarchy due to the use of at least one significant unobservable input which is the credit spread volatility. At inception, the credit spread was an observable input based on the transaction price of the debt; however, in future periods, it will also be an unobservable input. For the Prepayment Derivative asset in RMB Facility A, a change of -10% in credit spread volatility would result in a decrease in the derivative asset of $190, while a change of +10% in credit spread volatility would result in an increase in the derivative asset of $158. For the Prepayment Derivative asset in RMB Facility B, a change of -10% in credit spread volatility would result in a decrease in the derivative asset of $465, while a change of +10% in credit spread volatility would result in an increase in the derivative asset of $416. The Prepayment Derivative assets are included in Other assets and their fair values were $610 and $1,616 for RMB Facility A and RMB Facility B, respectively, as of March 31, 2024 and June 30, 2024. The debt-host contracts are accounted for at amortized cost. Total debt issuance costs of approximately $1,000 were incurred. For the three months ended June 30, 2024, the Company recorded $77 of amortization of the original debt issuance costs and the refinancing fee to RMB.

26

For the three-month periods ended March 31, 2024 and June 30, 2024, the Company recorded interest expense of $400 and $1,870, respectively.

Scheduled contractual maturities of the long-term debt as of June 30, 2024 are as follows:

2025 (remaining)
$1,458 
20264,859 
202747,845 
20285,345 
202954,162 
113,669 
Less: Current portion(2,597)
Plus debt costs and prepayment885 
Total$111,957 


NOTE 14 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following (in thousands):

March 31,
2024		June 30,
2024
Accounts payable$20,025 46,104 
Accrued warranty1,138 1,550 
Accrued compensation8,956 13,425 
Government authorities3,062 5,135 
Other current liabilities827 2,557 
$34,008 $68,771 

The following table summarizes warranty activity for the three months ended June 30, 2023 and 2024 (in thousands):

Three Months Ended June 30,
20232024
Accrued warranty reserve, beginning of year$2,255 2,926 
Accrual for product warranties issued430 247 
Product replacements and other warranty expenditures(110)(86)
Expiration of warranties(70)(9)
Acquired through MiX Combination— 356 
Foreign currency translation difference— — 
Accrued warranty reserve, end of period (1)
$2,505 3,434 
(1) Includes non-current accrued warranty included in other long-term liabilities at June 30, 2023 and 2024 of $1,739 and $1,884, respectively.





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NOTE 15 - STOCKHOLDERS' EQUITY

Convertible Redeemable Preferred Stock:

The Company is authorized to issue 150 shares of preferred stock, par value $0.01 per share of which 100 shares are designated Series A convertible preferred stock (“Series A Preferred Stock”) and 50 shares are undesignated.

Series A Preferred Stock

In connection with the completion of the Pointer acquisition, on October 3, 2019, the Company issued 50 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”). Concurrently with the closing of the MiX Combination on April 2, 2024, the Company used the net proceeds received from RMB and from incremental borrowing capacity as a result of the refinancing of credit facilities with Hapoalim to redeem in full for $90,300 for all of the outstanding shares of the Series A Preferred Stock.

Dividends

Holders of Series A Preferred Stock were entitled to receive cumulative dividends at a minimum rate of 7.5% per annum (calculated on the basis of the Series A Issue Price), quarterly in arrears. The dividends were payable at the Company’s election, in kind, through the issuance of additional shares of Series A Preferred Stock, or in cash, provided no dividend payment failure had occurred and was continuing and that there had not previously occurred two or more dividend payment failures. Commencing on the 66-month anniversary of the date on which any shares of Series A Preferred Stock were first issued (the “Original Issuance Date”), and on each monthly anniversary thereafter, the dividend rate would increase by 100 basis points, until the dividend rate reached 17.5% per annum, subject to the Company’s right to defer the increase for up to three consecutive months on terms set forth in the Company’s Amended and Restated Certificate of Incorporation (the “Charter”). During the three-month periods ended June 30, 2023 and June 30, 2024, the Company paid dividends in amounts equal to $1,129 and $25 respectively, to the holders of the Series A Preferred Stock. Dividends for the period ended March 31, 2024, plus accrued dividends through April 2, 2024, were paid in cash on the redemption date of the Series A Preferred Stock.


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 three-month period ended June 30, 2024 are as follows (in thousands):

Foreign currency translation adjustmentAccumulated other comprehensive loss
Balance at April 1, 2024
$(985)$(985)
Net current period change418418
Balance at June 30, 2024
$(567)$(567)

The accumulated balances for each classification of other comprehensive loss for the three-month period ended June 30, 2023 are as follows (in thousands):

Foreign currency translation adjustmentAccumulated other comprehensive loss
Balance at April 1, 2023
$(1,098)$(1,098)
Net current period change100100
Balance at June 30, 2023
$(998)$(998)
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NOTE 17 - SEGMENT INFORMATION

The Company operates in one reportable segment, wireless IoT asset management. The following table summarizes revenues by geographic region (in thousands):

Three Months Ended June 30,
20232024
North America
$16,765 $21,392 
Israel
10,905 10,661 
Africa
863 24,406 
Europe and Middle East
599 7,837 
Other
2,960 11,134 
$32,092 $75,430 

March 31, 2024June 30, 2024
Long lived assets by geographic region:
North America
$4,083 $8,716 
Israel
3,946 3,781 
Africa
705 29,513 
Europe and Middle East
2,850 4,482 
Other
1,135 3,213 
$12,719 $49,705 


NOTE 18 - INCOME TAXES

The Company records its interim tax provision based upon a projection of the Company’s annual effective tax rate (“AETR”). This AETR is applied to the year-to-date consolidated pre-tax income to determine the interim provision for income taxes before discrete items. The Company updates the AETR on a quarterly basis as the pre-tax income projections are revised and tax laws are enacted. The effective tax rate (“ETR”) each period is impacted by a number of factors, including the relative mix of domestic and foreign earnings and adjustments to recorded valuation allowances. The currently forecasted ETR may vary from the actual year-end due to the changes in these factors.

 Three Months Ended June 30,
20232024
Domestic pre-tax book loss$(10,470)$(16,475)
Foreign pre-tax book income (expense)7,201 (4,771)
Total loss before income taxes(3,269)(21,246)
Income tax benefit (expense)6 (1,053)
Total loss after taxes$(3,263)$(22,299)
Effective tax rate0.18 %(4.96)%
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For the three-month periods ended June 30, 2023 and June 30, 2024, the effective tax rate differed from the statutory tax rates primarily due to the mix of domestic and foreign earnings amongst taxable juris