Powerfleet, Inc. (AIOT)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to assist you in understanding our financial condition and results of operations and should be read in conjunction with the financial statements and related notes included elsewhere in this Form 10-K. Many of the amounts and percentages in this section have been rounded for convenience of presentation, but actual recorded amounts have been used in computations. Accordingly, some information may appear not to be computed accurately.

Overview

We are a global provider of AIoT solutions providing valuable business intelligence for managing high-value enterprise and mid-market assets that improve operational efficiencies.

We are headquartered in Woodcliff Lake, New Jersey, with offices located around the globe.

Our Unity data highway and AIoT ecosystem is the centerpiece of our strategy. Unity has the capability to ingest data from multiple data sources, harmonizing and transforming the dataset, and delivering simply understood insights through a unified SaaS platform and deep integrations with customer business systems.

Unity provides mission-critical solutions from warehouse to trailer to vehicle, allowing customers to consolidate suppliers and gain end-to-end control of their operations in a single pane of glass.

Unity enables customers to consume their data in multiple ways, from data-powered applications to unified operations integrations, which provide the ability to improve performance of the asset, the individual in charge of the asset, and the business process, continuously improving our customers’ business performance.

Within the Unity ecosystem, our Powerfleet for Warehouse and Factory AIoT solutions are designed to provide on-premise or in-facility asset and operator management, monitoring, and visibility for warehouse and factory trucks such as forklifts, man-lifts, tuggers and ground support equipment at airports. These solutions utilize a variety of communications capabilities such as Bluetooth®, WiFi, and proprietary radio frequency technology.

Additionally, within the Unity ecosystem, our Powerfleet for On-Road AIoT solutions are designed to provide bumper-to-bumper AIoT asset management, monitoring, and visibility for over-the-road based assets such as heavy trucks, dry-van trailers, refrigerated trailers and shipping containers and their associated cargo. These AIoT solutions provide mobile-asset tracking and condition-monitoring solutions to meet the transportation market’s desire for greater visibility, safety, security, and productivity throughout global supply chains. Our On-Road AIoT solutions extend to all mobile assets, whether it is a rental car, a private fleet, or automotive OEM partners. We achieve this by providing critical information that can be used to increase revenues, reduce costs, enhance safety and sustainability, deliver compliance, and improve customer service.

Our patented technologies are proven solutions for organizations that must monitor and analyze their assets to improve safety, increase efficiency, reduce costs, and drive profitability. Our offerings are sold under the global brands Powerfleet, Pointer, Cellocator, MiX by Powerfleet and Fleet Complete.

We have incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of $205.8 million as of March 31, 2025.

Critical Accounting Estimates

We have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States in the preparation of our consolidated financial statements. We believe the following accounting policies involve a high degree of judgment and complexity, and our other significant accounting policies are described in Note 2 to our consolidated financial statements included in this Form 10-K. Certain accounting policies involve significant judgments and assumptions by our management that can have a material impact on the carrying value of certain assets and liabilities. The judgments and assumptions used by our management are based on historical experience and other factors that our management believes to be reasonable under the circumstances. Because of the nature of these judgments and assumptions, actual results could differ significantly from these judgments and estimates, which could have a material

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impact on the carrying values of our assets and liabilities and our results of operations. Our critical accounting estimates, assumptions and judgments that we believe have the most significant impact on our consolidated results are described below.

Goodwill and Intangibles

Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill and intangible assets deemed to have indefinite lives are not amortized and are tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets other than goodwill are amortized over their useful lives unless the lives are determined to be indefinite. Intangible assets are carried at cost, less accumulated amortization. Intangible assets consist of trademarks and trade names, patents, customer relationships and other intangible assets. Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. We operate with one operating segment, which is our only reporting unit and segment presented in the consolidated financial statements. We test our goodwill for impairment annually, which is October 1 or when an indicator of impairment exists, by comparing the fair value of the reporting unit to its carrying value.

We test for goodwill impairment at the reporting unit level on October 1 of each year and between annual tests if a triggering event indicates the possibility of an impairment. As of October 1, 2024, we performed a quantitative assessment whereby the fair value of the reporting unit is calculated using a market approach. The fair value of the reporting unit was substantially more than its carrying value.

For the year ended March 31, 2025, we performed a qualitative assessment of goodwill. We considered such factors as our market capitalization as of March 31, 2025, and over a certain period of time, macroeconomic conditions, industry and market considerations, and overall financial performance. The fair value of the reporting unit was substantially more than its carrying value. For the years ended December 31, 2022 and 2023, the three months ended March 31, 2024, and the year ended March 31, 2025, we did not incur an impairment charge.

Business Combinations

We recognize the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. Determining these fair values requires management to make significant estimates and assumptions, especially with respect to intangible assets.

We recognize identifiable assets acquired and liabilities assumed at their acquisition date fair value. We used discounted cash flow analyses, to assess certain components of our purchase price allocation. 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 values, we 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.

During the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill or bargain purchase to the extent we identify adjustments to the preliminary fair values. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, any subsequent adjustments are recorded to the Consolidated Statement of Operations.

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Results of Operations

The following table sets forth certain items related to our Consolidated Statement of Operations as a percentage of revenues for the periods indicated and should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Form 10-K. A detailed discussion of the material changes in our operating results is set forth below.

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Year Ended March 31, 2025 Compared to Year Ended December 31, 2023

REVENUES. Revenues increased by $228.8 million, or 171.1%, to $362.5 million in the year ended March 31, 2025, from $133.7 million in the year ended December 31, 2023.

Revenues from products increased by $35.8 million, or 72.1%, to $85.6 million in the year ended March 31, 2025, from $49.7 million in the year ended December 31, 2023. The increase in product revenues was primarily due to the MiX Telematics business acquired, which contributed $31.8 million, and the Fleet Complete business acquired, which contributed $9.5 million, in product revenues for the year ended March 31, 2025, offset by lower demand from logistics customers in North America.

Revenues from services increased by $192.9 million, or 229.7%, to $276.9 million in the year ended March 31, 2025, from $84.0 million in the year ended December 31, 2023. The increase in services revenues was principally due to the MiX Telematics business acquired, which contributed $139.4 million, and the Fleet Complete business acquired, which contributed $49.5 million, in service revenues for the year ended March 31, 2025.

COST OF REVENUES. Cost of revenues increased by $101.3 million, or 152.0%, to $168.0 million in the year ended March 31, 2025, from $66.7 million in the year ended December 31, 2023. The MiX Telematics business acquired contributed $71.8 million, and the Fleet Complete business acquired contributed $18.3 million to cost of revenues for the year ended March 31, 2025. Gross profit was $194.5 million in the year ended March 31, 2025, compared to $67.1 million in the year ended December 31, 2023. As a percentage of revenues, gross profit increased to 53.7% in the year ended March 31, 2025 from 50.2% in the year ended December 31, 2023.

Cost of products increased by $25.6 million, or 70.2%, to $62.0 million in the year ended March 31, 2025, from $36.4 million in the year ended December 31, 2023. Gross profit for products was $23.6 million in the year ended March 31, 2025, compared to $13.3 million in the year ended December 31, 2023. As a percentage of product revenues, gross profit increased to 27.6% in the year ended March 31, 2025 from 26.8% in the year ended December 31, 2023. The increase in gross profit as a percentage of product revenues was principally due to a larger proportion of sales being driven by higher margin product lines.

Cost of services increased by $75.8 million, or 250.4%, to $106.0 million in the year ended March 31, 2025, from $30.3 million in the year ended December 31, 2023. The MiX Telematics business acquired contributed $49.5 million, the Fleet Complete business acquired contributed $11.2 million, and the amortization of MiX Telematics and Fleet Complete acquisition-related intangibles contributed $14.8 million to cost of services for the year ended March 31, 2025. Gross profit for services was $170.9 million in the year ended March 31, 2025, compared to $53.7 million in the year ended December 31, 2023. As a percentage of service revenues, gross profit decreased to 61.7% in the year ended March 31, 2025 from 64.0% in the year ended December 31, 2023. The decrease in gross profit as a percentage of revenues was mainly due to the commencement of amortization of MiX Telematics and Fleet Complete acquisition-related intangibles.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative (“SG&A”) expenses increased by $133.1 million, or 186.8%, to $204.4 million for the year ended March 31, 2025, compared to $71.3 million for the year ended December 31, 2023. The increase was primarily driven by the inclusion of SG&A expenses from the MiX Telematics business acquired, which contributed $73.9 million, and the Fleet Complete business acquired, which contributed $28.0 million. In addition, the increase reflects $21.3 million in acquisition-related expenses, $4.9 million in integration-related costs, $10.1 million in restructuring charges, and $4.7 million in accelerated stock-based compensation expenses, all incurred during the year ended March 31, 2025. As a percentage of revenues, SG&A expenses, excluding $41.1 million in acquisition-related, restructuring and accelerated stock-based compensation costs, decreased to 45.0% in the year ended March 31, 2025, from 53.3% in the year ended December 31, 2023.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development (“R&D”) expenses increased by $7.7 million, or 91.7%, to $16.1 million in the year ended March 31, 2025, compared to $8.4 million in the year ended December 31, 2023, principally due to $5.9 million incurred from the MiX Telematics business acquired, and $2.5 million incurred from the Fleet Complete business acquired, following completion of the transactions. As a percentage of revenues, R&D expenses decreased to 4.4% in the year ended March 31, 2025, from 6.3% in the year ended December 31, 2023.

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. Net loss attributable to common stockholders was $51.0 million, or $(0.43) per basic and diluted share, for the year ended March 31, 2025, as compared to net loss of $17.3 million, or $(0.49) per basic and diluted share, for the year ended December 31, 2023. The net loss was primarily the result of $21.3 million in acquisition-related expenses, $4.9 million in integration-related costs, $10.1 million in restructuring costs, and $14.8 million from the comme

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ncement of amortization of MiX Telematics and Fleet Complete acquisition-related intangibles, partially offset by $0.5 million gain in other income from the derivative mark-to-market adjustment.

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

REVENUES. Revenues increased by $69.9 million, or 207.2%, to $103.6 million in the three months ended March 31, 2025, from $33.7 million in the same period in 2024.

Revenues from products increased by $9.8 million, or 81.0%, to $21.9 million in the three months ended March 31, 2025, from $12.1 million in the same period in 2024. The increase in product revenues was primarily due to the MiX Telematics business acquired, which contributed $6.2 million, and the Fleet Complete business acquired, which contributed $4.6 million, in product revenues for the three months ended March 31, 2025, offset by lower demand from logistics customers in North America.

Revenues from services increased by $60.1 million, or 277.5%, to $81.8 million in the three months ended March 31, 2025, from $21.7 million in the same period in 2024. The increase in services revenues was primarily due to the MiX Telematics business acquired, which contributed $34.6 million, and the Fleet Complete business acquired, which contributed $24.7 million, in service revenues for the three months ended March 31, 2025.

COST OF REVENUES. Cost of revenues increased by $31.3 million, or 178.7%, to $48.9 million in the three months ended March 31, 2025, from $17.5 million for the same period in 2024. The MiX Telematics business acquired contributed $18.1 million, and the Fleet Complete business acquired contributed $9.1 million to cost of revenues for the three months March 31, 2025. Gross profit was $54.8 million in the three months ended March 31, 2025, compared to $16.2 million for the same period in 2024. As a percentage of revenues, gross profit increased to 52.8% in the three months ended March 31, 2025 from 48.0% in the same period in 2024.

Cost of products increased by $8.6 million, or 90.8%, to $18.2 million in the three months ended March 31, 2025, from $9.5 million in the same period in 2024. Gross profit for products was $3.7 million in the three months ended March 31, 2025, compared to $2.6 million in the same period in 2024. As a percentage of product revenues, gross profit decreased to 17.0% in the three months ended March 31, 2025 from 21.2% in the same period in 2024. The decrease in gross profit as a percentage of product revenues was principally due to a larger proportion of sales being driven by lower margin product lines.

Cost of services increased by $22.7 million, or 282.9%, to $30.7 million in the three months ended March 31, 2025, from $8.0 million in the same period in 2024. The MiX Telematics business acquired contributed $13.3 million, the Fleet Complete business acquired contributed $5.5 million, and the amortization of MiX Telematics and Fleet Complete acquisition-related intangibles contributed $5.2 million to cost of services for the three months ended March 31, 2025. Gross profit for services was $51.0 million in the three months ended March 31, 2025, compared to $13.6 million in the same period in 2024. As a percentage of service revenues, gross profit decreased to 62.4% in the three months ended March 31, 2025 from 63.0% in the same period in 2024. The decrease in gross profit as a percentage of revenues was mainly due to the commencement of amortization of MiX Telematics and Fleet Complete acquisition-related intangibles.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased by $35.0 million, or 160.3%, to $56.8 million in the three months ended March 31, 2025, compared to $21.8 million in the same period in 2024, principally due to the MiX Telematics business acquired, which contributed $20.6 million, and the Fleet Complete business acquired, which contributed $13.1 million, of SG&A expenses for the three months ended March 31, 2024. SG&A expenses included $0.4 million in acquisition-related expenses, $2.6 million in integration related expenses and $7.0 million in restructuring costs for the three months ended March 31, 2025. As a percentage of revenues, SG&A expenses, excluding $10.1 million in acquisition-related, integration related and restructuring, decreased to 45.0% in the three months ended March 31, 2025, from 64.7% in the same period in 2024.

RESEARCH AND DEVELOPMENT EXPENSES. R&D expenses increased by $2.9 million, or 143.0%, to $4.9 million in the three months ended March 31, 2025, compared to $2.0 million in the same period in 2024, principally due to $1.6 million incurred from the MiX Telematics business acquired, and $1.3 million incurred from the Fleet Complete business acquired, following completion of the transactions. As a percentage of revenues, R&D expenses decreased to 4.7% in the three months ended March 31, 2025, from 6.0% in the same period in 2024.

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. Net loss attributable to common stockholders was $12.4 million, or $(0.09) per basic and diluted share, for the three months ended March 31, 2025, as compared to net loss of $19.6 million, or $(0.55) per basic and diluted share, for the same period in 2024. The net loss was primarily the result of $0.4 million in acquisition-related expenses

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, $2.6 million in integration-related costs, $7.0 million in restructuring costs, and $5.2 million from the commencement of amortization of MiX Telematics and Fleet Complete acquisition-related intangibles.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

REVENUES. Revenues decreased by approximately $2.2 million, or 1.6%, to $133.7 million in 2023 from $135.9 million in 2022.

Revenues from products decreased by approximately $7.2 million, or 12.7%, to $49.7 million in 2023 from $56.9 million in 2022. The decrease in product revenues was due to decreased product sales in Germany, where we are actively shutting down sales from low margin contracts, large logistics companies recalibrating demand following aggressive builds during the pandemic, and lower product sales in and out of Israel reflecting geopolitical headwinds and a proactive decision to shutter our hardware-only line of business. These decreases were offset by increases in product revenue in our Powerfleet for Vehicles business in the United States due to new unit purchases from new and existing customers.

Revenues from services increased by approximately $5.0 million, or 6.4%, to $84.0 million in 2023 from $79.0 million in 2022. The increase in services revenues was principally due to an increase in our install base that generates service revenue, with revenue growth concentrated in North America where a positive market response to our Unity SaaS product offering has been a significant contributing factor.

COST OF REVENUES. Cost of revenues decreased by approximately $4.3 million, or 6.0%, to $66.7 million in 2023 from $70.9 million in 2022. Gross profit was $67.1 million in 2023 compared to $65.0 million in 2022.

Cost of products decreased by approximately $6.2 million, or 14.5%, to $36.4 million in 2023 from $42.6 million in 2022. Gross profit for products was $13.3 million in 2023 compared to $14.4 million in 2022. As a percentage of product revenues, gross profit increased to 26.8% in 2023 from 25.2% in 2022. The increase in gross profit as a percentage of product revenues was principally due to decisions to stop fulfilling low margin orders and decreases in raw materials costs related to global supply chain issues, which were more prevalent in 2022 than 2023.

Cost of services increased by approximately $1.9 million, or 6.7%, to $30.3 million in 2023 from $28.4 million in 2022. Gross profit for services was $53.7 million in 2023 compared to $50.6 million in 2022. As a percentage of service revenues, gross profit minimally decreased to 64.0% in 2023 from 64.1% in 2022. The decrease in gross profit as a percentage of services revenues was principally due to an increase in our install base that generates service revenue, offset by reduction due to the commencement of amortization for our Unity SaaS platform.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased by approximately $7.8 million, or 12.2%, to $71.3 million in 2023 compared to $63.5 million in 2022. The increase was principally due to an aggregate of $5.5 million in transaction-related costs in connection with our acquisition of Movingdots GmbH (“Movingdots”) and business combination with MiX Telematics, $2.1 million in SG&A costs incurred by Movingdots after the closing of such transaction, and increased salaries, investments in marketing programs and professional services fees. As a percentage of revenues, SG&A expenses increased to 53.3% in the year ended December 31, 2023, from 46.7% in the same period in 2022.

RESEARCH AND DEVELOPMENT EXPENSES. R&D expenses decreased by approximately $0.1 million, or 1.1%, to $8.4 million in 2023 compared to $8.5 million in 2022, principally due to the capitalization of software development expenses for new product development and reduction in salaries and wages offset in part by the acquisition of Movingdots, which added $2.0 million to expenses. As a percentage of revenues, R&D expenses increased to 6.3% in the year ended December 31, 2023, from 6.2% in the same period in 2022.

INTEREST EXPENSE. Interest expense increased by $2.6 million, or 261.2%, to $1.6 million in 2023 from $(1.0) million in 2022, principally due to foreign currency translation gains from the term facilities under the Prior Credit Agreement with Hapoalim.

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. Net loss attributable to common stockholders was $17.3 million, or $(0.49) per basic and diluted share, for 2023 as compared to net loss of $16.9 million, or $(0.48) per basic and diluted share, for the same period in 2022. The increase in net loss was due primarily to transaction costs of $5.5 million with respect to the Movingdots acquisition and the business combination with MiX Telematics, plus incremental SG&A spend from the Movingdots acquisition of $2.1 million, plus an increase in accretion of preferred stock of $1.2 million, offset by the bargain gain on the purchase of Movingdots of $9.0 million.

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Non-GAAP Financial Information

We use certain measures to assess the financial performance of our business, as well as to comply with the reporting requirements of the JSE. Certain of these measures are termed “non-GAAP measures” because they exclude amounts that are included in, or include amounts that are excluded from, the most directly comparable measure calculated and presented in accordance with GAAP, or are calculated using financial measures that are not calculated in accordance with GAAP. These non-GAAP measures include adjusted EBITDA, headline loss, and headline loss per common share.

An explanation of the relevance of the non-GAAP measure, a reconciliation of the non-GAAP measure to the most directly comparable measure calculated and presented in accordance with GAAP and a discussion of its limitations is set out below. We do not regard these non-GAAP measures as a substitute for, or superior to, the equivalent measure calculated and presented in accordance with GAAP or that calculated using financial measures that are calculated in accordance with GAAP.

Adjusted EBITDA

We define adjusted EBITDA as net loss attributable to common stockholders before non-controlling interest, preferred stock dividend and accretion, interest expense (net), other (income) expense, net, income tax expense (benefit), depreciation and amortization, stock-based compensation, foreign currency (gains) losses, restructuring-related expenses, gain on bargain purchase (Movingdots), severance-related expenses, derivative mark-to market adjustment, recognition of pre-October 1, 2024 contract assets (Fleet Complete), Movingdots-related expenses, acquisition-related expenses, and integration-related expenses.

We have included adjusted EBITDA in this Form 10-K because it is a key measure that our management and board of directors use to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short and long-term operational plans. In particular, the exclusion of certain expenses in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results. Because our method for calculating adjusted EBITDA may differ from other companies’ methods, the non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

A reconciliation of net loss attributable to common stockholders (the most directly comparable financial measure presented in accordance with GAAP) to adjusted EBITDA for the periods shown is presented below.

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Our use of adjusted EBITDA has limitations as analytical tools and should not be considered as performance measures in isolation from, or as a substitute for, analysis of our results as reported under GAAP.

Some of these limitations are:

•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

•adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

•adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation;

•adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;

•other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure; and

•certain of the adjustments (such as restructuring-related expenses and integration-related expenses) made in calculating adjusted EBITDA are those that management believes are not representative of our underlying operations and, therefore, are subjective in nature.

Because of these limitations, adjusted EBITDA should be considered alongside other financial performance measures, including loss from operations, net loss and our other results.

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Headline Loss per Share

In connection with our secondary listing on the JSE, we are required to calculate and publicly disclose headline loss per share and diluted headline loss per share. Headline loss per share is calculated using net loss which has been determined in accordance with GAAP.

Headline loss for the period represents the loss for the period attributable to our common stockholders adjusted for the remeasurements that are more closely aligned to the operating or trading results as set forth below, and headline loss per share represents headline loss divided by the weighted average number of shares of common stock outstanding.

The table below presents a reconciliation between net loss attributable to common stockholders to headline loss for the years ended December 31, 2022 and 2023, the three months ended March 31, 2024, and the year ended March 31, 2025.

The above disclosure was prepared for the purpose of complying with the reporting requirements of the JSE and includes certain non-GAAP measures, such as headline loss and headline loss per common share, and related reconciliations.

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Liquidity and Capital Resources

On April 2, 2024, we consummated the MiX Combination, pursuant to which MiX Telematics became our indirect, wholly owned subsidiary. The Implementation Agreement required, as a condition to closing of the MiX Combination, that we obtain debt and/or equity financing in an amount sufficient to provide for the redemption in full of all then-outstanding shares of our Series A convertible preferred stock. On April 2, 2024, concurrently with the closing of the MiX Combination, we used the net proceeds received from the RMB Facilities described below and incremental borrowing capacity as a result of the refinancing of Hapoalim Credit Facilities to redeem the full $90.3 million value of the then-outstanding shares of Series A convertible preferred stock.

In addition, our wholly owned subsidiaries, Powerfleet Israel and Pointer were party to the Prior Credit Agreement with Hapoalim, pursuant to which Hapoalim agreed to provide Powerfleet Israel with two senior secured term loan facilities denominated in NIS in an initial aggregate principal amount of $30 million (composed of two facilities in the aggregate principal amounts of $20 million and $10 million, respectively) and a five-year revolving credit facility to Pointer denominated in NIS in an initial aggregate principal amount of $10 million. The proceeds of the term loan facilities were used to finance a portion of the cash consideration payable in our acquisition of Pointer.

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 million (composed of Hapoalim Facility A and Hapoalim Facility B in the aggregate principal amounts of $20 million and $10 million, respectively) and (ii) two revolving credit facilities to Pointer in an aggregate principal amount of $20 million (composed of Hapoalim Facility C and Hapoalim Facility D in the aggregate principal amounts of $10 million and $10 million, respectively). The Hapoalim Term Facilities will mature on March 18, 2029. The Hapoalim Revolving Facilities are available for successive one-month periods until and including February 27, 2026, unless the Borrowers deliver prior notice to Hapoalim of their request not to renew the Hapoalim Revolving Facilities.

On March 18, 2024, Powerfleet Israel drew down $30 million in cash under the Hapoalim Term Facilities and used the proceeds to prepay approximately $11.2 million, representing the remaining outstanding balance, of the term loans extended to Powerfleet Israel under the Prior Credit Agreement and distributed the remaining proceeds to us. The proceeds of the Hapoalim Revolving Facilities may be used by Pointer for general corporate purposes, including working capital and capital expenditures.

On December 30, 2024, the Borrowers entered into an amendment (the “Amendment”) to the A&R Credit Agreement. The Amendment increases the principal amount available under Hapoalim Facility D from $10 million to $20 million and provides that the total principal amount of Hapoalim Facility D may be distributed to us or any of our subsidiaries by no later than December 31, 2025, subject to certain terms and conditions of the A&R Credit Agreement.

As of March 31, 2025, Powerfleet Israel had utilized approximately $17.4 million under the Hapoalim Revolving Facilities.

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

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 December 31, 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.

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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.

On March 7, 2024, we entered into the Facilities Agreement with RMB, pursuant to which RMB agreed to provide us with the RMB Facilities in an aggregate principal amount of $85 million, composed of RMB Facility A and RMB Facility B, each having a principal amount of $42.5 million. We drew down $85 million in cash under the RMB Facilities on March 13, 2024. The interest rates of RMB Facility A and RMB Facility B are 8.699% per annum and 8.979% per annum, respectively. Interest is payable quarterly in arrears. The principal under RMB Facility A and RMB Facility B is repayable in one installment on March 31, 2027 and March 31, 2029, respectively.

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 million (the equivalent of $19.0 million as at March 31, 2025) (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.

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. The RMB General Facility repayment terms were extended by a further 365 days based on the same terms and conditions of the Facility Agreement entered into on March 7, 2024. 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.

During April 2025, the RMB General Facility repayment terms were extended by an additional 365 days on the same terms and conditions of the Facilities Agreement. As of March 31, 2025, $18.0 million of the RMB General Facility was utilized.

On September 27, 2024, we entered into the Facility Agreement with RMB, pursuant to which RMB agreed to provide us with the New RMB Term Facility in an aggregate principal amount of $125 million. On October 1, 2024, we drew down $125 million in cash under the New RMB Term Facility to pay a portion of the Purchase Price for the FC Acquisition. Interest is payable quarterly in arrears at an interest rate of 5% per annum plus the applicable term SOFR reference rate. The principal is repayable in one installment on October 31, 2029.

As a result of global supply chain disruptions, the conflict in the Middle East, rising interest rates, fluctuations in currency values, restrictions on international trade (such as tariffs and other controls on imports or exports of goods, technology or data) and inflation and other cost increases, there remains uncertainty surrounding the potential impact of such events on our results of operations and cash flows. We are proactively taking steps to increase the available cash on hand including, but not limited to, targeted reductions in discretionary operating expenses and capital expenditures and borrowing under our revolving credit facility.

Our primary sources of cash are cash flows from sales of products and services, our holdings of cash, cash equivalents and proceeds from the sale of our capital stock and borrowings under our credit facilities. Management believes our cash and cash equivalents (including restricted cash) of $48.8 million as of March 31, 2025, in conjunction with cash expected to be generated from the execution of our strategic plan over the next 12 months and proceeds from our credit facilities, are sufficient to fund the projected operations for at least the next 12 months from the issuance date of these consolidated financial statements (June 26, 2025) and service our 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 we 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 us and would be implemented, if assumed levels of revenue and gross margin are not achieved and additional funding is not obtained.

44

Capital Requirements

As of March 31, 2025, we had cash and cash equivalents (including restricted cash) of $48.8 million and working capital of $18.1 million compared to cash and cash equivalents (including restricted cash) of $109.7 million and working capital of $126.2 million as of March 31, 2024. Our primary sources of cash are cash flows from sales of products and services, our holdings of cash, cash equivalents and proceeds from the sale of our capital stock and borrowings under our credit facilities. The FC Acquisition and MiX Combination are also expected to be a source of positive cash flow. To date, we have not generated sufficient cash flow solely from operating activities to fund our operations.

Our capital requirements depend on a variety of factors, including, but not limited to, the length of the sales cycle, the rate of increase or decrease in our existing business base, the success, timing, and amount of investment required to bring new products to market, revenue growth or decline and potential acquisitions. Failure to generate positive cash flow from operations will have a material adverse effect on our business, financial condition and results of operations.

Operating Activities

During the year ended March 31, 2025, net cash used in operating activities was $3.3 million, compared to net cash provided by operating activities of $4.4 million during the year ended December 31, 2023. The net cash used in operating activities for the year ended March 31, 2025 primarily included non-cash charges of $47.5 million for depreciation and amortization expense, $9.4 million for bad debts expense, $9.4 million for stock-based compensation, $5.0 million for ROU asset amortization, $4.5 million for inventory write-downs, $1.1 million for other non-cash items and $0.9 million for shares issued for transaction bonuses in connection with the MiX Combination, partially offset by $0.5 million for derivative mark-to-market adjustment. Changes in operating assets and liabilities included:

•an increase in accounts receivables of $14.0 million;

•a decrease in accounts payable of $12.2 million;

•a decrease in deferred costs of $8.4 million; and

•a decrease in lease liabilities of $4.6 million; offset by

•a decrease in inventory, net of write-downs of $5.7 million;

•a decrease in prepaid expenses and other assets of $5.5 million;

•an increase in deferred revenue of $1.7 million; and

•an increase in net severance fund of $1.2 million.

During the three months ended March 31, 2025, net cash provided by operating activities was $13.5 million, compared to net cash used in operating activities of $0.2 million for the same period in 2024. The net cash used in operating activities for the three months ended March 31, 2025 primarily included non-cash charges of $14.5 million for depreciation and amortization expense, $2.9 million for inventory write-downs, $2.2 million for bad debts expense, $0.9 million for stock-based compensation, $0.7 million for right-of-use asset amortization and $0.3 million for other non-cash items. Changes in operating assets and liabilities included:

•a decrease in deferred costs of $3.3 million; and

•a decrease in lease liabilities of $0.5 million; offset by

•an increase in accounts payable of $3.5 million;

•a decrease in prepaid expenses and other assets of $3.4 million;

•a decrease in inventory, net of write-downs of $3.1 million;

•an increase in net severance fund of $1.8 million,

•an increase in deferred revenue of $0.7 million; and

•a decrease in accounts receivables of $1.2 million.

45

Net cash provided by operating activities was $4.4 million for the year ended December 31, 2023, compared to net cash provided by operating activities of $1.2 million for the same period in 2022. The net cash provided by operating activities for the year ended December 31, 2023 reflects a net loss of $5.7 million and includes non-cash charges of $3.9 million for stock-based compensation, $9.4 million for depreciation and amortization expense, a gain on bargain purchase of $9.0 million, and $2.8 million for right-of-use asset amortization. Changes in operating assets and liabilities included:

•an increase in accounts receivable of $1.5 million;

•an increase in inventory of $1.7 million;

•a decrease in lease liabilities of $2.9 million; and

•an increase in accounts payable and accrued expenses of $4.5 million.

Investing Activities

Net cash used in investing activities for the year ended March 31, 2025 was $170.6 million, compared to net cash provided by investing activities of $1.5 million for the year ended December 31, 2023. The net cash used by investing activities was primarily due to $137.1 million in acquisitions, net of cash assumed from the MiX Combination and FC acquisition, $20.0 million for the purchase of fixed assets and $13.8 million for capitalized software development costs. The net cash provided by investing activities of $1.5 million in the year ended December 31, 2023 was primarily due to $8.7 million in net proceeds from the acquisition of Movingdots, partially offset by $3.6 million for capitalized software development costs and $3.5 million the purchase of fixed assets.

Net cash used in investing activities for the three months ended March 31, 2025 was $10.1 million, compared to net cash used in investing activities of $1.9 million for the three months ended March 31, 2024. The net cash used by investing activities was primarily due to $3.4 million for the purchase of fixed assets and $6.5 million for capitalized software development costs. The net cash used in investing activities of $1.9 million in the three months ended March 31, 2024 was primarily due to $1.3 million for the purchase of fixed assets and $0.6 million for capitalized software development costs.

Net cash provided by investing activities was $1.5 million for the year ended December 31, 2023, compared to net cash used in investing activities of $6.3 million for the same period in 2022. The increase in net cash provided by investing activities was primarily due to $8.7 million in net proceeds from the acquisition of Movingdots, partially offset by $3.6 million for capitalized software development costs and $3.5 million for the purchase of fixed assets.

Financing Activities

Net cash provided by financing activities was $115.7 million for the year ended March 31, 2025, compared to net cash used in financing activities of $3.7 million for the year ended December 31, 2023. The increase was primarily driven by $125.0 million in proceeds from long-term debt and $66.5 million in gross proceeds from a private placement completed in connection with the FC Acquisition, partially offset by related offering costs. Additional sources of cash included $19.6 million in proceeds from short-term bank borrowings and $1.9 million from the exercise of stock options. These inflows were partially offset by $90.3 million used for the redemption of Series A convertible preferred stock in connection with the MiX Combination, $2.8 million used for the repurchase of common stock related to tax withholding on vested restricted stock awards, and $2.6 million in repayments of long-term debt. Debt issuance costs totaled $1.4 million during the period.

During the three months ended March 31, 2025, net cash provided by financing activities was $8.2 million, compared to $92.8 million net cash provided by financing activities for the three months ended March 31, 2024. The cash provided by financing activities was primarily due to $7.7 million received from short-term bank debt, and $1.0 million proceeds from exercise of stock options, partially offset by repayment of long-term debt of $0.5 million.

Net cash used in financing activities was $3.7 million for the year ended December 31, 2023, compared to net cash used in financing activities of $0.3 million for the same period in 2022. The increase in net cash used in financing activities was primarily due to the payment in cash of preferred stock dividends totaling $3.4 million compared to $0 in 2022, net of the changes in the repayment of long-term debt and change in short-term debt, net balance.

46

Off-Balance Sheet Arrangements

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

Impact of Recently Issued Accounting Pronouncements

The Company is subject to recently issued accounting standards, accounting guidance and disclosure requirements. For a description of these new accounting standards, see Note 2 to our consolidated financial statements contained in Item 8 of Part II of this Annual Report on Form 10-K, which is incorporated herein by reference.

47

Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The
following discussion is intended to assist you in understanding our financial condition and results of operations and should be read
in conjunction with the financial statements and related notes included elsewhere in this Form 10-K. Many of the amounts
and percentages in this section have been rounded for convenience of presentation, but actual recorded amounts have been used in computations.
Accordingly, some information may appear not to compute accurately.

Restatement of Previously Issued Consolidated Financial
Statements

As
described in the Explanatory Note included in this Form 10-K, we have restated our previously issued consolidated financial
statements for the Non-Reliance Periods. As a result, we have also restated certain previously reported financial information for the
fiscal years ended December 31, 2022 and 2021 in this “Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” including but not limited to financial information under the sections entitled “Results of Operations”
and “Liquidity and Capital Resources—Capital Requirements” to conform the discussion with the restated information.
See Note 2 to our consolidated financial statements, included Item 8 of this Form 10-K, for additional information on
the restatement of, and the related effects on, our consolidated financial statements for the Non-Reliance Periods.

Overview

Powerfleet
is a global leader of IOT solutions providing valuable business intelligence for managing high-value enterprise
assets that improve operational efficiencies.

We
are headquartered in Woodcliff Lake, New Jersey, with offices located around the globe.

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

Our
Powerfleet for Warehouse solutions are designed to provide on-premise or in-facility asset and operator management, monitoring, and
visibility for warehouse trucks such as forklifts, man-lifts, tuggers and ground support equipment at airports. These solutions utilize
a variety of communications capabilities such as Bluetooth®, WiFi, and proprietary radio frequency.

Our
Powerfleet for Logistics solutions are designed to provide bumper-to-bumper asset management, monitoring, and visibility for over-the-road
based assets such as heavy trucks, dry-van trailers, refrigerated trailers and shipping containers and their associated cargo. These
systems provide mobile-asset tracking and condition-monitoring solutions to meet the transportation market’s desire for greater
visibility, safety, security, and productivity throughout global supply chains.

Our
Powerfleet for Vehicles solutions are designed both to enhance the vehicle fleet management process, whether it’s a rental car,
a private fleet, or automotive OEM partners. We achieve this by providing critical information that
can be used to increase revenues, reduce costs and improve customer service.

Our
patented technologies address the needs of organizations to monitor and analyze their assets to improve safety, increase efficiency and
productivity, reduce costs, and improve profitability. Our offerings are sold under the global brands Powerfleet, Pointer and Cellocator.

We deliver advanced mobility solutions that connect
assets to increase visibility operational efficiency and profitability by leveraging our Unity platform product strategy. Across our vertical
markets we differentiate ourselves by being OEM agnostic and helping mixed fleets view and manage their assets similarly. All of our solutions
are paired with SaaS analytics platforms to provide an even deeper layer of insights. These insights include a full set of operational
KPIs to drive operational and strategic decisions. These KPIs leverage industry comparisons to show how a company is performing versus
their peers. The more data the system collects, the more accurate a client’s understanding becomes.

The
analytics platform, which is integrated into our customers’ management systems, is designed to provide a single, integrated view
of asset and operator activity across multiple locations that provides enterprise-wide benchmarks and peer-industry comparisons. We look
for analytics, as well as the data contained therein, to differentiate us from our competitors, make a growing contribution to revenue,
add value to our solutions, and help keep us at the forefront of the wireless asset management markets we serve.

We
sell our wireless mobility solutions to both corporate-level executives, division heads and site-level management within the enterprise.
We also utilize channel partners such as independent dealers and OEMs who may opt for us to white label our product. Typically, our initial
system deployment serves as a basis for potential expansion across the customer’s organization. We work closely with customers
to help maximize the utilization and benefits of our system and demonstrate the value of enterprise-wide deployments. Post-implementation,
we consult with our customers to further extend and customize the benefits to the enterprise by delivering enhanced analytics capabilities.

We
market and sell our solutions to a wide range of customers in the commercial and government sectors. Our customers operate in diverse
markets, such as automotive manufacturing, heavy industry, retail food and grocery distribution, logistics, wholesale distribution, transportation,
aviation, manufacturing, aerospace and defense, homeland security and vehicle rental.

We
incurred net losses of approximately $22.1 million (as restated), $16.9 million (as restated), and $17.3 million for the years ended
December 31, 2021, 2022 and 2023, respectively, and have incurred additional net losses since inception. As of December 31, 2023, we
had cash (including restricted cash) and cash equivalents of $19.3 million, working capital of $23.5 million, and an accumulated
deficit of $146.3 million. Our primary sources of cash are cash flows from sales of products and services, our holdings of cash,
cash equivalents and investments from the sale of our capital stock and borrowings under our credit facilities. To date, we have not
generated sufficient cash flow solely from operating activities to fund our operations.

Critical
Accounting Policies and Estimates

We
have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States
in the preparation of our financial statements. Our significant accounting policies are described in Note 3 to our consolidated financial
statements included in this Form 10-K. Certain accounting policies involve significant judgments and assumptions by
our management that can have a material impact on the carrying value of certain assets and liabilities. We consider such accounting policies
to be our critical accounting policies. The judgments and assumptions used by our management in these critical accounting policies are
based on historical experience and other factors that our management believes to be reasonable under the circumstances. Because of the
nature of these judgments and assumptions, actual results could differ significantly from these judgments and estimates, which could
have a material impact on the carrying values of our assets and liabilities and our results of operations. Our critical accounting policies
are described below.

34

Revenue
Recognition

We
and our subsidiaries generate revenue from sales of systems and products and from customer SaaS and hosting infrastructure fees.
Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing
services. Sales, value add, and other taxes we collect concurrently with revenue-producing activities are excluded from
revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The expected costs
associated with our base warranties continue to be recognized as an expense when the products are sold.

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 are
not distinct to the customer separate from the SaaS services provided, we consider both hardware and SaaS services a bundled
performance obligation. Under the applicable accounting guidance, all of our billings for future services are deferred
and classified as a current and long-term liability. The 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.

We recognize revenue for remotely hosted SaaS agreements and post-contract maintenance and support agreements beyond our standard
warranties over the life of the contract. Revenue is recognized ratably over the service periods and the cost of providing these services
is expensed as incurred. 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.

We earn 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.

We
also derive 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.

Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue
to each performance obligation based on our relative standalone selling price (“SSP”). Judgment is required to determine
the SSP for each distinct performance obligation. We generally determine standalone selling prices based on observable prices
charged to customers. Significant pricing practices
taken into consideration include our discounting practices, the size and volume of our transactions, the customer demographic, price
lists, our go-to-market strategy and historical and current sales and contract prices. As our go-to-market strategies evolve, we may
modify our pricing practices in the future, which could result in changes to SSP.

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

We recognize an asset for the incremental costs of obtaining the contract arising from the sales commissions to employees because
we expect to recover those costs through future fees from the customers. We amortize the asset over one to five years
because the asset relates to the services transferred to the customer during the contract term of one to five years.

Goodwill
and Intangibles

Goodwill
represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill and intangible
assets deemed to have indefinite lives are not amortized and are tested for impairment on an annual basis and between annual tests
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets other than
goodwill are amortized over their useful lives unless the lives are determined to be indefinite. Intangible assets are carried at
cost, less accumulated amortization. Intangible assets consist of trademarks and trade names, patents, customer relationships and
other intangible assets. Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below
the operating segment. We operate in one reportable segment which is our only reporting unit. We test our goodwill for impairment
annually, which is the first day of our fourth quarter or when an indicator of impairment exists, by comparing the fair value of the
reporting unit to its carrying value.

We
test for goodwill impairment at the reporting unit level on October 1 of each year and between annual tests if a triggering event indicates
the possibility of an impairment. We performed a quantitative assessment whereby the fair value of the reporting unit is calculated using
a market approach and a discounted cash flow method, as a form of the income approach. The market approach includes the use of comparative
revenue multiples to complement discounted cash flow results. The discounted cash flow method is based on the present value of the projected
cash flows and a terminal value. The terminal value represents the expected normalized future cash flows of the reporting unit beyond
the cash flows from the discrete projection period. The fair value of the reporting unit is calculated based on the sum of the present
value of the cash flows from the discrete period and the present value of the terminal value. The discount rate represented our estimate
of the WACC, or expected return, that a marketplace participant would have required as of the valuation date. The application of our
goodwill impairment test required key assumptions underlying our valuation model.

The
discounted cash flow analysis factored in assumptions on discount rates and terminal growth rates to reflect risk profiles, as well as
revenue and cost growth relative to history and market trends and expectations. The market multiples approach incorporated judgment involved
in the selection of comparable public company multiples and benchmarks. The selection of companies and multiples was influenced by differences
in growth and profitability, and volatility in market prices of peer companies. These valuation inputs are inherently judgmental, and
an adverse change in one or a combination of these inputs could trigger a goodwill impairment loss in the future. In connection with our goodwill impairment testing as of October 1, 2023, the estimated fair value exceeded its carrying
value by approximately 6%.

For
the years ended December 31, 2021, 2022 and 2023, we did not incur an impairment charge.

Business
Combinations

In
accordance with ASC 805, Business Combinations (ASC 805), we recognize the tangible and intangible assets
acquired and liabilities assumed based on their estimated fair values. Determining these fair values requires management to make significant
estimates and assumptions, especially with respect to intangible assets.

We
recognize identifiable assets acquired and liabilities assumed at their acquisition date fair value. During the measurement period, which may be
up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding
offset to goodwill or bargain purchase to the extent we identify adjustments to the preliminary fair values. Upon the conclusion of the
measurement period or final determination of the values of assets acquired or liabilities assumed, any subsequent adjustments are recorded
to the consolidated statements of operations.

Income
Taxes

We
use the asset and liability method of accounting for deferred income taxes. Deferred income taxes are measured by applying enacted statutory
rates to net operating loss carryforwards and to the differences between the financial reporting and tax bases of assets and liabilities.
Deferred tax assets are reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the
deferred tax assets will not be realized.

We
recognize uncertainty in income taxes in the financial statements using a recognition threshold and measurement attribute of a tax position
taken or expected to be taken in a tax return. We apply the “more-likely-than-not” recognition threshold to all tax positions.
We have opted to classify interest and penalties that would accrue according to the provisions of relevant tax law as selling, general,
and administrative expenses, in the consolidated statement of operations. For the years ended December 31, 2021, 2022 and 2023, interest
and penalties were immaterial.

35

Results
of Operations

The
following table sets forth certain items related to our statement of operations as a percentage of revenues for the periods
indicated and should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in
this Form 10-K. A detailed discussion of the material changes in our operating results is set forth below.

36

Year
Ended December 31, 2023 Compared to Year Ended December 31, 2022

REVENUES. Revenues
decreased by approximately $2.2 million, or 1.6%, to $133.7 million in 2023 from $135.9 million (as restated) in 2022.

Revenues from products decreased by
approximately $7.2 million, or 12.7%, to $49.7 million in 2023 from $56.9 million (as restated) in 2022. The decrease in product
revenues was due to decreased product sales in Germany, where we are actively shutting down sales from low margin contracts, large
logistics companies recalibrating demand following aggressive builds during the pandemic, and lower product sales in and out of
Israel reflecting geopolitical headwinds and a proactive decision to shutter our hardware-only line of business. These decreases
were offset by increases in product revenue in our Powerfleet for Vehicles business in the United States due to new unit purchases
from new and existing customers.

Revenues from services increased by
approximately $5.0 million, or 6.4%, to $84.0 million in 2023 from $79.0 million (as restated) in 2022. The increase in services
revenues was principally due to an increase in our install base that generates service revenue, with revenue growth concentrated in
North America where a positive market response to our Unity SaaS product offering has been a significant contributing factor.

COST OF REVENUES. Cost of revenues decreased
by approximately $4.3 million, or 6.0%, to $66.7 million in 2023 from $70.9 million in 2022. Gross profit was $67.1 million in 2023 compared
to $65.0 million (as restated) in 2022. As a percentage of revenues, gross profit increased to 50.2% in 2023 from 47.8% in 2022.

Cost of products decreased by approximately $6.2
million, or 14.5%, to $36.4 million in 2023 from $42.6 million in 2022. Gross profit for products was $13.3 million in 2023 compared
to $14.4 million (as restated) in 2022. As a percentage of product revenues, gross profit increased to 26.8% in 2023 from 25.2% in 2022.
The increase in gross profit as a percentage of product revenues was principally due to decisions to stop fulfilling low margin
orders and decreases in raw materials costs related to global supply chain issues, which were more prevalent in 2022 than 2023.

Cost of services increased by approximately $1.9 million, or 6.7%,
to $30.3 million in 2023 from $28.4 million in 2022. Gross profit for services was $53.7 million in 2023 compared to $50.6 million (as restated)
in 2022. As a percentage of service revenues, gross profit minimally decreased to 64.0% in 2023 from 64.1% in 2022. The decrease in gross
profit as a percentage of services revenues was principally due to an increase in our install base that generates service revenue, offset
by reduction due to the commencement of amortization for our Unity SaaS platform.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.
Selling, general and administrative (“SG&A”) expenses increased by approximately $7.8 million, or 12.2%, to $71.3
million in 2023 compared to $63.5 million (as restated) in 2022. The increase was principally due to an aggregate of $5.5 million in transaction-related
costs in connection with our acquisition of Movingdots GmbH (“Movingdots”) and business combination with MiX Telematics,
$2.1 million in SG&A costs incurred by Movingdots after the closing of such transaction, and increased salaries, investments in marketing
programs and professional services fees. As a percentage of revenues, SG&A expenses increased to 53.3% in the year ended December
31, 2023, from 46.7% in the same period in 2022.

RESEARCH AND DEVELOPMENT EXPENSES. Research
and development (“R&D”) expenses decreased by approximately $0.1 million, or 1.1%, to $8.4 million in 2023 compared to
$8.5 million (as restated) in 2022, principally due to the capitalization of software development expenses for new product development and
reduction in salaries and wages offset in part by the acquisition of Movingdots, which added $2.0 million to expenses. As a percentage
of revenues, R&D expenses increased to 6.3% in the year ended December 31, 2023 from 6.2% in the same period in 2022.

INTEREST EXPENSE. Interest expense
increased by $2.6 million, or 261.2%, to $1.6 million in 2023 from $(1.0) million in 2022, principally due to foreign currency
translation gains from the term facilities under the Prior Credit Agreement with Hapoalim.

NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS. Net loss attributable to common stockholders was $17.3 million, or $(0.49) per basic and diluted share, for 2023
as compared to net loss of $16.9 million (as restated), or $(0.48) per basic and diluted share, for the same period in 2022. The
increase in net loss was due primarily to transaction costs of $5.5 million with respect to the Movingdots acquisition and the
business combination with MiX Telematics, plus incremental SG&A spend from the Movingdots acquisition of $2.1 million, plus
an increase in accretion of preferred stock of $1.2 million, offset by the bargain gain on the purchase of Movingdots of $9.0
million.

37

Year
Ended December 31, 2022 Compared to Year Ended December 31, 2021

REVENUES. Revenues increased by approximately $10.0 million, or 7.9%,
to $135.9 million (as restated) in 2022 from $126.0 million (as restated) in 2021.

Revenues from products increased by approximately $4.0 million, or
7.6%, to $56.9 million (as restated) in 2022 from $52.9 million (as restated) in 2021. The increase in product revenues was attributable to an
increase in sales by our Powerfleet for Logistics and Powerfleet for Warehouse products.

Revenues from services increased by approximately $5.9 million, or
8.1%, to $79.0 million (as restated) in 2022 from $73.1 million (as restated) in 2021. The increase in services revenues was principally due to
an increase in our install base that generates service revenue.

COST
OF REVENUES. Cost of revenues increased by approximately $4.7 million, or 7.1%, to $70.9 million (as restated) in 2022 from $66.2
million (as restated) in 2021. Gross profit was $65.0 million (as restated) in 2022 compared to $59.8 million (as restated) in 2021. As a
percentage of revenues, gross profit increased to 47.8% in 2022 from 47.4% in 2021. The minimal increase in gross profit as a
percentage of revenues was principally due to less significant increases in raw material costs as a result of global supply chain
issues in 2022 than in 2021.

Cost of products increased by approximately $2.9 million, or 7.4%,
to $42.6 million in 2022 from $39.6 million (as restated) in 2021. Gross profit for products was $14.4 million (as restated) in 2022 compared
to $13.3 million (as restated) in 2021. As a percentage of product revenues, gross profit minimally increased to 25.2% in 2022 from 25.1% in
2021. The gross profit as a percentage of product revenues was impacted by product mix, higher costs associated with supply chain issues,
electronic component shortages and inflation.

Cost of services increased by approximately $1.8 million, or 6.7%,
to $28.4 million in 2022 from $26.6 million in 2021. Gross profit for services was $50.6 million (as restated) in 2022 compared to $46.5 million
(as restated) in 2021. As a percentage of service revenues, gross profit increased to 64.1% in 2022 from 63.6% in 2021. The increase in gross
profit as a percentage of services revenues was principally due to an increase in our install base that generates service revenue.

SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased by approximately $7.0 million, or 12.3%, to $63.5
million (as restated) in 2022 compared to $56.5 million (as restated) in 2021, inclusive of higher foreign currency losses of $0.7 million and
higher severance costs of $0.7 million. Other drivers of the increase in expenses include increased salaries and related expenses, professional
fees, and marketing and travel expenses. As a percentage of revenues, SG&A expenses increased to 46.7% in the year ended December
31, 2022, from 44.9% in the same period in 2021.

RESEARCH
AND DEVELOPMENT EXPENSES. R&D expenses decreased by approximately $3.0 million, or 25.9%, to $8.5
million (as restated) in 2022 compared to $11.4 million (as restated) in 2021, principally due to the capitalization of software development expenses
for new product development, which increased by $1.7 million in 2022. As a percentage of revenues, R&D expenses decreased to 6.2%
in the year ended December 31, 2022 from 9.1% in the same period in 2021.

INTEREST
EXPENSE. Interest expense decreased by $3.8 million, or 136.0%, to $(1.0) million in 2022 from $2.8 million in 2021, principally
due to foreign currency translation gains from the term facilities under the Prior Credit Agreement with Hapoalim.

NET
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. Net loss attributable to common stockholders was $16.9 million (as restated), or
$(0.48) per basic and diluted share, for 2022 as compared to net loss of $22.1 million (as restated), or $(0.64) per basic and
diluted share, for the same period in 2021. The decrease in the net loss was due primarily to the reasons described
above.

38

Headline
Loss Earnings (Loss) per Share

In
connection with our secondary listing on the Johannesburg Stock Exchange (“JSE”), we are required to calculate and publicly
disclose headline earnings (loss) per share and diluted headline earnings (loss) per share. Headline loss per share is calculated using
net loss which has been determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Headline
loss for the period represents the loss for the period attributable to common stockholders of Powerfleet adjusted for the
remeasurements that are more closely aligned to the operating or trading results as set forth below, and headline loss per share
represents headline loss divided by the weighted average number of shares of common stock outstanding.

The
table below presents a reconciliation between net loss attributable to common stockholders to headline loss for the years ended December
31, 2021 (as restated), 2022 (as restated) and 2023.

Use
of Non-GAAP Measures

The
above disclosure was prepared for the purpose of complying with the reporting requirements of the JSE and includes certain non-GAAP measures,
such as headline earnings (loss) and headline earnings (loss) per common share, and related reconciliations.

Liquidity and Capital Resources

On October 3, 2019, in connection with the completion of the Pointer
Merger, we issued and sold 50,000 shares of the 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”) pursuant to the terms of an Investment and Transaction
Agreement, dated as of March 13, 2019 (as amended, the “Investment Agreement”), for an aggregate purchase price of $50.0 million.
The proceeds received from such sale were used to finance a portion of the cash consideration payable in our acquisition of Pointer.

In addition, our wholly owned
subsidiaries, Powerfleet Israel and Pointer (collectively, the “Borrowers”) were party to the Prior Credit Agreement with
Hapoalim, pursuant to which Hapoalim agreed to provide Powerfleet Israel with two senior secured term loan facilities denominated in NIS
in an initial aggregate principal amount of $30 million (comprised of two facilities in the aggregate principal amounts of $20 million
and $10 million, respectively) and a five-year revolving credit facility to Pointer denominated in NIS in an initial aggregate principal
amount of $10 million. The proceeds of the term loan facilities were used to finance a portion of the cash consideration payable in our
acquisition of Pointer. The outstanding amount under the revolving facility was approximately NIS 4,915, or $1,355, as of December 31,
2023.

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 million (comprised of Facility A and Facility B in the aggregate principal amounts of $20 million and $10 million,
respectively) and (ii) two revolving credit facilities to Pointer in an aggregate principal amount of $20 million (comprised of Facility
C and Facility D in the aggregate principal amounts of $10 million and $10 million, respectively). The Term Facilities will mature on
March 18, 2029. The Revolving Facilities are available for successive one-month periods until and including March 18, 2025, unless the
Borrowers deliver prior notice to Hapoalim of their request not to renew the Revolving Facilities.

On March 18, 2024, Powerfleet
Israel drew down $30 million in cash under the Term Facilities and used the proceeds to prepay approximately $11.2 million, representing
the remaining outstanding balance, of the term loans extended to Powerfleet Israel under the Prior Credit Agreement and distributed the
remaining proceeds to Powerfleet. The proceeds of the Revolving Facilities may be used by Pointer for general corporate purposes, including
working capital and capital expenditures.

The 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 our company will serve as collateral under the Credit Facilities.

Borrowings under the Term Facilities
will bear interest at a variable rate equal to the applicable prime interest rate, plus, in the case of borrowings under Facility A, 2.2%
per annum, and, in the case of borrowings under Facility B, 2.3% per annum. Borrowings under Facility C will bear interest, in the case
of borrowings made in NIS, at the applicable prime interest rate plus 2.5%, or, in the case of borrowings made in U.S. dollars, at SOFR
plus 2.15%. Borrowings under 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 Facility D. Borrowings under the Term Facilities will be denominated in NIS, based on the
applicable conversion rate at the time of conversion but will be made available to the Borrowers in U.S. dollars if requested by the Borrowers.

Pointer is required to pay a credit allocation fee
in NIS, with respect to Facility C, and a non-utilization fee in U.S. dollars, with respect to Facility D, in each case, equal to 0.5%
per annum on undrawn and uncancelled amounts of the Revolving Facilities during the period commencing on March 18, 2024 and ending on
the last day of the applicable availability period of such Revolving Facilities.

As a result of global supply chain disruptions, the
conflicts between Russia and Ukraine and between Israel and Hamas, rising interest rates, fluctuations in currency values, inflation and
other cost increases, there remains uncertainty surrounding the potential impact of such events on our results of operations and cash
flows. We are proactively taking steps to increase available cash on hand including, but not limited to, targeted reductions in discretionary
operating expenses and capital expenditures and borrowing under the revolving credit facility.

39

On April 2, 2024, we consummated the MiX
Combination, pursuant to which MiX Telematics became our indirect, wholly owned subsidiary. The Implementation Agreement required,
as a condition to closing of the MiX Combination, that we obtain debt and/or equity financing in an amount sufficient to provide for
the redemption in full of all outstanding shares of our Series A Preferred Stock. In order to meet this condition, we entered into
the Facilities Agreement on March 7, 2024 and shortly thereafter drew down $85 million in cash under the facilities provided
thereunder. On April 2, 2024, concurrently with the closing of the MiX Combination, we used the net proceeds received from RMB and
from incremental borrowing capacity as a result of the refinancing of Credit Facilities to redeem the full $90.3 million value of
the outstanding shares of Series A Preferred Stock.

We have incurred recurring losses and negative cash
flows from operations since inception and had an accumulated deficit of $146.3 million as of December 31, 2023. We anticipate incurring
additional losses until such time that growth in revenue and gross margin from our strategic plan centered on our Unity SaaS platform
and Warehouse safety product offerings exceed necessary investments in operating expenses, capital expenditures and debt financing costs.

Management believes our cash and cash equivalents
of $19.3 million as of December 31, 2023, in conjunction with the debt proceeds from our lenders, plus cash generated from the execution
of our strategic plan over the next 12 months, are sufficient to fund the projected operations for at least the next 12 months from the
issuance date of these financial statements (May 9, 2024) and service our outstanding obligations.

Capital Requirements

As of December 31, 2023, we had cash (including
restricted cash), cash equivalents and marketable securities of $19.3 million and working capital of $23.5 million, compared to cash
(including restricted cash) and cash equivalents of $17.9 million and working capital of $36.7 million (as restated) as of December 31,
2022. Our primary sources of cash are cash flows from sales of products and services, our holdings of cash, cash equivalents and
investments from the sale of our capital stock and borrowings under our credit facilities. The MiX Combination is also expected to
be a source of positive cash flow. To date, we have not generated sufficient cash flow solely from operating activities to fund our
operations.

Our capital requirements depend on a variety of factors,
including, but not limited to, the length of the sales cycle, the rate of increase or decrease in our existing business base, the success,
timing, and amount of investment required to bring new products to market, revenue growth or decline and potential acquisitions. Failure
to generate positive cash flow from operations will have a material adverse effect on our business, financial condition and results of
operations.

40

Operating
Activities

Net cash provided by operating activities was
$4.4 million for the year ended December 31, 2023, compared to net cash provided by operating activities of $1.2 million (as restated)
for the same period in 2022. The net cash provided by operating activities for the year ended December 31, 2023 reflects a net loss
of $5.7 million and includes non-cash charges of $3.9 million for stock-based compensation, $9.4 million for depreciation and
amortization expense, a gain on bargain purchase of $9.0 million, and $2.8 million for right of use asset amortization. Changes in
operating assets and liabilities included:

Net
cash provided by operating activities was $1.2 million (as restated) for the year ended December 31, 2022, compared to net cash used in
operating activities of $5.4 million (as restated) for the same period in 2021. The net cash provided by operating activities for the
year ended December 31, 2022 reflects a net loss of $6.8 million (as restated) and includes non-cash charges of $4.3 million for
stock-based compensation, $8.3 million for depreciation and amortization expense and $2.8 million for right of use asset
amortization. Changes in operating assets and liabilities included:

Investing
Activities

Net
cash provided by investing activities was $1.5 million for the year ended December 31, 2023, compared to net cash used in investing
activities of $6.3 million (as restated) for the same period in 2022. The increase in net cash provided by investing activities was
primarily due to $8.7 million in net proceeds from the acquisition of Movingdots, partially offset by $3.6 million for the purchase
of fixed assets and $3.5 million (as restated) for capitalized software development costs.

Net
cash used in investing activities was $6.3 million (as restated) for the year ended December 31, 2022, compared to net cash used in
investing activities of $3.0 million (as restated) for the same period in 2021. The cash used in investing activities for the years
ended December 31, 2022 and 2021 was for the purchase of fixed assets and capitalized software development.

Financing
Activities

Net
cash used in financing activities was $3.7 million for the year ended December 31, 2023, compared to net cash used in financing
activities of $0.3 million for the same period in 2022. The increase in net cash used in financing activities was primarily due to
the payment in cash of preferred stock dividends totaling $3.4 million compared to $0 in 2022, net of the changes in the repayment of long-term debt and change in short-term debt, net balance.

Net
cash used in financing activities was $0.3 million for the year ended December 31, 2022, compared to net cash provided by financing activities
of $16.2 million for the same period in 2021. The 2021 period was represented by net proceeds from our stock offering of $26.9 million
offset by the net repayment of long-term debt of $5.6 million and the payment of preferred stock dividends of $4.1 million. In 2022,
dividends were not paid in cash and the net cash used in financing was primarily from the repayment of long-term debt, net of proceeds
from debt.

Inflation

Rising
inflation and other macroeconomic conditions in the U.S. have resulted in higher costs of raw materials, freight, and labor, which has
impacted our operating costs. In addition, we operate in several emerging market economies that are particularly vulnerable to the impact
of inflationary pressures that could materially and adversely impact our operations in the foreseeable future.

41

Business
Acquisitions

In
addition to focusing on our core applications, we adapt our systems to meet our customers’ broader asset management needs and seek
opportunities to expand our solution offerings through strategic acquisitions.

On
March 6, 2023, we entered into a definitive share purchase and transfer agreement (the “SPA”) with Swiss Re Reinsurance Holding
Company Ltd (“Swiss Re”) to acquire all of the outstanding shares of Movingdots for consideration consisting of €1 and
the issuance by us of a ten-year warrant to purchase 800,000 shares of our common stock at an exercise price of $7.00 per share. Under
the SPA, Swiss Re was required to ensure that Movingdots had available cash and cash equivalents of at least €8,000,000 as of the
closing date. The transaction closed on March 31, 2023.

On April 2, 2024, we consummated the MiX Combination, pursuant to which Powerfleet Sub acquired all the issued ordinary
shares of MiX Telematics, including those represented by MiX Telematics’ American Depositary Shares, through the implementation
of the Scheme in accordance with Sections 114 and 115 of the Companies Act, in exchange for shares of our common stock. As a result, MiX
Telematics became our indirect, wholly owned subsidiary.

As
a result of the MiX Combination, the combined company remains Powerfleet and our common stock continues to be listed on The Nasdaq
Global Market and the Tel Aviv Stock Exchange under the symbol “PWFL.” Additionally, our common stock has been listed on
the JSE by way of a secondary inward listing under the symbol “PWR.”

MiX
Telematics is a leading global provider of fleet and mobile asset management solutions delivered as SaaS to over one million global subscribers
spanning more than 120 countries. MiX Telematics’ products and services provide enterprise fleets, small fleets, and consumers
with efficiency, safety, compliance, and security solutions. The MiX Combination is expected to provide us with operational synergies
and access to a broader base of customers.

The
MiX Combination has been accounted for as a business combination, and we have been identified as the accounting acquirer.

Off-Balance
Sheet Arrangements

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

Recently
Issued Accounting Pronouncements

In November 2023, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280):
Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which requires additional operating segment disclosures
in annual and interim consolidated financial statements. ASU 2023-07 is effective for annual periods beginning after December 15, 2023
and for interim periods beginning after December 15, 2024 on a retrospective basis, with early adoption permitted. We are evaluating
the effect of adopting ASU 2023-07.

In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements
to Income Tax Disclosures” (“ASU 2023-09”), which requires disclosure of disaggregated income taxes paid, prescribes
standard categories for the components of the effective tax rate reconciliation and modifies other income tax-related disclosures. ASU
2023-09 is effective for annual periods beginning after December 15, 2024 on a retrospective or prospective basis. We are evaluating
the effect of adopting ASU 2023-09.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses
(Topic 326) Measurement of Credit Losses on Financial Instruments,” which amends the guidance on measuring credit losses on financial
assets held at amortized cost. The amendment is intended to address the issue that the previous “incurred loss” methodology
was restrictive for an entity’s ability to record credit losses based on not yet meeting the “probable” threshold. The
new language will require these assets to be valued at amortized cost presented at the net amount expected to be collected with a valuation
provision. We adopted ASU No. 2016-13 on January 1, 2023. The adoption of the standard did not result in a material impact on
the consolidated financial statements.

Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The
following discussion is intended to assist you in understanding our financial condition and results of operations and should be read
in conjunction with the financial statements and related notes included elsewhere in this Annual Report on Form 10-K. Many of the amounts
and percentages in this section have been rounded for convenience of presentation, but actual recorded amounts have been used in computations.
Accordingly, some information may appear not to compute accurately.

Overview

PowerFleet,
Inc. (together with its subsidiaries, “Powerfleet,” the “Company,” “we,” “our” or “us”)
is a global leader of Internet-of-Things (IOT) solutions providing valuable business intelligence for managing high-value
enterprise assets that improve operational efficiencies.

We
are headquartered in Woodcliff Lake, New Jersey, with offices located around the globe.

Our
PowerFleet for Industrial solutions are designed to provide on-premise or in-facility asset and operator management, monitoring, and
visibility for industrial trucks such as forklifts, man-lifts, tuggers and ground support equipment at airports. These solutions utilize
a variety of communications capabilities such as Bluetooth ®, WiFi, and proprietary radio frequency.

Our
PowerFleet for Logistics solutions are designed to provide bumper-to-bumper asset management, monitoring, and visibility for
over-the-road based assets such as heavy trucks, dry-van trailers, refrigerated trailers and shipping containers and their
associated cargo. These systems provide mobile-asset tracking and condition-monitoring solutions to meet the transportation
market’s desire for greater visibility, safety, security, and productivity throughout global supply chains.

Our PowerFleet for
Vehicles solutions are designed both to enhance the vehicle fleet management process, whether it’s a rental car, a private fleet,
or automotive original equipment manufacturer (OEM) partners. We achieve this by providing critical information that can be used to
increase revenues, reduce costs and improve customer service.

Our
patented technologies address the needs of organizations to monitor and analyze their assets to improve safety, increase efficiency
and productivity, reduce costs, and improve profitability. Our offerings are sold under the global brands Powerfleet, Pointer and
Cellocator.

We
deliver advanced mobility solutions that connect assets to increase visibility operational efficiency and profitability. Across our
vertical markets we differentiate ourselves by being OEM agnostic and helping mixed fleets view and manage their assets similarly.
All of our solutions are paired with software as a service (SaaS) analytics platforms to provide an even deeper layer of insights.
These insights include a full set of operational Key Performance Indicators (KPIs) to drive operational and strategic
decisions. These KPIs leverage industry comparisons to show how a company is performing versus their peers. The more data the
system collects, the more accurate a client’s understanding becomes.

The
analytics platform, which is integrated into our customers’ management systems, is designed to provide a single, integrated view
of asset and operator activity across multiple locations that provides enterprise-wide benchmarks and peer-industry comparisons. We look
for analytics, as well as the data contained therein, to differentiate us from our competitors, make a growing contribution to revenue, add value to our solutions, and help keep us at the forefront of the wireless asset management markets we serve.

We
sell our wireless mobility solutions to both corporate-level executives, division heads and site-level management within the
enterprise. We also utilize channel partners such as independent dealers and OEMs who may opt for
us to white label our product. Typically, our initial system deployment serves as a basis for potential expansion across the
customer’s organization. We work closely with customers to help maximize the utilization and benefits of our system and
demonstrate the value of enterprise-wide deployments. Post-implementation, we consult with our customers to further extend and
customize the benefits to the enterprise by delivering enhanced analytics capabilities.

We
market and sell our solutions to a wide range of customers in the commercial and government sectors. Our customers operate in diverse
markets, such as automotive manufacturing, heavy industry, retail food and grocery distribution, logistics, wholesale distribution, transportation,
aviation, manufacturing, aerospace and defense, homeland security and vehicle rental.

We
incurred net losses of approximately $13.6 million, $18.1 million, and $11.9 million for the years ended December 31, 2020, 2021 and
2022, respectively, and have incurred additional net losses since inception. As of December 31, 2022, we had cash (including
restricted cash) and cash equivalents of $18.0 million, working capital of $35.5 million, and an accumulated deficit of $141.4
million. Our primary sources of cash are cash flows from operating activities, our holdings of cash, cash equivalents and
investments from the sale of our capital stock and borrowings under our credit facility. To date, we have not generated sufficient
cash flow solely from operating activities to fund our operations.

Critical
Accounting Estimates

We
have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States
in the preparation of our financial statements. Our significant accounting policies are described in Note 2 to our consolidated financial
statements included in this Annual Report on Form 10-K. Certain accounting policies involve significant judgments and assumptions by
our management that can have a material impact on the carrying value of certain assets and liabilities. We consider such accounting policies
to be our critical accounting policies. The judgments and assumptions used by our management in these critical accounting policies are
based on historical experience and other factors that our management believes to be reasonable under the circumstances. Because of the
nature of these judgments and assumptions, actual results could differ significantly from these judgments and estimates, which could
have a material impact on the carrying values of our assets and liabilities and our results of operations. Our critical accounting policies
are described below.

35

Revenue
Recognition

We
generate revenue from sales of systems and products and from customer SaaS and hosting infrastructure fees. Revenue is measured as the
amount of consideration the Company expects to receive in exchange for transferring goods or providing services.

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.

Our
contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance
obligation based on its relative standalone selling price. The 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.

We
recognize an asset for the incremental costs of obtaining the contract arising from the sales commissions to employees because the Company
expects to recover those costs through future fees from the customers. The Company amortizes the asset over one to five years because
the asset relates to the services transferred to the customer during the contract term of one to five years.

Goodwill
and Intangibles

Goodwill
represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill and intangible assets
deemed to have indefinite lives are not amortized and are tested for impairment on an annual basis and between annual tests whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets other than goodwill are
amortized over their useful lives unless the lives are determined to be indefinite. Intangible assets are carried at cost, less accumulated
amortization. Intangible assets consist of trademarks and trade names, patents, customer relationships and other intangible assets. Goodwill
is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. The Company
operates in one reportable segment which is its only reporting unit. The Company operates in one operating segment which is its only
reporting unit. The Company tests its goodwill for impairment annually which is the first day of the Company’s fourth quarter or
when an indicator of impairment exists, by comparing the fair value of the reporting unit to its carrying value.

The
Company performed a quantitative assessment whereby the fair value of the reporting unit is calculated using a market approach and a
discounted cash flow method, as a form of the income approach. The market approach includes the use of comparative revenue and adjusted
EBITDA multiples to complement discounted cash flow results. The discounted cash flow method is based on the present value of the projected
cash flows and a terminal value. The terminal value represents the expected normalized future cash flows of the reporting unit beyond
the cash flows from the discrete projection period. The fair value of the reporting unit is calculated based on the sum of the present
value of the cash flows from the discrete period and the present value of the terminal value. The discount rate represented our estimate
of the WACC, or expected return, that a marketplace participant would have required as of the valuation date. The application of our
goodwill impairment test required key assumptions underlying our valuation model.

The
discounted cash flow analysis factored in assumptions on discount rates and terminal growth rates to reflect risk profiles, as well as
revenue and cost growth relative to history and market trends and expectations. The market multiples approach incorporated judgment involved
in the selection of comparable public company multiples and benchmarks. The selection of companies and multiples was influenced by differences
in growth and profitability, and volatility in market prices of peer companies. These valuation inputs are inherently judgmental, and
an adverse change in one or a combination of these inputs could trigger a goodwill impairment loss in the future.

For
the years ended December 31, 2020, 2021 and 2022, the Company did not incur an impairment charge.

Income
Taxes

We
use the asset and liability method of accounting for deferred income taxes. Deferred income taxes are measured by applying enacted statutory
rates to net operating loss carryforwards and to the differences between the financial reporting and tax bases of assets and liabilities.
Deferred tax assets are reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the
deferred tax assets will not be realized.

We
recognize uncertainty in income taxes in the financial statements using a recognition threshold and measurement attribute of a tax position
taken or expected to be taken in a tax return. We apply the “more-likely-than-not” recognition threshold to all tax positions.
We have opted to classify interest and penalties that would accrue according to the provisions of relevant tax law as selling, general,
and administrative expenses, in the consolidated statement of operations. For the years ended December 31, 2020, 2021 and 2022, interest
and penalties were immaterial.

36

Results
of Operations

The
following table sets forth certain items related to our statement of operations as a percentage of revenues for the periods indicated
and should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual
Report on Form 10-K. A detailed discussion of the material changes in our operating results is set forth below.

37

Year
Ended December 31, 2022 Compared to Year Ended December 31, 2021

REVENUES.
Revenues increased by approximately $8.9 million, or 7.1%, to $135.2 million in 2022 from $126.2 million in 2021.

Revenues
from products increased by approximately $3.3 million, or 6.3%, to $56.3 million in 2022 from $53.0 million in 2021. The increase in
product revenues is attributable to an increase in sales by our Powerfleet for Logistics and Powerfleet for Industrial products.

Revenues
from services increased by approximately $5.6 million, or 7.7%, to $78.8 million in 2022 from $73.2 million in 2021. The increase in
services revenues is principally due to an increase in our install base that generates service revenue.

COST
OF REVENUES. Cost of revenues increased by approximately $5.0 million, or 7.5%, to $71.0 million in 2022 from $66.0 million in 2021.
Gross profit was $64.2 million in 2022 compared to $60.2 million in 2021. As a percentage of revenues, gross profit decreased to 47.5%
in 2022 from 47.7% in 2021. The decrease in gross profit as a percentage of revenues was principally due to increases in raw material costs as a result of global supply chain issues.

Cost
of products increased by approximately $3.2 million, or 8.1%, to $42.6 million in 2022 from $39.4 million in 2021. Gross profit for
products was $13.7 million in 2022 compared to $13.5 million in 2021. As a percentage of product revenues, gross profit decreased to
24.3% in 2022 from 25.5% in 2021. The decrease in gross profit as a percentage of product revenues was impacted by product mix,
higher costs associated with supply chain issues, electronic component shortages and inflation.

Cost
of services increased by approximately $1.8 million, or 6.7%, to $28.4 million in 2022 from $26.6 million in 2021. Gross profit for services
was $50.5 million in 2022 compared to $46.6 million in 2021. As a percentage of service revenues, gross profit increased to 64.0% in
2022 from 63.7% in 2021. The increase in gross profit as a percentage of services revenues was principally
due to an increase in our install base that generates service revenue.

SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative (“SG&A”) expenses increased by
approximately $5.9 million, or 10.3%, to $63.0 million in 2022 compared to $57.1 million in 2021, inclusive of higher foreign
currency losses of $0.7 million and higher severance costs of $0.7 million. Other drivers of the increase in expenses include
increased salaries and related expenses, professional fees, and marketing and travel expenses. As a percentage
of revenues, SG&A expenses increased to 46.6% in the year ended December 31, 2022, from 45.2% in the same period in
2021.

RESEARCH
AND DEVELOPMENT EXPENSES. Research and development (“R&D”) expenses decreased by approximately $2.1 million, or
18.9%, to $9.0 million in 2022 compared to $11.1 million in 2021, principally due to the capitalization of software development
expenses for new product development, which increased by $2.2 million in 2022. As a percentage of revenues, R&D expenses decreased to 6.7% in the year ended December
31, 2022 from 8.8% in the same period in 2021.

INTEREST
EXPENSE. Interest expense decreased by $3.8 million, or 136.0%, to $(1.0) million in 2022 from $2.8 million in 2021, principally
due to foreign currency translation gains from the Term Facilities.

NET
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. Net loss attributable to common stockholders was $11.9 million, or $(0.34) per basic and
diluted share, for 2022 as compared to net loss of $18.1 million, or $(0.52) per basic and diluted share, for the same period in 2021.
The decrease in the net loss was due primarily to the reasons described above.

Year
Ended December 31, 2021 Compared to Year Ended December 31, 2020

REVENUES.
Revenues increased by approximately $12.6 million, or 11.1%, to $126.2 million in 2021 from $113.6 million in 2020.

Revenues
from products increased by approximately $7.3 million, or 16.1%, to $53.0 million in 2021 from $45.7 million in 2020. The increase in
product revenue is attributable to an increase in sales by our Powerfleet for Logistics products.

Revenues
from services increased by approximately $5.3 million, or 7.8%, to $73.2 million in 2021 from $67.9 million in 2020. The increase in
services revenue is principally due to an increase in our install base that generates service revenue.

COST
OF REVENUES. Cost of revenues increased by approximately $11.4 million, or 21.0%, to $66.0 million in 2021 from $54.6 million in
2020. Gross profit was $60.2 million in 2021 compared to $59.0 million in 2020. As a percentage of revenues, gross profit decreased to
47.7% in 2021 from 52.0% in 2020. The decrease in gross profit as a percentage of revenue was principally due to changes in product mix
and higher costs for components as a result of the global supply chain issues.

38

Cost
of products increased by approximately $9.2 million, or 30.5%, to $39.4 million in 2021 from $30.2 million in 2020. Gross profit for
products was $13.5 million in 2021 compared to $15.4 million in 2020. As a percentage of product revenues, gross profit decreased to
25.5% in 2021 from 33.8% in 2020. The decrease in gross profit as a percentage of product revenues was primarily due to a $400,000 one-time
expense related to an incentive program to expand business with an existing customer that is one of the largest chassis lessors in North
America. Product gross profit was also impacted by product mix, higher costs associated with supply chain issues, electronic component
shortages and inflation.

Cost
of services increased by approximately $2.2 million, or 9.1%, to $26.6 million in 2021 from $24.4 million in 2020. Gross profit for services
was $46.6 million in 2021 compared to $43.6 million in 2020. As a percentage of service revenues, gross profit decreased to 63.7% in
2021 from 64.2% in 2020.

SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased by approximately
$5.2 million, or 10.0%, to $57.1 million in 2021 compared to $51.9 million in 2020 principally due to increased salaries due to the reversal
of temporary cost reduction initiatives implemented during the first quarter of 2020 in response to the impact and uncertainty caused
by COVID-19. There was an additional $1.0 million increase in severance and recruiting related expenses. As a percentage of revenues,
SG&A expenses decreased to 45.2% in the year ended December 31, 2021, from 45.7% in the same period in 2020.

RESEARCH
AND DEVELOPMENT EXPENSES. R&D expenses increased by approximately $0.5 million, or 4.4%,
to $11.1 million in 2021 compared to $10.6 million in 2020 principally due to increased salaries due to the reversal of temporary cost
reduction initiatives implemented during the first quarter of 2020 in response to the impact and uncertainty caused by COVID-19. As a
percentage of revenues, R&D expenses decreased to 8.8% in the year ended December 31, 2021from 9.3% in the same period in 2020.

INTEREST
EXPENSE. Interest expense decreased by $1.7 million, or 38.1%, to $2.8 million in 2021 from $4.5 million in 2020, due to the
continued paydown of principal on our credit facility with Hapoalim and the full pay down in 2020 of the convertible unsecured
promissory notes in the aggregate principal amount of $5,000,000 (the “Notes”) that we issued to the Investors and a decrease
in the foreign currency translation losses related to long-term debt included in interest expense.

NET
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. Net loss attributable to common stockholders was $18.1 million, or $(0.52) per basic and
diluted share, for 2021 as compared to net loss of $13.6 million, or $(0.46) per basic and diluted share, for the same period in 2020.
The decrease in the net loss was due primarily to the reasons described above.

Liquidity
and Capital Resources

Historically,
our capital requirements have been funded primarily from the net proceeds from the issuance of our securities, including any issuances
of our common stock upon the exercise of options. As of December 31, 2022, we had cash (including restricted cash) and cash equivalents
of $18.0 million and working capital of $35.5 million, compared to cash (including restricted cash) and cash equivalents of $26.8 million
and working capital of $43.6 million as of December 31, 2021.

39

On
October 3, 2019, in connection with the completion of the Transactions, we issued and sold 50,000 shares of the Series A Preferred
Stock to the Investors pursuant to the terms of the Investment Agreement for an aggregate purchase price of $50.0
million. The proceeds received from such sale were used to finance a portion of the cash consideration payable in our acquisition of
Pointer.

Also,
on October 3, 2019, we issued and sold the Notes to the Investors at the closing of the Transactions. We repaid in full the aggregate
principal amount of $5.0 million and accrued interest under the Notes on October 1, 2020.

In
addition, our wholly owned subsidiaries, Powerfleet Israel and Pointer (collectively, the “Borrowers”) are party to the
Credit Agreement with Hapoalim, pursuant to which Hapoalim agreed to provide Powerfleet Israel with two senior secured term loan
facilities denominated in NIS in an initial aggregate principal amount of $30 million (comprised of the Term A Facility and the Term
B Facility in the aggregate principal amount of $20 million and $10 million, respectively) and a five-year revolving credit facility
to Pointer denominated in NIS in an initial aggregate principal amount of $10 million (the “Revolving Facility”). The
outstanding amount under the term loan facilities was approximately NIS 55.3 million, or $15.9 million, as of December 31, 2022. The
proceeds of the term loan facilities were used to finance a portion of the cash consideration payable in our acquisition of Pointer.
The proceeds of the revolving credit facility may be used by Pointer for general corporate purposes.

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 Term A Facility and the Term B Facility. 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 3.65% per annum and the interest rate with respect to the Term B Facility
was reduced to a fixed rate of 4.5% per annum. The Amendment also provides, among other things, for (i) a reduction in the credit allocation
fee on undrawn and uncancelled amounts of the Revolving Facility from 1% to 0.5% per annum, (ii) removal of the requirement that Powerfleet
Israel maintain $3,000 on deposit in a separate reserve fund, and (iii) modifications to certain of the affirmative and negative covenants,
including a financial covenant regarding the ratio of the Borrowers’ debt levels to Pointer’s EBITDA.

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, 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 December 31, 2022, the Company borrowed approximately NIS20.1 million,
or $5.7 million, under the revolving credit facilities.

The
New Revolver will initially bear interest at the Secured Overnight Financing Rate plus 2.59%. Such interest is subject to monthly changes
by Hapoalim, provided that Hapoalim gives Pointer advance notice regarding such change prior to the end of the applicable calendar month.

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 0.5% per annum on undrawn and uncancelled amounts of the New Revolver.

Pointer
also has a one-year $1,000 revolving credit facility available for use with Discount Bank, which renews annually, subject to the bank’s
approval. Pointer did not have any borrowings outstanding under the revolving credit facility with Discount Bank as of December 31, 2022.

As
a result of global supply chain disruptions, the conflict between Russia and Ukraine, rising interest rates, fluctuations in
currency values, inflation and other cost increases, there remains uncertainty surrounding the potential impact of such events on
our results of operations and cash flows. We are proactively taking steps to increase available cash on hand including, but not
limited to, targeted reductions in discretionary operating expenses and capital expenditures and borrowing under the revolving
credit facility.

Capital
Requirements

As
of December 31, 2022, we had cash (including restricted cash), cash equivalents and marketable securities of $18.0 million and working
capital of $35.5 million. Our primary sources of cash are cash flows from operating activities, our holdings of cash, cash equivalents
and investments from the sale of our capital stock and borrowings under our credit facility. To date, we have not generated sufficient
cash flow solely from operating activities to fund our operations.

We
believe that our available working capital, anticipated level of future revenues and expected cash flows from operations will
provide sufficient funds to cover capital requirements through at least March 31, 2024.

Our
capital requirements depend on a variety of factors, including, but not limited to, the length of the sales cycle, the rate of increase
or decrease in our existing business base, the success, timing, and amount of investment required to bring new products to market, revenue
growth or decline and potential acquisitions. Failure to generate positive cash flow from operations will have a material adverse effect
on our business, financial condition and results of operations.

40

Operating
Activities

Net
cash provided by operating activities was $0.8 million for the year ended December 31, 2022, compared to net cash used in operating activities
of $5.0 million for the same period in 2021. The net cash provided by operating activities for the year ended December 31, 2022 reflects
a net loss of $7.0 million and includes non-cash charges of $4.3 million for stock-based compensation, $8.3 million for depreciation
and amortization expense and $2.8 million for right of use asset amortization. Changes in working capital items included:

Net
cash used in operating activities was $5.0 million for the year ended December 31, 2021, compared to net cash provided by operating activities
of $8.8 million for the same period in 2020. The net cash used in operating activities for the year ended December 31, 2021 reflects
a net loss of $13.3 million and includes non-cash charges of $4.7 million for stock-based compensation, $8.6 million for depreciation
and amortization expense and $2.9 million for right of use asset amortization. Changes in working capital items included:

Investing
Activities

Net
cash used in investing activities was $5.8 million for the year ended December 31, 2022, compared to net cash used in investing
activities of $3.4 million for the same period in 2021. The cash used in investing activities for the years ended December 31, 2022
and 2021 was primarily for the purchase of fixed assets and capitalized software development.

Net
cash used in investing activities was $3.4 million for the year ended December 31, 2021, compared to net cash used in investing
activities of $3.3 million for the same period in 2020. The cash used in investing activities for the years ended December 31, 2021 and 2020
was for the purchase of fixed assets and capitalized software development.

Financing
Activities

Net
cash used in financing activities was $0.3 million for the year ended December 31, 2022, compared to net cash provided by financing activities
of $16.2 million for the same period in 2021. The 2021 period was represented by net proceeds from our stock offering of $26.9 million
offset by the net repayment of long-term debt of $5.7 million and the payment of preferred stock dividends of $4.1 million. In 2022,
dividends were not paid in cash and the net cash used in financing was primarily from the repayment of long-term debt, net of proceeds
from debt.

Net
cash provided by financing activities was $16.2 million for the year ended December 31, 2021, compared to net cash used in financing
activities of $3.9 million for the same period in 2020. The change from the same period in 2020 was primarily due to the net proceeds
from our stock offering of $26.9 million offset by the repayment of long-term debt of $5.6 million and the payment of preferred stock
dividends of $4.1 million.

Inflation

Rising
inflation and other macroeconomic conditions in the U.S. have resulted in higher costs of raw materials, freight, and labor, which has
impacted our operating costs. In addition, we operate in several emerging market economies that are particularly vulnerable to the impact
of inflationary pressures that could materially and adversely impact our operations in the foreseeable future.

41

Business
Acquisitions

In
addition to focusing on our core applications, we adapt our systems to meet our customers’ broader asset management needs and seek
opportunities to expand our solution offerings through strategic acquisitions.

On
March 6, 2023, we entered into the SPA with Swiss Re to acquire all of the outstanding shares of Movingdots for consideration
consisting of €1 and the issuance by us of a ten-year warrant to purchase 800,000 shares of our common stock at an exercise
price of $7.00 per share. Under the SPA, Swiss Re is required to
ensure that Movingdots has available cash and cash equivalents of at least €8,000,000 as of the closing date. The transaction closed on March 31, 2023.

Off-Balance
Sheet Arrangements

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

Recently
Issued Accounting Pronouncements

In
December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
2019-12, Simplifying the Accounting for Income Taxes which removes certain exceptions related to the approach for intraperiod tax allocation,
the methodology for calculating income taxes in an interim period, the recognition of deferred tax liabilities for outside basis differences
and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance is generally effective
as of January 1, 2021, with early adoption permitted. The adoption of this standard did not have a material impact on the Company’s
consolidated financial statements.

In
June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on
Financial Instruments,” which amends the guidance on measuring credit losses on financial assets held at amortized cost. The amendment
is intended to address the issue that the previous “incurred loss” methodology was restrictive for an entity’s ability
to record credit losses based on not yet meeting the “probable” threshold. The new language will require these assets to
be valued at amortized cost presented at the net amount expected to be collected with a valuation provision. This updated standard is
effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating
the impact of this ASU on the consolidated financial statements.

Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The
following discussion is intended to assist you in understanding our financial condition and results of operations and should be read
in conjunction with the financial statements and related notes included elsewhere in this Annual Report on Form 10-K. Many of the amounts
and percentages in this section have been rounded for convenience of presentation, but actual recorded amounts have been used in computations.
Accordingly, some information may appear not to compute accurately.

Overview

PowerFleet,
Inc. (together with its subsidiaries, “PowerFleet,” the “Company,” “we,” “our” or “us”)
is a global leader of Internet-of-Things (“IOT”) solutions providing valuable business intelligence for managing high-value
enterprise assets that improve operational efficiencies.

We
are headquartered in Woodcliff Lake, New Jersey, with offices located around the globe.

Our
patented technologies address the needs of organizations to monitor and analyze their assets to improve safety, increase efficiency and
productivity, reduce costs, and improve profitability. Our offerings are sold under the global brands PowerFleet, Pointer and Cellocator.

We
deliver advanced mobility solutions that connect assets to increase visibility operational efficiency and profitability. Across our vertical
markets we differentiate ourselves by being OEM agnostic and helping mixed fleets view and manage their assets similarly. All of our
solutions are paired with software as a service, or SaaS, analytics platforms to provide an even deeper layer of insights. These insights
include a full set of operational Key Performance Indicators, or KPI’s, to drive operational and strategic decisions. These KPI’s
leverage industry comparisons to show how a company is performing versus their peers. The more data the system collects, the more accurate
a client’s understanding becomes.

The
analytics platform, which is integrated into our customers’ management systems, is designed to provide a single, integrated view
of asset and operator activity across multiple locations that provides enterprise-wide benchmarks and peer-industry comparisons. We look
for analytics, as well as the data contained therein, to differentiate us from our competitors, make a growing contribution to revenue,
and add value to our solutions, and help keep us at the forefront of the wireless asset management markets we serve.

41

We
sell our wireless mobility solutions to both corporate-level executives, division heads and site-level management within the enterprise.
We also utilize channel partners such as independent dealers and original equipment manufacturers, or OEMs, who may opt for us to white
label our product. Typically, our initial system deployment serves as a basis for potential expansion across the customer’s organization.
We work closely with customers to help maximize the utilization and benefits of our system and demonstrate the value of enterprise-wide
deployments. Post-implementation, we consult with our customers to further extend and customize the benefits to the enterprise by delivering
enhanced analytics capabilities

We
market and sell our solutions to a wide range of customers in the commercial and government sectors. Our customers operate in diverse
markets, such as automotive manufacturing, heavy industry, retail food and grocery distribution, logistics, wholesale distribution, transportation,
aviation, manufacturing, aerospace and defense, homeland security and vehicle rental.

We
incurred net losses of approximately, $12 million, $13.6 million, and $18.1 million for the years ended December 31, 2019, 2020
and 2021, respectively, and have incurred additional net losses since inception. As of December 31, 2021, we had cash (including restricted
cash) and cash equivalents of $26.8 million, working capital of $43.6 million, and an accumulated deficit of $134.4 million.
Our primary sources of cash are cash flows from operating activities, our holdings of cash, cash equivalents and investments from the
sale of our capital stock and borrowings under our credit facility. To date, we have not generated sufficient cash flow solely from operating
activities to fund our operations.

Critical
Accounting Estimates

We
have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States
in the preparation of our financial statements. Our significant accounting policies are described in Note 2 to our consolidated financial
statements included in this Annual Report on Form 10-K. Certain accounting policies involve significant judgments and assumptions by
our management that can have a material impact on the carrying value of certain assets and liabilities. We consider such accounting policies
to be our critical accounting policies. The judgments and assumptions used by our management in these critical accounting policies are
based on historical experience and other factors that our management believes to be reasonable under the circumstances. Because of the
nature of these judgments and assumptions, actual results could differ significantly from these judgments and estimates, which could
have a material impact on the carrying values of our assets and liabilities and our results of operations. Our critical accounting policies
are described below.

Revenue
Recognition

We
generate revenue from sales of systems and products and from customer SaaS and hosting infrastructure fees. Revenue is measured as the
amount of consideration the Company expects to receive in exchange for transferring goods or providing services.

42

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 stand-alone 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.

Our
contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance
obligation based on its relative standalone selling price. The 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.

We
recognize an asset for the incremental costs of obtaining the contract arising from the sales commissions to employees because the Company
expects to recover those costs through future fees from the customers. 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.

43

Goodwill
and Intangibles

Goodwill represents costs in
excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill and intangible assets deemed to have indefinite
lives are not amortized and are tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Intangible assets other than goodwill are amortized over their useful lives
unless the lives are determined to be indefinite. Intangible assets are carried at cost, less accumulated amortization. Intangible assets
consist of trademarks and trade names, patents, customer relationships and other intangible assets. Goodwill is tested at the reporting
unit level, which is defined as an operating segment or one level below the operating segment. The Company operates in one reportable
segment which is its only reporting unit. The Company operates in one operating segment which is its only reporting unit. The Company
tests its goodwill for impairment annually which is the first day of the Company’s fourth quarter or when an indicator of impairment
exists, by comparing the fair value of the reporting unit to its carrying value. The Company performed a market-based quantitative
assessment utilizing the guideline public company and guideline transaction approaches by comparing revenue and adjusted EBITDA multiples
of similar sized companies and similar sized transactions. For the years ended December 31, 2019, 2020, and 2021, the Company did not
incur an impairment charge.

Income
Taxes

We
use the asset and liability method of accounting for deferred income taxes. Deferred income taxes are measured by applying enacted statutory
rates to net operating loss carryforwards and to the differences between the financial reporting and tax bases of assets and liabilities.
Deferred tax assets are reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the
deferred tax assets will not be realized.

We recognize uncertainty in
income taxes in the financial statements using a recognition threshold and measurement attribute of a tax position taken or expected
to be taken in a tax return. We apply the “more-likely-than-not” recognition threshold to all tax positions. We
have opted to classify interest and penalties that would accrue according to the provisions of relevant tax law as selling, general,
and administrative expenses, in the consolidated statement of operations. For the years ended December 31, 2019, 2020 and 2021, interest
and penalties were immaterial.

44

Results
of Operations

The
following table sets forth certain items related to our statement of operations as a percentage of revenues for the periods indicated
and should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual
Report on Form 10-K. Our results reflect the operations of (i) Pointer Telocation Ltd. from October 3, 2019, the closing date
of the transactions pursuant to which we acquired Pointer (the “Transactions”), (ii) the assets we acquired from CarrierWeb
Services Ltd. from July 30, 2019, and (iii) the assets we acquired from CarrierWeb, L.L.C from January 30, 2019. A
detailed discussion of the material changes in our operating results is set forth below.

45

Year
Ended December 31, 2021, Compared to Year Ended December 31, 2020

REVENUES.
Revenues increased by approximately $12.6 million, or 11.1%, to $126.2 million in 2021 from $113.6 million in 2020.

Revenues
from products increased by approximately $7.3 million, or 16.1%, to $53.0 million in 2021 from $45.7 million in 2020. The increase in
product revenue is attributable to an increase in sales by our PowerFleet for Logistics business.

Revenues
from services increased by approximately $5.3 million, or 7.8%, to $73.2 million in 2021 from $67.9 million in 2020. The increase in
services revenue is principally due to an increase in our install base that generates service revenue.

COST
OF REVENUES. Cost of revenues increased by approximately $11.4 million, or 21.0%, to $66.0 million in 2021 from $54.6 million in
2020. Gross profit was $60.2 million in 2021 compared to $59.0 million in 2020. As a percentage of revenues, gross profit decreased to
47.7% in 2021 from 52.0% in 2020. The decrease in gross profit as a percentage of revenue was principally due to changes in product mix
and higher costs for components as a result of the global supply chain issues.

Cost
of products increased by approximately $9.2 million, or 30.5%, to $39.4 million in 2021 from $30.2 million in 2020. Gross profit for
products was $13.5 million in 2021 compared to $15.4 million in 2020. As a percentage of product revenues, gross profit decreased to
25.5% in 2021 from 33.8% in 2020. The decrease in gross profit as a percentage of product revenues was primarily due to a $400,000 one-time
expense related to an incentive program to expand business with an existing customer that is one of the largest chassis lessors in North
America.. Product gross profit was also impacted by product mix, higher costs associated with supply chain
issues, electronic component shortages and inflation.

Cost
of services increased by approximately $2.2 million, or 9.1%, to $26.6 million in 2021 from $24.4 million in 2020. Gross profit for services
was $46.6 million in 2021 compared to $43.6 million in 2020. As a percentage of service revenues, gross profit decreased to 63.7% in
2021 from 64.2% in 2020.

SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative (“SG&A”) expenses increased by approximately
$5.2 million, or 10.0%, to $57.1 million in 2021 compared to $51.9 million in 2020 principally due to increased salaries due to the reversal
of temporary cost reduction initiatives implemented during the first quarter of 2020 in response to the impact and uncertainty caused
by COVID-19. There was an additional $1.0 million increase in severance and recruiting related expenses. As a percentage of revenues,
SG&A expenses decreased to 45.2% in the year ended December 31, 2021, from 45.7% in the same period in 2020.

RESEARCH
AND DEVELOPMENT EXPENSES. Research and development (“R&D”) expenses increased by approximately $0.5 million,
or 4.4%, to $11.1 million in 2021 compared to $10.6 million in 2020 principally due to increased salaries due to the reversal of temporary
cost reduction initiatives implemented during the first quarter of 2020 in response to the impact and uncertainty caused by COVID-19.
As a percentage of revenues, R&D expenses decreased to 8.8% in the year ended December 31, 2021from 9.3% in the same period in 2020.

INTEREST
EXPENSE. Interest expense decreased by $1.7 million, or 38.1%, to $2.8 million in 2021 from $4.5 million in 2020, due to the
continued paydown of principal on our credit facility with Bank Hapoalim and the full paydown in 2020 of the convertible unsecured promissory
notes in the aggregate principal amount of $5,000,000 (the “Notes”) that we issued to ABRY Senior Equity V, L.P., ABRY
Senior Equity Co-Investment Fund V, L.P and ABRY Investment Partnership, L.P. (the “Investors” and a decrease in the
foreign currency translation losses related to long-term debt included in interest expense.

NET
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. Net loss attributable to common stockholders was $18.1 million, or $(0.52)
per basic and diluted share, for 2021 as compared to net loss of $13.6 million, or $(0.46) per basic and diluted share, for the same
period in 2020. The decrease in the net loss was due primarily to the reasons described above.

Year
Ended December 31, 2020 Compared to Year Ended December 31, 2019

REVENUES.
Revenues increased by approximately $31.7 million, or 38.7%, to $113.6 million in 2020 from $81.9 million in 2019. The increase in
revenue is attributable to a full year of revenue from the Pointer acquisition, which was completed on October 3, 2019, offset by a decrease
in revenue in PowerFleet due to the impact COVID-19.

Revenues
from products increased by approximately $0.3 million, or 0.5%, to $45.7 million in 2020 from $45.4 million in 2019. The increase in
product revenue is attributable to a full year of product revenue from the Pointer acquisition, offset by a decrease in product revenue
in PowerFleet due to the impact of COVID-19.

Revenues
from services increased by approximately $31.4 million, or 86.1%, to $67.9 million in 2020 from $36.5 million in 2019. The increase in
service revenue is attributable to a full year of service revenue resulting from our acquisition of Pointer.

46

COST
OF REVENUES. Cost of revenues increased by approximately $11.0 million, or 25.3%, to $54.6 million in 2020 from $43.6 million in
2019. Gross profit was $59.0 million in 2020 compared to $38.4 million in 2019. As a percentage of revenues, gross profit increased to
52.0% in 2020 from 46.8% in 2019.

Cost
of products increased by approximately $0.2 million, or 0.8%, to $30.2 million in 2020 from $30.0 million in in 2019. Gross profit for
products was $15.4 million in 2020 compared to $15.4 million in 2019. As a percentage of product revenues, gross profit decreased to
33.8% in 2020 from 33.9% in 2019.

Cost
of services increased by approximately $10.8 million, or 79.5%, to $24.4 million in 2020 from $13.6 million in 2019. Gross profit for
services was $43.6 million in 2020 compared to $22.9 million in 2019. The increase in the gross profit was attributable to the increase
in service revenue resulting from a full year of operations from our acquisition of Pointer. As a percentage of service revenues, gross
profit increased to 64.2% in 2020 from 62.8% in 2019.

SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative (“SG&A”) expenses increased by approximately
$17.4 million, or 50.6%, to $51.9 million in 2020 compared to $34.5 million in 2019. The increase was principally due to our acquisition
of Pointer.

RESEARCH
AND DEVELOPMENT EXPENSES. Research and development expenses increased by approximately $2.1 million, or 24.1%, to $10.6 million in
2020 compared to $8.5 million in 2019 principally due to our acquisition of Pointer.

ACQUISITION-RELATED
EXPENSES. Acquisition related expenses decreased to $-0- in 2020 from approximately $5.1 million in 2019 principally due to the completion
of the Transactions in 2019.

INTEREST
EXPENSE. Interest expense increased by $3.1 million, or 225.3%, to $4.5 million in 2020 from $1.4 million in 2019, principally due
to a full year of our credit facility with Bank Hapoalim and the “Notes” that we issued to the Investors, compared to a partial year of such interest expense in 2019
and an increase in the foreign currency translation losses related to long-term debt included in interest expense.

NET
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. Net loss attributable to common stockholders was $13.6 million, or $(0.46) per basic
and diluted share, for 2020 as compared to net loss of $12.0 million, or $(0.59) per basic and diluted share, for the same period in
2019. The decrease in the net loss was due primarily to the reasons described above

Liquidity
and Capital Resources

Historically, our capital requirements have been
funded primarily from the net proceeds from the issuance of our securities, including any issuances of our common stock upon the exercise
of options. As of December 31, 2021, we had cash (including restricted cash), and cash equivalents of $26.8 million and working
capital of $43.6 million, compared to cash (including restricted cash) and cash equivalents of $18.4 million and working
capital of $28.9 million as of December 31, 2020.

On
October 3, 2019, in connection with the completion of the Transactions, we issued and sold 50,000 shares of the Series A Convertible
Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), to the Investors pursuant to the terms of
an Investment and Transaction Agreement, dated as of March 13, 2019 (as such agreement has been amended from time to time, the “Investment
Agreement”) for an aggregate purchase price of $50.0 million. The proceeds received from such sale were used to finance
a portion of the cash consideration payable in our acquisition of Pointer.

Also,
on October 3, 2019, we issued and sold the Notes to the Investors at the closing of the Transactions. We repaid in full the aggregate
principal amount of $5.0 million and accrued interest under the Notes on October 1, 2020.

In
addition, our wholly owned subsidiaries, PowerFleet Israel Ltd. (“PowerFleet Israel”) and Pointer (the “Borrowers”)
are party to a Credit Agreement (the “Credit Agreement”) with Bank Hapoalim B.M. (“Hapoalim”), pursuant to which
Hapoalim agreed to provide PowerFleet Israel with two senior secured term loan facilities in an aggregate principal amount of $30 million
(comprised of two facilities in the aggregate principal amount of $20 million (the “Term A Facility”) and $10 million (the
“Term B Facility”)) and a five-year revolving credit facility to Pointer in an aggregate principal amount of $10 million
(the “Revolving Facility”). The outstanding amount under the term loan facilities was $24,400,000 as of December 31, 2021.
The proceeds of the term loan facilities were used to finance a portion of the cash consideration payable in our acquisition of Pointer.
The proceeds of the revolving credit facility may be used by Pointer for general corporate purposes.

47

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 Term A Facility and the Term B Facility. 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 3.65% per annum and the interest rate with respect to the Term B Facility
was reduced to a fixed rate of 4.5% per annum. The Amendment also provides, among other things, for (i) a reduction in the credit allocation
fee on undrawn and uncancelled amounts of the Revolving Facility from 1% to 0.5% per annum, (ii) removal of the requirement that PowerFleet
Israel maintain $3,000 on deposit in a separate reserve fund, and (iii) modifications to certain of the affirmative and negative covenants,
including a financial covenant regarding the ratio of the Borrowers’ debt levels to Pointer’s EBITDA.

We
have on file a shelf registration statement on Form S-3 that was declared effective by the Securities and Exchange Commission (the “SEC”)
on November 27, 2019. Pursuant to the shelf registration statement, we may offer to the public from time to time, in one or more offerings,
up to $60.0 million of our common stock, preferred stock, warrants, debt securities, and units, or any combination of the foregoing,
at prices and on terms to be determined at the time of any such offering. The specific terms of any future offering will be determined
at the time of the offering and described in a prospectus supplement that will be filed with the SEC in connection with such offering.

On
May 14, 2020, we entered into an equity distribution agreement for an “at-the-market offering” program (the “ATM Offering”)
with Canaccord Genuity LLC (“Canaccord”) as sales agent, pursuant to which we issued and sold an aggregate of 809,846 shares
of common stock for approximately $4.2 million in gross proceeds. We terminated the equity distribution agreement effective as of August
14, 2020.

On
February 1, 2021, we closed an underwritten public offering (the “Underwritten Public Offering”) of 4,427,500 shares of common
stock (which includes the full exercise of the underwriters’ over-allotment option) for gross proceeds of approximately $28.8 million,
before deducting the underwriting discounts and commissions and other estimated offering expenses. The offer and sale of common stock
in the ATM Offering and the Underwritten Public Offering were made pursuant to our shelf registration statement.

As
a result of the COVID-19 pandemic the related global supply chain disruptions, inflation and other cost increases, there
remains uncertainty surrounding the potential impact of such events on our results of operations and cash flows. We are proactively
taking steps to increase available cash on hand including, but not limited to, targeted reductions in discretionary operating expenses
and capital expenditures and borrowing under the revolving credit facility.

Capital
Requirements

As
of December 31, 2021, we had cash (including restricted cash), cash equivalents and marketable securities of $26.8 million and working
capital of $43.6 million. Our primary sources of cash are cash flows from operating activities, our holdings of cash, cash equivalents
and investments from the sale of our capital stock and borrowings under our credit facility. To date, we have not generated sufficient
cash flow solely from operating activities to fund our operations.

We
believe our available working capital, anticipated level of future revenues and expected cash flows from operations will provide sufficient
funds to cover capital requirements through at least March 16, 2023.

Our
capital requirements depend on a variety of factors, including, but not limited to, the length of the sales cycle, the rate of increase
or decrease in our existing business base, the success, timing, and amount of investment required to bring new products to market, revenue
growth or decline and potential acquisitions. Failure to generate positive cash flow from operations will have a material adverse effect
on our business, financial condition and results of operations.

48

Operating
Activities

Net
cash used in operating activities was $5.0 million for the year ended December 31, 2021, compared to net cash provided by operating
activities of $8.8 million for the same period in 2020. The net cash used in operating activities for the year ended December 31, 2021,
reflects a net loss of $18.1 million and includes non-cash charges of $4.7 million for stock-based compensation, $8.6 million
for depreciation and amortization expense and $2.9 million for right of use asset amortization. Changes in working capital items
included:

Net
cash provided by operating activities was $8.8 million for the year ended December 31, 2020, compared to net cash used in operating activities
of $7.3 million for the same period in 2019. The net cash provided by operating activities for the year ended December 31, 2020, reflects
a net loss of $13.6 million and includes non-cash charges of $4.6 million for preferred dividends, $4.3 million for stock-based compensation,
$8.4 million for depreciation and amortization expense and $2.8 million for right of use asset amortization. Changes in working capital
items included:

Investing
Activities

Net
cash used in investing activities was $3.4 million for the year ended December 31, 2021, compared to net cash used in investing activities
of $3.3 million for the same period in 2020. The cash used in investing activities for the year ended December 31, 2021, was for the
purchase of fixed assets. The cash used in investing activities in the same period in 2020 was primarily for the purchase of fixed assets.

Net
cash used in investing activities was $3.3 million for the year ended December 31, 2020, compared to net cash used in investing activities
of $65.5 million for the same period in 2019. The change from the same period in 2019 was primarily due to $-0- used for acquisitions
in 2020 compared to $69.0 million used for our acquisitions of Pointer and CarrierWeb in 2019, $3.4 million used for the purchase of
fixed assets in 2020 compared to $1 million used for the purchase of fixed assets in 2019 and $-0- provided by the proceeds from the
sales and maturities of investments in 2020 compared to $4.6 million in 2019.

Financing
Activities

Net
cash provided by financing activities was $16.2 million for the year ended December 31, 2021, compared to net cash used in financing
activities of $3.9 million for the same period in 2020. The change from the same period in 2020 was primarily due to the net proceeds
from our stock offering of $26.9 million offset by the repayment of long-term debt of $5.6 million and the payment of preferred stock
dividends of $4.1 million.

Net
cash used in financing activities was $3.9 million for the year ended December 31, 2020, compared to net cash provided by financing activities
of $78.6 million for the same period in 2019. The change from the same period in 2019 was primarily due to net proceeds from our ATM
Offering of $4 million in 2020 compared to net proceeds from our sale of Series A Preferred Stock to the Investors of $46.3 million in
2019, offset by the repayment of the Notes of $5 million and the repayment of long-term debt of $2.9 million.

Inflation

Rising inflation and other
macroeconomic conditions in the U.S. have resulted in higher costs of raw materials, freight, and labor, which has impacted our operating
costs. In addition, we operate in several emerging market economies that are particularly vulnerable to the impact of inflationary pressures
that could materially and adversely impact our operations in the foreseeable future.

Business
Acquisitions

In
addition to focusing on our core applications, we adapt our systems to meet our customers’ broader asset management needs and seek
opportunities to expand our solution offerings through strategic acquisitions.

49

On January 30, 2019, we completed the acquisition
of substantially all of the assets of CarrierWeb, L.L.C., and on July 30, 2019, we complete the acquisition of substantially all of the
assets of CarrierWeb Services Ltd. (together, the “CarrierWeb Acquisitions”). The assets we acquired in the CarrierWeb Acquisitions
have been integrated into our products. The CarrierWeb Acquisitions allow us to offer a full complement of highly integrated logistics
technology solutions to its current customers and prospects and immediately adds more than 70 customers and 9,000 subscriber units.

On
October 3, 2019, we completed the Transactions, as a result of which I.D. Systems and PowerFleet Israel each became direct, wholly-owned
subsidiaries of the Company and Pointer became an indirect, wholly-owned subsidiary of the Company. For further discussion on the Transactions
and related transactions, please see Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K.

Off-Balance
Sheet Arrangements

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

Recently
Issued Accounting Pronouncements

In December 2019, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Simplifying the Accounting for Income
Taxes which removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income
taxes in an interim period, the recognition of deferred tax liabilities for outside basis differences and clarifies the accounting for
transactions that result in a step-up in the tax basis of goodwill. The guidance is generally effective as of January 1, 2021, with early
adoption permitted. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements..

In
June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on
Financial Instruments,” which amends the guidance on measuring credit losses on financial assets held at amortized cost. The amendment
is intended to address the issue that the previous “incurred loss” methodology was restrictive for an entity’s ability
to record credit losses based on not yet meeting the “probable” threshold. The new language will require these assets to
be valued at amortized cost presented at the net amount expected to be collected with a valuation provision. This updated standard is
effective for fiscal years beginning after December 15, 2021. The Company is currently evaluating the impact of this ASU on the consolidated
financial statements.

In
January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment,” which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill
impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill
with the carrying amount of that goodwill. Under the amendments in ASU 2017-04, an entity should recognize an impairment charge for the
amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total
amount of goodwill allocated to that reporting unit. The updated guidance requires a prospective adoption. The guidance is effective
beginning fiscal year 2020. Early adoption is permitted. The adoption of this standard did not have an impact on the Company’s
consolidated financial statements.