Powerfleet, Inc. (AIOT) FY 2021 MD&A

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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.