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ACQUISITION | 6 Months Ended
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Sep. 30, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] |
ACQUISITION | ACQUISITION On April 2, 2024, the Company consummated the MiX Combination. On the Implementation Date, Powerfleet Sub acquired all the issued ordinary shares of MiX Telematics (including those represented by MiX Telematics’ American Depositary Shares) through the implementation of a scheme of arrangement in accordance with Sections 114 and 115 of the South African Companies Act, No. 71 of 2008, as amended, in exchange for shares of the Company’s common stock. As a result, MiX Telematics became the Company’s indirect, wholly owned subsidiary. The MiX Combination met the criteria for a business combination to be accounted for using the acquisition method under ASC 805, Business Combinations (“ASC 805”), with the Company identified as the legal and the accounting acquirer. The Company was determined to be the accounting acquirer under Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), based on the evaluation of the following facts and circumstances favoring Powerfleet as the accounting acquirer over those supporting MiX Telematics as the accounting acquirer: •The majority of the Board of Directors is comprised by Directors with prior affiliation to the Company. In addition the Company’s Board Chairperson continued in the role post the acquisition date; •Post acquisition the majority of the senior management team, including the Chief Executive Officer, comprised of the Company’s senior management team who were already operating in that capacity for the Company prior to the acquisition date; •While the voting rights of 65.5% in favor of MiX Telematics is an indicator that MiX Telematics is the acquirer, the Company believes that the weight of the indicator is tempered given that the negotiated premium paid by Powerfleet to MiX Telematics contributed to the relative ownership split, and that, qualitatively, the significant reduction in the carryover MiX Telematics institutional investor base would have reduced the legacy MiX Telematics shareholders’ ability to control the combined entity, particularly in the light of the significant concentration of institutional investors on the Powerfleet side; and •While no individual or organized group owns a large minority interest in the combined entity, the Company notes that the largest institutional investor post-transaction is an investor of legacy Powerfleet. Additionally, the Company also notes that, immediately following the closing of the Business Combination, 30% out of the approximately 35% of total shares held by shareholders of legacy Powerfleet were concentrated in the Company’s top 20 institutional shareholders, compared to only 9% out of the approximately 65% of total shares held by shareholders of legacy MiX Telematics. The acquisition of MiX Telematics and its business will, among other things: •create a mobile asset IoT SaaS organization with significant scale, serving all mobile asset types. The increased scale is expected to enable the combined entity to more efficiently serve its customers and create advantages to compete in an industry characterized by the need for high pace of development and innovation; •enable the Company to maximize significant cross-sell and upsell opportunities within its large joint customer base due to the joint entity’s combined geographical footprint, deep vertical expertise and expanded software solution sets coupled with its extensive direct and indirect sales channel capabilities; and •enable the combined organization to accelerate the delivery of top-class solutions with improved competitive advantage by integrating Powerfleet’s and MiX Telematics’ world-class engineering and technology teams. The preliminary estimated fair value of the consideration transferred for MiX Telematics was $362,005 as of the Implementation Date, which consisted of the following:
(in thousands, except for share price and exchange ratio) |  | April 2, 2024
Number of MiX Telematics ordinary shares outstanding |  | 554,021 |
Exchange ratio |  | 0.12762
Shares of Powerfleet common stock to be issued for MiX Telematics ordinary shares outstanding |  | 70,704 |
Powerfleet stock price* |  | 5.12
Fair value of Powerfleet common stock transferred to MiX Telematics shareholders |  | 362,005 |
Replacement of acquiree’s equity awards by the acquirer** |  | 7,818 |
Total fair value of preliminary consideration |  | 369,823 |
* Powerfleet’s closing share price on April 2, 2024. ** The portion of the fair-value-based measure of the replacement award that is part of the consideration transferred in exchange for the acquiree equals the portion of the acquiree award that is attributable to pre-combination vesting. Preliminary Allocation of Purchase Price The purchase price was allocated to the assets and liabilities assumed based on the estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill. Goodwill is primarily attributed to the assembled workforce, expected synergies from future expected economic benefits, including enhanced revenue growth from expanded products and capabilities, as well as substantial cost savings from duplicative overheads, streamlined operations and enhanced efficiency. Goodwill is not deductible for tax purposes. Goodwill associated with the acquisition has not yet been assigned to the Company’s geographical regions pending finalization of the purchase accounting. The preliminary allocation of purchase price was as follows (in thousands):
|  | April 2, 2024
Assets acquired: |  |
Cash and cash equivalents |  | $ | 26,737 |
Restricted cash |  | 794 |
Accounts receivable, net |  | 24,250 |
Inventory, net |  | 4,142 |
Prepaid expenses and other current assets |  | 8,886 |
Fixed assets, net |  | 35,587 |
Intangible assets, net |  | 153,000 |
Right-of-use asset |  | 3,794 |
Deferred tax assets |  | 1,093 |
Other assets |  | 973 |
Total assets acquired |  | $ | 259,256 |
Liabilities assumed: |  |
Short-term bank debt and current maturities of long-term debt |  | $ | 20,158 |
Accounts payable and accrued expenses |  | 26,400 |
Deferred revenue - current |  | 6,394 |
Lease liability - current |  | 859 |
Income taxes payable |  | 355 |
Lease liability - less current portion |  | 2,852 |
Deferred tax liability |  | 48,725 |
Other long-term liabilities |  | 484 |
Total liabilities assumed |  | $ | 106,227 |
Total identifiable net assets acquired |  | $ | 153,029 |
Non-controlling interest |  | (5) |
Goodwill |  | 216,799 |
Purchase price consideration |  | $ | 369,823 |
The above fair values of assets acquired and liabilities assumed are preliminary and are based on the information that was available as of the reporting date. The Company’s allocation of the preliminary purchase price to certain assets acquired and liabilities assumed is provisional and the Company will continue to adjust those estimates as additional information pertaining to events or circumstances present at April 2, 2024 becomes available and final valuation and analysis are completed. During the three-month period ended September 30, 2024, the Company recognized an adjustment of $425 against goodwill. In addition, the Company is still in the process of determining the fair value of acquired assets and assumed liabilities, which may also result in adjustments of the provisional amounts recorded. The fair values of the assets acquired and liabilities assumed, including the identifiable assets acquired, have been preliminarily determined using the income and cost approach, and are partially based on inputs that are unobservable. The Company used discounted cash flow (“DCF”) analyses, which represent Level 3 fair value measurements, to assess certain components of its purchase price allocation as a result of the acquisition. The fair value of the customer relationships was determined using the multi-period excess earnings method. The fair value of the tradename and developed technology was determined using an income approach based on the relief from royalty method. For the fair value estimates, the Company used (i) forecasted future cash flows, (ii) historical and projected financial information, (iii) synergies including cost savings, (iv) revenue growth rates, (v) customer attrition rates, (vi) royalty rates, and (vii) discount rates, as relevant, that market participants would consider when estimating fair values. These estimates require judgment and are subject to change. Differences between the preliminary estimates and final accounting may occur, and those could be material. The Company believes that the information provides a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities, but the potential for measurement period adjustments exists based on the Company’s continuing review of matters related to the acquisition. Adjustments to initial preliminary fair value of the assets acquired and assumed liabilities during the measurement period until April 2, 2025, will be recorded during the period in which the adjustments are determined, including the effect on earnings of any amounts we would have recorded in previous periods if the accounting had been completed (i.e. the historical reported financial statements will not be retrospectively adjusted). The provisional amounts for assets acquired and liabilities assumed include: •The fair value of accounts receivable and other receivables which may be subject to adjustment for reassessment of collectability as of the date of acquisition, collections and other adjustment subsequent to the acquisition; •Property, and equipment, for which the preliminary estimates are subject to revision for finalization of preliminary appraisals; •Right-of-use assets and lease liabilities, which will be subject to adjustment upon completion of the review of the inputs, including sublease assumptions, for the calculations; •Acquired inventory, which values are still being assessed on an individual basis; •Prepaid expenses, accounts payable and accrued expenses, which will be subject to adjustment based upon completion of working capital clean up and assessment of other factors; •The recognition and measurement of contract assets and contract liabilities acquired in accordance with ASC 606 will be subject to adjustment upon completion of assessment; •Acquired intangible assets will be subject to adjustment as additional assets are identified, estimates and forecasts are refined and disaggregated, useful lives are finalized, and other factors deemed relevant are considered; •Deferred income taxes will be subject to adjustment based upon the completion of the review of the book and tax bases of assets acquired and liabilities assumed, applicable tax rates and the impact of the revisions of estimates for the items described above; and •Goodwill will be subject to adjustment for the impact of the revisions of estimates for the items described above. The Company expects to complete the purchase price allocation as soon as practicable, but no later than one year from the acquisition date. Acquired Identifiable Intangible Assets The following table sets forth preliminary estimated fair values of the components of the identifiable intangible assets acquired and their estimated useful lives:
(in thousands) | Fair value |  | Weighted average useful lives
Trade name | $ | 10,000 |  |  | 14 | years
Developed technology | 30,000 |  |  | 5 | years
Customer relationships | 113,000 |  |  | 13 | years
| $ | 153,000 |  |  |  |
Acquisition-Related Expenses The Company expensed a total of $20,443 of acquisition-related costs in the consolidated statement of operations related to the MiX Combination, of which $152 was expensed in the three-month period ended September 30, 2024 and $14,643 was expensed in the six-month period ended September 30, 2024. Unaudited Pro Forma Financial Information The business acquired in the MiX Combination contributed revenue of $43,825 and a net profit of $2,007, after amortization of identified intangibles, for the three-month period ended September 30, 2024 and revenue of $87,514 and a net loss of $4,925 for the six-month period ended September 30, 2024.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/805/tableOfContent + Details
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