Item 1A. Risk Factors
In addition to the other information contained in this Form 10-K, the following risk factors should be considered carefully in evaluating the Company’s business. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. Additional risks not presently known to the Company or that the Company currently deems immaterial may also adversely affect our business, financial condition or results of operations. The summary below is not exhaustive, and investors should read this “Risk Factors” section in full. These and other risks are described in more detail in this Item 1A. Risk Factors.
Risk Factor Summary
Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this summary. These risks include, among others, the following:
• We may not realize all of the anticipated benefits of the MiX Combination and the FC Acquisition, and the continued integration of the businesses may involve challenges that could adversely affect our business, financial condition and results of operations.
• We have incurred significant losses and have a substantial accumulated deficit. If we cannot achieve profitability, the market price of our common stock could decline significantly.
• We are an international company and may be susceptible to several political, economic, trade and geographic risks that could harm our business.
• Conditions and changes in the global economic environment may adversely affect our business and financial results.
• Disruptions in our global supply chain or failures by subcontractors could materially and adversely affect our business, financial condition and results of operations.
• If we are unable to keep up with rapid technological change, we may be unable to meet the needs of our customers.
• Inaccurate output from AI could result in brand and reputation damage.
• We are subject to breaches of our information technology systems, which could damage our reputation, vendor, and customer relationships, and our customers’ access to our services.
• The industry in which we operate is highly competitive, and competitive pressures from existing and new companies.
• Failure to correctly and efficiently implement ERP and customer relationship management (“CRM”) systems could have a material and adverse effect on our business.
• The international scope of our business exposes us to risks associated with foreign exchange rates, currency fluctuations and economic instability in certain emerging markets.
• We may need to obtain additional capital to fund our operations that could have negative consequences on our business.
• We rely significantly on third-party channel partners, including telecommunication companies and regional distributors, for market access and sales execution, and any disruption to, or our failure to develop and manage, our channel partners would harm our business.
• Failure to adequately protect our intellectual property rights or defend against third-party claims could materially and adversely affect our business, financial condition and results of operations.
• In connection with the MiX Combination and the FC Acquisition, we have incurred significant additional indebtedness to finance the redemption of our then-outstanding Series A convertible preferred stock and the acquisition of Fleet Complete.
• Our Israeli subsidiaries have incurred significant indebtedness.
• The terms of the A&R Credit Agreement restrict Powerfleet Israel’s and Pointer’s current and future operations, particularly their ability to respond to changes or take certain actions.
• Goodwill impairment or intangible impairment charges may affect our results of operations in the future.
• We have reported material weaknesses in our internal control over financial reporting. If we fail to remediate the identified material weaknesses and maintain effective internal control, our ability to produce accurate and timely financial statements could be impaired, which may adversely affect our business, results of operations, and investor and customer confidence.
• Our manufacturers rely on a limited number of suppliers for several significant components and raw materials used in our products. If we or our manufacturers are unable to obtain these components or raw materials on a timely or cost-effective basis, we will be unable to meet our customers’ orders, which could reduce our revenues, subject us to claims for damages and adversely affect our relationships with our customers.
• The use of our products is subject to international regulations.
• The adoption of industry standards that do not incorporate the technology we use may decrease or eliminate the demand for our services or products and could harm our results of operations.
• Under the current laws in jurisdictions in which we operate, we may not be able to enforce non-compete covenants and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.
• Our cash and cash equivalents could be adversely affected by a downturn in the financial and credit markets.
• Future sales of our common stock, including sales of our common stock acquired upon the exercise of outstanding options, may cause the market price of our common stock to decline.
• The concentration of common stock ownership among our executive officers and directors could limit the ability of other stockholders of the Company to influence the outcome of corporate transactions or other matters submitted for stockholder approval.
• Our Amended and Restated Certificate of Incorporation, as amended provides that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between us and our stockholders, which could limit stockholders’ ability to obtain a judicial forum viewed by the stockholders as more favorable for disputes with us or our directors, officers or employees, and the enforceability of the exclusive forum provision may be subject to uncertainty.
• Provisions of Delaware law or the Charter could delay or prevent an acquisition of the Company, even if the acquisition would be beneficial to our stockholders and could make it more difficult for stockholders to change our management.
Risks Related to Our Business
We may not realize all of the anticipated benefits of the MiX Combination and the FC Acquisition, and the continued integration of the businesses may involve challenges that could adversely affect our business, financial condition and results of operations.
While we have made meaningful progress integrating MiX Telematics and Fleet Complete into our operations, the ultimate success of the MiX Combination and the FC Acquisition remains subject to a number of risks and uncertainties, including our ability to fully integrate their respective operations, technologies and personnel with our existing business. We believe these transactions will provide strategic benefits and operational synergies, including cost savings, increased scale and enhanced customer offerings, but such benefits may not be realized within the anticipated timeframe, or at all.
Integrating three historically independent businesses continues to present operational, cultural and logistical challenges and may involve unexpected costs or delays. These challenges include, among other things: combining operational, financial and administrative functions; integrating enterprise resource planning (“ERP”) and other IT systems; harmonizing policies, procedures and internal controls; aligning product and service offerings; consolidating facilities and infrastructure; managing geographically dispersed operations; retaining and integrating key employees; aligning human resources practices; addressing cultural differences; coordinating sales and marketing strategies; and preserving relationships with customers, vendors and other business partners. While progress has been made, any failure to effectively address these matters may adversely affect our ability to realize all of the anticipated benefits of the MiX Combination and the FC Acquisition.
There can be no assurance that the combined business will perform as expected or that the anticipated synergies, including those related to optimizing operating models, eliminating redundancies, reallocating investments or enhancing free cash flow generation, will be fully achieved. The aggregate consideration paid in connection with the MiX Combination and the FC Acquisition may ultimately exceed the value realized from these transactions, and our assumptions regarding future financial performance, unlevered free cash flow or earnings accretion may prove inaccurate. If the MiX Combination or the FC Acquisition is not accretive to our earnings per share, the market price of our common stock could be adversely affected.
Additionally, the transactions have resulted in the incurrence of additional indebtedness and the assumption of existing and contingent liabilities of MiX Telematics and Fleet Complete, including potential tax, employee-related and other obligations, which may further limit our operational flexibility and adversely affect our financial condition.
Moreover, the continued integration efforts may divert management’s time and attention from the day-to-day operation of our business, which could disrupt ongoing operations and impede the achievement of our strategic objectives. If we are unable to fully integrate MiX Telematics and Fleet Complete, or if the combined company does not perform as anticipated, our business, financial condition, results of operations and the market price of our common stock could be materially and adversely affected.
We have incurred significant losses and have a substantial accumulated deficit. If we cannot achieve profitability, the market price of our common stock could decline significantly.
As of March 31, 2024, and March 31, 2025, we had cash (including restricted cash) and cash equivalents of $109.7 million and $48.8 million, respectively, and working capital of $126.2 million and $18.1 million, respectively. Our primary sources of cash are cash flows from the 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.
We incurred net losses attributable to common stockholders of approximately $(16.9) million, $(17.3) million, $(19.6) million, and $(51.0) million for the years ended December 31, 2022 and 2023, the three months ended March 31, 2024 and the year ended March 31, 2025, respectively, and have incurred additional net losses since inception. At March 31, 2024, and March 31, 2025, we had an accumulated deficit of approximately $154.8 million and $205.8 million, respectively. Our ability to increase our revenues from the sale of our solutions will depend on our ability to successfully implement our growth strategy and the continued expansion of our markets. If our revenues do not grow or if our operating expenses continue to increase, we may not be able to become profitable, and the market price of our common stock could decline.
We are an international company and may be susceptible to several political, economic, trade and geographic risks that could harm our business.
We are dependent on sales to customers outside the United States. Our international sales are likely to account for a significant percentage of our products and services revenue for the foreseeable future. As a result, the occurrence of any international, political, economic or geographic event (for example, restrictions on international trade, imposition of tariffs, global supply chain disruptions, inflation and other cost increases, and the conflict in the Middle East, could result in a significant decline in our revenue. In addition, compliance with complex foreign and U.S. laws and regulations that apply to our international operations will increase our cost of doing business in international jurisdictions. These numerous and sometimes conflicting laws and regulations include internal control and disclosure rules, data privacy and filtering requirements, anti-corruption laws, such as the Foreign Corrupt Practices Act, and other local laws prohibiting corrupt payments to governmental officials, and anti-competition regulations, among others. Violations of these laws and regulations could result in fines and , sanctions us, our officers, or employees, prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries, and could also materially affect our brand, international expansion efforts, ability to attract and retain employees, business, and operating results. Although we plan to implement policies and procedures
designed to ensure compliance with these laws and regulations, there can be no assurance that our employees, contractors, or agents will not violate our policies.
Some of the risks and challenges of doing business internationally include:
• unexpected changes in regulatory requirements;
• fluctuations in international currency exchange rates including its impact on unhedgeable currencies and our forecast variations for hedgeable currencies;
• imposition of tariffs and other barriers and restrictions;
• sanctions and export regulations;
• management and operation of an enterprise spread over various countries;
• the burden of complying with a variety of laws and regulations in various countries;
• application of the income tax laws and regulations of multiple jurisdictions, including relatively low-rate and relatively high-rate jurisdictions, to our sales and other transactions, which results in additional complexity and uncertainty;
• the conduct of unethical business practices in certain developing countries;
• general economic and geopolitical conditions, including inflation and trade relationships;
• war and acts of terrorism;
• kidnapping and high crime rate;
• natural disasters or pandemics (for example, the COVID-19 pandemic);
• availability of U.S. dollars especially in countries with economies highly dependent on resource exports, particularly oil; and
• changes in export regulations.
While these factors and the impacts of these factors are difficult to predict, any one or more of them could adversely affect our business, financial condition and results of operations in the future.
Conditions and changes in the global economic environment may adversely affect our business and financial results.
The global economy continues to be adversely affected by stock market volatility, tightening of credit markets, concerns of inflation, restrictions on international trade, adverse business conditions and liquidity concerns. These events and the related uncertainty about future economic conditions could negatively impact our customers and, among other things, postpone their decision-making, decrease their spending and jeopardize or delay their ability or willingness to make payment obligations, any of which could adversely affect our business and results of operations. Uncertainty about current global economic conditions, in particular as a result of the continued supply chain disruptions, inflation and other cost increases, and the conflict in the Middle East, could also adversely affect our business and results of operations. In addition, restrictions on international trade, such as tariffs and other controls on imports or exports of goods, technology or data, can materially affect our business and supply chain. The impact can be particularly significant if these restrictive measures apply to countries and regions where we derive a significant portion of our revenues and/or have significant supply chain operations. Restrictive measures can increase the cost of our products and can require us to take various actions, including changing suppliers, business relationships and operations, to offer and distribute affected products, services and third-party applications to our customers, and increasing the prices of our products and services. Changing our business and supply chain in accordance with new or changed restrictions on international trade can be expensive, time-consuming and to our business and results of operations. Such restrictions can be announced with little or no advance notice, which can create uncertainty, and we may not be to effectively mitigate any or all impacts from such measures. Beginning in the second quarter of 2025, new U.S. tariffs were announced, including additional tariffs on imports from China, Taiwan, Vietnam and the EU, among others. In response, several countries have imposed, or to impose, reciprocal tariffs on imports from the U.S. and other measures. Various modifications, and to the U.S. tariffs have been announced and further changes are expected to be made in the future, which may include additional sector-based tariffs or other measures. The ultimate impact remains uncertain and will depend on several factors, including whether additional or
incremental U.S. tariffs or other measures are announced or imposed, to what extent other countries implement tariffs or other retaliatory measures in response, and the overall magnitude and duration of these measures. If disputes and conflicts further escalate, actions by governments in response could be significantly more severe and restrictive. Any of the foregoing could materially adversely affect our business, results of operations, financial condition and stock price.
During periods of economic downturn, our customers may decrease their demand for AIoT solutions, as well as the maintenance, support and consulting services we provide. This slowdown may have an adverse effect on the wireless solutions industry in general and on demand for our products and services, but the magnitude of that impact is uncertain. Our future growth is dependent, in part, on the demand for our products and services. Prolonged weakness in the economy may cause business enterprises to delay or cancel wireless solutions projects, reduce their overall wireless solutions budgets and/or reduce or cancel orders for our services. This, in turn, may lead to longer sales cycles, delays in purchase decisions, and payment and collection issues, and may also result in price pressures, causing us to realize lower revenues and operating margins. Additionally, if our customers cancel or delay their wireless solutions initiatives, our business, financial condition and results of operations could be materially and affected. If the current uncertainty in the general economy does not change or continue to , our business, financial condition and results of operations could be .
Disruptions in our global supply chain or failures by subcontractors could materially and adversely affect our business, financial condition and results of operations.
Our ability to manufacture and deliver products in a timely, cost-effective and high-quality manner is dependent on a complex, global supply chain and on subcontractors for key manufacturing and fulfillment operations. We source a significant number of components—including semiconductors and telecommunications hardware—from a globally distributed network of suppliers and rely on third-party subcontractors for product assembly, testing and logistics. Any disruption or failure at any point in this network may materially impair our ability to meet customer demand.
The availability of certain critical components, particularly semiconductors, remains constrained due to global supply chain imbalances, capacity limitations and geopolitical tensions. Although conditions in the semiconductor market have stabilized somewhat, the broader supply chain remains subject to risks, including extended lead times, input cost inflation, production bottlenecks and macroeconomic disruptions. Events such as trade restrictions, tariffs, sanctions, natural disasters, regional conflicts and labor shortages continue to affect both our direct suppliers and upstream vendors.
In addition, we depend on subcontractors to manufacture and deliver finished products to customers. If these subcontractors experience quality issues, production shortfalls, labor disruptions or financial instability, our product quality, delivery timelines and customer satisfaction may suffer. The consolidation of third-party manufacturers within the electronic component industry may reduce our supplier options and increase pricing leverage in favor of those vendors, potentially resulting in higher manufacturing costs. If we are unable to pass those costs on to customers, our gross margins and profitability may be adversely affected.
There is also intense competition for access to the most qualified and reliable subcontractors. If we are unable to maintain access to such partners or if their performance deteriorates, we may face significant challenges in scaling production or ensuring service-level commitments. Any resulting failure to fulfill customer orders on time and in accordance with contractual terms could lead to business interruptions, loss of key accounts, reputational harm, damage claims and reduced revenue.
While we continuously monitor our supply chain and subcontractor performance and seek to diversify sources of supply where feasible, there can be no assurance that we will be able to effectively mitigate these risks. If we are unable to manage ongoing or future disruptions in our supply chain or subcontractor network, our business, financial condition, and results of operations could be materially and adversely affected.
If we are unable to keep up with rapid technological change, we may be unable to meet the needs of our customers, which could materially and adversely affect our financial condition and results of operations and reduce our ability to increase our market share.
Our market is characterized by rapid technological change and frequent new product announcements. Significant technological changes could render our existing technology obsolete. We are active in the research and development of new products and technologies and in enhancing our current products. However, research and development in our industry is complex and filled with uncertainty. For example, it is common for research and development projects to encounter delays due to unforeseen problems, resulting in low initial volume production, fewer product features than originally considered desirable and higher production costs than initially budgeted, any of which may result in lost market opportunities. In addition, these new products
may not adequately meet the requirements of the marketplace and may not achieve any significant degree of market acceptance. If our efforts do not lead to the successful development, marketing and release of new products that respond to technological developments or changing customer needs and preferences, our revenues and market share could be materially and adversely affected. We may expend a significant number of resources in unsuccessful research and development efforts. In addition, new products or enhancements by our competitors may cause customers to defer or forego purchases of our products. Any of the foregoing could materially and adversely affect our financial condition and results of operations and reduce our ability to increase our market share.
Inaccurate output from AI could result in brand and reputation damage.
We have integrated AI and machine learning technologies into certain products and operational processes. While these technologies offer the potential for significant enhancements in performance, decision-making and customer insights, they also present material risks, including algorithmic bias, data integrity issues and lack of transparency or explainability. Inaccurate or unpredictable AI-generated outputs could result in operational failures, reputational damage, regulatory scrutiny or legal liability. Additionally, evolving AI regulations, such as the EU AI Act and prospective U.S. federal guidance, may impose additional compliance obligations, which could increase operational costs and limit certain product capabilities.
We are subject to breaches of our information technology systems, which could damage our reputation, vendor, and customer relationships, and our customers’ access to our services.
We rely extensively on information technology systems, cloud infrastructure and third-party service providers to support critical business operations, including customer and financial data management. As a result, we face an increasing risk of cybersecurity threats, including ransomware attacks, insider threats and advanced persistent threats, some of which may be sponsored by nation-state actors. Despite our security measures, our information technology systems have been, and may continue to be, subject to cybersecurity threats and incidents. Any successful breach could result in unauthorized access to sensitive data, business interruption, financial loss or reputational harm. Furthermore, we are subject to various data protection laws and regulations, including the General Data Protection Regulation, the California Consumer Privacy Act and other similar international regimes. or may result in significant financial , remediation costs, regulatory and private .
The industry in which we operate is highly competitive, and competitive pressures from existing and new companies could have a material adverse effect on our financial condition and results of operations.
The industry in which we operate is highly competitive and influenced by the following:
• advances in technology;
• new product introductions;
• evolving industry standards;
• product improvements;
• rapidly changing customer needs;
• intellectual property invention and protection;
• marketing and distribution capabilities;
• ability to attract and retain highly skilled professionals;
• competition from highly capitalized companies;
• entrance of new competitors;
• ability of customers to invest in information technology; and
• price competition.
The products marketed by us, and our competitors, are becoming more complex. As the technological and functional capabilities of future products increase, these products may begin to compete with products being offered by traditional computer, network and communications industry participants that have substantially greater financial, technical, marketing and manufacturing resources than we do.
Although we are not aware of any current competitors that provide the precise capabilities of our systems, we are aware of competitors that offer similar approaches to address the customer needs that our products address. Those companies include both emerging companies with limited operating histories and companies with longer operating histories, greater name recognition and/or significantly greater financial, technical and marketing resources than ours.
We attempt to differentiate our solutions by continuing to innovate and by offering a choice of communication mode, patented battery management technology, sensor options, and installation configurations.
If we do not keep pace with product and technology advances, including the development of superior products by our competitors, or if we are unable to otherwise compete successfully against our competitors, there could be a material adverse effect on our competitive position, revenues and prospects for growth. As a result, our financial condition and results of operations could be materially and adversely affected.
Failure to correctly and efficiently implement ERP and customer relationship management (“CRM”) systems could have a material and adverse effect on our business.
We have started the process of implementing an integrated ERP and CRM system, starting with our North American and European businesses, leveraging the systems used by Fleet Complete. The overall aim is to have all of our businesses on the same ERP and CRM to enable management to achieve enhanced quality, reliability and timeliness of information, improve integration and visibility of information from different countries and optimize global management of corporate processes.
The adoption of these systems, which will replace the various accounting systems within the individual operations, poses several challenges relating to, among other things, project governance, migration of data, potential instability of existing systems, changes to processes and controls, communication of new procedures, training of personnel and maintaining an effective control environment. We are aware of the potential risks associated with a global system implementation and intend to adopt mitigation plans and contingency plans, in order to ensure business continuity. However, there is no assurance that the ERP and CRM systems will be successfully implemented and failure to do so could have a material adverse effect on our operations and ability to execute on our strategy.
The international scope of our business exposes us to risks associated with foreign exchange rates, currency fluctuations and economic instability in certain emerging markets.
We report our financial results in U.S. dollars. However, a significant portion of our net sales, assets, indebtedness and other liabilities, and costs are denominated in foreign currencies. These currencies include, among others, the Euro, Israeli shekel, British pound sterling, Canadian dollar, Mexican peso, Argentine peso, Brazilian real and South African rand. As a result, fluctuations in foreign exchange rates—particularly in emerging markets—can significantly affect our reported revenue, expenses, and overall financial performance.
Currency fluctuations, especially with respect to the South African rand, Mexican peso, and Brazilian real, may materially impact our income and expenses due to the translation of our foreign subsidiaries’ financial statements into U.S. dollars. For example, the majority of subscription agreements and operating expenses of our subsidiary, MiX Telematics, are denominated in foreign currencies and, therefore, subject to such fluctuations.
In addition, several emerging market economies are particularly vulnerable to the impact of rising interest rates, inflationary pressures, and large external deficits. Risks in one country can limit our opportunities for growth and negatively affect our operations in another country or countries. As a result, any such unfavorable conditions or developments could have an adverse impact on our operations. Our results of operations and, in some cases, cash flows, have in the past been, and may in the future be, adversely affected by movements in exchange rates. In addition, we may also be exposed to credit risks in some of those markets. We may implement currency hedges or take other actions intended to reduce our exposure to changes in foreign currency exchange rates. If we are not successful in mitigating the effects of changes in exchange rates on our business, any such changes could materially impact our results.
We may need to obtain additional capital to fund our operations that could have negative consequences on our business.
We may require additional capital in the future to develop and commercialize additional products and technologies or take advantage of other opportunities that may arise, including potential acquisitions. We may seek to raise the necessary funds through public or private equity offerings, debt financings, additional operating improvements, asset sales or strategic alliances and licensing arrangements.
To the extent we raise additional capital by issuing equity securities, our existing stockholders may experience substantial dilution. In addition, we may be required to relinquish rights to our technologies or systems or grant licenses on terms that are not favorable to us in order to raise additional funds through strategic alliance, joint venture and licensing arrangements. We cannot provide assurance that the additional sources of funds will be available, or if available, would have reasonable terms. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of our development programs, and our business, financial condition, results of operations and stock price could be materially and adversely affected.
We rely significantly on third-party channel partners, including telecommunication companies and regional distributors, for market access and sales execution, and any disruption to, or our failure to develop and manage, our channel partners would harm our business.
We depend substantially on third-party channel partners—including telecommunications providers, systems integrators, value-added resellers and managed service providers—to market, sell, install and support our solutions in key domestic and international markets. These partners play a critical role in extending our global reach, accessing customer segments where direct sales are less effective or impractical, and delivering localized expertise.
Recruiting, onboarding and retaining high-performing channel partners require considerable time, effort and financial investment. We must provide ongoing training and technical support to ensure that our partners possess the necessary product knowledge and capabilities to effectively position our offerings. As we expand our business and diversify our portfolio, the management and oversight of this partner ecosystem becomes increasingly complex and resource-intensive. To stay ahead of these challenges, we must continue to invest in the development of robust governance structures, compliance protocols, performance management systems and scalable partner enablement programs. There can be no assurance that we will succeed in doing so, and failure to maintain a consistently high-performing channel may negatively impact our ability to execute our go-to-market strategy.
We cannot assure you that our existing channel partners will maintain their historical performance levels, that we will be able to retain or grow these relationships on favorable terms or that new partners will be successfully recruited or onboarded. If we are unable to establish, maintain or grow effective distribution relationships, or if our key partners fail to meet expectations or cease carrying our products, our revenues, operating margins, market share and long-term strategic objectives could be materially and adversely affected.
Failure to adequately protect our intellectual property rights or defend against third-party claims could materially and adversely affect our business, financial condition and results of operations.
Our ability to compete effectively depends in large part on our proprietary technologies and intellectual property. We rely on a combination of patents, copyrights, trademarks, trade secrets, know-how and contractual protections, including confidentiality and invention assignment agreements, to safeguard our proprietary rights. Despite these efforts, there is no assurance that our intellectual property portfolio will be able to prevent third parties from copying or otherwise obtaining and using our technology, or that our rights will not be challenged, narrowed, invalidated or circumvented.
Intellectual property protection is particularly difficult to enforce in certain jurisdictions where legal systems may not offer the same degree of protection as the United States. We may be unable to prevent unauthorized use of our technology, especially internationally, and may be limited in our ability to assert our rights due to jurisdictional barriers, enforcement limitations, or the cost and complexity of international litigation.
In addition, confidentiality agreements with our employees, contractors, consultants, advisors and third-party providers may be breached, and we may not have adequate remedies in the event of such breaches. Moreover, others may independently develop technologies or solutions that are substantially equivalent to, or derived from, ours, without violating our proprietary rights.
We may also be subject to disputes with collaborators, contractors or other third parties over ownership or licensing of intellectual property developed through joint efforts, which could result in costly and time-consuming litigation or delays in research, development or commercialization. Any such dispute, even if resolved in our favor, could divert significant management attention and financial resources.
Additionally, we have been, and may in the future become, involved in legal proceedings relating to alleged infringement of third-party intellectual property rights. Intellectual property litigation is inherently uncertain, expensive and disruptive to our business operations. Adverse outcomes in such proceedings could require us to:
• pay significant monetary damages or royalties;
• cease the manufacture, use, marketing or sale of products or services found to infringe;
• obtain licenses to third-party intellectual property, which may not be available on commercially reasonable terms, or at all; or
• redesign our products or services to avoid infringement, which could require substantial time and expense.
If we are unable to obtain necessary licenses, successfully defend against infringement claims or protect our own intellectual property rights, our ability to develop, commercialize and sell our products could be materially limited, and our financial condition and operating results could be materially and adversely affected.
In connection with the MiX Combination and the FC Acquisition, we have incurred significant additional indebtedness to finance the redemption of our then-outstanding Series A convertible preferred stock and the acquisition of Fleet Complete.
The closing of debt and/or equity financing in an amount sufficient to provide for the redemption in full in cash of all then-outstanding shares of our Series A convertible preferred stock was a condition to closing the MiX Combination. On March 7, 2024, we, together with certain of our wholly owned subsidiaries, entered into a facilities agreement (the “Facilities Agreement”) with FirstRand Bank Limited (acting through its Rand Merchant Bank division) (“RMB”), pursuant to which RMB agreed to provide us with two term loan facilities in an aggregate principal amount of $85 million, composed of Facility A and Facility B, each with a principal amount of $42.5 million (“RMB Facility A” and “RMB Facility B,” respectively, and collectively, the “RMB Facilities”), the proceeds of which could be used to redeem all the then-outstanding shares our Series A convertible preferred stock and for general corporate purposes. On March 13, 2024, we drew down all $85 million available under such facilities. 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 Hapoalim Credit Facilities (as defined below) to redeem in full all of the then-outstanding shares of our Series A convertible preferred stock.
Additionally, on September 27, 2024, we entered into a facility agreement (the “Facility Agreement”) with RMB, pursuant to which RMB agreed to provide us with a term loan facility in an aggregate principal amount of $125 million (the “New RMB Term Facility”). On October 1, 2024, we drew down the full amount of the New RMB Term Facility and used the proceeds to pay a portion of the purchase price in the FC Acquisition.
The indebtedness we incurred in connection with the MiX Combination and FC Acquisition will have the effect of, among other things, reducing our flexibility to respond to changing business and economic conditions, will increase our borrowing costs and, to the extent that such indebtedness is subject to floating interest rates, may increase our vulnerability to fluctuations in market interest rates. The increased levels of indebtedness could also reduce funds available to fund efforts to combine our, MiX Telematics’ and Fleet Complete’s businesses and realize expected benefits of the MiX Combination and the FC Acquisition and/or engage in investments in product development, capital expenditures and other activities and may create competitive disadvantages for the combined company relative to other companies with lower debt levels.
Our Israeli subsidiaries have incurred significant indebtedness.
On March 18, 2024, Powerfleet Israel Ltd. (“Powerfleet Israel”) and Pointer (together with Powerfleet Israel, the “Borrowers”) entered into an amended and restated credit agreement (as amended, the “A&R Credit Agreement”), with Bank Hapoalim B.M. (“Hapoalim”), which refinanced the facilities under, and amended and restated, the prior credit agreement, dated August 19, 2019 (as amended, the “Prior Credit Agreement”). The A&R Credit Agreement provides Powerfleet Israel with two senior secured term loan facilities denominated in New Israeli Shekel (“NIS”) in an aggregate principal amount of $30 million (comprised of two facilities in the aggregate principal amounts of $20 million and $10 million, respectively (“Hapoalim Facility A” and “Hapoalim Facility B,” respectively, and collectively, the “Hapoalim Term Facilities”)), and two revolving credit facilities to Pointer in an aggregate principal amount of $20 million (comprised of two revolvers in the aggregate principal amounts of $10 million and $10 million, respectively (“Hapoalim Facility C” and “Hapoalim Facility D”, respectively, and, collectively, the “Hapoalim Revolving Facilities” and, together with the Hapoalim Term Facilities, the “Hapoalim Credit Facilities”)). The outstanding amount under the facilities made available pursuant to the Prior Credit Agreement was approximately NIS 40.1 million, or $11.1 million, as of December 31, 2023. 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 Powerfleet.
On December 30, 2024, the Borrowers entered into an amendment to the A&R Credit Agreement, which increased 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 Powerfleet or any of its 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, the Borrowers had utilized $17.4 million under the Hapoalim Revolving Facilities. The undrawn facility balance at March 31, 2025, was $12.6 million.
Such indebtedness will have the effect, among other things, of reducing Powerfleet Israel’s and Pointer’s flexibility to respond to changing business and economic conditions, will increase our borrowing costs and, because such indebtedness is subject to floating interest rates and exposed to foreign currency fluctuations, may increase Powerfleet Israel’s and Pointer’s vulnerability to fluctuations in market interest and foreign exchange rates. The A&R Credit Agreement continues to require Powerfleet Israel and Pointer to satisfy various covenants, including negative covenants that directly or indirectly restrict our ability to engage in certain transactions without the consent of the lender. The indebtedness continues 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 its assets, as well as cross guarantees between Powerfleet Israel and Pointer. This may also make it more difficult for us to engage in future transactions without the consent of the lender. The increased levels of indebtedness could also reduce funds available to engage in investments in product development, capital expenditures and other activities and may create competitive disadvantages for us relative to other companies with lower debt levels. We may be required to raise additional financing for working capital, capital expenditure, acquisitions or other general corporate purposes. Our ability to arrange additional financing will depend on, among other factors, our financial position and performance, as well as prevailing market conditions and other factors beyond its control. We cannot you that we will be to obtain additional financing on terms acceptable to us or at all.
The terms of the A&R Credit Agreement restrict Powerfleet Israel’s and Pointer’s current and future operations, particularly their ability to respond to changes or to take certain actions.
The A&R Credit Agreement contains several restrictive covenants that impose significant operating and financial restrictions on Powerfleet Israel and Pointer and limits their ability to engage in acts that may be in their long-term best interest, including restrictions on their ability to:
• incur or guarantee additional indebtedness;
• incur liens;
• sell or otherwise dispose of assets;
• enter into transactions with affiliates; and
• enter into new lines of business.
The A&R Credit Agreement also limits the ability of Powerfleet Israel and Pointer to consolidate or merge with or into another person.
In addition, the covenants in the A&R Credit Agreement require Powerfleet Israel and Pointer to maintain specified financial ratios, tested quarterly. Their ability to meet those financial ratios can be affected by events beyond their control, and they may be unable to meet them.
A breach of the covenants or restrictions under the A&R Credit Agreement could result in an event of default, which may allow the lender to accelerate the indebtedness thereunder. In addition, an event of default under the A&R Credit Agreement would permit the lender to terminate all commitments to extend further credit pursuant to the Revolving Facilities. Furthermore, if Powerfleet Israel and Pointer are unable to repay the amounts due and payable under the A&R Credit Agreement, the lender could proceed against the collateral granted to it to secure the indebtedness under the A&R Credit Agreement. In the event the lender accelerates the repayment of borrowings, Powerfleet Israel and Pointer may not have sufficient assets to repay that indebtedness.
As a result of these restrictions, we may be:
• limited in our flexibility in planning for, or reacting to, changes in our business and the markets we serve;
• unable to raise additional debt or equity financing to fund working capital, capital expenditures, new product development expenses and other general corporate requirements; or
• unable to compete effectively or to take advantage of new business or strategic acquisition opportunities.
These restrictions may affect our ability to grow in accordance with our strategy.
Goodwill impairment or intangible impairment charges may affect our results of operations in the future.
We test goodwill for impairment on an annual basis and more often if events occur or circumstances change that would likely reduce the fair value of a reporting unit to an amount below its carrying value. We also test for other possible intangible impairments if events occur, or circumstances change that would indicate that the carrying amount of such intangible may not be recoverable. Any resulting impairment loss would be a non-cash charge and may have a material adverse impact on our results of operations in any future period in which we record a charge.
Long-lived assets with determinable useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Such charges could have a material adverse effect on our results of operations in the period in which they are recorded.
We have reported material weaknesses in our internal control over financial reporting. If we fail to remediate the identified material weaknesses and maintain effective internal control, our ability to produce accurate and timely financial statements could be impaired, which may adversely affect our business, results of operations, and investor and customer confidence.
Under Section 404 of the Sarbanes-Oxley Act of 2002, we are required to furnish a management certification and an independent auditor attestation regarding the effectiveness of our internal control over financial reporting. We are required to report, among other things, control deficiencies that constitute a “material weakness” or any changes in internal control that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.
In 2025, we identified two material weaknesses related to:
• Design and execution of controls over journal entries at I.D. Systems and Pointer Recuperación de México, S.A. de C.V. (“Pointer Mexico”); and
• Controls over the financial close and reporting process at Fleet Complete - specifically, the controls to ensure the completeness and accuracy of Fleet Complete’s financial reporting information that is consolidated into Powerfleet’s financial statements.
For a discussion of the material weaknesses and our remediation efforts, see Item 9A, Controls and Procedures, in this Annual Report on Form 10-K. We successfully remediated the previously disclosed material weaknesses relating to controls over the redemption premium on our convertible redeemable preferred stock, determination of standalone selling price, capitalized software costs and the financial statement close process, as of March 31, 2025. However, there can be no assurance that our current remediation efforts will be successful or that new material weaknesses will not arise in the future.
If we fail to remediate our existing material weakness or to maintain effective internal control, our ability to produce accurate and timely financial statements could be impaired, which could adversely affect our business, results of operations, and investor and customer confidence. In addition, the identification and disclosure of any future material weaknesses, even if promptly remediated, could negatively impact market perception and the trading price of our common stock.
We also face risks associated with the cost of establishing effective control over financial reporting, insofar as we expect to continue to incur increased costs related to our control over financial reporting to remediate the above-described material weaknesses and further improve our internal control environment.
Our manufacturers rely on a limited number of suppliers for several significant components and raw materials used in our products. If we or our manufacturers are unable to obtain these components or raw materials on a timely or cost-effective basis, we will be unable to meet our customers’ orders, which could reduce our revenues, subject us to claims for damages and adversely affect our relationships with our customers.
We rely on a limited number of suppliers for the components and raw materials used in our products. Although there are many suppliers for most of our component parts and raw materials, we are dependent on a limited number of suppliers for many of our significant components and raw materials. This reliance involves several significant risks, including:
• unavailability of materials and interruptions in delivery of components and raw materials from our suppliers, which could result in manufacturing delays;
• fluctuations in the quality of components and raw materials; and
• increases in the price of components and raw materials due to factors such as supply constraints, inflationary pressures, and changes in trade policy, including the imposition of tariffs or import and export restrictions.
Recent changes in international trade policy have introduced new or increased tariffs on a range of imported materials and components, including those sourced from regions such as China and other key manufacturing hubs. These tariffs may increase our procurement costs and reduce pricing flexibility, particularly if we are unable to pass on such cost increases to customers. Moreover, ongoing uncertainty regarding the scope and duration of tariff regimes and other trade barriers may make it more difficult to forecast costs and manage supply chain planning. If we are unable to mitigate these impacts through alternative sourcing, pricing strategies or supply chain adjustments, our business, financial condition and results of operations could be materially and adversely affected.
In addition, we currently do not have any long-term or exclusive purchase commitments with any of our suppliers. In addition, our suppliers may enter into exclusive arrangements with our competitors, be acquired by our competitors, or stop selling their products or components to us on commercially reasonable terms or at all. We may not be able to develop alternative sources for the components and raw materials. Even if alternate suppliers are available to us or our manufacturers, identifying them is often difficult and time-consuming. If we or our manufacturers are unable to obtain an ample supply of product or raw materials from our existing suppliers or alternative sources of supply, we may be unable to satisfy our customers’ orders, which could reduce our revenues, subject us to claims for damages and adversely affect our relationships with our customers.
The use of our products is subject to international regulations.
The use of our products is subject to regulatory approvals of government agencies in each of the countries in which our systems are operated, including Israel. Our operators typically must obtain authorization from each country in which our systems and products are installed. While in general, operators have not experienced problems in obtaining regulatory approvals to date, the regulatory schemes in each country are different and may change from time to time. We cannot guarantee that the approvals which our operators have obtained will remain sufficient in the view of regulatory authorities. In addition, we cannot assure you that third party operators of our systems and products will obtain licenses and approvals in a timely manner in all jurisdictions in which we wish to sell our systems or that restrictions on the use of our systems will not be unduly burdensome.
The adoption of industry standards that do not incorporate the technology we use may decrease or eliminate the demand for our services or products and could harm our results of operations.
There are no established industry standards in all the businesses in which we sell our products. For example, vehicle location devices may operate by employing various technologies, including network triangulation, GPS, satellite-based or network-based cellular or direction-finding homing systems. The development of industry standards that do not incorporate the technology we use may decrease or eliminate the demand for our services or products and we may not be able to develop new services and products that are in compliance with such new industry standards on a cost-effective basis. If industry standards develop and such standards do not incorporate our products and we are unable to effectively adapt to such new standards, such development could harm our results of operations.
Under the current laws in jurisdictions in which we operate, we may not be able to enforce non-compete covenants and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.
We currently have non-competition agreements with many of our employees. However, due to the difficulty of enforcing non-competition agreements globally, not all of our employees in foreign jurisdictions have such agreements. These agreements generally prohibit our employees, if they cease working for us, from directly competing with us or working for our competitors for a certain period of time following termination of their employment agreements. Israeli courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or its intellectual property. If we cannot demonstrate that harm would be caused to us, we may be unable to prevent our competitors from benefiting from the expertise of our former employees.
In the United States, the legal landscape regarding non-competes is rapidly evolving. In April 2024, the Federal Trade Commission (“FTC”) finalized a rule broadly prohibiting most non-compete clauses, with limited exceptions for senior executives. Although the rule was set to take effect in September 2024, federal courts enjoined its enforcement shortly before implementation. Following the 2024 U.S. presidential election, the new presidential administration halted appeals of these rulings and signaled a departure from the prior administration’s position. As a result, the FTC’s non-compete ban is not currently in effect, and its future remains uncertain. As a result, there is ongoing uncertainty regarding the long-term enforceability of non-competition agreements with employees in the United States. If future legislation, judicial decisions or regulatory actions further limit or invalidate the use of non-compete agreements, our ability to prevent former employees, who received training and experience through their employment with us, from using their knowledge of our business and operations to compete with us.
Our cash and cash equivalents could be adversely affected by a downturn in the financial and credit markets.
We maintain our cash and cash equivalents with major financial institutions; however, our cash and cash equivalent balances with these institutions exceed the Federal Deposit Insurance Corporation insurance limits. While we monitor on a systematic basis the cash and cash equivalent balances in our operating accounts and adjust the balances as appropriate, these balances could be impacted if one or more of the financial institutions with which we deposit our cash and cash equivalents fails or is subject to other adverse conditions in the financial or credit markets. To date, we have experienced no loss of principal or lack of access to our invested cash or cash equivalents; however, we can provide no assurance that access to our invested cash and cash equivalents will not be affected if the financial institutions in which we hold our cash and cash equivalents fail or the financial and credit markets deteriorate.
We have operations located in Israel, and therefore our results may be adversely affected by political, military and economic conditions in Israel.
Our subsidiaries Powerfleet Israel and Pointer operate in Israel, and therefore our business and operations may be directly influenced by the political, economic and military conditions affecting Israel at any given time. A change in the security and political situation in Israel could have a material adverse effect on our business, operating results and financial condition. Since the establishment of the State of Israel in 1948, Israel has experienced numerous armed conflicts with neighboring Arab countries, as well as persistent hostilities involving Iran and Iran-backed groups, including Hezbollah in Lebanon and Hamas in the Gaza Strip. In the last several years, these conflicts have involved missile strikes against civilian targets in various parts of Israel, particularly in southern Israel where Pointer’s main offices and manufacturing facility are located and have negatively affected business conditions in Israel. In June 2025, hostilities escalated into direct military conflict between Israel and Iran, further increasing regional instability. As of the date of this report, the in the Middle East remains ongoing and has had an impact on, and may continue to impact, our supply chain, our ability to manufacture and deliver products in Israel to customers and the of our Israeli workforce. Ongoing and political in other countries in the region, including Syria, Iraq and Iran, further contribute to uncertainty in the Middle East, and the potential impact of these developments on Israel’s security situation remains .
Furthermore, several countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities or political instability in the region continues or intensifies. These restrictions may limit materially our ability to obtain raw materials from these countries or sell our products to companies in these countries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could have a material adverse effect on our business, operating results and financial condition.
Any downturn in the Israeli economy may also have a significant impact on our business. Israel’s economy has been subject to numerous destabilizing factors, including a period of rampant inflation in the early to mid-1980’s, low foreign exchange reserves, fluctuations in world commodity prices, military conflicts and civil unrest. The revenues of certain of our products and services may be adversely affected if fewer vehicles are used as a result of an economic downturn in Israel, an increase in use of mass transportation, an increase in vehicle related taxes, an increase in the imputed value of vehicles provided as a part of employee compensation or other macroeconomic changes affecting the use of vehicles. In addition, our security services significantly depend on Israeli insurance companies mandating subscription to a service such as the Company’s. If Israeli insurance companies cease to require such subscriptions, our business could be significantly adversely affected. We also rely on the renewal and retention of several operating licenses issued by certain Israeli regulatory authorities. Should such authorities to renew any of these licenses, existing licenses, or require additional licenses, we may be to or certain services we provide.
If we do not achieve applicable Broad-Based Black Economic Empowerment objectives in our South African businesses, we risk not being able to renew certain of our existing contracts which service South African government and quasi-governmental customers, as well as not being awarded future corporate and governmental contracts, each of which would result in the loss of revenue.
The South African government established a legislative framework for the promotion of Broad-Based Black Economic Empowerment (“B-BBEE”). Achievement of B-BBEE objectives is measured by a scorecard which establishes a weighting for the various components of B-BBEE which relates to:
• Ownership – measuring the share of Black ownership and corresponding rights in the business, including voting rights among others;
• Management Control – reflecting the percentage of Black people in managerial positions ranging from junior management upwards;
• Skills Development – measuring the amount of money that was spent on the training and development of Black people including amongst others short courses, bursaries and learnerships;
• Enterprise and Supplier Development (including Preferential Procurement) – with enterprise development measuring contributions to, and the development of small Black-owned businesses with the objective of enabling them to supply goods and services to the company in the future; with supplier development measuring contributions to, and the development of Black-owned suppliers to help grow their businesses; and with preferential procurement measuring the extent to which goods and services are procured from suppliers that are empowered and have a good B-BBEE rating; and
• Socio-Economic Development – assessing the initiatives that the company supports often to the benefit of groups of individuals and communities with the objective of promoting income-generating activities and sustainable access to the economy for these beneficiaries.
The B-BBEE Codes have a continuous review process and are updated from time to time. Various amendments and clarifications with more onerous compliance requirements have been made over the years.
Our subsidiary, MiX Telematics Enterprise SA Pty Ltd (“MiX Enterprise”), engages with government and state-owned enterprises in tendering for business and is therefore required to maintain at least a certain B-BBEE contributor level to continue to provide the service. Currently, certain material end-customers require MiX Enterprise to maintain level 1 or 2 B-BBEE contributor status as measured under the new B-BBEE Codes.
Furthermore, certain employment equity regulations and legislative measures that have been enacted in South Africa impose robust compliance obligations on employers in South Africa, which include establishment of numerical targets for employment equity and development and implementation of an employment equity plan for the next five years.
Failing to achieve applicable B-BBEE and EE objectives could result in financial penalties and could jeopardize our ability to maintain existing business or to secure future business from corporate, governmental or state-owned enterprises that could materially and adversely affect our business, financial condition and results of operations.
Socio-economic inequality in South Africa or regionally may subject us to political and economic risks, which may affect the ownership or operation of our business.
We own significant operations in South Africa. As a result, we are subject to political and economic risks relating to South Africa. Although political conditions in South Africa are generally stable, recent geopolitical developments. including possible sanctions may negatively impact the international sentiment towards South Africa, which may, in turn, materially and adversely affect our business, financial condition and results of operations. These risks may include changes in legislation, arbitrary interference with private ownership of contract rights, and changes to exchange controls, taxation and other laws or policies affecting foreign trade or investment and could materially and adversely affect our business, financial condition and results of operations. Any resultant changes in investment ratings, regulations and policies or a shift in political attitudes both within and towards South Africa are beyond our control and could materially and adversely affect our business, financial condition and results of operations.
Risks Related to Our Securities
Future sales of our common stock, including sales of our common stock acquired upon the exercise of outstanding options, may cause the market price of our common stock to decline.
The market price of our common stock could decline as a result of sales by our existing stockholders of shares of common stock in the market, or sales of our common stock acquired upon the exercise of outstanding options, or the perception that these sales could occur. These sales also may make it more difficult for us to sell equity securities at a time and price that we deem appropriate.
We have 133,370,542 shares of common stock outstanding as of June 25, 2025, of which 125,479,189 shares are freely transferable without restriction, and 7,891,353 shares are held by our officers and directors and, as such, are subject to the applicable volume, manner of sale, holding period and other limitations of Rule 144 under the Securities Act. In addition, as of June 25, 2025, time-based options and market-based stock options subject to performance-based vesting conditions, to purchase 1,890,000 and 5,200,000 shares of our common stock, respectively, were issued and outstanding, of which 1,627,000 and 0, respectively, have vested. As of March 31, 2025, the weighted-average exercise price of the vested non-market-based stock options was $6.37. We also may issue additional shares of stock in connection with our business, including in connection with acquisitions, and may grant additional stock options to our employees, officers, directors and consultants under our stock option plans or warrants to third parties. If a significant portion of these shares of common stock were sold on the public market, the market value of our common stock could be adversely affected.
The concentration of common stock ownership among our executive officers and directors could limit the ability of other stockholders of the Company to influence the outcome of corporate transactions or other matters submitted for stockholder approval.
As of June 25, 2025, our executive officers and directors beneficially owned, in the aggregate, approximately 5.9% of our outstanding common stock, not including approximately 965,000 shares of common stock that our executive officers and directors may acquire upon the exercise of outstanding options and stock appreciation rights, or if they otherwise acquire additional shares of common stock in the future. As a result, our officers and directors may have the ability to influence the outcome of all corporate actions requiring stockholder approval, irrespective of how our other stockholders may vote, including the following actions:
• the election of directors;
• adoption of stock option or other equity incentive compensation plans;
• the amendment of our organizational documents; and
• the approval of certain mergers and other significant corporate transactions, including the sale of substantially all of our assets.
Our Amended and Restated Certificate of Incorporation, as amended, provides that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between us and our stockholders, which could limit stockholders’ ability to obtain a judicial forum viewed by the stockholders as more favorable for disputes with us or our directors, officers or employees, and the enforceability of the exclusive forum provision may be subject to uncertainty.
Article SIXTEENTH of our Amended and Restated Certificate of Incorporation (as amended, the “Charter”) provides, subject to certain exceptions enumerated in Article SIXTEENTH, that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any stockholder to bring (i) any derivative action brought on behalf of the Company, (ii) any action asserting a claim of breach of fiduciary duty owed by any current or former director, officer or other employee or stockholder of the Company, (iii) any action asserting a claim arising pursuant to the General Corporation Law of Delaware (the “DGCL”) or the Charter or our Amended and Restated Bylaws or as to which the DGCL confers jurisdiction on such court, or (iv) any action asserting a claim governed by the internal affairs doctrine, except for, in each of the aforementioned actions, among other things, any claims which are vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery of the State of Delaware or for which the Court of Chancery of the State of Delaware does not have subject matter jurisdiction. Accordingly, the exclusive forum provision will not apply to arising under the Securities Act the Exchange Act or other federal securities laws for which there is federal or concurrent federal and state jurisdiction. Article SIXTEENTH provides that any person or entity who acquires an interest in our capital stock will be deemed to have notice of and consented to the provisions of Article SIXTEENTH. Stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. Although we believe this forum provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, this forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds for with us or any of our directors, officers, other employees or stockholders, which may lawsuits with respect to such . Further, in the event a court finds the forum provision contained in the Charter to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could our business, operating results and financial condition.
Provisions of Delaware law or the Charter could delay or prevent an acquisition of the Company, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for stockholders to change our management.
The Charter contains provisions that may discourage an unsolicited takeover proposal that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include: the absence of cumulative voting in the election of directors; the ability of our board of directors to issue up to 50,000 shares of currently undesignated and unissued preferred stock without prior stockholder approval; advance notice requirements for stockholder proposals or nominations of directors; limitations on the ability of stockholders to call special meetings or act by written consent; the requirement that certain amendments to the Charter be approved by 75% of the voting power of the outstanding shares of our capital stock; and the ability of our board of directors to amend our bylaws without stockholder approval.
