What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-13 compared with 2020-05-14 · 378 added, 317 removed, 517 unchanged (57% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

March 31, 2020

June 30, 2020

December 31, 2019

( UNAUDITED )

(In thousands, except share and per share data)

Current assets

13 unchanged sentences

Accounts payable and accrued liabilities

Accrued interest and accrued liabilities, related party

Line of credit

25 unchanged sentences

$0.001 par value;

15,000,000 shares designated, 4,828,530 and 4,828,530 shares issued and outstanding, respectively

15,000,000 shares designated,

2,145,030 and 4,828,530 shares issued and outstanding, respectively

Common stock;

6 unchanged sentences

Total stockholders’

equity (deficit)

Total liabilities and stockholders’

equity (deficit)

accompanying unaudited notes to the financials should be read in conjunction with these condensed

1 unchanged sentence

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the three months ended

For the three months

For the six months

ending June 30,

(In thousands, except share and per share data)

8 unchanged sentences

Total operating expenses

Income (loss) from operations

Loss from operations

Other income (expenses):

6 unchanged sentences

Net Loss attributable to OMNIQ Corp.

Foreign currency translation adjustment

Comprehensive loss

Reconciliation of net loss to net loss attributable to common shareholders

Preferred stock –

2 unchanged sentences

Net (loss) per share - basic

Net loss per share from continuing operations - basic

Weighted average number of common shares outstanding - basic

15 unchanged sentences

Balance, March 31, 2019

Dividend on Class C Shares

ESPP Stock Issuance

Stock-based compensation –

options and warrants

Stock and warrant issuances, net of issuance costs

Purchase price adjustment –

shares to be received

Net (loss) income

Balance, June 30, 2019

Balance, December 31, 2019

7 unchanged sentences

Balance, March 31, 2020

Dividend on Class C Shares

Accumulated other comprehensive loss

Stock-based compensation –

Subscribed common stock

Professional fees (including prepaid) –

Cashless exercise of stock options

Conversion agreements –

preferred shares

Conversion agreements - debt

Balance, June 30, 2020

accompanying unaudited notes to the financials should be read in conjunction with these condensed consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOW

For the three months ended

For the six months ended

(In thousands)

14 unchanged sentences

Cash flows from investing activities:

Restricted cash

Purchase of property and equipment

2 unchanged sentences

Proceeds from ESPP stock issuance

Net proceeds from common stock and warrant issuances

Proceeds from / (payments on) line of credit

Proceeds from notes/loans payable

Payment on notes/loans payable

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

Net increase in cash

Cash, beginning of period

5 unchanged sentences

Intangible assets acquired in non-cash exchange

Stock options and warrants issued

Conversion of notes payable

Stock options issued

accompanying unaudited notes to the financials should be read in conjunction with these condensed consolidated financial statements.

6 unchanged sentences

(“HTS”), a Delaware corporation,

HTS (USA), Inc., a Delaware corporation and HTS Image Ltd.

(“HTS Ltd.”) (f/k/a Teamtronics Ltd.), an Israeli corporation.

December 31, 2016, the Company acquired one hundred percent (100%) of the shares of Bar Code Specialties, Inc.

(“BCS”)

and merged BCS into Quest Marketing to form one US legal entity as part of its streamlining efforts.

OMNIQ Vision, Inc.

(f/k/a HTS (USA), Inc.), a Delaware corporation and HTS Image Ltd.

(“HTS Ltd.”) (f/k/a Teamtronics

Ltd.), an Israeli corporation.

interim consolidated financial statements included herein, presented in accordance with United States generally accepted accounting

10 unchanged sentences

The Company operates in one segment.

results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year

results for the six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year

ended December 31, 2020.

The novel coronavirus (“COVID-19”)

was first identified in late 2019.

COVID-19 spread rapidly throughout the world and, in March 2020, the World Health Organization

(“WHO”) characterized COVID-19 as a pandemic.

COVID-19 is a pandemic of respiratory disease spreading from person-to-person

that poses a serious public health risk.

It has significantly disrupted supply chains and businesses around the world.

and duration of the COVID-19 impact on our operations and financial position is highly uncertain.

Management cares about the employees, customers

and the communities served, so quick and strict action was taken based on the Center for Disease Control and WHO recommendations

to combat illness in the workforce and to lessen business interruption for the Company and customers.

OMNIQ has been designated

an essential business and the operations remain open to serve customers.

The Company’s management and employees are focused

on safely providing the equipment, parts, and services customers need to continue their work.

Management continues to closely monitor

and evaluate the impact of the COVID-19 pandemic on the Company’s operations and will take, the necessary actions to right-size

the business in this environment, which is evolving daily.

Some potential actions include, but are not limited to, modified work

schedules as well as appropriate adjustments to the operating expenditures and capital spending plans.

novel coronavirus (“COVID-19”) was first identified in late 2019.

COVID-19 spread rapidly throughout the world and,

in March 2020, the World Health Organization (“WHO”) characterized COVID-19 as a pandemic.

COVID-19 is a pandemic

of respiratory disease spreading from person-to-person that poses a serious public health risk.

It has significantly disrupted

supply chains and businesses around the world.

The extent and duration of the COVID-19 impact on our operations and financial

position is highly uncertain.

cares about the employees, customers and the communities served, so quick and strict action was taken based on the Center for

Disease Control and WHO recommendations to combat illness in the workforce and to lessen business interruption for the Company

and customers.

OMNIQ has been designated an essential business and the operations remain open to serve customers.

The Company’s

management and employees are focused on safely providing the equipment, parts, and services customers need to continue their work.

continues to closely monitor and evaluate the impact of the COVID-19 pandemic on the Company’s operations and will take,

the necessary actions to right-size the business in this environment, which is evolving daily.

Some potential actions include,

but are not limited to, modified work schedules as well as appropriate adjustments to the operating expenditures and capital spending

OF SIGNIFICANT ACCOUNTING POLICIES

7 unchanged sentences

ACCOUNTING PRONOUNCEMENTS

The Company has evaluated recent pronouncements

and believes that none of them will have a material effect on the Company’s financial statements.

November 20, 2019, the Company implemented a one-for-20 reverse stock split of the Company’s common stock (the “Reverse

Split”).

The par value of common stock and the number of authorized shares were not adjusted as a result of the Reverse

All share and per share amounts in the financial statements and notes thereto have been retroactively adjusted for all

periods presented to give effect to the Reverse Split, including reclassifying an amount equal to the reduction in par value of

common stock to additional paid-in capital.

As a result of the Reverse Split, proportionate adjustments have been made to the

per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options and warrants issued

by the Company and outstanding immediately prior to the Reverse Split, which resulted in a proportionate decrease in the number

of shares of the Company’s common stock reserved for issuance upon exercise or vesting of such stock options, restricted

Company has evaluated recent pronouncements and believes that none of them will have a material effect on the Company’s

financial statements.

Effective November 20, 2019, the Company implemented

a one-for-20 reverse stock split of the Company’s common stock (the “Reverse Split”).

The par value of common

stock and the number of authorized shares were not adjusted as a result of the Reverse Split.

All share and per share amounts

in the financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the

Reverse Split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital.

As a result of the Reverse Split, proportionate adjustments have been made to the per share exercise price and/or the number of

shares issuable upon the exercise or vesting of all preferred stock, stock options and warrants issued by the Company and

outstanding immediately prior to the Reverse Split, which resulted in a proportionate decrease in the number of shares of the

Company’s common stock reserved for issuance upon exercise or vesting of such preferred stock, stock options, restricted

stock units and warrants, and, in the case of stock options and warrants, a proportionate increase in the exercise price of all

6 unchanged sentences

lives ranging from 3 to 11 years.

Amortization expense for the three months ended March 31, 2020 and March 31, 2019 was $501 thousand

and $501 thousand, respectively.

Amortization expense for the six months ended June 30, 2020 and June 30, 2019 was $1.0 million

and $1.0 million, respectively.

LOSS PER COMMON SHARE

6 unchanged sentences

The weighted-average number of common

shares outstanding for computing basic EPS for the three months ended March 31, 2020 and 2019 were 3,984,006 and 3,584,076, respectively.

shares outstanding for computing basic EPS for the six months ended June 30, 2020 and 2019 were 4,135,420 and 3,854,564, respectively.

Diluted net loss per share of common stock is the same as basic net loss per share of common stock because the effects of potentially

3 unchanged sentences

following table sets forth the potentially dilutive securities excluded from the computation of diluted net loss per share because

such securities have an anti-dilutive impact due to losses reported, as of March 31:

such securities have an anti-dilutive impact due to losses reported, as of June 30:

(In thousands)

16 unchanged sentences

continuing operations are conducted in Israeli Shekel.

Reclassifications

and adjustments —

Certain prior year amounts in the condensed consolidated interim financial statements have been

reclassified to conform with current year presentation.

The impact of the reclassifications made to prior year amounts is not

material and did not affect net loss.

GOING CONCERN

accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As of March 31, 2020, the Company had a working capital deficit of $22.5 million and an accumulated deficit of $48.0 million.

The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its

obligations on a timely basis.

Management’s plan to eliminate the going concern situation includes, but is not limited to,

the continuation of improving cash flow, maintaining moderate cost reductions, the creation of additional sales and profits across

its product lines, and the obtaining of sufficient financing to restructure current debt in a manner more in line with the Company’s

improving cash flow and cost reduction successes.

As of June 30, 2020, the Company had a working capital deficit of $22.5 million and an accumulated deficit of $50.0

The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow

to meet its obligations on a timely basis.

Management’s plan to eliminate the going concern situation includes, but is not

limited to, the continuation of improving cash flow, maintaining moderate cost reductions, the creation of additional sales and

profits across its product lines, and the obtaining of sufficient financing to restructure current debt in a manner more in line

with the Company’s improving cash flow and cost reduction successes.

consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded

2 unchanged sentences

CONCENTRATIONS

the three months ended March 31, 2020 and the year ended December 31, 2019, one customer accounted for 32.5% and 12.3% of the

Company’s revenues, respectively.

At March 31, 2020 and December 31, 2019, one customer accounted for 36.6% and 29.6% of

the Company’s accounts receivable balance, respectively.

the six months ended June 30, 2020 and June 30, 2019, one customer accounted for 44.4% and 21.4% of the Company’s

revenues, respectively.

At June 30, 2020 and December 31, 2019, one customer accounted for 56.0% and 13.5% of the Company’s

accounts receivable balance, respectively.

BUSINESS ACQUISITION

5 unchanged sentences

purchase price paid is as follows:

shall be paid on the Closing Date, less $5,000 previously paid as an advance payment,

accordingly the remaining balance to be paid on Closing Date is $95,000.

per month for three months shall be paid on or before the last business day of the month

beginning with the first month after the Closing Date, and a fourth payment of $20,000

until a total of $95,000 has been made.

on the first month after Closing Date, $5,000 per month shall be paid in ten (10) monthly

installments.

shares of the Company’s common stock in the name of the Seller, will be issued

during 45 days from Closing Date at $5.00 per common share.

options to purchase 20,000 shares of the Company’s common stock at an exercise

price of $5.00 per share.

The option shares will vest in equal quarterly periods, expiring

on February 28th, 2023.

shall be paid on the Closing Date, less $5,000 previously paid as an advance payment, accordingly the remaining balance to

be paid on Closing Date is $95,000.

per month for three months shall be paid on or before the last business day of the month beginning with the first month after

the Closing Date, and a fourth payment of $20,000 until a total of $95,000 has been made.

on the first month after Closing Date, $5,000 per month shall be paid in ten (10) monthly installments.

shares of the Company’s common stock in the name of the Seller, will be issued during 45 days from Closing Date at $5.00

per common share.

options to purchase 20,000 shares of the Company’s common stock at an exercise price of $5.00 per share.

shares will vest in equal quarterly periods, expiring on February 28th, 2023.

purchase price was measured at fair value on the Closing Date as follows:

8 unchanged sentences

Liabilities assumed

Net assets acquired

at fair value

Total purchase

Net assets acquired at fair value

Total purchase price

Goodwill recognized

5 unchanged sentences

OTHER LIABILITIES

March 31, 2020 and December 31, 2019, other liabilities consisted of the following:

June 30, 2020 and December 31, 2019, other liabilities consisted of the following:

(In thousands)

March 31, 2020

December 31, 2019

June 30, 2020

Other vendor payable

13 unchanged sentences

The balance outstanding under the Action credit line

at March 31, 2020 and December 31, 2019, was $5.0 million and $1.4 million respectively, which includes accrued interest.

at June 30, 2020 and December 31, 2019, was $3.5 million and $1.4 million respectively, which includes accrued interest.

per annum interest rate with respect to the daily average balance of unpaid advances outstanding under the FASA (computed on a

10 unchanged sentences

NOTES PAYABLE

payable at March 31, 2020 and December 31, 2019, consists of the following:

payable at June 30, 2020 and December 31, 2019, consists of the following:

(In thousands)

March 31, 2020

December 31, 2019

June 30, 2020

Supplier Note Payable

1 unchanged sentence

Long Term Notes Payable

maturities of notes payable as of March 31, 2020 are as follows;

maturities of notes payable as of June 30, 2020 are as follows;

Protection Program (PPP) Loan

April 30, 2020, the Company received an unsecured loan (the “PPP Loan”) in the amount of $888 thousand, under the

Paycheck Protection Program (the “PPP”).

The PPP, established as part of the Coronavirus Aid, Relief and Economic

Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average

2019 monthly payroll expenses.

PPP Loan was made through Zions First National Bank (the “Lender”) and the Company entered into a U.S.

Small Business

Administration Paycheck Protection Program Note (“Note”) with the Lender evidencing the PPP Loan.

The term of the

PPP Loan is two years.

Interest will accrue on the outstanding principal balance of the PPP Loan at a fixed rate of 1.0%, which

shall be deferred for the first six months of the term of the PPP Loan.

Monthly payments will be due and payable beginning in

November 2020 and continue each month thereafter until maturity of the PPP Loan.

The Company may prepay principal of the PPP Loan

at any time in any amount without penalty.

The Note contains customary events of default relating to, among other things, payment

defaults, breach of representations and warranties or provisions of the PPP Loan.

Company may apply to the Lender for forgiveness of the PPP Loan, and the amount which may be forgiven will be equal to the sum

of the payroll and benefit costs and covered rent and utility payments incurred by the Company during the twenty four-week period

beginning on April 30, 2020, as calculated in accordance with the terms of the CARES Act.

No assurance is provided that the Company

will obtain forgiveness of the PPP Loan in whole or in part, but the Company has used and intends to use the proceeds in accordance

with the PPP Loan program.

connection with the acquisition of Bar Code Specialties, Inc.

5 unchanged sentences

to the Company’s bank debt.

The balance on this loan at March 31, 2020 and December 31, 2019 was $138 thousand, all of which

was classified as long-term.

In July 2016, the holder of the note signed a subordination agreement with the Supplier of the Secured

Promissory Note (as defined below) and Action Capital, whereby the noteholder agrees to subordinate its right to payment of capital

and interest until the Supplier with the Secured Promissory Note is reimbursed in full, therefore, the note is classified as long-term.

On June 5, 2020, the Company reached an agreement with the noteholder to convert an aggregate

of $261 thousand in principal, unpaid interest, and penalties into an aggregate of 37,270 shares of Common Stock at a conversion

price of $7.00 per share, which was based on the closing price on June 3, 2020.

The balance on this loan at June 30, 2020 and

December 31, 2019 was $0 and $138 thousand, respectively, all of which was classified as long-term.

July 18, 2016, the Company and the Supplier entered into a certain secured promissory note, with an effective date of July 1,

23 unchanged sentences

(In thousands)

March 31, 2020

December 31, 2019

June 30, 2020

Note payable –

27 unchanged sentences

as long term, being due in 2023.

As of March 31, 2020, the balance of this loan was $840 thousand.

As of June 30, 2020, the balance of this loan was $780 thousand.

payable –

10 unchanged sentences

The effective date of the agreement is December 30, 2017.

As of March 31, 2020, the balance

As of June 30, 2020, the balance

of this loan was $485 thousand and is due in 2023.

10 unchanged sentences

The effective date of the agreement is December 30, 2017.

As of March 31, 2020, the balance of this loan was $126 thousand.

As of June 30, 2020, the balance of this loan was $0.

of the Marins, Thomet and Zicman entered into a voting agreement with the Company whereby they agreed to vote any shares of common

38 unchanged sentences

Accordingly, the Company issued 15,890 shares to each of Walefar and Campbeltown.

of March 31, 2020, the remaining principal amount of $75 thousand is owed to each Walefar and Campbeltown, respectively, ($150

of June 30, 2020, the remaining principal amount of $75 thousand is owed to each Walefar and Campbeltown, respectively, ($150

thousand total) under the Convertible Promissory Note.

payable –

company acquired the Note Payable –

The Company acquired the Note Payable

RWCC (“RWCC Note”) (f.k.a.

Certus) with the acquisition of HTS.

Note was a non-interest-bearing note.

The RWCC Note was a non-interest-bearing note.

The RWCC Note was historically discounted using an effective interest rate of 5.0%.

outstanding balance of $215 thousand is classified as short term and is due and payable in April 2020 with monthly payment of

approximately $85,000 per month.

The RWCC Note is classified as a related party note because the Chief Executive Officer of RWCC

is the son of a significant shareholder of the Company and a sibling of a member of the Board of Directors.

As of June 30, 2020, this note was fully paid.

The RWCC Note is classified as a related party note because the Chief Executive Officer of RWCC is the son of a significant shareholder

of the Company and a sibling of a member of the Board of Directors.

of notes payable

repayment of the notes payable, related parties at March 31, 2020 is as follows:

repayment of the notes payable, related parties at June 30, 2020 is as follows:

(In thousands)

STOCKHOLDERS’

of March 31, 2020, there were 1,000,000 Series A preferred shares designated and no Series A preferred shares outstanding.

board of directors of the Company (the “Board”) had previously set the voting rights for the preferred stock at 1

share of preferred to 250 common shares.

of March 31, 2020, there was 1 preferred share designated and no preferred shares outstanding.

of March 31, 2020, there were 15,000,000 Series C preferred share authorized and 4,828,530 Series C preferred shares outstanding.

As of June 30, 2020, there were 1,000,000

Series A preferred shares designated and no Series A preferred shares outstanding.

The board of directors of the Company (the

“Board”) had previously set the voting rights for the Series A preferred stock at 1 share of preferred to 250

common shares.

of June 30, 2020, there was 1 preferred share designated and no preferred shares outstanding.

of June 30, 2020, there were 15,000,000 Series C preferred share authorized and 2,145,030 Series C preferred shares outstanding.

They have preferential rights above common shares and the Series B preferred shares and are entitled to receive a quarterly dividend

5 unchanged sentences

for one common share.

February 27, 2020, the Company issued an aggregate of 64 thousand shares of common stock valued at $354 thousand as compensation

for professional services to the Company.

of March 31, 2020, the Company had, 4,024,837 common shares outstanding.

and Stock Options

- The following table summarizes information about warrants granted during the three-month periods ended March 31, 2020 and

Effective June 5, 2020, certain holders of

an aggregate of 2,683,500 shares of Series C Preferred Stock individually converted their shares of Series C Preferred Stock into

an aggregate of 134,175 shares of common stock at a ratio of 20 shares of Preferred Stock for each share of Common Stock.

the holders of such shares converted all accrued but unpaid dividends, penalties, and interest in the aggregate amount of $393,331

into an aggregate of 56,190 shares of Common Stock at a conversion price of $7.00 per share which was based on the closing price

on June 3, 2020.

The shares of Common Stock pertaining to these transactions were issued in July, 2020.

the first six months of 2020, the Company issued an aggregate of 141 shares of common stock to certain individuals as part

of the Company’s Employee Stock Purchase Program valued at under $1 thousand.

April 20, 2020, the Company issued 2,336 shares to Sichenzia Ross Ference LLP as payment for legal services rendered to the Company.

The shares were valued at $10 thousand.

April 20, 2020, the Company issued 15,000 shares to Balencic Creative Group as part of a consulting agreement.

The shares were

valued at $63 thousand.

April 23, 2020, the Company issued 80,000 shares to Eyepax Consulting, LLC valued at $440 thousand as part of an asset purchase

agreement dated February 27, 2020.

May 8, 2020, an employee of the company received 27,777 shares as part of a transaction involving the cashless exercise of previously

issued stock options.

May 19, 2020, the Company issued 50,000 shares to Three Rivers Consulting as part of a consulting agreement.

were valued at $270 thousand.

May 11, 2020, a certain advisor received 6,666 shares as part of a transaction involving the cashless exercise of previously

issued stock options.

of June 30, 2020, the Company had 4,206,692 common shares outstanding.

following table summarizes information about warrants granted during the six-month periods ended June 30, 2020 and 2019:

June 30, 2020

June 30, 2019

Balance, beginning of period

1 unchanged sentence

Warrants expired

Warrants cancelled,

Balance, end of

warrants as of March 31, 2020 are as follows:

Average residual life span (in years)

Average Exercise Price

outstanding at March 31, 2020 and 2019 have the following expiry date and exercise prices:

Warrants cancelled, forfeited

Warrants exercised

Balance, end of period

Exercisable warrants

the six months ended June 30, 2020, the Company granted 75,000 warrants in connection with a consulting agreement.

warrants as of June 30, 2020 are as follows:

Exercise Prices

Weighted Average

residual life span

Exercise Price

$ 2.20 to 14.00

outstanding at June 30, 2020 and 2019 have the following expiry date and exercise prices:

Exercise Prices

June 30, 2020

June 30, 2019

June 26, 2020

October 10, 2020

December 30, 2020

February 27, 2021

August 2, 2021

October 10, 2021

February 27, 2022

October 6, 2024

Stock Option Plan

13 unchanged sentences

On October 31, 2018, the Board amended the

Plan to increase the amount of shares authorized for issuance thereunder from 500 thousand to 800 thousand shares of the Corporation’s

Plan to increase the amount of shares authorized for issuance thereunder from 500,000 to 800,000 shares of the Corporation’s

common stock, par value $0.001 (the “Shares”).

On January 23, 2019, the Company’s shareholders adopted and ratified

at March 31, 2020, the Company had issued options under the 2018 Plan allowing for the subscription of 709,250 shares of its common

at June 30, 2020, the Company had issued options under the 2018 Plan allowing for the subscription of 740,500 shares of its common

stock, with 59,500 shares remaining for issuance.

Options - The following table summarizes information about stock options granted during the three months ended March 31, 2020

beginning of period

options granted

options expired

options cancelled, forfeited

options exercised

end of period

following table summarizes information about stock options granted during the six months ended June 30, 2020 and 2019:

June 30, 2020

June 30, 2019

stock options

the three months ended March 31, 2020, the Company granted 20,000 stock options.

stock options as of March 31, 2020 are as follows:

Exercise Price

stock options

options outstanding at March 31, 2020, and 2019 have the following expiration date and exercise prices:

Exercise Price

Balance, beginning of period

Stock options granted

Stock options expired

Stock options cancelled, forfeited

Stock options exercised

Balance, end of period

Exercisable stock options

the six months ended June 30, 2020, the Company granted 30,000 stock options.

These options were granted as part of the asset

acquisition described in Note 4, and to a member of the board of advisors.

stock options as of June 30, 2020 are as follows:

Exercise Prices

residual life

Stock Options

Exercise Price

Stock Options

Exercise Price

$ 1.50 to 1.80

$ 1.50 to 10.00

options outstanding at June 30, 2020, and 2019 have the following expiration date and exercise prices:

Expiration Date

Exercise Prices

March 31, 2020

March 31, 2019

June 30, 2020

June 30, 2019

August 2, 2021

1 unchanged sentence

February 17, 2022

February 28, 2023

March 5, 2023

3 unchanged sentences

November 20, 2024

February 28, 2023

compensation expense is $123 thousand for the three months ended March 31, 2020 and $323 thousand for the three months ended March

The fair value of the Company’s stock option and warrant grants are estimated using the Black-Scholes-Merton Option

Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock

options or warrants, and future dividends.

Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton

Option Pricing model, and based on actual experience.

The assumptions used in the Black-Scholes-Merton Option Pricing model could

materially affect compensation expense recorded in future periods.

April 20, 2025

These options and warrants were valued

at the grant date using the Black-Scholes valuation methodology.

The Company determines the assumptions used in the valuation

of warrants and option awards as of the date of grant.

Differences in the expected stock price volatility, expected term or risk-free

interest rate may necessitate distinct valuation assumptions at those grant dates.

As such, the Company may use different assumptions

for options and warrants granted throughout the year.

The valuation assumptions used to determine the fair value of each option/warrant

award on the date of grant were:

expected stock price volatility 153.9% - 155.6%;

expected term in years 1.0-5.0;

and risk-free

interest rate 0.22%-1.16%.

The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation

expense recorded in future periods.

and nonemployee stock compensation expense is $753 thousand for the six months ended June 30, 2020 and $423 thousand for the six

months ended June 30, 2019.

SALARY AND EMPLOYEE BENEFITS

and employee benefits for the three months ended March 31, 2020 and March 31, 2019 consists of the following:

and employee benefits for the six months ended June 30, 2020 and June 30, 2019 consists of the following:

(In thousands)

Stock compensation

Employee stock compensation

Salaries (except R&D)

subsidiary, HTS (USA), Inc., was previously in litigation with Sagy Amit, a former employee, who claimed that he was owed wages

and commissions.

As of March 31, 2020, the case has been resolved.

Our subsidiary, OMNIQ Vision, Inc.

(f/k/a HTS (USA), Inc.), was

previously in litigation with a former employee who claimed that he was owed wages and commissions.

As of March 31, 2020, the case

had been resolved.

While the terms of the resolution are confidential, management has determined that the amounts involved in resolving

the case are immaterial to the financial statements taken as a whole.

company is not a party to any other pending material legal proceeding.

To the knowledge of management, no federal, state or local

governmental agency is presently contemplating any proceeding against the Company.

To the knowledge of management, no director,

executive officer or affiliate of the Company, any owner of record or beneficially of more than five percent of the Company’s

Common Stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.

To the knowledge of management, no federal, state

or local governmental agency is presently contemplating any proceeding against the Company.

To the knowledge of management, no

director, executive officer or affiliate of the Company, any owner of record or beneficially of more than five percent of the

Company’s Common Stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.

RELATED PARTY TRANSACTIONS

party transactions are discussed in Note 8.

Company accounts for leases in accordance with ASC Topic 842, “Leases,”

which requires lessees to recognize a right-of-use

asset and lease liability on the balance sheet and expands disclosures about leasing arrangements for both lessees and lessors,

among other items, for most lease arrangements.

accordance with the adoption of ASC 842 on January 1, 2019, we recorded operating lease right-of-use (“ROU”) assets,

which represent our right to use an underlying asset for the lease term, and operating lease liabilities which represent our obligation

to make lease payments.

Generally, we enter into operating lease agreements for facilities.

Finance lease assets are recorded

within property and equipment, net of accumulated depreciation.

The amount of operating lease liabilities due within 12 months

are recorded in other current liabilities, with the remaining operating lease liabilities recorded as non-current liabilities

in our consolidated balance sheet based on their contractual due dates.

Finance lease liabilities are classified according to

contractual due dates.

operating lease ROU assets and liabilities are recognized as of the lease commencement date at the present value of the lease

payments over the lease term.

Most of our leases do not provide an implicit rate that can readily be determined.

Therefore, we

use a discount rate based on our incremental borrowing rate which was between 13.16% and 15.06% for all operating leases.

operating lease agreements may include options to extend the lease term or terminate it early.

We have included options to extend

in the operating lease ROU assets and liabilities when we are reasonably certain that we will exercise such options.

average remaining lease terms and discount rates for our operating leases were approximately 2.64 years and 14.6% at March 31,

We did not have finance leases at March 31, 2020.

Operating lease expense is recognized as rent expense on a straight-line

basis over the lease term.

We evaluate ROU assets for impairment consistent with our property and equipment policy disclosure

included in our 2019 Form 10-K.

of March 31, 2020, operating lease ROU assets were $118 thousand and operating lease liabilities were $122 thousand, of which

$73 thousand were classified as noncurrent.

minimum lease commitments at March 31, 2020 were as follows:

Year ending December 31,

Operating Leases

(In thousands)

2020 (excluding the three months ended March 31, 2020)

2023 and thereafter

Total lease payments

Less imputed interest

cash flow information related to leases was as follows:

(In thousands)

March 31, 2020

Cash paid for amounts included in the measurement of lease liabilities:

Cash flows from operating activities - operating leases

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

SUBSEQUENT EVENTS

PROTECTION PROGRAM

April 30, 2020, the Company received an unsecured loan (the “PPP Loan”) in the amount of $888 thousand, under the

Paycheck Protection Program (the “PPP”).

The PPP, established as part of the Coronavirus Aid, Relief and Economic

Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average

2019 monthly payroll expenses.

PPP Loan was made through Zions First National Bank (the “Lender”) and the Company entered into a U.S.

Small Business

Administration Paycheck Protection Program Note (“Note”) with the Lender evidencing the PPP Loan.

The term of the

PPP Loan is two years.

Interest will accrue on the outstanding principal balance of the PPP Loan at a fixed rate of 1.0%, which

shall be deferred for the first six months of the term of the PPP Loan.

Monthly payments will be due and payable beginning in

November 2020 and continue each month thereafter until maturity of the PPP Loan.

The Company may prepay principal of the PPP Loan

at any time in any amount without penalty.

The Note contains customary events of default relating to, among other things, payment

defaults, breach of representations and warranties or provisions of the PPP Loan.

Company may apply to the Lender for forgiveness of the PPP Loan, and the amount which may be forgiven will be equal to the sum

of the payroll and benefit costs and covered rent and utility payments incurred by the Company during the eight-week period beginning

on April 30, 2020, as calculated in accordance with the terms of the CARES Act.

No assurance is provided that the Company will

obtain forgiveness of the PPP Loan in whole or in part, but the Company intends to use the proceeds in accordance with the PPP

Loan program.

July 17, 2020, the company issued 70,000 shares of Common Stock to IRTH Communications, LLC as part of a consulting agreement.

The shares were valued at $392 thousand.

July 17, 2020, the company issued 50,000 shares of Common Stock to StockLoan Solutions as part of a consulting agreement.

shares were valued at $280 thousand.

July 17, 2020, the company issued warrants to purchase 250,000 shares of Common Stock to ThinkEquity as part of a service agreement.

The warrants were valued at approximately $1.3 million.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

28 unchanged sentences

We intend to continue with our acquisition of existing companies with revenues and positive cash flow.

October 5, 2018, we entered into a purchase agreement with Walefar and Campbeltown (the “HTS Purchase Agreement”)

(Walefar and Campbeltown are collectively referred to as the “Sellers”).

Pursuant to the HTS Purchase Agreement, we

purchased 100% of the capital stock of HTS Image Processing, Inc.

(“HTS”) from the Sellers and consequently acquired

HTS’s wholly owned subsidiaries HTS (USA), Inc.

and HTS Image Ltd.

(“HTS Ltd.”) (f/k/a Teamtronics Ltd.)

following is a discussion of our financial condition, results of operations, financial resources, and working capital.

This discussion

and analysis should be read in conjunction with the our financial statements contained in this Form 10-Q.

February 28, 2018, the Company finalized settlement agreements with related parties which have an effective date of December 30,

As part of the settlement agreements, the Company authorized the issuance of 30,000 shares of common stock valued at $59

thousand, 1,685,000 shares of Preferred Stock valued at $0.80 per share and issued 150,000 stock warrants with an exercise price

The total net amount of debt extinguished in these transactions was $15.4 million.

Company’s sales from continuing operations for the three months ended March 31, 2020, were $13.8 million, a decrease of

approximately $4.8 million, or 25.9% over the three months ended March 31, 2019.

loss from continuing operations for the three months ended March 31, 2020 was $2.9 million, an increase of $2.2 million compared

with the loss in the three months ended March 31, 2019 of $0.6 million.

Basic loss per share from continuing operations for the

three months ended March 31, 2020 was ($0.74) versus ($0.19) per share for the same time period in 2019.

and analysis should be read in conjunction with our financial statements contained in this Form 10-Q.

Company’s sales from continuing operations for the six months ended June 30, 2020 were $26.5 million, a decrease of approximately

$6.3 million, or 19.1%, over the six months ended June 30, 2019.

loss from continuing operations for the six months ended June 30, 2020 was $4.9 million, an increase of $3.7 million

compared with the loss in the six months ended June 30, 2019 of $1.2 million.

Basic loss per share from continuing operations

for the six months ended June 30, 2020 was ($1.21) versus ($0.33) per share for the same time period in 2019.

accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As of March 31, 2020, the Company had a working capital deficit of $22.5 million and an accumulated deficit of $48.0 million.

The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its

obligations on a timely basis.

Management’s plan to eliminate the going concern situation includes, but is not limited to,

the continuation of improving cash flow, maintaining moderate cost reductions, the creation of additional sales and profits across

its product lines, and the obtaining of sufficient financing to restructure current debt in a manner more in line with the Company’s

improving cash flow and cost reduction successes.

The Company has also diversified its sourcing and procurement of materials and

finished goods.

The Company also completed a debt settlement with a related party in exchange for equity, eliminating future needs

for cash in servicing debt.

As of June 30, 2020, the Company had a working capital deficit of $22.5 million and an accumulated deficit of $50.0

The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow

to meet its obligations on a timely basis.

Management’s plan to eliminate the going concern situation includes, but is not

limited to, the continuation of improving cash flow, maintaining moderate cost reductions, the creation of additional sales and

profits across its product lines, and the obtaining of sufficient financing to restructure current debt in a manner more in line

with the Company’s improving cash flow and cost reduction successes.

The Company has also diversified its sourcing and procurement

of materials and finished goods.

The Company also completed a debt settlement with a related party in exchange for equity, eliminating

future needs for cash in servicing debt.

the acquisition of HTS in October 2018, the Company has in its portfolio of products a computer vision technology that is based

14 unchanged sentences

(In thousands, except per share data)

Three months ended

Six months ended June 30

Cost of Goods sold

3 unchanged sentences

Net Loss per common Share

For the three months ended March 31, 2020

and 2019, the Company generated net revenues in the amount of $13.8 million and $18.6 million, respectively.

The 2020 decrease

between the three-month periods was attributable strong fulfillment and deliveries by the Company’s subsidiary HTS Image

Processing in first quarter 2019.

(In thousands, except per share data)

Three months ended June 30

Cost of Goods sold

Operating Expenses

Income (loss) from operations

Net loss from continuing operations

Net Loss per common Share

For the six months ended June 30, 2020 and

2019, the Company generated net revenues in the amount of $26.5 million and $32.7 million, respectively.

For the three months

ended June 30, 2020 and 2019, the Company generated net revenues in the amount of $12.7 million and $14.1 million, respectively.

The 2020 decrease was attributable to stronger fulfillment and deliveries by the Company in the first six months of 2019.

of Goods Sold

the three months ended March 31, 2020 and 2019, the Company recognized a total of $10.8 million and $14.0 million, respectively,

the six months ended June 30, 2020 and 2019, the Company recognized a total of $20.9 million and $24.5 million, respectively,

of cost of goods sold.

For the three months ended March 31, 2020 and 2019, cost of goods sold were 78.0% and 75.3% of net revenues,

For the six months ended June 30, 2020 and 2019, cost of goods sold were 78.8% and 74.9% of net revenues,

respectively.

Variation from prior periods is difficult in an ever increasing competitive industry.

Due to this, the Company is

continually reevaluating its current product mix and supply channels to improve margins in 2020.

operating expense for the three months ended March 31, 2020 and 2019 recognized was $5.1 million and $4.5 million, respectively,

representing an 12.7% increase.

The increase is primarily attributable to an increase in non-cash stock-based compensation awarded

to professional service providers.

For the three months ended June 30, 2020 and 2019, the Company recognized a total of $10.1 million and $10.5 million,

respectively, of cost of goods sold.

For the three months ended June 30, 2020 and 2019, cost of goods sold were 79.7% and 74.3%

of net revenues, respectively.

Variation from prior years is difficult in an ever increasing competitive industry.

the Company is continually reevaluating its current product mix and supply channels to improve margins in 2020.

operating expense for the six months ended June 30, 2020 and 2019 recognized was $9.0 million and $8.3 million, respectively,

representing a 7.8% increase.

Total operating expense for the three months ended June 30, 2020 and 2019 recognized was

$3.9 million and $3.8 million, respectively, representing a 2.0% increase.

The increases are primarily attributable

to an increase in non-cash stock-based compensation awarded to professional service providers as well as increased general and

administrative expenses.

and Administrative –

General and administrative expenses for the three months ended March 31, 2020 and 2019 totaled

$793 thousand and $689 thousand, respectively, representing a 15.1% increase.

The increase in the first three months of 2020 is

primarily attributed to non-cash stock-based compensation as well as general growth of operations.

General and administrative expenses for the six months ended June 30, 2020 and 2019 totaled

$1.6 million and $1.2 million, respectively, representing a 29.9% increase.

General and administrative expenses for the three

months ended June 30, 2019 and 2018 totaled $784 thousand and $525 thousand, respectively, representing a 49.3% increase.

increases are primarily attributed to increased R&D spending as well as general costs associated with expanding our range

of solutions offered to customers.

and benefits –

Salary and employee benefits for the three months ended March 31, 2020 totaled $2.9 million, including

Salary and employee benefits for the six months ended June 30, 2020 totaled $5.1 million, including

$228 thousand from non-cash stock-based compensation, as compared to $5.1 million including $423 thousand from non-cash stock

based compensation for the three months ended March 31, 2019.

based compensation for the six months ended June 30, 2019.

Excluding stock-based compensation, salaries increased by $217 thousand

in the first three months of 2020 compared to the first three months of 2019, which increase is primarily attributed to an increase

in R&D-related salaries.

Professional fees for the three months ended March 31, 2020 were $875 thousand as compared to $415 thousand

for the three months ended March 31, 2019, representing an increase of $460 thousand.

The increase is attributable to non-cash

stock-based compensation awarded to professional service providers.

in the first six months of 2020 compared to the first six months of 2019, which increase is primarily attributed increased R&D

salary and employee benefits.

Salary and employee benefits for the three months ended June 30, 2020 totaled $2.2 million, including

$105 thousand from non-cash stock-based compensation, as compared to $2.2 million including $100 thousand from non-cash stock

based compensation for the three months ended June 30, 2019.

Excluding stock-based compensation, salaries increased by $16 thousand

in the three months ended June 30, 2020 compared to the three months ended June 30, 2019.

Professional fees for the six months ended June 30, 2020 were $1.2 million as compared to $958 thousand

for the six months ended June 30, 2019.

Professional fees for the three months ended June 30, 2020 were $325 thousand as

compared to $543 thousand for the three months ended June 30, 2019.

The increase and decrease are primarily attributable

to non-cash stock-based compensation awarded to professional service providers.

income and expenses

Expense - Interest expense for the three months ended March 31, 2020 totaled $795 thousand, as compared to $684 thousand

for the three months ended March 31, 2019.

The increase is attributable to interest incurred in connection with the Sixth Amendment

to the Secured Promissory in addition to interest expense incurred in connection with vendor interest agreements.

loss from continuing operations

Company realized a net loss from continuing operations of $2.9 million for the three months ended March 31, 2020, compared to

a net loss from continuing operations of $635 thousand for the three months ended March 31, 2019, an increase of $2.2 million.

The increase in net loss between the three-month periods is mainly attributable to the lower sales amount in the first three months

Expense - Interest expense for the six months ended June 30, 2020 totaled $1.2 million, as compared to $1.2 million for

the six months ended June 30, 2019.

Interest expense for the three months ended June 30, 2020 totaled $418 thousand, as compared

to $467 thousand for the three months ended June 30, 2019.

The decrease is primarily attributable to a reduction in interest charged

in connection with vendor interest agreements.

loss from operations

The Company realized a net loss from continuing

operations of $4.9 million for the six months ended June 30, 2020, compared to a net loss of $1.2 million for the six months

ended June 30, 2019, an increase of $3.7 million.

The Company realized a net loss from continuing operations of $2.0

million for the three months ended June 30, 2020, compared to a net loss of $530 thousand for the three months ended June

30, 2019, an increase of $1.5 million.

The increase in net loss is mainly attributable to the Company’s lower

sales and corresponding margin in 2020 compared with the same periods in 2019, as discussed above, as well as the increase in

operating expenses, as discussed above.

and capital resources

of March 31, 2020, the Company had cash in the amount of $3.3 million of which $541 thousand is on deposit and restricted as collateral

for a letter of credit and a corporate purchasing card, and a working capital deficit of $22.5 million, compared to cash in the

amount of $1.6 million, of which $533 thousand was restricted, and a working capital deficit of $20.2 million as of December

of June 30, 2020, the Company had cash in the amount of $4.0 million of which $533 thousand is on deposit and restricted as collateral

for a letter of credit and a corporate purchasing card, and a working capital deficit of $22.5 million, compared to cash

in the amount of $2.1 million, of which $533 thousand was restricted, and a working capital deficit of $20.2 million as

of December 31, 2019.

In addition, the Company had a stockholders’

deficit of $156 thousand at March 31, 2020 and stockholders’

deficit of $725 thousand at June 30, 2020 and

stockholders’

equity of $1.8 million as of December 31, 2019.

Company’s accumulated deficit was $48.0 million and $45.1 million at March 31, 2020 and December 31, 2019, respectively.

Company’s operations resulted in net cash used of $1.5 million during the three months ended March 31, 2020, compared to

net cash provided of $4.5 million during the three months ended March 31, 2019, a decrease of $3.0 million.

The changes in the

non-cash working capital accounts are primarily attributable the large increase in accounts receivable during the first three

months of 2020.

cash provided by investing activities was $15 thousand for the three months ended March 31, 2020, compared to net cash used of

$213 thousand for the three months ended March 31, 2019, an increase of $228 thousand, primarily attributable to a small increase

in other assets during the first three months of 2020, as opposed to a modest decrease in other assets during the first three

months of 2019.

Company’s financing activities provided net cash of $3.2 million during the three months ended March 31, 2020, compared

to net cash used of $4.4 million during the three months ended March 31, 2019.

For the three months ended March 31, 2020, the

Company received cash from the line of credit with Action Capital of approximately $3.6 million.

Company’s accumulated deficit was $50.0 million and $45.1 million at June 30, 2020 and December 31, 2019, respectively.

Company’s operations resulted in net cash used of $549 thousand during the six months ended June 30, 2020, compared to net

cash provided of $5.2 million during the six months ended June 30, 2019, a decrease of $5.7 million.

The changes in the non-cash

working capital accounts are primarily attributable the large increases in accounts receivable and accounts payable during the

first six months of 2020.

cash provided by investing activities was $48 thousand for the six months ended June 30, 2020, compared to net cash used of $375

thousand for the six months ended June 30, 2019, an increase of $423 thousand, primarily attributable to a small increase in other

assets during the first six months of 2020, as opposed to a modest decrease in other assets during the first six months of 2019.

Company’s financing activities provided net cash of $2.3 million during the six months ended June 30, 2020, compared to

net cash used of $2.5 million during the six months ended June 30, 2019.

For the six months ended June 30, 2020, the Company received

cash from the line of credit with Action Capital of approximately $2.1 million and also from the PPP Loan of $888 thousand.

Company’s results of operations have not been affected by inflation and management does not expect inflation to have a material

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements