What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-12 compared with 2020-08-13 · 300 added, 248 removed, 647 unchanged (46% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

June 30, 2020

September 30, 2020

December 31, 2019

6 unchanged sentences

Total current assets

Property and equipment, net of accumulated depreciation of $523 and $2,195, respectively

Trade name, net of accumulated amortization of $3,105 and $2,932, respectively

Customer relationships, net of accumulated amortization of $7,330 and $6,578, respectively

Other intangibles, net of accumulated amortization of $272 and $185, respectively

Property and equipment, net of accumulated depreciation of $555 and

$2,195, respectively

Trade name, net of accumulated amortization of $1,156 and $2,932,

Customer relationships, net of accumulated amortization of $4,885

and $6,578, respectively

Other intangibles, net of accumulated amortization of $1,104 and $185,

Cash, restricted

30 unchanged sentences

$0.001 par value;

15,000,000 shares designated,

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

5,000,000 shares designated, 2,145,030 and 4,828,530 shares issued and outstanding, respectively

Common stock;

13 unchanged sentences

For the three months

For the six months

ending June 30,

For the nine months

ending September 30,

(In thousands, except share and per share data)

11 unchanged sentences

Interest expense

Other (expenses) income

Other (expenses)

Total other expenses

15 unchanged sentences

EQUITY (DEFICIT)

Preferred Stock

Comprehensive

19 unchanged sentences

Balance, June 30, 2019

Dividend on Class C Shares

ESPP Stock Issuance

Stock-based compensation –

options, warrants, issuances

Foreign currency translation

Conversion of debt

Balance, September 30, 2019

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

Preferred Stock

Comprehensive

Total Stockholders’

(In thousands)

Income (Loss)

Balance, December 31, 2019

17 unchanged sentences

Balance, June 30, 2020

Dividend on Class C Shares

Foreign currency translation adjustment

Employee stock-based compensation (options)

Options/warrants exercised

Nonemployee stock-based compensation (warrants, grants)

Conversion agreements

Balance, September 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 six months ended

For the nine months ended

(In thousands)

12 unchanged sentences

Other liabilities

Net cash (used in) provided by operating activities

Net cash provided by operating activities

Cash flows from investing activities:

Purchase of property and equipment

Net cash provided by (used in) investing activities

Net cash provided by investing activities

Cash flows from financing activities:

39 unchanged sentences

The Company operates in one segment.

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.

results for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the

year ended December 31, 2020.

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

28 unchanged sentences

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

such stock options and warrants.

In addition, the number of shares authorized for future grant under the Company’s equity

incentive/compensation plans immediately prior to the Reverse Split was reduced proportionately.

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 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 such stock options and warrants.

In addition, the number of shares authorized for future grant under

the Company’s equity incentive/compensation plans immediately prior to the Reverse Split was reduced proportionately.

AND INTANGIBLE ASSETS

2 unchanged sentences

lives ranging from 3 to 11 years.

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

and $1.0 million, respectively.

Amortization expense for the nine months ended September 30, 2020 and September 30, 2019 was

$1.6 million and $1.5 million, respectively.

LOSS PER COMMON SHARE

6 unchanged sentences

The weighted-average number of common

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

dilutive securities are antidilutive.

shares outstanding for computing basic EPS for the nine months ended September 30, 2020 and 2019 were 4,339,634 and 3,865,647,

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 dilutive securities are antidilutive.

securities are excluded from the computation of diluted net loss per share because such securities have anti-dilutive impact due

1 unchanged sentence

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 June 30:

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

(In thousands)

18 unchanged sentences

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

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.

As of September 30, 2020, the Company had a working capital deficit of $24.6 million and an accumulated deficit of $53.8 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.

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

2 unchanged sentences

CONCENTRATIONS

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

the nine months ended September 30, 2020 and September 30, 2019, one customer accounted for 39.0% and 15.3% 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

At September 30, 2020 and December 31, 2019, one customer accounted for 19.2% and 11.1% of the Company’s

accounts receivable balance, respectively.

34 unchanged sentences

OTHER LIABILITIES

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

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

(In thousands)

June 30, 2020

September 30,

Other vendor payable

13 unchanged sentences

The balance outstanding under the Action credit line

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

at September 30, 2020 and December 31, 2019, was $3.2 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 June 30, 2020 and December 31, 2019, consists of the following:

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

(In thousands)

June 30, 2020

September 30,

Supplier Note Payable

1 unchanged sentence

Long Term Notes Payable

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

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

Protection Program (PPP) Loan

17 unchanged sentences

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.

of September 30, 2020, the Company has applied 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.

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.

The balance on this loan at September 30, 2020 and December 31, 2019

was $888 thousand and $0, respectively.

connection with the acquisition of Bar Code Specialties, Inc.

8 unchanged sentences

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.

The balance on this loan at September 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)

June 30, 2020

September 30,

Note payable –

9 unchanged sentences

Long-term portion

of notes payable

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

(In thousands)

payable –

16 unchanged sentences

as long term, being due in 2023.

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

As of September 30, 2020, the balance of this loan was $720 thousand.

payable –

10 unchanged sentences

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

As of June 30, 2020, the balance

As of September 30, 2020, the balance

of this loan was $450 thousand and is due in 2023.

10 unchanged sentences

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

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

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

of September 30, 2020, the remaining principal amount of $45 thousand is owed to each Walefar and Campbeltown, respectively, ($90

thousand total) under the Convertible Promissory Note.

payable –

The Company acquired the Note Payable

Company acquired the Note Payable –

RWCC (“RWCC Note”) (f.k.a.

Certus) with the acquisition of HTS.

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

Note was a non-interest-bearing note.

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

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 June 30, 2020 is as follows:

(In thousands)

September 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.

STOCKHOLDERS’

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.

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

of September 30, 2020, there were 5,000,000 Series C preferred shares 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.

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.

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.

In addition, 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 nine months of 2020, the Company issued an aggregate of 203 shares of common stock to certain individuals as part of

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

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

The shares were

valued at $392 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

July 17, 2020, the Company issued 50,000 shares to Stock Loan Solutions LLC as part of a consulting agreement.

The shares were

valued at $280 thousand.

July 28, 2020, the Company issued 251,635 shares as part of a series of conversion agreements with former noteholders and preferred

shareholders.

The shares were valued at $3.5 million including conversion penalties.

July 2020, various holders exercised in cashless transactions options and warrants resulting in the issuance of 56,248

shares valued at $339 thousand.

of September 30, 2020, the Company had 4,634,637 common shares outstanding.

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

September 30, 2020

September 30, 2019

Balance, beginning of period

5 unchanged sentences

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

the nine months ended September 30, 2020, the Company granted 325,000 warrants in connection with various consulting agreement.

warrants as of September 30, 2020 are as follows:

Range of Exercise Prices

Weighted Average

3 unchanged sentences

$ 2.20 to 14.00

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

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

Exercise Prices

June 30, 2020

June 30, 2019

September 30, 2020

September 30, 2019

June 26, 2020

6 unchanged sentences

October 6, 2024

September 1, 2025

December 4, 2027

Stock Option Plan

16 unchanged sentences

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

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.

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

June 30, 2020

June 30, 2019

at September 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.

Stock Option Plan

September 30, 2020, the Company adopted a stock option plan (the “2020 Plan”).

The purpose of the 2020 Plan is to

provide long-term incentives and rewards to directors, officers, consultants, advisors and employees of the Company and its subsidiaries

in order to assist the Company to attract and retain individuals with experience and/or ability on a basis competitive with industry

practices and to associate the interest of these individuals with those of the Company’s shareholders by providing for the

issuance of stock-based awards.

The total number of shares of Common Stock authorized for issuance under the 2020 Plan is 1,000,000

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

September 30, 2020

September 30, 2019

stock options

9 unchanged sentences

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:

the nine months ended September 30, 2020, the Company granted 775,000 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, and to certain employees as part of the Company’s

Equity Incentive Plan.

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

Exercise Prices

5 unchanged sentences

$ 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:

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

Expiration Date

Exercise Prices

June 30, 2020

June 30, 2019

September 30, 2020

September 30, 2019

August 2, 2021

8 unchanged sentences

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:

September 30, 2030

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 152.5% - 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.

term in years 1.0-10.0;

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 $2.3 million for the nine months ended September 30, 2020 and $1.1 million for the

nine months ended September 30, 2019.

SALARY AND EMPLOYEE BENEFITS

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

and employee benefits for the nine months ended September 30, 2020 and September 30, 2019 consists of the following:

(In thousands)

1 unchanged sentence

Salaries (except R&D)

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.

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

The Company is currently pursuing

legal claims against two former employees who resigned from the Company to launch a competing business, RedLPR LLC (the

“RedLPR case”).

The claims include trade secret misappropriation and tortious interference.

The RedLPR case

was filed in the U.S.

District Court, District of Utah on June 24, 2019.

The Company recently was named a

defendant in a Mississippi state lawsuit that is directly related to the RedLPR case (the “Mississippi case”).

The Mississippi case also names RedLPR, LLC as a defendant.

The Mississippi case was brought by Riverland Park Technologies

(“Riverland”).

Riverland is also a party to the RedLPR case.

The Mississippi case was filed in the Circuit Court of Rankin County, Mississippi on September

The Company was named a defendant in

a case involving a former employee who claims he is owed approximately $60 thousand in unpaid commissions.

Company’s position is that the former employee’s claims have no apparent factual basis and appear to be designed

to force a quick “nuisance value”

This case was filed in the Superior Court of the State of

California, County of San Diego on October 21, 2020.

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

1 unchanged sentence

SUBSEQUENT EVENTS

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

October 12, 2020, the Company issued 50,000 shares of Common Stock to Three Rivers Business Consulting, LLC as part of a consulting

The shares were valued at $284 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.

Additionally, the Company issued warrants to purchase 50,000 shares of Common

Stock to Three Rivers Business Consulting, LLC.

The warrants were valued at approximately $229 thousand.

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

31 unchanged sentences

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.

Company’s sales from continuing operations for the nine months ended September 30, 2020 were $42.3 million, a decrease of

approximately $3.5 million, or 7.7%, over the nine months ended September 30, 2019.

loss from continuing operations for the nine months ended September 30, 2020 was $8.6 million, an increase of $6.0 million compared

with the loss in the nine months ended September 30, 2019 of $2.6 million.

Basic loss per share from continuing operations for

the nine months ended September 30, 2020 was ($2.03) versus ($0.64) 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 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.

As of September 30, 2020, the Company had a working capital deficit of $24.6 million and an accumulated deficit of $53.8 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.

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)

Six months ended June 30

Cost of Goods sold

4 unchanged sentences

(In thousands, except per share data)

Three months ended June 30

Three months ended

Cost of Goods sold

3 unchanged sentences

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.

the nine months ended September 30, 2020 and 2019, the Company generated net revenues in the amount of $42.3 million and $45.8

million, respectively.

For the three months ended September 30, 2020 and 2019, the Company generated net revenues in the amount

of $15.8 million and $13.1 million, respectively.

The decrease between the nine-month periods was attributable to stronger fulfillment

and deliveries by the Company in the first nine months of 2019.

The increase between the three-month periods was attributable

to increased demand by certain customers in connection with the COVID-19 pandemic.

of Goods Sold

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

the nine months ended September 30, 2020 and 2019, the Company recognized a total of $33.9 million and $34.1 million, respectively,

of cost of goods sold.

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

For the nine months ended September 30, 2020 and 2019, cost of goods sold were 80.1% and 74.4% of net revenues,

respectively.

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,

For the three months ended September 30, 2020 and 2019, the Company recognized a total of $13.0 million and $9.6

million, respectively, of cost of goods sold.

For the three months ended September 30, 2020 and 2019, cost of goods sold were

82.3% and 73.3% of net revenues, respectively.

Determining the cause of 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.

The 2020 increase in cost of goods sold as a percentage of net revenue was attributable to certain lower-margin

deals reached by the Company with certain large customers during the COVID-19 pandemic.

operating expense for the nine months ended September 30, 2020 and 2019 recognized was $14.8 million and $12.6 million, respectively,

representing a 17.9% increase.

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

Total operating expense for the three months ended September 30, 2020 and 2019 recognized was $5.8

million and $4.2 million, respectively, representing a 37.8% 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.

The increases are primarily attributable to an increase

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

and Administrative –

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

General and administrative expenses for the nine months ended September 30, 2020 and 2019 totaled

$2.4 million and $1.9 million, respectively, representing a 24.4% 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.

months ended September 30, 2020 and 2019 totaled $837 thousand and $727 thousand, respectively, representing a 15.1%

The 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 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 six months ended June 30, 2019.

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

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.

Salary and employee benefits for the nine months ended September 30, 2020 totaled $7.7 million, including

$304 thousand from non-cash stock-based compensation, as compared to $7.8 million including $1.1 million from non-cash stock based

compensation for the nine months ended September 30, 2019.

Excluding stock-based compensation, salaries increased by $699 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.

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

salary and employee benefits as well as the appointment of an in-house general counsel.

Salary and employee benefits for the three

months ended September 30, 2020 totaled $2.6 million, including $76 thousand from non-cash stock-based compensation, as compared

to $2.7 million including $670 thousand from non-cash stock based compensation for the three months ended September 30, 2019.

Excluding stock-based compensation, salaries increased by $475 thousand in the three months ended September 30, 2020 compared

to the three months ended September 30, 2019.

Professional fees for the nine months ended September 30, 2020 were $3.0 million as compared to $1.2 million

for the nine months ended September 30, 2019.

Professional fees for the three months ended September 30, 2020 were $1.8 million

as compared to $268 thousand for the three months ended September 30, 2019.

The increase is primarily attributable to non-cash

stock-based compensation awarded to professional service providers.

income and expenses

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.

Expense - Interest expense for the nine months ended September 30, 2020 totaled $2.0 million, as compared to $1.8 million

for the nine months ended September 30, 2019.

Interest expense for the three months ended September 30, 2020 totaled $744 thousand,

as compared to $618 thousand for the three months ended September 30, 2019.

The increase is primarily 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 as well as interest incurred in connection with the increased average daily balance in the line

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.

Company realized a net loss from continuing operations of $8.6 million for the nine months ended September 30, 2020, compared

to a net loss of $2.6 million for the nine months ended September 30, 2019, an increase of $6.0 million.

The Company realized

a net loss from continuing operations of $3.8 million for the three months ended September 30, 2020, compared to a net loss of

$1.4 million for the three months ended September 30, 2019, an increase of $2.4 million.

The increase in net loss between the

nine-month periods 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 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 September 30, 2020, the Company had cash in the amount of $5.6 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 $24.6 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 $725 thousand at June 30, 2020 and

stockholders’

deficit of $3.2 million at September 30, 2020 and stockholders’

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

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 accumulated deficit was $53.8 million and $45.1 million at September 30, 2020 and December 31, 2019, respectively.

Company’s operations resulted in net cash provided of $1.5 million during the nine months ended September 30, 2020, compared

to net cash provided of $4.9 million during the nine months ended September 30, 2019, a decrease of $3.4 million.

in the non-cash working capital accounts are primarily attributable the large increases in accounts receivable and accounts payable

during the first nine months of 2020.

cash provided by investing activities was $61 thousand for the nine months ended September 30, 2020, compared to net cash used

of $270 thousand for the nine months ended September 30, 2019, an increase of $331 thousand, primarily attributable to

a decrease in other assets.

Company’s financing activities provided net cash of $1.9 million during the nine months ended September 30, 2020, compared

to net cash used of $3.1 million during the nine months ended September 30, 2019.

For the nine months ended September 30, 2020,

the Company received cash from the line of credit with Action Capital of approximately $1.9 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