OMNIQ Corp. 10-K

ITEM 1. BUSINESS General OMNIQ Corp., a Delaware corporation, formerly Quest Solution, Inc., together with its wholly owned subsidiaries, referred to herein as “we,” “us,” and “our” (“OMNIQ” or the “Company”), was incorporated in 1973. Since its incorporation, the Company has been involved in various lines of business. Our Company From 2008 to 2013, we were in the business of developing oil and gas reserves. In January 2014, we determined it was in the best interest of our stockholders to focus on operating companies with a track record of positive cash flows and larger existing revenue bases. Our strategy developed into leveraging management’s relationships in the business world for investments for us. Since 2014, we have made the following acquisitions resulting in us becoming a leading provider of computerized and machine vision image processing solutions: ● Quest Solutions, Inc. (January 2014) ● Bar Code Specialties, Inc. (November 2014) ● ViascanQdata, Inc (October 2015 – later sold in September 2016) ● HTS Image Processing, Inc. (October 2018) ● EyepaxIT Consulting LLC. (February 2020) We use patented and proprietary artificial intelligence (AI) technology to deliver data collection, real time surveillance and monitoring for supply chain management, homeland security, public safety, traffic & parking management and access control applications. The technology and services we provide helps our clients move people, assets and data safely and securely through airports, warehouses, schools, national borders, and many other applications and environments. We offer end-to-end solutions that include hardware, software, communications, and full lifecycle management services. We are an established manufacturer and distributor of barcode labels, tags, and ribbons, as well as RFID labels and tags. Our highly tenured team of professionals has the knowledge and expertise to simplify the integration process for our customers, and our team delivers proven problem-solving solutions backed by numerous customer references. We offer comprehensive packaged and configurable software and we are a leading provider of best-in-class mobile and wireless equipment. Our customers include government agencies and leading Fortune 500 companies from diverse sectors, including healthcare, food and beverage, manufacturing, retail, distribution, transportation and logistics, and oil, gas, and chemicals. Since 2014, our annual consolidated revenues have grown to more than $50 million with clients in more than 40 countries. We currently address several billion-dollar markets with double-digit growth, including the Global Safe City market, forecasted to grow to $29.6 billion by 2022, and the Ticketless Safe Parking market, forecasted to grow to $5.2 billion by 2023. In November 2019, the Company filed an amendment to its Certificate of Incorporation, as amended, with the Secretary of State of Delaware, pursuant to which we changed our name from Quest Solution, Inc. to OMNIQ Corp. 4 Our Strategy Our strategy is to focus on operational excellence and cost reduction, addressing the balance sheet debt and putting together a business plan that is based on revenue growth and technological leadership. We intend to continue to identify synergies within the Company to offer a more complete offering of products, services and technological solutions to customers throughout the United States. Furthermore, the market in which OMNIQ operates is undergoing consolidation and OMNIQ intends to start identifying strategic companies in the data collection, big data analytics and mobile systems integration market, as well as other complementary technologies for potential future acquisition in order to become the leading specialty integrator within our served markets. We are a provider of products and solutions to two main markets, supply chain management and smart/safe city. We have expanded our product solutions, which are based on artificial intelligence and machine learning algorithms, offering computer vision applications. Our product offerings have established us as an innovative and technological company, and we are able to offer our fortune 1,000 customers an end-to-end solution. We are a pioneer in providing cutting-edge technology solutions to the markets we serve. As a world-wide systems integrator, we focus on design, delivery, deployment and support of fully integrated mobile and automatic identification data collection solutions. We use unique computer vision technology and additional identification technologies in its solutions. We also manufacturer and/or distributor labels, tags, ribbons and RFID identification tags. We take a consultative approach by offering end-to-end solutions that include software, algorithm, hardware, service contracts, communications and full lifecycle management services. We are able to simplify the integration process because of our experienced team of professionals. We deliver problem solving solutions backed by numerous customer references. We offer comprehensive packaged and configurable software, some of which we developed and some of it is sourced from third parties. We are a leading providing of bar code labels and ribbons (media). We provide consultative services to companies to select, design and manufacture the right label for their product offering. Once a company purchases our product, sales generally recur on a regular basis. Our groundbreaking AI-based vision solutions are currently in use for sensitive Homeland Security anti-terror projects and automated parking solutions. Inspired by time-critical “friend or foe” decision-making processes, our patented algorithms are based on a combination of cognitive science and machine learning-based pattern recognition technology which is arbitrated through a multi-layered decision-making process that offers both speed and accuracy. Our experienced team of consulting and integration professionals guide companies through the entire development and deployment process, from selecting technology to the successful company-wide rollout of a customized solution that fits a company’s unique requirements. After performing a thorough technical evaluation of the client’s current operations and specific operational problems, our team determines the optimal hardware and software solutions to optimize the client’s operational workflow. We deliver, ongoing services provided throughout the deployment process and throughout the entire product life cycle. We also deliver full installation services for all mobile, data collection computers and printing equipment including full staging and kitting of the equipment. We have been successful in delivering mission critical mobile computing and data collection solutions to Fortune 1000 companies for over two decades. The requirements and needs of our customers continue to evolve as they require new mobile and wireless technologies and services to make their business more competitive and profitable. The result is a continuous flow of opportunities for us to assist customers to evaluate, choose, implement, and support the right mobile and data collection solutions. As we focus on what we do best, we believe that there is more than adequate market size, growth and opportunity available to the Company to succeed. Core to the solutions offered by the Company is a full suite of configurable packaged software solutions that were internally developed and provide customers with unique solutions with significant business Return on Investment (“ROI”), including: Order Entry: Software designed to increase productivity in the field. Remote workers increasingly demand rapid access to real-time information and up to date data to facilitate and streamline their job functions in the field for which we believe our Order Entry Software is the answer. 5 Intelligent Order Entry: Adds intelligence to aging order entry system to maximize profits. The hand held industry is a vital link in getting remote orders from the field to corporate. Our Intelligent Order Entry Software adds this capability to aging order entry systems. iTrack: Track Device Deployment. iTrack, an Internet Tracking System, is a management tool that tracks the deployment of hardware devices in the field and their repair history. Warehouse: Enhances efficiency in distribution and manufacturing environments. The warehouse is a collection of applications for portable devices that we believe extend the power of your existing system out to the warehouse floor and dock doors. Proof of Delivery: Enhances document delivery performance. We offer proof-of-delivery capabilities as part of its Mobility Suite that we believe gives companies an edge over competitors by improving customer service. WTMiP: Extends business beyond four walls. WTMiP provides the link between corporate and the mobile worker. WTMiP servers allow files and data to seamlessly synchronize between the corporate host and laptops, handheld devices and Windows CE or Windows Mobile devices. Easy Order: Easy order on-line purchasing portal. Our Easy Order Solution offers companies a customized portal that streamlines and simplifies ordering by providing clients with their own unique private on-line store. QTSaaS (Quest Total Solutions as a Service ) : QTSaaS is a complete mobile services offering that includes hardware, software, services and wireless data in a bundled subscription payment offering over a period of time. Our partnership with Hyperion Partners LLC and wireless carriers allows us to offer mobility solutions to our customers on platforms that extend the market into new mobile applications that previously were not being automated. Media and Label Business: Repeatable easy order online purchasing portal. The largest segment of data collection opportunity for us is the barcode label market providing ongoing and repeatable purchasing business. We intend to continue in the label business in the United States of America to drive business growth and increased margins. Our Target Markets Two markets we serve are Smart/Safe City and Supply Chain Management. Our groundbreaking AI-based vision solutions are currently in use for sensitive Homeland Security anti-terror projects and discerning customers within the access control, airport, border crossing, municipality safety and parking industries. We seek to utilize our expertise and end-to-end software solutions in markets which we believe provide the greatest opportunity to increase margins. Within the Supply Chain Management market, we believe we can further develop our existing customer base needing to replace their legacy systems with a new go-to-market strategy leveraging our field sales and system resources, telemarketing, customer portals and vertical market and barcode label specialists. We believe our base of industry leading customers for the barcode label and ribbon (media) products in the manufacturing, distribution, transportation and logistics, retail and healthcare sectors, which sectors are at the core of our business, are ideal candidates for our machine learning technology. For over two decades, we have been successful in integrating mission critical mobile computing and data collection solutions for Fortune 1000 companies. The requirements and needs of our customers continue to evolve as they require new mobile and wireless technologies and services to make their business more competitive and profitable. The result is a continuous flow of opportunities to assist customers to evaluate, choose, implement, and support the right mobile and data collection solutions. As we focus on what we do best, we believe there is more than adequate market size, growth and opportunity available for us to succeed. 6 We believe integrating our patented and proprietary AI technology into its existing Supply Chain offerings will allow for automated logistics monitoring and optimization, creating operational efficiencies at higher margins both us and our fortune 1000 clients. Our Sales Strategy Our direct sales teams are supported by systems engineers averaging over twenty (20) years of experience in the mobile industry. The sales organization’s growth in-reach mirrors the addition of new products and services. Sales team members are organized by industry areas of opportunity, areas of expertise and territory. Our sales teams are organized to address national accounts offering a broad array of unique solutions for key lines of business applications, which provides opportunities for upsell and cross sell to our clients. For the barcode label (media) business, we utilize a specialty sales force, resellers and distributors of our manufactured private label products. Salespeople are supported internally by sales support personnel who coordinate quotes and logistics and by members of the systems engineering group and software teams. The normal sales cycle is one (1) to six (6) months, and typically involves the development of a scope of work and preparation of a ROI analysis. We use Company developed analysis templates which we believe reduce the sales cycle. The analyses and proposals include information on leasing and other financing options, which helps differentiate us from our competitors. The label business sales cycles are shorter, with purchases made more frequently on a transactional basis. Competition The mobile system integration market is characterized by a limited number of large competitors and numerous smaller niche players. We typically pursue larger accounts and national customers, competing most often with larger channel partners. For specific solutions, we also compete with niche players who are often focused on a single industry. Hardware sales are competitive because of online retailers. We believe our consultative, integrated solutions approach is a clear differentiator for most prospective customers. Human Capital OMNIQ’s operating philosophy is our growth and continued success are the result of management and employees working together in a spirit of cooperation and teamwork. Our core values emphasize an environment where safety, diversity, inclusion, talent development, training and retention are top priorities. We believe this has enabled us to meet various challenges over the years, and the progress that has been achieved by us reflects this strong mutual commitment between the Company and its employees. We believe our employees are our greatest asset. We remain focused on furnishing friendly and safe working conditions, providing competitive pay and offering quality benefits, and producing revenue for the continued growth of the Company and the communities in which we operate, with an emphasis on the welfare of our employees and their families. We realize our success is a direct result of the hard work and dedication of our employees. Each employee at OMNIQ is a contributing partner in our future growth and we strive to maintain a mutually beneficial workplace culture that also fosters the professional development of each employee. As of December 31, 2020, we had approximately 61 employees. Of these employees, 46 are salaried (including commissioned employees) personnel and 15 are hourly personnel. Our employees perform the following functions: sales operations, parts operations, technical services and office and administrative support. We believe our relations with our employees are good, and we have never experienced a work stoppage. Generally, the total number of employees does not significantly fluctuate throughout the year. 7 Concentrations For the years ended December 31, 2020 and 2019, one customer accounted for 37.2% and 12.3%, respectively, of the Company’s consolidated revenues. Accounts receivable at December 31, 2020 and 2019 are made up of trade receivables due from customers in the ordinary course of business. Two customers made up 46% of the accounts receivable balance at December 31, 2020 and two customers together represented 20.9% of the balance of accounts receivable at December 31, 2019. Accounts payable are made up of amounts due to suppliers in the ordinary course of business at December 31, 2020 and 2019. One vendor made up 92.4% and 83.0% of our accounts payable in 2020 and 2019, respectively. Available Information OMNIQ’s website is located at www.omniq.com . The Company’s website and the information to be contained on that site, or connected to that site, are not part of or incorporated by reference into this filing. We file electronically with the SEC annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Copies of these reports, proxy and information statements and other information may be obtained by electronic request at the following e-mail address: publicinfo@sec.gov. We use the Investor section of our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor section of our website, in addition to following press releases, SEC filings and public conference calls and webcasts. ITEM 1A. RISK FACTORS This section is not required for smaller reporting companies. ITEM 1B. UNRESOLVED STAFF COMMENTS This section is not required for smaller reporting companies.