What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-31 compared with 2021-03-31 · 96 added, 589 removed, 10 unchanged (99% of the section changed)

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

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 i) changed our name from Quest Solution, Inc.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

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 i) changed our name from Quest Solution, Inc.

to OMNIQ Corp.

and ii) effected a reverse split

of its common stock at a ratio of one (1) for twenty (20), effective November 20, 2019 (the “Reverse Split”).

discussions of the Company’s securities, in this Annual Report Form 10k, reflect the consolidation of shares as a

result of the Reverse Split.

of OMNIQ’s common stock are not traded on an established market.

OMNIQ’s common stock is traded through broker/dealers

and in private transactions, and quotations are reported on the OTCQB under the symbol “OMQS”.

OTCQB quotations reflect

interdealer prices, without mark-up, mark-down or commission and may not represent actual transactions.

No dividends have been

declared or paid on OMNIQ’s common stock and none are likely to be declared or paid in the near future.

Fiscal Year Ended December 31, 2019:

Fiscal Quarter Ended March 31, 2019

Fiscal Quarter Ended June 30, 2019

Fiscal Quarter Ended September 30, 2019

Fiscal Quarter Ended December 31, 2019

Fiscal Year Ended December 31, 2020:

Fiscal Quarter Ended March 31, 2020

Fiscal Quarter Ended June 30, 2020

Fiscal Quarter Ended September 30, 2020

Fiscal Quarter Ended December 31, 2020

March 22, 2021, the common stock closed at $9.00 per share.

and ii) effected a reverse split of its common stock

at a ratio of one (1) for twenty (20), effective November 20, 2019 (the “Reverse Split”).

All discussions of the Company’s

securities, in this Annual Report Form 10k, reflect the consolidation of shares as a result of the Reverse Split.

October 8, 2021 the Company’s common stock became available on The Nasdaq Stock Market LLC

under the symbol “OMQS”.

Before then, shares of OMNIQ’s common stock were not traded on an established market.

OMNIQ’s common stock was traded through broker/dealers and in private transactions, and quotations reported on the OTCQB under

the symbol “OMQS”.

OTCQB quotations reflected interdealer prices, without mark-up, mark-down or commission and may not represent

actual transactions.

No dividends have been declared or paid on OMNIQ’s common stock and none are likely to be declared or paid

in the near future.

Year Ended December 31, 2020:

Quarter Ended March 31, 2020

Quarter Ended June 30, 2020

Quarter Ended September 30, 2020

Quarter Ended December 31, 2020

Year Ended December 31, 2021:

Quarter Ended March 31, 2021

Quarter Ended June 30, 2021

Quarter Ended September 30, 2021

Quarter Ended December 31, 2021

Compensation Plan Information

Plan category

Number of securities to be

issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise

price of outstanding options, warrants and rights

Number of securities remaining

available for future issuance under equity compensation plans (excluding securities reflected in column (a)

Equity compensation plans approved by security holders

August 2020, OMNIQ’s Board of Directors adopted an Equity Incentive Plan (the “Plan”), as an incentive

to retain in the employ of and attract new employees, directors, officers, consultants, advisors and employees to the Company.

Pursuant to the Plan, one million (1,000,000) shares of OMNIQ’s common stock, par value $0.001 (the “Shares”),

were set aside and reserved for issuance.

The Plan was approved by our stockholders at the September 2020, shareholders’

September 2020 and pursuant to the 2020 Equity Incentive Plan, we granted options to purchase an aggregate of 745,000 shares of

the Company’s common stock to certain of our employees, officers and directors.

Included in the total shares granted are

options to purchase 230,000 shares of its common stock to Mr.

Shai Lustgarten, our Chief Executive Officer, options to purchase

of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average

exercise price of outstanding options, warrants and rights

of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)

compensation plans approved by security holders

October 2021, OMNIQ’s Board of Directors adopted an Equity Incentive Plan (the “Plan”), as an incentive 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 Plan is 1,118,856

August 2020, OMNIQ’s Board of Directors adopted an Equity Incentive Plan (the “Plan”), as an incentive to retain in

the employ of and attract new employees, directors, officers, consultants, advisors and employees to the Company.

Pursuant to the Plan,

one million (1,000,000) shares of OMNIQ’s common stock, par value $0.001 (the “Shares”), were set aside and reserved

for issuance.

The Plan was approved by our stockholders at the September 2020, shareholders’ meeting.

For the year ending December

31, 2020, we issued 336,146 shares ($1.6 million) to consultants and advisors for services rendered.

No shares were issued in 2021

September 2020 and pursuant to the 2020 Equity Incentive Plan, we granted options to purchase an aggregate of 745,000 shares of the Company’s

common stock to certain of our employees, officers and directors.

Included in the total shares granted are options to purchase 230,000

shares of its common stock to Mr.

Neev Nissenson, our Chief Financial Officer, options to purchase 150,000 shares of its

common stock to Mr.

Nissensohn, a consultant and principal stockholder, and options to purchase 10,000 shares

of its common stock to our Directors Andy MacMillan and Yaron Shalem, respectively.

The remaining 305,000 granted options are

for other employees and concsultants.

The exercise price of the options granted was $4.40 per share, which was the

closing price of the Company’s common stock on September 29, 2020, the day prior to the grant, except for the options granted

to Shai Lustgarten and Carlos J.

Shai Lustgarten, our Chief Executive Officer, options to purchase 40,000 shares of its common stock

Neev Nissenson, our Chief Financial Officer, options to purchase 150,000 shares of its common stock to Mr.

a consultant and principal stockholder, and options to purchase 10,000 shares of its common stock to our Directors Andy MacMillan and

Yaron Shalem, respectively.

The remaining 305,000 granted options are for other employees and consultants.

The exercise price of the

options granted was $4.40 per share, which was the closing price of the Company’s common stock on September 29, 2020, the day prior

to the grant, except for the options granted to Shai Lustgarten and Carlos J.

Nissensohn, which have an exercise price of $4.84 per share.

The options granted to Shai Lustgarten

and Carlos J.

Nissensohn have a term of five (5) years and the balance of the options have a term of ten (10) years.

The options granted to Shai Lustgarten and Carlos J.

Nissensohn have a term of five (5) years and the balance of the options have a term

of ten (10) years.

January 23, 2019, the Company received shareholder approval to adopt its 2018 Equity Incentive Plan.

1 unchanged sentence

has never declared or paid any cash dividends on its common stock.

The Company currently plans to retain future earnings to finance

growth and development of its business and does not anticipate paying any cash dividends in the foreseeable future.

incur indebtedness in the future which may prohibit or effectively restrict the payment of dividends, although the Company has

no current plans to do so.

Any future determination to pay cash dividends will be at the discretion of OMNIQ’s Board of

Directors The Company’s Series C Preferred Stock pays a 6% dividend, but the Company has been unable to make such

dividend payments and so those dividends are accrued quarterly.

The Company currently plans to retain future earnings to finance growth

and development of its business and does not anticipate paying any cash dividends in the foreseeable future.

OMNIQ may incur indebtedness

in the future which may prohibit or effectively restrict the payment of dividends, although the Company has no current plans to do so.

Any future determination to pay cash dividends will be at the discretion of OMNIQ’s Board of Directors.

The Company’s Series

C Preferred Stock pays a 6% dividend, but the Company has been unable to make such dividend payments and so those dividends are accrued

Accrued but unpaid dividends do not bear interest.

the settlement agreements made certain shareholders in February 2018, in which over $15 million in debt was extinguished, the

shares of Series C Preferred Stock issued in exchange, totaling 1,685,000 shares, will not pay and will not accrue dividends for

a 24 month period, or any time prior to March 1, 2020.

Pursuant to the settlement agreements made certain shareholders in February

2018, in which over $15 million in debt was extinguished, the shares of Series C Preferred Stock issued in exchange, totaling 1,685,000

shares, will not pay and will not accrue dividends for a 24-month period, or any time prior to March 1, 2020.

the time of acquisition of Dangot Computers Ltd certain dividend payables were owed to non-controlling interests.

These liabilities were

assumed by OMNIQ and during the year ended December 31, 2021 Dangot Computers Ltd paid $306 thousand to those non-controlling interests.

Sales of Unregistered Securities

During the 2020, the Company issued

an aggregate of 302 shares of common stock to certain individuals as part of the Company’s Employee Stock Purchase Program

valued at approximately $1 thousand.

On 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.

On 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.

On 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.

During July 2020, various holders exercised

in cashless transactions options and warrants resulting in the issuance of 56,248 shares valued at $339 thousand.

On October 16, 2020, the Company issued

50,000 shares to Three Rivers Business Consulting, LLC as part of a consulting agreement.

The shares were valued at $270 thousand.

2021, the Company issued an aggregate of 2,186 shares of common stock to certain individuals as part of the Company’s Employee

Stock Purchase Program valued at approximately $16 thousand.

February 15, 2021, the Company issued 25,000 shares to Orion 4, LLC as part of a consulting agreement.

The shares were valued at $188

May 4, 2021, the Company issued 95,424 shares as part of a series of conversion agreements with a former noteholder and preferred shareholder.

The shares were valued at $859 thousand including conversion penalties.

July 8, 2021, the Company issued 220,103 shares in connection with the acquisition of Dangot Computers.

The shares were valued at approximately

July 8, 2021, the Company entered into a form of Securities Purchase Agreement (the “Securities Purchase Agreement”) with

accredited investors.

Pursuant to the Securities Purchase Agreement, on July 8, 2021 (the Closing Date”), the Company sold an aggregate

gross proceeds of $15 million of units (the “Units”) before deducting placement agent fees, consultant and legal fees and

other offering expenses (the “Offering”).

The per Unit purchase price was $7.00.

Unit is comprised of one share of the Company’s common stock, $0.001 par value per share.

As a result of the Offering, the Company

issued 2,142,857 shares of common Stock (the “Shares”) and warrants (the “Warrants”) to purchase 171,429 shares

of Common Stock (the “Warrant Shares”) at an exercise price equal to $7.70 per Warrant Share, which Warrants are exercisable

for a period of five years from the issuance date.

October 13, 2021, the Company issued 10,127 shares as part of a series of conversion agreements with a former noteholder and preferred

The shares were valued at less than $100 thousand including conversion penalties.

2021, various holders exercised options and warrants resulting in the issuance of 77,677 shares valued at $436 thousand

2021, various holders exercised in cashless transactions options and warrants resulting in the issuance of 201,429 shares valued at $1,269

SELECTED FINANCIAL DATA

section is not required for smaller reporting companies.

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

following discussion summarizes the financial position of OMNIQ, Corp.

and its consolidated subsidiaries as of December

31, 2020, and its consolidated results of operations for the year ended December 31, 2020, and should be read in conjunction

with our consolidated financial statements and the accompanying notes thereto included elsewhere in this Annual Report on Form

The following discussion contains, in addition to historical information, forward-looking statements that include risks

and uncertainties (see discussion of “Forward-Looking Statements”

included elsewhere in this Annual Report on Form

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain

factors, including those factors set forth under Item 1A—Risk Factors of this Annual Report on Form 10-K.

outbreak of the COVID-19 pandemic continues to affect the United States of America and the world, including in the primary regions

Many State Governors issued temporary Executive Orders in 2020, which continue to remain effective in many

states that, among other stipulations, effectively limit in-person work activities for most industries and businesses having the

effect of suspending or severely curtailing operations.

Many of these orders are in the process of being lifted.

we have not incurred any significant interruptions to our day-to-day operations or supply chain, except some of our employees

have or are working remotely.

In response to the COVID-19 pandemic, we proactively implemented certain measures to strengthen

cash flow, manage costs, strengthen liquidity and enhance employee safety.

These measures included the reduction of payroll costs,

a reduction in capital expenditures and other discretionary spending, the elimination of most business travel and restriction

of visitors to our corporate office, enhanced cleaning and disinfection procedures at our corporate office and branch locations,

promotion of social distancing and the wearing of face coverings (masks) at our corporate office and branch locations, and requirements

for employees to work from home where possible.

the impact of COVID-19 became more widespread in March 2020, our sales volumes began to decline from previous years.

revenues for the year ended December 31, 2020, were 3.48% lower than those of the year ended December 31, 2019.

had a more significant impact on our gross margin.

Total gross margin percentage dropped 5% for the year ended December

31, 2020 compared to 2019.

The timing and the extent of any continued recovery, or subsequent contraction, in our sales volumes

cannot be reasonably estimated at this time.

As such, the extent of the ultimate impact of the pandemic on the Company’s

operational and financial performance will depend on various developments, including the duration and spread of the outbreak,

the impact on capital and financial markets, governmental limitations on business operations generally, and its and their impact

on potential customers, employees, vendors and distribution partners, all of which cannot be reasonably predicted at this time.

Company’s consolidated revenue from continuing operations for the year ended December 31, 2020 were $55.2

million, representing a decrease of $2.0 million from 2019’s amount of $57.2 million.

Revenues in 2020 and 2019 are presented

in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606).

The loss from continuing operations for common

stockholders was $11.5 million in 2020, an increase of $6 million from the prior year loss of $5.5 million.

Basic and Diluted

loss per share from continuing operations was $2.46 and $2.66 in 2020 compared to $1.37 per share in 2019.

February 2020, OMNIQ entered in an asset purchase agreement with EyepaxIT Consulting LLC, a California limited liability company,

(“Eyepax”) and its principal owners (collectively the “Sellers”), effective September 30, 2019, pursuant

to which the Company purchased certain assets from the Sellers at a cash purchase price of $245,000.

As additional consideration,

the Company issued to the Sellers 80,000 shares of the Company’s common stock and an option to purchase 20,000 shares of

the Company’s common stock at an exercise price of $5.00 per share, subject to adjustment, which shall vest quarterly in

four (4) equal installments and expire on February 28, 2023.

The Company entered into an employment agreement with Mr.

Caldera, a principal owner of Eyepax, agreeing to pay Mr.

Caldera an annual salary of $100,000.

May 2020, we entered into a Loan Agreement with Zions Bank corporation,

NA (“Zions”) whereby the Company borrowed $887,500 from Zions under the Small Business Administration’s (the

“SBA”) Paycheck Protection Program.

In October 2020, OMNIQ applied for and was granted forgiveness of the full amount

owed (including accrued interest) by Zions on behalf of the SBA.

August 2020, we filed an Amendment to the Certificate of Designation of the Rights and Preferences of its Series C Preferred Stock

(the “Amendment”) clarifying that the conversion price and voting rights of the Series C Preferred Stock were amended

to equitably reflect the reverse stock split of November 1, 2019.

The holders of a majority of the Series Preferred Stock consented

to such Amendment.

August 2020, OMNIQ adopted an Equity Incentive Plan (the “Plan”), as an incentive to retain in the employ of and attract

new employees, directors, officers, consultants, advisors and employees to the Company.

Pursuant to the Plan, one million (1,000,000)

shares of the Company’s common stock, par value $0.001 (the “Shares”), were set aside and reserved for issuance.

The Plan was approved by the Company’s stockholders in September 2020.

September 2020 and pursuant to the 2020 Equity Incentive Plan, the Company granted options to purchase an aggregate of 440,000

shares of the Company’s common stock to certain of its employees, officers and directors, including options to purchase

230,000 shares of its common stock to Mr.

Shai Lustgarten, the Company’s Chief Executive Officer, options to purchase 40,000

shares of its common stock to Mr.

Neev Nissenson, its Chief Financial Officer, options to purchase 150,000 shares of its common

Nissensohn, a consultant and principal stockholder, and options to purchase 10,000 shares of its common

stock to Company Directors Andy MacMillan and Yaron Shalem, respectively.

The exercise price of all of the options granted was

$4.40 per share, which was the closing price of the Company’s common stock on September 29, 2020, the day prior to the grant,

except for the options granted to Shai Lustgarten and Carlos J.

Nissensohn, which have an exercise price of $4.84 per share.

options granted to Shai Lustgarten and Carlos J.

Nissensohn have a term of five (5) years and the balance of the options have

a term of ten (10) years.

September 2020, the Company filed an amendment to its Certificate of Incorporation, as amended (the “Amendment”),

with the Secretary of State of Delaware, pursuant to which the Company reduced the amount of its authorized common stock to 15,000,000

and reduced the amount of its authorized preferred stock to 5,000,000, of which 3,000,000 shares shall be designated as Series

C Preferred Stock.

May 2019, the Company, Campbeltown and Walefar entered into an Amendment to the HTS Purchase Agreement which provided for an adjustment to the number of shares of common stock issued to Walefar and Campbeltown in the acquisition

Pursuant to the Amendment, Campbeltown and Walefar agreed to return for cancelation 277,166 and 277,116 shares of common

stock, respectively.

This Amendment reduced the number of shares issued in the acquisition to 568,415 shares from 1,122,648 shares

and the amount of share consideration to approximately $2.7 million from approximately $5.3 million.

This adjustment was made

as a result of a correction in the calculation of working capital and other share give back provisions of the HTS Purchase Agreement.

April 2019, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with accredited

investors (the “Purchasers”).

Pursuant to the Securities Purchase Agreement, in April, 2019, the Company sold an aggregate,

with the Conversions included, of $5.0 million of units (the “Units”) resulting in gross proceeds of $5.0 million

(the individual Unit price purchase price was $6.00), before deducting placement agent fees and offering expenses (the “Offering”).

Each Unit was comprised of one share of the Company’s common stock, $0.001 par value per share (the “Common Stock”),

and a warrant to purchase one share of Common Stock, and, as a result of the Offering, the Company issued 833,333 shares of Common

Stock (the “Shares”) and warrants (the “Warrants”) to purchase 833,333 shares of Common Stock (the “Warrant

Shares”) at an exercise price equal to $7.00 per Warrant Share, which Warrants are exercisable for a period of five and

one-half years from the issuance date.

Shai Lustgarten, the Company’s Chief Executive Officer, and Mr.

Nissensohn, a consultant to and principal stockholder of the Company, participated in the offering by each converting $200

thousand of unpaid principal owed to them from the HTS acquisition (the “Conversions”), by the Company in exchange

for Shares and Warrants on the same terms as all other Purchasers.

With the Conversions included, the Offering resulted in gross

proceeds of $5.0 million.

As a result of the Conversions, a principal amount of $150 thousand is owed to each Walefar and Campbeltown

respectively under the note issued to them as partial consideration in the sale of HTS Image Processing to the Company on October

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

December 31, 2020, we had a working capital deficit of $ 25.3 million.

These facts and others raise substantial doubt about our

ability to continue as a going concern.

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 following:

continuation of improving cash flow by implementing and maintaining moderate cost reductions;

the accounts receivable factoring line of credit;

lower interest rates on outstanding debt;

issuances of additional common stock;

creation of additional sales and profits across product lines, and obtaining sufficient financing to restructure current debt

in a manner more in line with the Company’s improving cash flow and cost reduction successes;

our portfolio of products, we have a computer vision technology that is based on AI and machine learning concepts.

These solutions

have a higher gross profit that will provide an increase in cashflow on a consolidated basis going forward.

an operating facility with the ability for light manufacturing and assembling components, which helps reduce the cost

of goods and increase profit margins;

April 2019, the Company raised approximately $5.0 million in gross proceeds from the sale of 833,333 shares of the Company’s

common stock.

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

asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue

as a going concern.

Results of Operations

following table sets forth certain selected condensed statement of operations data for the periods indicated in dollars.

we note that the period-to-period comparison may not be indicative of future performance.

Years Ended December 31

Cost of Goods sold

Operating Expenses

Loss from operations

Net Loss per common Share from continuing operations

for the years ended December 31, 2020 and 2019 were generated from the sales of hardware, service contracts, software,

labels and ribbons and related services provided by the Company to its customers.

For the years ended December 31, 2020 and 2019,

the Company recognized $55.2 million and $57.2 million in net revenues, respectively.

This represents a decrease of 3.48%.

of Goods Sold

the years ended December 31, 2020 and 2019, the Company recognized a total of $44.3 million and $43.2 million respectively, of

cost of goods sold.

Cost of goods sold was 80% of net revenues for 2020 and 75.5% for 2019.

Our gross margin percentage

has remained relatively stable in an industry that which is experiencing gross margin pressure.

the years ended December 31, 2020 and 2019, operating expenses related to continuing operations were $19.9 million and $16.9 million,

respectively.

This represents an increase of $3.0 million, or 17.76%, which is due to a general increase in business operations,

including the addition of HTS in October 2018.

The following explains in detail the change in operating expenses.

& Development –

Research and development for the year ended December 31, 2020 totaled $1.8 million, compared

to $1.1 million for the year ended December 31, 2019, representing an increase of $.7 million, or 70%.

The increase in research

and development was due to development on the HTS proprietary products.

General and Administrative –

Selling, General and Administrative expenses were $15.8 million for the year

ended December 31, 2020, compared to $13.7 million for the year ended December 31, 2019, representing an increase of $2.1 million,

The increase was due primarily to the inclusion of HTS general and administrative expenses.

Depreciation for the year ended December 31, 2020 were $178 thousand compared to $151 thousand for the year ended

December 31, 2019.

This represents an increase of $27 thousand, or 6% attributable to growth in fixed assets.

Amortization –

Intangible amortization expenses for the year ended December 31, 2020 were $2.1 million, compared

to $2.0 million for the year ended December 31, 2019.

income and expenses

Company incurred $2.6 million in interest expense for the year ended December 31, 2020, compared to $2.6 million for the year

ended December 31, 2019.

The interest expense in 2020 is comprised of interest incurred on promissory notes payable, the company’s

line of credit, and vendor payables.

currency transactions

Our subsidiary, HTS Image Processing,

Inc., has operations in Israel, therefore had foreign currency transactions conducted in 2020 and 2019.

transaction gains and losses are reported on the consolidated statement of operations and were included in the amount of loss

from comprehensive income.

for income taxes

the year ended December 31, 2020, the Company had $5 thousand in state income tax expenses for states in which the Company recently

began operations and for which past net operating losses may not apply.

the year ended December 31, 2019, the Company had $14 thousand in state income tax expenses for states in which the Company recently

began operations and for which past net operating losses may not apply.

loss from continuing operations

Company realized a net loss from continuing operations of $11.5 million for the year ended December 31, 2020, compared to a net

loss from continuing operations of $5.5 million for the year ended December 31, 2019.

The increased loss in 2020 is

due primarily to an increase in Selling, General and Administrative expenses, and cost of goods.

and capital resources

December 31, 2020, the Company had cash in the amount of $5.1 million of which $.5 million is on deposit and restricted,

and a working capital deficit of $25.3 million, compared to cash in the amount of $2.1 million of which $0.5 million was on deposit

and restricted, and a working capital deficit of $20.2 million for the year ended December 31, 2019.

The Company had stockholders’

deficit of $(5) million and stockholders’

equity of $1.8 million for the years ended December 31, 2020 and 2019,

respectively.

This decrease in our stockholders’

equity was primarily due to the book net loss for 2020.

Company’s accumulated deficit was $56.7 million and $45.1 million for the years ended December 31, 2020 and

2019, respectively.

Company’s operations used net cash of $420 thousand and provided $4.3 million for the years ended December 31, 2020

and 2019, respectively.

The decrease in cash from operations of $4.7 million is primarily a result of a decrease in gross

Company’s cash provided by investing activities was $94 thousand for the year ended December 31, 2020 compared to

cash used in investing activities of $251 thousand for the year ended December 31, 2019.

Company’s financing activities used $3.4 million of cash during the year ended December 31, 2020, and used $2.8 million

during the year ended December 31, 2019.

During the year ended December 31, 2020, the Company made payments of $1.3 million on

its notes payable, including its Supplier Secured Promissory note and related party notes payable, compared to the year ended

December 31, 2019, when the Company made payments of $3.4 million on its notes payable, including notes payable, related party,

and its Supplier Secured Promissory note.

Additionally, the Company borrowed $3.5 million on the Company’s line of credit,

compared to the year ended December 31, 2019, when $866 thousand was borrowed from the Company’s line of credit.

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

impact on the Company’s operations in the future.

Sheet Arrangements

Company currently does not have any off-balance sheet arrangements.

Accounting Policies

prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States

of America (“GAAP”).

The application of many accounting principles requires us to make assumptions, estimates and/or

judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our consolidated financial statements.

We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances.

These assumptions, estimates and/or judgments, however, are often subjective and they and our actual results may change based

on changing circumstances or changes in our analyses.

If actual amounts are ultimately different from our estimates, the revisions

are included in our results of operations for the period in which the actual amounts first become known.

We believe the following

critical accounting policies could potentially produce materially different results if we were to change underlying assumptions,

estimates and/or judgments.

See also note 2 to our consolidated financial statements for a summary of our significant accounting

Recognition .

entering into contracts with our customers, we review follow the five steps outline in Accounting Standards Codification Topic

606, Revenue from Contracts with Customers (Topic 606) :

the contract with our customer.

the performance obligations in the contract.

the transaction price.

the transaction price to the performance obligations.

the satisfaction of the performance obligations,

account for contracts, with our customers, when we have approval and commitment from both parties, the rights of the parties are

identified, payment terms are established, the contract has commercial substance and collectability of consideration is probable.

evaluate, in accordance with Topic 606, whether or not we meet the criteria to be a principal or an agent and record the revenue

on a gross or net basis.

We are considered a principal if we obtain control of any one of the following:

good or another asset from another party that we then transfer to our customer.

right to a service to be performed by another party, which gives the us the ability to

direct that party to provide the service to the customer on our behalf, and

good or service from another party that we then combine with other goods or services

in providing the specified good or service to our customer.

have certain relationships with manufacturers and suppliers to sell us products or provide services.

Our contracts may transfer

to our customer a right to a future service or product to be provided by our manufacturer or supplier.

When a specified good or

service is a right to a good or service is provided by a manufacturer or supplier, we evaluate whether we control the right to

the goods or services before that right is transferred to the customer rather than whether we control the underlying goods or

that we control the specified good or service before it is transferred to the customer (and we are therefore a principal) include,

but are not limited to, the following:

are responsible for fulfilling the promise to provide the specified good or service.

This typically includes responsibility for the acceptability of the specified good or

If we are primarily responsible for fulfilling the promise to provide the specified

good or service, this may indicate that the other party involved in providing the specified

good or service is acting on our behalf.

Often, we provide value added services (combining

hardware, integrating hardware to software, etc.) to the products and services purchased

from our manufacturers and suppliers.

have inventory risk before the specified good or service has been transferred to a customer.

Our purchases of products or services from our manufactures and suppliers is evidenced

by our issuing a binding purchase order contract with the negotiated terms including

specifications, pricing, delivery among other things.

Our obligation for purchased products

and services is mutually exclusive of our customers’

performance (failure to take

acceptance, make payment, etc.)

have sole discretion in establishing our price for the specified good or service.

the price our customer pays for a specified good or service may indicate we have the

ability to direct the use of that good or service and obtain substantially all of the

remaining benefits.

We control and set the pricing for the product or services to be

provided to our customers.

the terms of a transaction do not indicate we are acting as a principal in the transaction, we are then considered acting as an

agent and the associated revenues would be recognized on a net basis.

principal, when (or as) we satisfy a performance obligation, we recognize revenue in the gross amount of consideration which we

expect to be entitled in exchange for the specified good or service transferred.

We are an agent if our performance obligation

is to arrange for the provision of the specified good or service by another party.

As an agent, we do not control the specified

good or service provided by another party before that good or service is transferred to our customer.

As an agent, when (or as)

we satisfy a performance obligation, we recognize revenue in the amount of any fee or commission which we expect to be entitled

in exchange for arranging for the specified goods or services to be provided by another party to our customer.

Topic 606, we recognize revenue (on either a gross or net basis previously discussed) only when we satisfy a performance obligation

by transferring a promised good or service to our customer.

A good or service is considered to be transferred when the customer

obtains control.

The standard defines control as an entity’s ability to direct the use of, and obtain substantially all

of the remaining benefits from, an asset.

We recognize revenue (either gross or net) once control has passed to the customer.

The following indicators are evaluated in determining when control has passed to the customer:

have a right to payment for the product or service,

customer has legal title to the product,

have transferred physical possession of the product to the customer,

customer has the risk and rewards of ownership of the product, and

customer has accepted the product.

Recognition for Hardware.

Revenues from sales of hardware products are recognized on a gross basis as we are acting as a principal

in these transactions, with the selling price to the customer recorded as sales and the acquisition cost of the product recorded

as cost of sales.

We recognize revenue from these transactions when control has passed to the customer.

Manufacturers

and suppliers, from whom we purchase hardware, often provide their warranties only providing assurance the products and services

will conform to their specifications.

These assurance type warranties are not sold separately and are not considered separate

performance obligations.

In some transactions, a third-party will provide the customer with an extended warranty.

These extended

warranties are sold separately and provide the customer with a service in addition to assurance that the product will function

We consider these warranties to be separate performance obligations from the underlying product.

For warranties,

where we are arranging those services be provided by a third-party, we are acting as an agent in the transaction and records revenue

on a net basis at the point of sale.

Recognition for Software.

Sales of software licenses are generally considered a single performance obligation.

considered to be the principal, we recognize revenues on a gross basis at the point the software is delivered to and accepted

by our customer.

Generally, software licenses are sold with accompanying third-party delivered software assurance, which is a

product that allows customers to upgrade, at no additional cost, to the latest technology if new capabilities are introduced during

the period that the software assurance is in effect.

explained above, we evaluate whether the software assurance is a separate performance obligation by assessing if the third-party

delivered software assurance is critical or essential to the core functionality of the software itself.

This involves considering:

the software provides its original intended functionality to the customer without the

the customer would ascribe a higher value to the upgrades versus the up-front deliverable,

the customer would expect frequent intelligence updates to the software (such as updates

that maintain the original functionality), and

the customer chooses to not delay or always install upgrades.

we determine the accompanying third-party delivered software assurance is critical or essential to the core functionality of the

software license, the software license and the accompanying third-party delivered software assurance are recognized as a single

performance obligation.

some transactions, a third-party will provide the customer with an extended warranty.

These extended warranties are sold separately

and provide the customer with a service in addition to assurance that the product will function as expected.

We consider these

warranties to be separate performance obligations from the underlying product.

For warranties, where we are arranging those services

be provided by a third-party, we are acting as an agent in the transaction and records revenue on a net basis at the point of

Recognition for Services.

We provide professional services, which include project managers and consultants recommending, designing

and implementing IT solutions.

Revenue from professional services is recognized either on a time and materials basis or proportionally,

as costs are incurred for fixed fee project work.

Revenue is recognized on a gross basis each month as work is performed and we

transfers those services.

from the sale of professional and support services, provided by us, are recognized over the period the service is provided.

the customer receives the benefit of the service each month, we recognize the respective revenue on a gross basis as we are acting

as a principal in the transaction.

Additionally, we manage services team provides project support to customers that are billed

on a fixed fee basis.

We are acting as the principal in the transaction and recognize revenue on a gross basis based on the total

number of hours incurred for the period over the total expected hours for the project.

Total expected hours to complete the project

is updated for each period and best represents the transfer of control of the service to the customer.

We record both the freight billed to its customers and the related freight costs as cost of sales when the underlying

product revenue is recognized.

For freight not billed to its customers, we record the freight costs as cost of sales.

considers shipping to be a fulfillment activity and not a separate performance obligation.

of Goodwill Impairment.

have made acquisitions in the past that resulted in the recognition of goodwill.

Goodwill is the excess of the consideration transferred

plus the fair value of any non-controlling interest in the acquiree at the acquisition date over the fair values of the identifiable

net assets acquired.

We evaluate goodwill for impairment annually or more frequently, if triggering events occur or other impairment

indicators arise which might impair recoverability.

of the goodwill impairment test requires judgment.

We performed a Step 1 quantitative assessment of goodwill impairment as of

December 31, 2020, our annual impairment test date.

We compared the carrying value inclusive of goodwill and definite-lived

intangible assets, to its fair value.

We estimated the fair value of these reporting units by weighting results from the income

approach and the market approach, as further described below.

Based on this quantitative test, we determined there was no impairment

as of the December 31, 2020.

purposes of performing the quantitative impairment test described above, we estimate the fair value by utilizing fair value techniques

consistent with the income approach and market approach.

When performing the income approach for each reporting unit, we use a

discounted cash flow analysis based on our internal projected results of operations, weighted average cost of capital (“WACC”)

and terminal value assumptions.

Our cash flow projections are based on five-year financial forecasts developed by management that

include revenue projections, capital spending trends, and investment in working capital to support anticipated revenue growth.

The WACC is an estimate of the overall after-tax rate of return required by equity and debt holders of a business enterprise and

represents the expected cost of new capital likely to be used by market participants.

The WACC is used to discount our combined

future cash flows.

The inputs and variables used in determining the fair value of a reporting unit require management to make

certain assumptions regarding the impact of operating and macroeconomic changes, as well as estimates of future cash flows.

estimates regarding future cash flows are based on historical experience and projections of future operating performance, including

revenues, margins and operating expenses.

We also make certain forecasts about future economic conditions, interest rates and

other market data.

Many of the factors used in assessing fair value are outside the control of management, and these assumptions

and estimates may change in future periods.

Changes in assumptions or estimates could materially affect the estimate of a reporting

unit’s fair value, and therefore could affect the likelihood and amount of potential impairment.

Under the market approach,

we compare the reporting units to selected reasonably similar (or “guideline”) publicly traded companies.

this method, valuation multiples are:

(i) derived from the operating data of selected guideline companies;

(ii) evaluated and

adjusted based on the strengths and weaknesses of our reporting unit relative to the selected guideline companies;

and (iii) applied

to the operating data of our reporting unit to arrive at an indication of value.

The application of the market approach results

in an estimate of the price reasonably expected to be realized from a sale of the Company.

Based Compensation

periodically issue stock options and warrants to employees and non-employees in non-capital raising transactions for services

and for financing costs.

We account for stock option and warrant grants issued and vesting to employees based on the authoritative

guidance provided by Financial Accounting Standards Board (the “FASB”) where the value of the award is measured on

the date of grant and recognized as compensation expense on the straight-line basis over the vesting period.

record stock-based compensation expense according to the provisions of ASC Topic 718, Compensation –

Stock Compensation.

ASC Topic 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in

the financial statements based on their fair values.

Under the provisions of ASC Topic 718, the Company determines the appropriate

fair value model to be used for valuing share-based payments and the amortization method for compensation cost.

fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model.

estimates the expected volatility and expected option life assumption consistent with ASC Topic 718, Compensation –

Compensation.

The expected volatility of the Company’s common stock at the date of grant is estimated based on a historic

volatility rate and the expected option life is calculated based on historical stock option experience as the best estimate of

future exercise patterns.

The dividend yield assumption is based on historical and anticipated dividend payouts.

The risk-free

interest rate assumption is based on observed interest rates consistent with the expected life of each stock option grant.

Company uses historical data to estimate pre-vesting option forfeitures and records stock-based compensation expense only for

those awards that are expected to vest.

Compensation expense is recorded for all stock options expected to vest based on the amortization

of the fair value at the date of grant on a straightline basis primarily over the vesting period of the options.

accounting policies can be found in Note 2 to our Audited Consolidated Financial Statements.

Accounting Pronouncements

Pronouncements

Not Yet Adopted

December 2019, the FASB issued Accounting Standards Update (“ASU”) No.

2019-12, Income Taxes (Topic 740):

the Accounting for Income Taxes (“ASU 2019-12”).

The guidance removes the following exceptions:

1) exception to the

incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from

other items, 2) exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign

subsidiary becomes an equity method investment, 3) exception to the ability not to recognize a deferred tax liability for a foreign

subsidiary when a foreign equity method investment becomes a subsidiary and 4) exception to the general methodology for calculating

income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

Additionally, the guidance

simplifies the accounting for income taxes by:

1) requiring that an entity recognize a franchise tax (or similar tax) that is

partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, 2)

requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination

in which the book goodwill was originally recognized and when it should be considered a separate transaction, 3) specifying that

an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not

subject to tax in its separate financial statements (although the entity may elect to do so (on an entity-by-entity basis) for

a legal entity that is both not subject to tax and disregarded by the taxing authority), 4) requiring that an entity reflect the

effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes

the enactment date and 5) making minor improvements for income tax accounting related to employee stock ownership plans and investments

in qualified affordable housing projects accounted for using the equity method.

ASU 2019-12 became effective on January 1, 2021

and is not expected to have a material impact on our consolidated financial statements.

Adopted Accounting Pronouncements

January 1, 2020, we adopted Accounting Standards Codification Topic 326, Credit Losses (Topic 326).

This standard establishes

an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather

than incurred losses.

Under the new guidance, we recognize an allowance for our estimate of expected credit losses over the entire

contractual term of our receivables from the date of initial recognition of the financial instrument.

Measurement of expected

credit losses are based on relevant forecasts that affect collectability.

Topic 326 applies to trade receivables from certain

revenue transactions including receivables from equipment sales, parts and service sales.

Under Topic 606 revenue is recognized when, among other criteria, it is probable that the entity will collect the consideration

to which it is entitled for goods or services transferred to a customer.

At the point that these trade receivables are recorded,

they become subject to the CECL model and estimates of expected credit losses over their contractual life are recorded at inception

based on historical information, current conditions, and reasonable and supportable forecasts.

The adoption of Topic 326 did not

have a material impact on our consolidated financial statements and related disclosures or our existing internal controls because

accounts receivable are of short duration and there is not a material difference between incurred losses and expected losses.

January 1, 2020, we adopted ASU No.

2018-13, Fair Value Measurement - Disclosure Framework.

ASU 2018-13 modifies the disclosure

requirements for fair value measurements.

Entities are no longer required to disclose the amount of and reasons for transfers

between Level 1 and Level 2 of the fair value hierarchy, but public companies are required to disclose the range and weighted

average used to develop significant unobservable inputs for Level 3 fair value measurements.

The adoption of ASU 2018-13 did not

have a material impact on our consolidated financial statements and footnotes.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

section is not required for smaller reporting companies.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

financial statements required by this Item are included as a separate section of this report commencing on page F-1.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 5. Market for Registrant’s Common Equity